HomeMy WebLinkAbout2018-06-11 City Council Agenda PacketPALO
ALTO
City Council
REVISED
Monday, June 11, 2018
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.
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
Closed Session 5:00-7:00 PM
Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker.
1. CONFERENCE WITH LABOR NEGOTIATORS
City Designated Representatives: City Manager and his Designees
Pursuant to Merit System Rules and Regulations (James Keene,
Ed Shikada, Michelle Flaherty, Rumi Portillo, Sandra Blanch,
Nicholas Raisch, Molly Stump, Terence Howzell, Charles Sakai,
Lalo Perez, and Kiely Nose)
Employee Organizations: 1) Utilities Management and Professional
Association of Palo Alto (UMPAPA); 2) Service Employees International
Union, (SEIU) Local 521; 3) Service Employees International Union,
(SEIU) Local 521, Hourly Unit; 4) Palo Alto Police Officers' Association
(PAPOA); 5) Palo Alto Fire Chiefs' Association (FCA) and Employee
Organization: 6) International Association of Fire Fighters (IAFF), Local
1319; 7) Palo Alto Police Managers' Association (PAPMA)
Authority: Government Code Section 54957.6(a)
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.
2. CONFERENCE WITH CITY ATTORNEY- POTENTIAL LITIGATION
Significant Exposure to Litigation (One Potential Case, as Petitioner) -
Initiative Measure Palo Alto Accountable and Affordable Health
Care Initiative
Authority: Government Code Section 54956.9(d)(2)
2A. PUBLIC EMPLOYMENT
Title: City Manager
Authority: Government Code Section 54957(b)
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.
Minutes Approval 7:25-7:30 PM
3. Approval of Action Minutes for the May 29, 2018 Council Meeting
Consent Calendar 7:30-7:35 PM
Items will be voted on in one motion unless removed from the calendar by three Council Members.
Q&A 4. Accept the Stanford University Medical Center (SUMC) Annual Report
for Fiscal Year 2016-2017 and Find the SUMC Parties in Compliance
With the Development Agreement
Q & A 5.
Memo
Approval of Amendment Number One for Contract Number S16163447
With Brad Horak Consulting to Provide Public Safety Communications
Services, Extending the Period of Performance by Two -years, and
Increasing the Total Contract Amount by $40,000 to a Not -to -Exceed
Amount of $100,000
6. Approval of Contract Number C18171028A With SCS Field Services for
a Not -To -Exceed Amount of $373,362 for Landfill Gas and Leachate
Control Systems Monitoring and Reporting Services at the Palo Alto
Landfill for a Term of Three Years
7. Approval of a 1.5 Year Contract With the Empowerment Institute for
$25,000 for Community Engagement Block Program (Continued From
April 2, 2018)
Q&A 8. PUBLIC HEARING: Approval of a Finding That the California Avenue
Parking Garage Project (CIP PE -18000) is "Substantially Complex"
2 June 11, 2018
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.
Under Public Contract Code Section 7201 and Direction to Increase the
Contractor Retention Amount From Five Percent to Ten Percent
Action Items
Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials,
Unfinished Business and Council Matters.
Memo
7:35-7:45 PM
9. PUBLIC HEARING: to Hear Objections to the Levy of Proposed
Assessments on the Palo Alto Downtown Business Improvement
District; and Adoption of a Resolution Confirming the Report of the
Advisory Board and Levying Assessments for Fiscal Year 2019 on the
Downtown Palo Alto Business Improvement District
7:45-8:45 PM
10. PUBLIC HEARING and PROPOSITION 218 HEARING: Staff
Recommendation That the City Council Adopt the Following ten
Resolutions: Approving the Fiscal Year (FY) 2019 Electric Financial
Plan; Adopting an Electric Rate Increase of 6 Percent and Amending
Utility Rate Schedules E-1, E-2, E -2-G, E-4, E -4-G, E-4 TOU, E-7, E -7-
G, E-7 TOU, and E-14; Approving the FY 2019 Gas Utility Financial
Plan; Adopting a Gas Rate Increase of 4 Percent and Amending Utility
Rate Schedules G-1, G-2, G-3, and G10; Approving the FY 2019
Wastewater Collection Utility Financial Plan; Adopting a Wastewater
Collection Rate Increase of 11 Percent and Amending Utility Rate
Schedules S-1, S-2, S-6, and S-7; Approving the FY 2019 Water Utility
Financial Plan; Adopting a Water Rate Increase of 3 Percent and
Amending Utility Rate Schedules W-1, W-2, W-3, W-4, and W-7;
Amending Utility Rate Schedule D-1 to Increase Storm Drain Rates 2.9
Percent per Month per Equivalent Residential Unit for FY 2019; and
Adopting a Dark Fiber Rate Increase of 2.9 Percent and Amending
Utility Rate Schedules EDF-1 and EDF-2
8:45-9:45 PM
11. PUBLIC HEARING LEGISLATIVE AND QUASI-JUDICIAL 250 and 350
Sherman Avenue, Public Safety Building Project: Adoption of: 1) a
Resolution Certifying the Final Environmental Impact Report and
Adopting Findings and a Mitigation Monitoring and Reporting Program
Pursuant to the California Environmental Quality Act for the Project
Comprised of a new Public Safety Building at 250 Sherman Avenue
and a new Four-story Parking Structure at 350 Sherman Avenue; 2)
an Ordinance Amending the Public Facilities (PF) Zone Development
Standards in Chapter 18.28 of Title 18 of the Palo Alto Municipal Code;
and 3) a Record of Land Use Action Approving Architectural Review
Application [File 17PLN-00257] for a new Four-story Parking Structure
3 June 11, 2018
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.
at 350 Sherman Avenue to Provide 636 Public Parking Spaces Above
and Below Grade. Planning and Transportation Commission Review
Recommended Modification to PF Zoning Development Standards on
January 31, 2018 (Continued From June 4, 2018)
9:45-10:30 PM
12.
Accept the City Clerk's Report Certifying the Sufficiency of the
Initiative Petition to Amend the Comprehensive Plan and Zoning Code
to Reduce the Maximum Allowable New Office and R&D Development
from 1.7 Million Square Feet to 850,000 Square Feet, Subject to
Specified Exemptions; and Adopt a Resolution Placing the Initiative
Petition on the November 2018 Ballot, or Adopt the Petition as an
Ordinance Without Alteration, or Provide Other Direction to Staff
13. Accept the City Clerk's Report Certifying the Sufficiency of an
Initiative Petition to Limit Health Care Costs that Hospitals and
Medical Clinics May Charge; and Adopt a Resolution Placing the
Initiative Petition on the November 2018 Ballot, or Adopt the Petition
as an Ordinance Without Alteration, or Provide Other Direction to
Staff
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 June 11, 2018
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 Council Meeting -REVISED June 12, 2018
Policy and Services Committee Meeting Cancellation June 12, 2018
Council Rail Committee Meeting June 13, 2018
Schedule of Meetings
Schedule of Meetings
Tentative Agenda
Tentative Agenda
Informational Report
City of Palo Alto's Energy Risk Management Report for the First Half of Fiscal
Year 2018
Council Roster
Public Letters to Council
Set 1 Set 2
5 June 11, 2018
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.
CITY OF
PALO
ALTO
CITY OF PALO ALTO OFFICE OF THE CITY CLERK
June 11, 2018
The Honorable City Council
Attention: Finance Committee
Palo Alto, California
Approval of Action Minutes for the May 29, 2018 Council Meeting
Staff is requesting Council review and approve the attached Action Minutes.
ATTACHMENTS:
• Attachment A: 05-29-18 DRAFT Action Minutes (DOCX)
Department Head: Beth Minor, City Clerk
Page 2
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CITY OF
PALO
ALTO
CITY OF PALO ALTO CITY COUNCIL
DRAFT ACTION MINUTES
Special Meeting
May 29, 2018
The City Council of the City of Palo Alto met on this date in the Council
Chambers at 5:01 P.M.
Present: DuBois, Filseth, Fine; Holman arrived at 5:07 P.M., Kniss; Kou
arrived at 8:10 P.M., Scharff; Tanaka arrived at 5:03 P.M.,
Wolbach
Absent:
Closed Session
1. CONFERENCE WITH CITY ATTORNEY -POTENTIAL LITIGATION
Significant Exposure to Litigation (One Potential Case, as
Plaintiff/Defendant) - Issues Relating to the Cable Franchise and
Public, Education and Government (PEG) Fee Audit (May 10, 2016)
Authority: Government Code Section 54956.9(d) (2).
2. PUBLIC EMPLOYMENT
Title: City Manager
Authority: Government Code Section 54957(b).
MOTION: Council Member Wolbach moved, seconded by Vice Mayor Filseth
to go into
Closed Session.
MOTION PASSED: 5-0-1 Scharff abstain, Holman, Kou, Tanaka absent
Council went into Closed Session at 5:02 P.M.
Council returned from Closed Session at 7:12 P.M.
Mayor Kniss announced no reportable action.
Agenda Changes, Additions and Deletions
MOTION: Council Member Fine moved, seconded by Council Member
Holman to continue Agenda Item Number 7- Adoption of an Updated Salary
Schedule and Revised Compensation Plan... to June 18, 2018.
Page 1 of 8
DRAFT ACTION MINUTES
MOTION PASSED: 8-0 Kou absent
Minutes Approval
3. Approval of Action Minutes for the May 14, 2018 Council Meeting.
MOTION: Council Member Scharff moved, seconded by Vice Mayor Filseth
to approve the Action Minutes for the May 14, 2018 Council Meeting.
MOTION PASSED: 8-0 Kou absent
Consent Calendar
Council Member Holman registered a no vote on Agenda Item Number 4 -
Preliminary Approval of the Downtown Business Improvement District
(BID)...
Council Member Tanaka registered a no vote on Agenda Item Number 6 -
Approval of Three Contracts...
MOTION: Vice Mayor Filseth moved, seconded by Council Member Scharff
to approve Agenda Item Numbers 4-6, 8.
4. Preliminary Approval of the Downtown Business Improvement District
(BID) 2018-2019 Annual Report; and Resolution 9758 Entitled,
"Resolution of the Council of the City of Palo Alto Declaring an
Intention to Levy an Assessment Against Businesses Within the BID for
Fiscal Year 2019 and Setting a Time and Place for a Public Hearing on
June 11, at 6:00 PM or Thereafter, in the City Council Chambers."
5. Approval of Amendment Number One to Contract Number C17167868
With Artist Mary Lucking to Increase the Contract Amount by $10,000
for the Completion of the Public Art for the Highway 101 Bike and
Pedestrian Bridge.
6. Approval of Three Contracts: 1) a Five-year Contract With BrightView
Landscape Services in the Amount of $5,821,106 for Landscape
Maintenance Services; 2) a Five-year Contract With Gachina
Landscape Management, in the Amount of $376,842 for Landscape
Maintenance Services; and 3) a Five-year Contract With Acterra in the
Amount of $298,456 for Habitat Restoration in Foothills Park.
7. Adoption of an Updatcd Salary Schcdulc and Rcviscd Compcnsation
Plan for Unrcprcscntcd Limitcd Hourly Employccs Effcctivc July 1,
2017 Junc 30, 2021.
Page 2 of 8
City Council Meeting
Draft Action Minutes: 5/29/18
DRAFT ACTION MINUTES
8. Approval of a Construction Contract With State Roofing Systems, Inc.
in an Amount Not -to -Exceed $775,506 in the Roofing Replacement
(PF-00006) Capital Improvement Program Project to Provide
Construction Services to Replace the Existing Roofs at Ventura
Community Center Units 1, 2, & 3 and Repair the Water Damaged
Soffit Areas and Stucco Under all Three Roof Overhangs.
MOTION FOR AGENDA ITEM NUMBER 4 PASSED: 7-1 Holman no, Kou
absent
MOTION FOR AGENDA ITEM NUMBER 6 PASSED: 7-1 Tanaka no, Kou
absent
MOTION FOR AGENDA ITEM NUMBERS 5 AND 8 PASSED: 8-0 Kou
absent
Action Items
9. Resolution 9759, Entitled "Resolution of the Council of the City of
Palo Alto Designating 450 Bryant Street, Known as the Avenidas
Building, as a 'Sender Site' in the Transfer of Development Rights
(TDR) Program; Direction to Staff to Issue Requests for Proposals for
Avenidas and College Terrace Building TDRs; and Approval of
Commitment of Additional $2 Million for Enhancements to the New
Junior Museum and Zoo."
MOTION: Council Member Scharff moved, seconded by Council Member
Wolbach to:
A. Adopt a Resolution designating 450 Bryant Street, known as the
Avenidas Building, to be eligible as a "Sender Site" for 9,188 square
feet in the Transfer of Development Rights (TDR) program;
B. Direct the City Manager or his designee to issue a Request for
Proposals (RFP) for the sale of 9,188 square feet of TDRs from the
Avenidas Building at the minimum starting price of $275 per square
foot;
C. Direct the City Manager or his designee to issue a Request for
Proposals (RFP) for the sale of 2,500 square feet of TDRs from the
College Terrace Building located at 2300 Wellesley Street at the
minimum starting price of $275 per square foot and direct Staff to
return to City Council with the results of the RFP;
Page 3 of 8
City Council Meeting
Draft Action Minutes: 5/29/18
DRAFT ACTION MINUTES
D. Authorize the City Manager or his designee to transfer $2.5 million in
proceeds from the sale of the TDRs to Avenidas, to be used for the
cost of historic and seismic rehabilitation of the Avenidas Building
(this $2.5 million contribution will fulfill the remaining portion of the
City's pledge to contribute a total of $5 million towards the historic and
seismic rehabilitation of the Avenidas building); and
E. Approve the commitments described in Staff Report Attachment B
from the City Manager to Dick Peery in support of the Junior Museum
and Zoo (JMZ) project, stating that the City supports construction of
$2 million in enhanced features and will contribute an additional
$1 million toward the cost, with the Friends of the Junior Museum and
Zoo conducting private fundraising for $1 million, by fiscal year 2020.
MOTION SPLIT FOR THE PURPOSE OF VOTING
MOTION1: Council Member Scharff moved, seconded by Council Member
Wolbach to:
A. Adopt a Resolution designating 450 Bryant Street, known as the
Avenidas Building, to be eligible as a "Sender Site" for 9,188 square
feet in the Transfer of Development Rights (TDR) program;
B. Direct the City Manager to issue a Request for Proposals (RFP) for the
sale of 9,188 square feet of TDRs from the Avenidas Building at the
minimum starting price of $275 per square foot;
C. Direct the City Manager or his designee to issue a Request for
Proposals (RFP) for the sale of 2,500 square feet of TDRs from the
College Terrace Building located at 2300 Wellesley Street at the
minimum starting price of $275 per square foot and direct Staff to
return to City Council with the results of the RFP; and
D. Authorize the City Manager or his designee to transfer $2.5 million in
proceeds from the sale of the TDRs to Avenidas, to be used for the
cost of historic and seismic rehabilitation of the Avenidas Building (this
$2.5 million contribution will fulfill the remaining portion of the City's
pledge to contribute a total of $5 million towards the historic and
seismic rehabilitation of the Avenidas building).
AMENDMENT TO MOTION1: Council Member Holman moved, seconded by
Council Member XX to replace in Motionl Parts B and C, "$275" with "$300."
AMENDMENT TO MOTION1 FAILED DUE TO THE LACK OF A SECOND
Page 4 of 8
City Council Meeting
Draft Action Minutes: 5/29/18
DRAFT ACTION MINUTES
MOTION1 PASSED: 7-2 Filseth, Kou no
MOTION2: Council Member Scharff moved, seconded by Council Member
Wolbach to:
E. Approve the commitments described in Staff Report Attachment B
from the City Manager to Dick Peery in support of the Junior Museum
and Zoo (JMZ) project, stating that the City supports construction of
$2 million in enhanced features and will contribute an additional $1
million toward the cost, with the Friends of the Junior Museum and Zoo
conducting private fundraising for $1 million, by fiscal year 2020.
MOTION2 PASSED: 8-1 Kou no
10. Connecting Palo Alto Rail Program Status Update and Initial Screening
of Ideas for Further Study (Continued From May 14, 2018).
Mayor Kniss advised she will not participate in this Agenda Item because she
owns real property within 500 feet of the Caltrain rail corridor. She left the
meeting at 9:09 P.M.
Vice Mayor Filseth advised he will not participate in this Agenda Item
because he owns real property within 500 feet of the Caltrain rail corridor.
He left the meeting at 9:09 P.M.
Council Member DuBois advised he will not participate in this Agenda Item
because he lives within 500 feet of the Caltrain rail corridor. He left the
meeting at 9:09 P.M.
Council took a break from 9:09 P.M. to 9:21 P.M.
MOTION: Council Member Fine moved, seconded by Council Member
Wolbach to:
A. Approve moving forward with the following specific grade separation
options, and authorize polling if Staff deems appropriate:
i. CAH - Churchill Avenue roadway under railroad hybrid;
ii. CAR - Churchill Avenue roadway over railroad reverse hybrid;
ii i . CAX - Churchill Avenue crossing closed; improvement options
include: widen existing Embarcadero Road undercrossing, add
new traffic signals at Embarcadero Road ramps, build
bike/pedestrian crossing at Churchill Avenue, and/or build Seale
Avenue bike/pedestrian crossing to connect to Peers Park and
Page 5 of 8
City Council Meeting
Draft Action Minutes: 5/29/18
DRAFT ACTION MINUTES
Stanford Avenue bicycle boulevard;
iv. MCL - Meadow Drive and Charleston Road railroad over roadway
hybrid and build Loma Verde Avenue bike/pedestrian crossing to
connect to Margarita Avenue bicycle boulevard;
v. MCR - Meadow Drive and Charleston Road roadway over railroad
reverse hybrid and build Loma Verde Avenue bike/pedestrian
crossing to connect to Margarita Avenue bicycle boulevard;
vi. MCT - Meadow Drive and Charleston Road roadway over railroad
trench or tunnel; Alma Street would not be within trench or
tunnel (maintains Alma Street connections to Meadow Drive and
Charleston Road);
vii. MCV - Meadow Drive and Charleston Road railroad over roadway
viaduct;
viii. PAH - Continue proposed Menlo Park railroad over roadway
hybrid and/or viaduct across San Francisquito Creek and Palo
Alto Avenue;
ix. PCX - Palo Alto Avenue crossing closed; improvement options
include: build an Everett Avenue bike/pedestrian undercrossing
and widen University Avenue; and
x. WBP - City-wide deep -bore railroad under roadway tunnel within
Palo Alto city limits with two new underground rail stations.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion, "direct Staff to return to the
Rail Committee and/or Council with an enhanced community engagement
plan in June." (New Part B.i.)
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion, "direct Staff to continue
exploring the future of freight and the possibility of 2 percent grade." (New
Part B.ii.)
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to add to the Motion, "direct Staff to engage with
our lobbyists to help with freight, funding, and other matters." (New
Part B.iii.)
Page 6 of 8
City Council Meeting
Draft Action Minutes: 5/29/18
DRAFT ACTION MINUTES
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER OR SECONDER to add to the Motion Part A.x., "with or without
freight."
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER OR SECONDER to add to the Motion Part A.xi., "with Alma Street in
its existing alignment or a new alignment."
AMENDMENT: Council Member Tanaka moved, seconded by Council
Member Kou to add to the Motion, "take permanent eminent domain off the
table."
AMENDMENT RESTATED: Council Member Tanaka moved, seconded by
Council Member Kou to add to the Motion, "take full permanent property
takings off the table."
AMENDMENT AS AMENDED FAILED: 2-4 Kou, Tanaka yes, DuBois,
Filseth, Kniss absent
AMENDMENT: Council Member Tanaka moved, seconded by Council
Member XX to add to the Motion, "take widening Embarcadero Road off the
table."
AMENDMENT FAILED DUE TO THE LACK OF A SECOND
MOTION AS AMENDED RESTATED: Council Member Fine moved,
seconded by Council Member Wolbach to:
A. Approve moving forward with the following specific grade separation
options, and authorize polling if Staff deems appropriate:
i. CAH - Churchill Avenue roadway under railroad hybrid;
ii. CAR - Churchill Avenue roadway over railroad reverse hybrid;
ii i . CAX - Churchill Avenue crossing closed; improvement options
include: widen existing Embarcadero Road undercrossing, add
new traffic signals at Embarcadero Road ramps, build
bike/pedestrian crossing at Churchill Avenue, and/or build Seale
Avenue bike/pedestrian crossing to connect to Peers Park and
Stanford Avenue bicycle boulevard;
iv. MCL - Meadow Drive and Charleston Road railroad over roadway
hybrid and build Loma Verde Avenue bike/pedestrian crossing to
connect to Margarita Avenue bicycle boulevard;
Page 7 of 8
City Council Meeting
Draft Action Minutes: 5/29/18
DRAFT ACTION MINUTES
v. MCR - Meadow Drive and Charleston Road roadway over railroad
reverse hybrid and build Loma Verde Avenue bike/pedestrian
crossing to connect to Margarita Avenue bicycle boulevard;
vi. MCT - Meadow Drive and Charleston Road roadway over railroad
trench or tunnel; Alma Street would not be within trench or
tunnel (maintains Alma Street connections to Meadow Drive and
Charleston Road) with Alma Street in its existing alignment or a
new alignment;
vii. MCV - Meadow Drive and Charleston Road railroad over roadway
viaduct;
viii. PAH - Continue proposed Menlo Park railroad over roadway
hybrid and/or viaduct across San Francisquito Creek and Palo
Alto Avenue;
ix. PCX - Palo Alto Avenue crossing closed; improvement options
include: build an Everett Avenue bike/pedestrian undercrossing
and widen University Avenue;
x. WBP - City-wide deep -bore railroad under roadway tunnel within
Palo Alto city limits with two new underground rail stations with
or without freight;
B. Direct Staff to:
Return to the Rail Committee and/or Council with an enhanced
community engagement plan in June;
ii. Continue exploring the future of freight and the possibility of 2
percent grade;
Engage with our lobbyists to help with freight, funding, and other
matters.
MOTION AS AMENDED PASSED: 6-0 DuBois, Filseth, Kniss absent
State/Federal Legislation Update/Action
None.
Adjournment: The meeting was adjourned at 12:19 A.M.
Page 8 of 8
City Council Meeting
Draft Action Minutes: 5/29/18
CITY OF
PALO
ALTO
City of Palo Alto (ID # 8999)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 6/11/2018
Summary Title: SUMC Annual Report 2016-2017
Title: Accept the Stanford University Medical Center (SUMC) Annual Report
for Fiscal Year 2016-2017 and Find the SUMC Parties in Compliance With the
Development Agreement
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that the City Council:
1. Review the Stanford University Medical Center (SUMC) Annual Report for Fiscal Year
2016-2017 and find that the Stanford Parties (Stanford Hospitals & Clinics, Lucile
Packard Children's Hospital, and Stanford University) have complied in good faith with
the terms and conditions of the Development Agreement; and
2. Find that the SUMC Parties are not in default with the terms and conditions of the
Agreement.
3. Accept the City of Palo Alto's (City) Annual Report Supplement regarding the funds
received by the SUMC Parties as required under Section 12(d) of the Development
Agreement. (Attachment C)
Executive Summary
The City Council is required to review the Development Agreement between the SUMC Parties
and the City of Palo Alto on an annual basis to ascertain compliance with the terms of the
agreement. The SUMC Parties have submitted the FY 2016-2017 Annual Report that
summarizes the construction activities and other actions taken to fulfill the obligations of the
Development Agreement. Of note, the SUMC Parties report achieving a 39.1% alternative
transportation mode split which exceeds the Alternative Mode Share target of 30.0% for 2018.
The SUMC Parties have paid approximately $32.5 million in public benefit fees to the City since
June 6, 2011 through the FY 2016-2017 reporting period. City Council reviewed and approved
use of the existing SUMC contributed funds for a wide variety of capital projects and partial
funding of Project Safety Net operations.
City of Palo Alto Page 1
Background
On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes,
a conditional use permit, annexation and design applications for the Stanford University
Medical Center Facilities Renewal and Replacement Project (the "Projects"). The Projects
include the construction of a new Stanford Hospital and clinics buildings, an expansion of the
Lucile Packard Children's Hospital, construction of new School of Medicine buildings,
renovation of the existing Hoover Pavilion, construction of a new medical office building and
parking garage at Hoover Pavilion, roadway improvements along Welch Road and Durand Way,
and SUMC design guidelines. A Development Agreement (the "Agreement") vesting these
approvals was entered into between the SUMC Parties and the City; the Agreement was
deemed effective on June 6, 2011 and continues for thirty (30) years from the effective date.
The Agreement requires annual City Council review of the SUMC Parties compliance.
This report covers the SUMC Parties activities during the FY 2016-2017 reporting period, the
sixth year of the Agreement. Last year's SUMC Annual Report and compliance documentation
can be found in the following documents:
• Fiscal Year 2015-2016
https://www.cityofpaloalto.org/civicax/filebank/documents/60896
To obtain the latest information regarding the Stanford University Medical Center project
construction, members of the public may wish to visit the Stanford -hosted website
(http://www.sumcrenewal.org) and sign up for the 10 -day Look Ahead weekly email
notifications (http://www.sumcrenewal.org/contact-us/?signup=1).
Discussion
As described in Development Agreement Section 12, "Periodic Review of Compliance," the City
Council is to review the Agreement annually in order to ascertain the SUMC Parties' compliance
with the terms of the Agreement. Section 12 also includes the reporting requirement for the
SUMC Parties and the City to demonstrate good faith compliance with the Agreement. The FY
2016-2017 SUMC Annual Report, dated July 6, 2017 (Attachment A), describes the SUMC
Parties' activities related to implementation of the Agreement and is summarized below along
with notable activities from prior reporting periods.
Construction Activities and Net New Square Footage
The SUMC Annual Report summarizes the construction activities within the reporting period, as
well as provides a summary of net new square footage added within the past year.
Construction activities during this reporting period included:
• Lucile Packard Children's Hospital (LPCH) — Substantial construction progress continued
during the FY 2016-2017 reporting period and LPCH anticipated opening for patient care in
late 2017.
• New Stanford Hospital (NSH) - Substantial construction progress continued during the FY
2016-2017 reporting period. NSH is anticipated to complete construction in 2019.
City of Palo Alto Page 2
• School of Medicine (SOM) Buildings- The School of Medicine commenced site preparation
and other activities during the FY 2016-2017 reporting period for the new Biomedical
Innovations Building.
Construction activities in past reporting periods included:
• Hoover Pavilion Renovation- Site work and renovation of the exterior and interior features
of the building have been completed and in December 2012, Hoover Pavilion re -opened,
providing a modern medical office and clinics to the SUMC community. The renovation
project is considered to be complete.
• Hoover Pavilion Parking Garage- Site work and construction for the new 1,084 -stall parking
garage was completed in Fall 2013. It is now open for use by patients and staff.
• Welch Road Utilities Project- This project involves the replacement and installation of
utilities to support the New Stanford Hospital and the Lucille Packard Children's Hospital
expansion. The construction portion of this project was considered to be largely complete in
2013 and two-way automobile traffic currently operates on Welch Road. The SUMC Parties
and the City are currently in the process of finalizing easements and maintenance
agreements.
• Hoover Medical Office Building "Neuroscience Health Center" — Site work and construction
for the building was completed in October 2015 and the Neuroscience Health Center
opened in January 2016.
As discussed in past reporting periods, a total of approximately 133,731 square feet of floor
area was demolished at the Stanford Hospital, Lucile Packard Children's Hospital, and Hoover
Pavilion sites and only the opening of the Neuroscience Health Center at the Hoover Pavilion
site represents net new square footage that has received occupancy permits. During the FY
2016-2017 reporting period, none of the aforementioned sites received occupancy permits for
net new floor area.
Compliance with Development Agreement Obligations
The SUMC Annual Report also summarizes the SUMC Parties' progress in meeting terms
described in Section 5 of the Agreement, "SUMC Parties' Promises," including with respect to
the following obligation items:
• Health Care Benefits;
• Fiscal Benefits;
• Traffic Mitigation and Reduced Vehicle Trips;
• Linkages (Pedestrian, Bicycle, and Transit);
• Infrastructure, Sustainable Neighborhoods & Communities, Affordable Housing, and
• Climate Change.
City staff reviewed this information within the SUMC Annual Report and determined that it is
complete and correct. A summary of the obligations and staff -confirmed status can be found in
Table 1: Development Agreement, Section 5 — SUMC Parties' Promises (Attachment B).
City of Palo Alto Page 3
Traffic Mitigation and Reduced Vehicle Trips
The SUMC Parties have made substantial progress in meeting the traffic and alternative
transportation obligations of the Agreement. Specifically, they have accomplished the
following:
• Annually purchasing CalTrain Go Passes for all eligible employees as of January 1, 2012,
which was three years ahead of the September 1, 2015 requirement in the Agreement;
• Previously purchasing shuttle buses for the Marguerite Shuttle service, as well as ongoing
annual payments to cover the net increase in operating costs for the Marguerite Shuttle
service;
• Hiring and maintaining a Transportation Demand Management (TDM) coordinator position
since March 13, 2012, three years ahead of the September 1, 2015 requirement as stated in
the Agreement, and
• Achieving another increase in the alternative transportation mode split from 31.9% in the
FY 2015-2016 reporting period to 39.1% of hospital employees using alternative modes to
get to work rather than driving alone in the FY 2016-2017 reporting period.
The 39.1% mode split exceeds the alternative mode share target for 2018 of 30.0%. It is
anticipated that the SUMC Parties will continue to meet or exceed the alternative mode share
targets for 2021 (33.0%) and 2025 (35.1%), especially with the implementation of Development
Agreement -required pedestrian, bicycle, and transit linkage improvements that are planned for
completion in 2018-2019.
The SUMC Parties and City staff will continue to monitor the TDM program throughout the
term of the Agreement and will continue annual reporting to City Council.
Supplement to the Annual Report
As described in Section 12(d) of the Agreement, City staff is required to prepare a supplement
to the Annual Report (the "Supplement") (Attachment C). The Supplement is to include an
accounting of the funds received from the SUMC Parties to satisfy the obligations outlined in
Section 5 of the Agreement, a description of the account balances, and a summary and
description of expenditures from the funds.
The SUMC Parties have paid approximately $32.5 million in public benefit fees to the City since
June 6, 2011. There were no required new payments from the SUMC Parties during the FY
2016-2017 reporting period. Payments made in late 2017 will be reflected in the next annual
report. There was a loss of investment earnings in FY 2016-2017 of $ ( - 38,520) due to the
recognition of unrealized losses across the city's investments as reported in the FY 2016-2017
comprehensive annual financial report (CAFR)
During the FY 2016-2017 reporting period, the City authorized transfers to the Capital
Improvement plan and Operating expenditures for the following:
City of Palo Alto Page 4
• $441,000 under the "Intermodal Transit Center" cost center for a Temporary Park
Connection between the Transit Center and El Camino Real (PL -16000).
• $359,000 under the "Quarry Road Improvements" cost center for completion of
enhancements to the pedestrian and bicycle connection from the west side of El Camino
Real to Welch Road, including urban design elements and wider bicycle lanes the public
right-of-way (PL -16000).
• $10,350,000 under the "Infrastructure and Affordable Housing" cost center for the
Charleston/Arastadero Corridor Project (PE -13011), the new Public Safety Building (PE -
15011), and the replacement of Fire Station 3 (PL -15003).
• $1,200,000 under the "Climate Change & Sustainability" cost center for the
implementation of the Bicycle & Pedestrian Transportation Plan (PL -04010).
• $85,000 under the "Community Health & Safety" cost center for partial funding of
Project Safety Net Program operations (Actual is $30,033).
General Fund Sales and Use Tax revenues in calendar year 2016 resulting from construction -
related activities totaled $883,767, based on the City Auditor's review of the Construction Sales
& Use Tax Monitoring Report submitted by Stanford Medicine on June 30, 2017. The City
Auditor submitted a letter to Stanford Medicine noting that local tax for the project for
calendar years 2011 through 2016 totaled $2,896,941, which was $6,102 more than what was
listed in the Construction Sales & Use Tax Monitoring Report.
Future Use of Development Agreement Funds
The funds received by the City as a result of the Development Agreement represent a
significant portion of future funding for implementation of the City's Infrastructure Plan. Over
the course of the 2018-2022 CIP, transfers to the Capital Improvement Fund totaling $18.8
million are anticipated. This funding will support a variety of ongoing and new projects
including the Bicycle and Pedestrian Transportation Plan (PL -04010), the New Public Safety
Building (PE -15011), the reconstruction of Fire Station 3 (PE -15003) and Fire Station 4 (PE -
18004), the New Downtown Garage (PE -15007), and the Charleston Arastradero Corridor
Improvements Project (PE -13011).
For additional information about the future use of development agreement funds, please refer
to the following:
• Fiscal Year 2018 Adopted Operating Budget document, Special Revenue Funds section:
• https://www.cityofpaloalto.org/civicax/filebank/documents/61330; and
• Fiscal Year 2018 Adopted Capital Improvement Budget document:
• https://www.cityofpaloalto.org/civicax/filebank/documents/61331.
City of Palo Alto Page 5
Resource Impact
There are no impacts to the City's FY 2018 budget as a result of issuing this FY 2016-2017
Annual Report for the SUMC Development Agreement. As stated above, the SUMC Parties have
paid approximately $32.5 million in public benefit fees to the City since June 6, 2011 through
the FY 2016-2017 reporting period.
Policy Implications
This report does not represent any changes to existing City policies.
Environmental Review
Finding the SUMC Parties in compliance with the Terms of the Agreement is not a project under
the California Environmental Quality Act and no environmental assessment is required for the
annual compliance review. An environmental impact report for the entire SUMC project was
prepared and certified by the City Council prior to approval of the Development Agreement.
Attachments:
• Attachment A: SUMC Annual Report 2016-2017
• Attachment B: Table 1 -Development Agreement
• Attachment C: (PART 1) SUMC Annual Report Supplement FY2016_17
• Attachment C: (PART 2) SUMC Annual Report Supplement FY2016_17 Attachment A
City of Palo Alto Page 6
Attachment A -
2016-17 ANNUAL REPORT
PREPARED FOR THE CITY OF PALO ALTO 1 JULY 6, 2017
CONTENTS
EXECUTIVE SUMMARY 1
BACKGROUND AND PURPOSE
2
2016-2017 SUMMARY OF PROGRESS 3
LUCILE PACKARD CHILDREN'S HOSPITAL 3
NEW STANFORD HOSPITAL 4
SCHOOL OF MEDICINE 5
NET NEW SQUARE FOOTAGE 6
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS 7
HEALTH CARE BENEFITS 7
SECTION 5(a)(ii). FUND FOR HEALTHCARE SERVICES 7
SECTION 5(a)(iii). FUND FOR COMMUNITY HEALTH AND SAFETY PROGRAMS 7
PALO ALTO FISCAL BENEFITS 8
SECTIONS 5(b)(i) AND 5(b)(ii). PAYMENT OF SALES AND USE TAXES 8
SECTION 5(b)(iii). FUNDING OF OPERATING DEFICIT 9
SECTION 5(b)(iv). PAYMENT OF UTILITY USER TAX 9
SECTION 5(b)(v). SCHOOL FEES 9
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS 10
SECTION 5(c)(ii). MENLO PARK TRAFFIC MITIGATION 10
SECTION 5(c)(iii). EAST PALO ALTO VOLUNTARY MITIGATION 10
SECTION 5(c)(iv). CONTRIBUTIONS TO AC TRANSIT 10
SECTION 5(c)(v). OPTICOM PAYMENTS 11
SECTION 5(c)(vi). CALTRAIN GO PASSES 11
SECTION 5(c)(vii). MARGUERITE SHUTTLE SERVICE 11
SECTION 5(c)(viii). TRANSPORTATION DEMAND MANAGEMENT COORDINATOR 11
SECTION 5(c)(ix). MONITORING OF TDM PROGRAMS 12
LINKAGES 13
SECTION 5(d)(i). INTERMODAL TRANSIT FUND 13
SECTION 5(d)(ii). QUARRY ROAD FUND 13
SECTION 5(d)(iii). STANFORD BARN CONNECTION 14
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING
SECTION 5(e).
CLIMATE CHANGE
SECTION 5(f). CLIMATE CHANGE FUND
SATISFACTION OF CONDITIONS OF APPROVAL
SECTION 5(h). SATISFACTION OF ALL CONDITIONS OF APPROVAL
14
14
14
14
15
15
CONCLUSION 16
EXECUTIVE SUMMARY
On June 6, 2011, the Stanford University Medical Center parties (now Stanford Medicine) —comprised
of Stanford Hospital and Clinics (now Stanford Health Care), Lucile Packard Children's Hospital, and
Stanford University —entered into a Development Agreement with the City of Palo Alto, committing to
provide a range of community benefits in exchange for vested development rights to develop and use the
Stanford Medicine Renewal and Replacement Project ("Renewal Project") facilities in accordance with
the approvals granted by the City, and a streamlined process for obtaining subsequent project approvals.
The Renewal Project —driven by a growing demand for healthcare services, state -mandated seismic
safety requirements, and the need to replace outmoded facilities with modern, technologically advanced
spaces —holds the potential to transform the way that healthcare is delivered and research is conducted.
Today, six years after the execution of the Development Agreement, the Hospital projects are moving
closer to completion, with the first Hospital occupancy permit anticipated to be issued in late 2017.
Meanwhile, the School of Medicine is beginning the first phase of development of its replacement
facilities.
Against this backdrop, Stanford Medicine submits its Annual Report in compliance with Section 12(c) of
the Development Agreement, and looks forward to continued collaboration with the City of Palo Alto in
advancing the goals of both Stanford Medicine and the broader community.
ANNUAL REPORT 2016-17
BACKGROUND AND PURPOSE
The Palo Alto City Council's unanimous approval of the entitlements for the Stanford Medicine
Renewal and Replacement Project in July 2011 has paved the way for a historic investment in new
and replacement facilities for Stanford Medicine. The project approvals —including new zoning for the
Renewal Project sites, a conditional use permit, architectural review approval, and the execution of a
Development Agreement —allow for the construction of approximately 1.3 million net new square feet of
hospital facilities, clinics, medical offices, and medical research spaces, and will enable the Hospitals to
optimize the delivery of healthcare services to patients, and maintain their position as leading providers of
world -class healthcare.
In order to facilitate this important replacement and expansion work, the Stanford Medicine parties
entered into a Development Agreement with the City of Palo Alto, which includes a comprehensive
package of community benefits and additional development conditions. In exchange for these benefits,
the City has vested for a period of 30 years Stanford Medicine's rights to develop and use the property
in accordance with the project approvals, and agreed to streamline the process for obtaining subsequent
approvals.
The terms of the Development Agreement (Section 12(c)) provide for a periodic review of compliance,
and require that Stanford Medicine submit an Annual Report to the City of Palo Alto's Director of Planning
and Community Environment each year within 30 days of the anniversary of the agreement effective
date (June 6, 2011). The Annual Report is to summarize Stanford Medicine's progress on the Renewal
Project, including a list of net new square footage for which a certificate of occupancy has been received,
and a description of the steps that Stanford Medicine has taken to comply with the obligations listed in
Section 5 of the Development Agreement. With this report, Stanford Medicine fulfills these requirements.
Within 45 days of receipt of this Annual Report, the City will prepare a Supplement to the Annual Report,
to provide an accounting of the City's balances and expenditures from each of the City Funds and how
they were used.
2
ANNUAL REPORT 2016-17
2016-2017 SUMMARY OF PROGRESS
The Renewal Project continues to progress, with construction activities for both Hospitals moving
closer to completion, and site preparation work for the first of the new School of Medicine facilities now
underway. The section to follow provides an overview of central goals for the project elements that
presently are under construction or nearing construction, a synopsis of progress to date, as well as a
preview of near -term upcoming activities.
LUCILE PACKARD CHILDREN'S HOSPITAL
In response to growing community needs for specialized pediatric and obstetric care, Lucile Packard
Children's Hospital is opening an expanded facility. The new hospital, to be located adjacent to the
current Packard Children's Hospital, will provide patients and doctors with the most modern clinical
advancements and technology, while also creating a more patient- and family -centered environment
of care, with additional single -patient rooms and more spaces for families to be with their child during
treatment and recovery.
The Packard Children's expansion will feature a new entrance lobby, public concourse with dining, three
floors of nursing units, and new patient rooms. Spaces have been designed with an attention to natural
light and views, and the exterior grounds —more than 3.5 acres of outdoor areas and gardens —will
provide a park -like setting for patients, families, and visitors.
In the past year, significant construction progress has been made on the LPCH expansion project —
the exterior enclosure of the building has been completed, and interior finish construction has been
underway. Installation of medical equipment and furniture is currently in progress, and all patient rooms
are now substantially complete. LPCH anticipates licensure by the State Department of Public Health
in late 2017; this will constitute issuance of an occupancy permit for purposes of the Development
Agreement.
ANNUAL REPORT 2016-17
2016-2017 SUMMARY OF PROGRESS
NEW STANFORD HOSPITAL
Stanford Health Care is constructing new and replacement hospital facilities that will usher in a new era
of advanced patient care. Growth in patient volumes and rapidly changing medical technology have
rendered much of the existing midcentury hospital infrastructure inadequate, while new seismic safety
requirements have accelerated the need to construct replacement facilities.
The New Stanford Hospital will substantially increase capacity, and will also address a rapidly advancing
medical landscape. High-tech spaces such as Surgery, Radiology, and Intensive Care will be replaced
to accommodate the latest advances in medical technology, while still retaining the flexibility to adapt
to future innovations. Facilities will feature new patient rooms, an enlarged Level -1 trauma center
and Emergency Department, and new surgical, diagnostic, and treatment rooms. And foremost, the
new facility will create a healing environment responsive to the needs of patients, visitors, and staff.
Upper -level pavilions will feature light -filled patient rooms, and a mid -level garden floor will offer dining,
conference, and educational facilities, as well as social and spiritual support spaces.
Substantial progress has been made on the New Stanford Hospital project over the past year. The
exterior enclosure for the Hospital is now nearly complete, and interior finish construction and elevator
installation are underway. Site grading is also underway at the perimeter of the building, including the
Promenade area. Meanwhile, at the adjacent New Stanford Hospital Garage, interior construction of the
rooftop pavilions has been underway. A temporary Certificate of Occupancy issued by the City in 2014
allows for contractor parking while construction continues.
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ANNUAL REPORT 2016-17
2016-2017 SUMMARY OF PROGRESS
SCHOOL OF MEDICINE
The Stanford University School of Medicine will replace its outmoded research buildings with new
state-of-the-art facilities designed to support contemporary translational research. The new facilities
will accommodate 21st century medical advancements and enable the development of new medical
innovations. The new buildings will feature integrated laboratory suites, with easier access between
labs and support facilities, enabling transparency, flexibility, and collaboration. The new facilities will be
surrounded by landscaped areas and tree -lined walkways.
The School of Medicine development received architectural review approval for the first phase of its
development (Biomedical Innovations Building 1, or "BMI-1") from the City of Palo Alto in March 2017.
Since that time, site preparation activities have commenced, including the relocation of one large
protected -status oak from the project site to the Kaplan Lawn across South Pasteur Drive. Excavation is
currently underway for a new tunnel which will connect the future BMI-1 to the existing network of School
of Medicine tunnels and central loading dock. Applications for site utilities, grading, and building permits
are currently under City of Palo Alto review.
ANNUAL REPORT 2016-17
5
2016-2017 SUMMARY OF PROGRESS
NET NEW SQUARE FOOTAGE
The following table summarizes the net new square footage for which a certificate of occupancy has
been issued.
NEW STANFORD HOSPITAL
1101 Welch demolished
(40,100)
Total
(40,100)
LUCILE PACKARD CHILDREN'S HOSPITAL EXPANSION
701 Welch demolished
(56,300)
703 Welch demolished
(23,500)
Total
(79,800)
SCHOOL OF MEDICINE
None
0
HOOVER PAVILION
Misc. shops and storage demolished
(13,831)
Stanford Neuroscience Health Center (Hoover MOB)
91,605
ANNUAL REPORT 2016-17
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
This section of the Annual Report summarizes the steps that Stanford Medicine has taken to comply with
their obligations under Section 5 of the Development Agreement.
HEALTH CARE BENEFITS
In addition to the health care funds listed below, Stanford Medicine provides certain intrinsic benefits to
the community, as both a global leader in medical care and research, and as a community healthcare
services provider. The Renewal Project enables Stanford Medicine to continue its important work, and
the addition of more beds for adults and children will help to alleviate overcrowding. Additionally, the new
hospital facilities will provide critical emergency preparedness and response resources for the community
in the event of an earthquake, pandemic, or other major disaster.
Section 5(a)(ii). Fund for Healthcare Services
The Hospitals have designated the amount of $3 million for Healthcare Services, which will increase
to $5.6 million by December 31, 2025. No further action is required until 2026. This amount will be
reconciled with the construction use tax payments as described in Development Agreement Section 5(b)
(ii)(C), and will be spent between 2026 and 2036.
Section 5(a)(iii). Fund for Community Health and Safety Programs
Stanford Medicine has contributed a single lump -sum payment of $4 million to establish a Community
Health and Safety Program Fund for the City of Palo Alto. This fund is to be distributed to selected
community health programs that benefit residents of the City, including the Project Safety Net Program,
a community -based mental health plan for youth well-being in Palo Alto. Ajoint committee is to be
established to evaluate proposals regarding the other specific programs to receive funding, composed
of two representatives selected by Stanford Medicine and two representatives selected by the City; this
committee shall make annual recommendations to the City Council regarding proposed disbursements
from the Community Health and Safety Program Fund, and the City Council shall use its reasonable
discretion to decide whether to accept, reject, or modify the joint committee recommendations.
Stanford Medicine provided the entire required contribution to the Community Health and Safety
Program Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with
this Development Agreement provision. As required by Development Agreement Section 12(d), the City
will provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditures
from this fund, and the purposes for which the expenditures were used.
ANNUAL REPORT 2016-17 7
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
PALO ALTO FISCAL BENEFITS
The Stanford Medicine Renewal Project brings considerable fiscal benefits to the City of Palo Alto. The
project is expected to generate at least $8.1 million in sales and use tax revenues for the City, and multiple
mechanisms have been put into place to ensure that this target is met. The Development Agreement also
provides for further fiscal benefits to the City, including a payment by Stanford Medicine to fund the City's
operating deficit, and the payment of utility user taxes and school fees.
Sections 5(b)(i) and 5(b)(ii). Payment of Sales and Use Taxes
As required by the Development Agreement, Stanford Medicine submitted its annual Construction Sales
and Use Tax monitoring report to the City on June 30, 2017. The Stanford Medicine parties will continue
to submit such a report annually during the construction period for the Renewal Project so that the City
can determine the share of construction use taxes that it has received as a result of the Renewal Project.
Each year, within 60 days of receiving the monitoring report, the City will provide its determination of
the amount of construction use taxes that it has received as a result of the Renewal Project during the
preceding calendar year. In August 2026 or soon thereafter, Stanford Medicine and the City will conduct
a reconciliation process to confirm that the City has received at least $8.1 million in construction use taxes
as a result of the Renewal Project, as further described in Development Agreement Section 5(b)(ii).
To date, Stanford Medicine has taken the following steps detailed below to maximize the City's allocation
of sales and use taxes associated with Project construction and operation. Documentation of each of
these items is included in the 2016 construction use tax monitoring report already submitted.
• Stanford Medicine has obtained all permits and licenses necessary to maximize the City's allocation
of construction use taxes derived from the project, including California Seller's Permits and Use Tax
Direct Pay Permits. Copies of permits and licenses are attached to the 2016 monitoring report.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of sale of all fixtures furnished or installed as part of the project.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of use of all materials used in the construction of the project.
• Stanford Medicine has required all contractors and subcontractors to allocate the local sales and
use taxes derived from their contracts directly to the City. Stanford Medicine has used best efforts to
require contractors and subcontractors to complete and file any forms required by the State Board of
Equalization to effect these designations.
• Both Hospitals have obtained use tax direct pay permits from the State of California for their existing
facilities in order to increase the City tax allocation for the Hospitals' purchases. The Hospitals will
maintain the use tax direct pay permit for the life of the project.
• Finally, Stanford Medicine has assisted the City in establishing and administering a Retail Sales
and Use Tax Reporting District for the Renewal Project, to enable the City to track the generation,
allocation, reporting and payment of sales and use taxes derived from the Project.
8 ANNUAL REPORT 2016-17
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Section 5(b)(iii). Funding of Operating Deficit
In order to assure that City costs associated with the Renewal Project do not exceed revenues to the
City resulting from construction and operation of the project, Stanford Medicine has provided to the City a
single lump sum payment in the amount of $2,417,000. This payment was made on August 25, 2011. No
further action is required by Stanford Medicine to comply with this Development Agreement provision.
Section 5(b)(iv). Payment of Utility User Tax
Stanford Medicine will pay the City a utility user tax at a minimum rate of 5 percent of all electricity, gas,
and water charges allocable to new construction completed as part of the project for the life of the project.
This rate may be increased by the City as provided by Section 2.35.100(b) of the Municipal Code. The 5
percent utility user tax is currently being paid by Stanford Medicine.
Section 5(b)(v). School Fees
Stanford Medicine will pay to the City —who is then to forward to the Palo Alto Unified School District —
school fees upon issuance of each building permit from the City or OSHPD, in the amount that is
generally applicable to non-residential development at the time of payment based upon net new square
footage, as defined in the Development Agreement.
School fees were paid in 2012 for LPCH and SHC in the amounts of $188,815 and $153,802,
respectively. In July 2013, additional school fees were paid in the amount of $7,051 to account for
additional program square footage for the New Stanford Hospital and Garage. In May 2014, an additional
payment of school fees in the amount of $16,119 was made to account for the incremental square
footage associated with the Hoover Medical Office Building, beyond the 60,000 square feet originally
planned. In November 2015, additional school fees in the amount of $461.16 were paid to account for
incremental square footage for the New Stanford Hospital Garage.
ANNUAL REPORT 2016-17
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS
Stanford Medicine has taken a number of steps to mitigate the potential traffic impacts projected at full
project buildout. Already, Stanford Medicine provides a robust transportation demand management
program, offering a variety of incentives for employees to forego driving alone to work. As the Renewal
Project moves forward, Stanford Medicine will take the following actions outlined below.
Section 5(c)(ii). Menlo Park Traffic Mitigation
Stanford Medicine has agreed to contribute to the City of Menlo Park a total of $3,699,000 for use
in connection with traffic mitigation, infrastructure enhancements, and the promotion of sustainable
neighborhoods and communities and affordable housing. This contribution is to be made in three equal
payments; the first payment of $1,233,000 was made on August 19, 2011. The second payment of
$1,233,000 was made on December 5, 2012, following the November 2012 issuance of the first Hospital
foundation permit. The final payment will be made within 30 days from issuance of the first Hospital
occupancy permit, currently anticipated in late 2017.
Section 5(c)(iii). East Palo Alto Voluntary Mitigation
Stanford Medicine has contributed a single lump sum payment of $200,000 to East Palo Alto to be
used for roadway and traffic signal improvements on University Avenue. This payment was made on
August 19, 2011. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. In the event that Stanford Medicine does not meet alternative transportation mode
goals specified in the Development Agreement by 2025 and is assessed a $4 million payment under
Development Agreement section 5(c)(ix)(B), the City will be required to remit $150,000 of such payment
to the City of East Palo Alto.
Section 5(c)(iv). Contributions to AC Transit
The Hospitals have committed to offering the following contributions to AC Transit within 30 days from
issuance of the first Hospital occupancy permit:
• The Hospitals will offer to contribute a one-time payment of $250,000 to AC Transit to be used for
capital improvements to the U -Line to increase capacity (Section 5(c)(iv)(A)).
• The Hospitals will offer to make annual payments to AC Transit in a reasonable amount, not to exceed
$50,000, to be used for operating costs of the U -Line to maintain a load factor for bus service to the
Medical Center of less than 1 (Section 5(c)(iv)(B)).
• In order to encourage Hospital employees living in the East Bay to use public transit for their
commute, the Hospitals have committed to using best efforts to lease 75 parking spaces at the
Ardenwood Park and Ride lot, or an equivalent location, at a cost not to exceed $45,000 per year
(Section 5(c)(iv)(C)). No action is required at this time; however, since May 2014, a 100 -space park -
and -ride facility on Kaiser Drive at Campus Drive in Fremont (0.9 mile from Ardenwood Park & Ride)
has been under lease for the use of Stanford University and Hospital commuters.
These offers are anticipated to be made to AC Transit in late 2017, upon issuance of the first Hospital
occupancy permit.
10 ANNUAL REPORT 2016-17
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Section 5(c)(v). Opticom Payments
Within 30 days from issuance of the first Hospital occupancy permit, the Hospitals will pay $11,200 to
the City of Palo Alto to be used for the installation of Opticom traffic control systems at the following
seven intersections: El Camino Real/Palm Drive/University Avenue; El Camino Real/Page Mill Road;
Middlefield Road/Lytton Road; Junipero Serra/Page Mill Road; Junipero Serra/Campus Drive West;
Galvez/Arboretum; and the Alpine/280 Northbound ramp. This payment is anticipated to be made in late
2017, upon issuance of the first Hospital occupancy permit.
Section 5(c)(vi). Caltrain GO Passes
The Development Agreement requires that the Hospitals purchase annual Caltrain GO Passes for
all existing and new Hospital employees who work more than 20 hours per week at a cost of up to
approximately $1.8 million per year, beginning on September 1, 2015. This obligation is expected to
continue for a period of 51 years.
Hospital management accelerated the purchase of the annual GO Pass for Hospital employees, and
began providing free GO Passes to employees commencing on January 1, 2012. Further details
regarding the GO Pass purchase can be found in the Alternative Mode Share report, which was
submitted to the City on May 31, 2017.
Section 5(c)(vii). Marguerite Shuttle Service
The Hospitals will fund the reasonable costs, in an approximate amount of $2 million, for the purchase
of additional shuttle vehicles for the Marguerite shuttle service, as and when required to meet increased
demand for shuttle service between the project sites and the Palo Alto Intermodal Transit Station. In
addition, the Hospitals will fund as annual payments the reasonable costs, in an approximate amount
of $450,000 per year, to cover the net increase in operating costs for the Marguerite Shuttle. Demand
for the Marguerite shuttle increased in 2012, and the Hospitals funded the purchase of three new hybrid
shuttles to meet this increased demand. Since this time, the Hospitals have funded as annual payments
the reasonable costs of the net increase in operating costs for the Marguerite Shuttle.
Section 5(c)(viii). Transportation Demand Management Coordinator
The Development Agreement requires that the Hospitals employ an onsite qualified Transportation
Demand Management (TDM) Coordinator for Stanford Medicine, commencing on September 1, 2015,
and continuing through the life of the Renewal Project.
Because the Hospitals accelerated the purchase of the Caltrain GO Pass, the Hospitals also accelerated
the hiring of the TDM Coordinator, filling this position in March 2012. The TDM Coordinator (TDM
Program Manager) is responsible for analyzing, developing, and implementing programs to advance
the Hospitals' TDM objectives. Specifically, the position supports the Hospitals' TDM program by raising
awareness among commuters about alternative transportation options and Stanford's commute incentive
programs; providing alternative commute planning assistance and responses to customer inquiries;
writing and editing electronic and print communications; coordinating and staffing outreach events, such
as free transit pass distributions and employee fairs; and providing alternative transportation information
and resources at new employee orientations.
ANNUAL REPORT 2016-17 11
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Section 5(c)(ix). Monitoring of TDM Programs
The Hospitals are required to submit annual monitoring reports showing the current number of employees
employed over 20 hours per week; the number of employees using an alternative transportation mode as
documented by a study or survey to be completed by the Hospitals using a method mutually agreeable
to the City and the Hospitals; and the efforts used by the Hospitals to attempt to achieve the Alternative
Mode Targets identified in the Development Agreement. The Development Agreement specifies
payments to be made in the event that such targets are not met during particular time periods. Stanford
Medicine submitted its 2016-17 Alternative Mode Share Report to the City on May 31, 2017; this report
shows an alternative mode split of 39.1% for the Hospitals. This mode split exceeds the Alternative Mode
Share target for 2025.
ANNUAL REPORT 2016-17
12
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
LINKAGES
To further encourage use of Caltrain, bus, and other transit services, and to enhance and encourage use of
pedestrian and bicycle connections between Stanford Medicine and downtown Palo Alto, Stanford Medicine
has funded or will fund the following specific infrastructure improvements.
Section 5(d)(i). Intermodal Transit Fund
Stanford Medicine has provided to the City one lump sum payment of $2.25 million for improvements to
enhance the pedestrian and bicycle connection from the Palo Alto Intermodal Transit Center to the existing
intersection of El Camino Real and Quarry Road. Up to $2 million of this amount is to be used by the
City for the development of an attractive, landscaped passive park/green space with a clearly marked
and lighted pedestrian pathway, benches, and flower borders. Stanford Medicine paid the entire required
amount for the Intermodal Transit Fund on August 25, 2011. No further action is required by Stanford
Medicine to comply with this Development Agreement provision. As required by Development Agreement
Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of
the City's expenditures from this fund, and the purposes for which the expenditures were used. The City is
required to construct the improvements prior to issuance of the first Hospital Occupancy Permit, currently
anticipated to be issued in late 2017.
The City commenced work in February 2017 on a temporary path with associated lighting, landscaping
/ green space, benches, and flower borders from the transit center to the existing crosswalk at the
intersection of El Camino Real and Quarry Road; this scope is anticipated to be completed in July 2017.
Available funds remaining after this work is completed may be applied to the construction of permanent
improvements in the future.
Section 5(d)(ii). Quarry Road Fund
Stanford Medicine has provided to the City one lump sum payment of $400,000 for improvements to and
within the public right-of-way to enhance the pedestrian and bicycle connection from the west side of El
Camino Real to Welch Road along Quarry Road, including urban design elements and way finding, wider
bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus and/or shuttle stops, and
prominent bicycle facilities. Stanford Medicine paid the entire required amount for the Quarry Road Fund
on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City's expenditures from this fund, and
the purposes for which the expenditures were used. The City is required to construct the improvements
prior to issuance of the first Hospital Occupancy Permit, currently anticipated to be issued in late 2017.
The City has developed a design for bicycle enhancements along Quarry Road, but as agreed to with
Stanford Medicine, is delaying implementation of these improvements until planned utility trenching to the
Medical Center (anticipated for Summer 2017) is complete.
ANNUAL REPORT 2016-17 13
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Section 5(d)(iii). Stanford Barn Connection
Stanford Medicine will construct up to $700,000 of improvements to enhance the pedestrian connection
between the Main Medical Campus and the Stanford Shopping Center from Welch Road to Vineyard
Lane, in the area adjacent to the Stanford Barn. Stanford Medicine is required to construct these
improvements prior to issuance of the first Hospital Occupancy permit, currently anticipated to be issued
in late 2017. Stanford Medicine received architectural review approval for the proposed pedestrian
improvements on the Barn property in April 2017, and a building permit was issued in June 2017.
Construction of the improvements is expected to be completed in Fall 2017.
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND
AFFORDABLE HOUSING
Section 5(e). Infrastructure, Sustainable Neighborhoods and Communities, and Affordable
Housing
Stanford Medicine will contribute a total amount of $23.2 million toward City of Palo Alto infrastructure,
sustainable neighborhoods and communities, and affordable housing. The Development Agreement
requires this amount to be contributed in three equal payments. The first payment, in the amount of
$7,733,333, was made on August 25, 2011; the second payment of $7,733,333 was made on December
5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final
payment is to be made within 30 days from issuance of the first Hospital occupancy permit, currently
anticipated for late 2017. As required by Development Agreement Section 12(d), the City will provide
yearly Supplements to the Annual Report to provide an accounting of the City's expenditures from this
fund, and the purposes for which the expenditures were used.
The City will use $1,720,488 of these funds in the same manner as funds collected under the City's
housing fee ordinance.
CLIMATE CHANGE
Section 5(t). Climate Change Fund
Stanford Medicine will contribute a total amount of $12 million toward City projects and programs for a
sustainable community, including programs identified in the City's Climate Action Plan, carbon credits,
and investments in renewable energy and energy conservation. The Development Agreement requires
this amount to be contributed in three equal payments. The first payment, in the amount of $4 million,
was made on August 25, 2011; the second payment of $4 million was made on December 5, 2012,
following the November 2012 issuance of the first Hospital foundation permit; and the final payment is to
be made within 30 days from issuance of the first Hospital occupancy permit, currently anticipated for late
2017. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to
the Annual Report to provide an accounting of the City's expenditures from this fund, and the purposes for
which the expenditures were used.
14 ANNUAL REPORT 2016-17
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
SATISFACTION OF CONDITIONS OF APPROVAL
Section 5(h). Satisfaction of All Conditions of Approval
Stanford Medicine will satisfy all Conditions of Approval by the dates and within the time periods required
by the project approvals, and has taken several steps in order to ensure that this requirement is met
(Section 5(h)). The Conditions of Approval encompass conditions imposed by the Architectural Review
Board, mitigation measures enumerated in the Mitigation Monitoring and Reporting Program, and
conditions attached to the Conditional Use Permit.
In order to implement, monitor, and report on the implementation of this diverse array of conditions,
Stanford Medicine, with input from City planning staff, has created two Excel spreadsheet tracking
and reporting tools. These spreadsheets serve as a centralized repository for compliance monitoring
information and documentation, and are updated by the Stanford Medicine project teams on a regular
basis, and reviewed by the City.
ANNUAL REPORT 2016-17
CONCLUSION
As the Renewal Project completes its sixth year, Stanford Medicine looks forward to continued
engagement with the City of Palo Alto as the project continues to forge ahead.
ANNUAL REPORT 2016-17
Attachment B
Table 1: Development Agreement, Section 5 - SUMC Parties' Promises
FY 2016-17
DA Section
Description
Summary
Activity
Complies?
Health Care Benefits
5(a)(ii)
Fund for Healthcare
Services
Financial assistance for Palo
Alto residents
Establishment of $3M SUMC fund
Yes
5(a)(iii)
Fund for Community
Health and Safety
Programs
$4M fund for selected
community health
programs for Palo Alto
residents
Payment of $4M on August 25, 2011 to
establish City fund
Yes
Fiscal Benefits
5(b)(i), (ii)
Payment of Sales and Use
Taxes
Activities to maximize sales
and use taxes paid to the
City
General Fund Sales and Use Tax
revenues in calendar year 2016
resulting from construction -related
activities totaled $883,767, based on
the City Auditor's review of the
Construction Sales & Use Tax
Monitoring Report submitted by
Stanford Medicine on June 30, 2017.
The City Auditor submitted a letter to
Stanford Medicine noting that local tax
for the project for calendar years 2011
through 2016 totaled $2,896,941,
which was $6,102 more than what was
listed in the Construction Sales & Use
Tax Monitoring Report.
Ongoing
SUMC Development Agreement Compliance: 2016-2017
Attachment B
Table 1: Development Agreement, Section 5 - SUMC Parties' Promises
FY 2016-17
DA Section
Description
Summary
Activity
Complies?
5(b)(iii)
Funding of Operating
Deficit
$2.417M fund to address
long-term deficits
Payment of $2.417M on August 25,
2011 to establish fund. (B11)
Yes
5(b)(iv)
Payment of Utility Users
Tax
5% tax on all electricity, gas
and water charges on new
construction.
Utilities confirmed that billing accounts
were created when new meters were
set for new construction and the Utility
Users Tax has been paid through the
normal billing process for each site.
Yes
5(b)(v)
School Fees
Payment of PAUSD fees for
net new square footage
$342,617 fee paid for LPCH and NSH
expansion in 2012. $7,051 fee paid for
NSH and NSH Garage expansion in July
2013. $16,119 fee paid for Hoover
Medical Office Building expansion in
May 2014. $461.16 fee paid to account
for incremental square footage for the
New Stanford Hospital Garage.
Yes
Traffic Mitigation and Reduced Vehicle Trips
DA Section
Description
Summary
Activity
Complies?
5(c)(ii)
Menlo Park Traffic
Mitigation
$3.7M payment for traffic
mitigation, infrastructure,
sustainable neighborhoods,
affordable housing
First of three $1.23M payments made
on August 19, 2011. Second payment
of $1.23M made on December 5,
2012. Final Payment to be made
within 30 days from issuance of the
first Hospital Occupancy Permit.
Yes.
Also, payments
made in late
2017 will be
reflected in the
next annual
report.
SUMC Development Agreement Compliance: 2016-2017
Table 1: Development Agreement, Section 5 - SUMC Parties' Promises
FY 21316-17
5(c)(iii)
East Palo Alto Voluntary
Mitigation
$200K for Roadway and
single improvements on
University Ave.
$200K payment made on
August 19, 2011.
Yes
5(c)(iv)
Contributions to AC
Transit
U -line capital
improvements, low load
factor ratios, parking spaces
at Ardenwood Park & Ride
No action required at this time —
Forthcoming contribution payment to
be made within 30 days from issuance
of the first Hospital Occupancy
Permit. Also, since May 2014, SUMC
Parties have leased a park -and -ride
facility near the Ardenwood Park &
Ride.
NA in FY 2016
2017. Also,
payments made
in late 2017 will
be reflected in
the next annual
report.
DA Section
Description
Summary
Activity
Complies?
5(c)(v)
Opticom Payments
$11,200 payment for
Opticom traffic control
system at 7 intersections
No action required at this time —
Forthcoming payment to be made
within 30 days from issuance of the
first Hospital Occupancy Permit.
NA in FY 2016-
2017. Also,
payments made
in late 2017 will
be reflected in
the next annual
report.
5(c)(vi)
CalTrain Go Passes
SUMC purchase of passes
for all hospital employees
working >20hrs/week
Go Passes have been purchased per
the Development Agreement since
January 1, 2012.
Yes
SUMC Development Agreement Compliance: 2016-2017
Table 1: Development Agreement, Section 5 - SUMC Parties' Promises
FY 2016-17
Purchased additional shuttle buses for
the Marguerite Shuttle service which
s c vii
( )( )
Marguerite Shuttle
Service
Purchase of additional
shuttles to meet demand
now includes five renewable diesel-
electric hybrid buses and 23 all -
electric buses. Additional all -electric
buses are anticipated to come online
in the next reporting period.
Yes
DA Section
Description
Summary
Activity
Complies?
5(c)(viii)
SUMC Transportation
Demand Management
(TDM) Coordinator
SUMC hires coordinator to
promote alternative
transportation options
TDM Coordinator was hired in March
2012. This position has since been
elevated to a TDM Program Manager
position.
Yes
5(c)(ix)
Monitoring of TDM
Programs
Yearly report regarding
alternative transit mode
use
2017 Alternative Mode Share Report
indicates that 39.1% of SUMC
employees are using alternative
modes.
Yes
Linkages
5(d)(i)
Intermodal Transit Fund
$2.25M payment to
improve pedestrian linkages
to PA Intermodal Transit
Center
Payment of $2.25M on August 25,
2011 to establish City fund. (C11)
Yes
SUMC Development Agreement Compliance: 2016-2017
Table 1: Development Agreement, Section 5 - SUMC Parties' Promises
FY 21316-17
5(d)(ii)
Quarry Road Fund
$400K payment to improve
pedestrian linkages along
Quarry Road
Payment of $400K on August 25, 2011
to establish City fund. (D11)
Yes
5(d)(iii)
Stanford Barn Connection
SUMC budgets up to $700K
for pedestrian connections
in the vicinity of barn
No action required at this time —
SUMC is required to construct these
improvements prior to the issuance of
the first Hospital Occupancy permit.
NA in FY 2016-
2017. Also,
completion of
the connection
construction will
be reflected in
the next annual
report.
Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing
5(e)
Infrastructure, Sustainable
Neighborhoods and
Communities, and
Affordable Housing Fund
$23.2M payment for these
uses
First of three $7.3M payments made
on August 19, 2011. (Ell) Second
payment of $7.3M made on
December 5, 2012. (E13) Final
Payment to be made within 30 days
from issuance of the first Hospital
Occupancy Permit.
Yes. Also,
payments made
in late 2017 will
be reflected in
the next annual
report.
Climate Change (F11, F13)
5(f)
Climate Change Fund
$12M payment for climate
change -related projects and
programs
First of three $4M payments made on
August 19, 2011. (F11) Second
payment of $4M made on December
5, 2012. (F13) Final Payment to be
made within 30 days from issuance of
the first Hospital Occupancy Permit.
Yes. Also,
payments made
in late 2017 will
be reflected in
the next annual
report.
SUMC Development Agreement Compliance: 2016-2017
4 "A,
Attachment C — Part 1
CITY OF
PALO ALTO
2016-2017 Annual Report Supplement
Prepared by the City of Palo Alto
May 29, 2018
Background and Purpose
On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes, a
conditional use permit, annexation and design applications for the Stanford University Medical Center
Facilities Renewal and Replacement Project (the "Projects"). The Projects include the construction of a
new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children's Hospital,
construction of new School of Medicine buildings, renovation of the existing Hoover Pavilion,
construction of a new medical office building and parking garage at Hoover Pavilion, roadway
improvements along Welch Road and Durand Way, and SUMC design guidelines. A Development
Agreement (the "Agreement") vesting these approvals was entered into between the SUMC Parties and
the City and was effective on June 6, 2011 and continues for thirty (30) years from the effective date.
The Agreement requires an annual report, prepared by SUMC that outlines the activities of the
preceding year and the efforts to fulfill the obligations of the Agreement.
Per the requirements of sections 12(a) and 12(c) of the Agreement, The City of Palo Alto is to prepare a
supplement to the annual report that contains an accounting of the funds described in the Section 5 of
the Agreement ("SUMC Parties' Promises") including the fund balances and expenditures and the
purposes for which the expenditures were used.
Public Benefit Fund Accounting
This annual report supplement covers the period during the sixth year of the Agreement: June 6, 2016
through June 6, 2017. Accounting for the funds outlined in Attachment A extends through the end of the
City's Fiscal Year 2017, June 30, 2017.
In summary, the SUMC Parties have paid approximately $32.5 million in public benefit fees to the City
since June 6, 2011 through the FY 2016-2017 reporting period. There were no required new payments
from the SUMC Parties during the FY 2016-2017 reporting period. Payments made in late 2017 will be
reflected in the next annual report.
The first payment of $20,800,333 on August 11, 2011 was for the following funds:
• Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii));
• Fund for SUMC Project Operating Deficit (Section 5(b)(iii));
• Fund for Pedestrian and Bicycle Connections from Intermodal Transit Center to El Camino
Real/Quarry Road Intersection (Section 5(d)(i));
• Fund for Public Right of Way Improvements to Enhance Pedestrian and Bicycle Connections on
Quarry Road (Section 5(d)(ii));
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e)), and
• Fund for Sustainable Programs Benefit (Section 5(f)(i))
An additional $11,733,333 payment was made on December 5, 2012 for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e)), and
• Fund for Sustainable Programs Benefit (Section 5(f)(i))
The specific funding accounts in Attachment A are consistent with Section 5 of the Agreement. These
funds have been assigned a unique cost center number for accounting purposes. Attachment A also
contains the investment earnings and the earnings allocation to the various cost centers.
Public Benefit Fund Expenditures
Expenditures and other activity occurred in the following funds in Fiscal Year 2016-2017 through June
30, 2017:
Fund for Intermodal Transit and Fund for Quarry Road Improvements: $441,000 from the Fund for
Intermodal Transit and $359,000 from the Fund for Quarry Road Improvements was transferred, per the
June 20, 2016 (ID 6838) Council discussion regarding concept plans and proceeding with final
construction documents for both the Temporary Park Connection and the Quarry Road Improvements.
Fund for Infrastructure and Affordable Housing: $10,350,000 was transferred to capital projects from
this fund: $1.55 million for the Charleston/Arastadero Corridor Project, $2.8 million for the construction
of the new Public Safety Building, and $6.0 million for the replacement of Fire Station 3.
Fund for Community Health and Safety, Project Safety Net: $85,000 was allocated for continued work
of the Project Safety Net (PSN) collaborative which strives to develop and implement a mental health
plan for Palo Alto youth (actual expenditure, $33,033). The Project Safety Net program is specifically
identified in the Agreement as a community health program that would be an appropriate program for
the use of this fund.
Fund for Climate Change & Sustainability: $1,200,000 was transferred for the implementation of the
Bicycle & Pedestrian Transportation Plan.
Fund for Expansion Cost Mitigation: Funds are held in this category for the purpose of assuring that City
costs associated with the project do not exceed revenues to the City. There was a loss of investment
earnings in FY 2016-2017 of $ (38,520) due to recognition of unrealized losses on investments.
Attachment C - Part 2 -
ATTACHMENT A
City of Palo Alto
Stanford Medical Center Development Agreement (Fund 260)
Jul 2016 -June 30, 2017, Audited Balances
AUDITED BALANCES
Expansion Cost Intermodal Transit Quarry Road Infrastructure & Climate Change Community Total FY 2017 FY 2017
Mitigation Improvements Afford Housing & Sustainability Health & Safety Actuals Budget
cost centers 26000000 60260010 60260020 60260030 60260040 80260010
Beginning Balances, 7/1/2016 2,774,337.68
Revenues:
Revenues From Stanford
Transfer from Housing Residential (repayment of 2014 advances for
Maybell)
Investment Earnings / Unrealized gain (loss) (up to June 2017)
Allocate to categories
Allocated Investment Earnings
Total Revenues
Expenditures:
Temp Salaries/Benefits
Contract Services
Supplies Expenses
Other expenses
Transfer to Capital Projects
Total Expenditures
FY 2017 Revenues less Exp
Fund Balance 6/30/2017, Audited Balances
Less: Unrealized Gain/(Loss), 6/30/17
Reserve for Encumbrances, 6/30/2017 (ZFIR44)
Interest Receivable, 6/30/17
Scheduled Remaining Operating Transfer for FY2017
Fund Balance Available 6/30/2017 Audited Balances
Future Revenues from Stanford:
Estimated January 2018 -1st hospital occupancy permit
(191,047.59)
191,047.59
(38,520.27)
(38,520.27)
2,158,358 52 364,035.63 13,023,121.63 5,099,904.92 2,723,056.17 26,142,814 56
(23,844.65)
(23,844.65)
(69.92) (37,114.94)
(69.92) (37,114.94)
(54,148.20) (37,349.61)
(54,148.20) (37,349.61)
(441,000 00) (359,000.00) (10,350,000.00) (1,200,000.00)
(441,000 00)
(28,178.83)
(2,759.33)
(1,465.51)
(629.50)
(191,047 59)
191,047 59
(191,047 59)
(191,047 59)
(28,178 83)
(2,759 33)
(1,465 51)
(629.50)
(12, 350,000.00)
662,800.00
662,800.00
(28,279.16)
(214,502.80)
(12,350,000.00)
(38,520.27) (464,844.65)
(359,000.00) (10,350,000.00) (1,200,000.00) (33,033.17) (12,383,033.17) (12,592,781.96)
(359,069.92) (10,387,114.94) (1,254,148.20) (70,382.78) (12,574,080.76) (11,929,981.96)
2,735,817.41
1,693,513 87 4,965.72 2,636,006.69 3,845,756.72 2,652,673.39 13,568,733.80
(18,776.27)
(11,622 81) (34.08)
(18,091.26) (26,393.93)
(35,031.43) (35,031.43)
(18,205.65) (93,124 00)
2,717,041.14
1,681,891 06 4,931.64 2,617,915.43 3,819,362.79 2,599,436.32 13,440,578.37
7,733,333.00 4,000,000.00
Estimated January 2018 - Opticom Payment 11,200.00
S:\PLAN\PLADIV\Long Range Planning\SUMC Renewal Project 2006 to 2011\Annual Reports and Funds Tracking\SUMC Annual Reports\2016_17\SUMC Dev Fund (260)_FY2017
CITY OF
PALO
ALTO
City of Palo Alto (ID # 9090)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 6/11/2018
Summary Title: OES Network & Wireless Consulting Contract
Title: Approval of Amendment Number One for Contract Number S16163447
with Brad Horak Consulting to Provide Public Safety Communications
Services, Extending the Period of Performance by Two Years, a nd increasing
the Total Contract Value by $40,000 to a Not -to -Exceed $100,000
From: City Manager
Lead Department: Office of Emergency Services
Recommendation
Staff recommends that Council approve and authorize the City Manager or his designee to
execute Amendment 1 on contract S16163447 with Brad Horak Consulting to extend the period
of performance by two years, and increase the total contract value by $40,000 to not -to -exceed
$100,000.
Background
Palo Alto OES initiated this contract in April 2016 with a three-year period of performance at a
cost of $60,000. It is a professional services contract for wireless and mobile network
communications consulting to maintain and enhance the City's Public Safety capabilities,
broader emergency response, and recovery applications.
Discussion
Given the increasing use of technology in mission -critical public safety applications, having
technical expertise becomes necessary to assist our departments in the development and
management of technological solutions. Over this past period of performance OES has been
able to leverage this contract to:
• assist in the planning of the Public Safety Wireless Network project including the
network architecture for mobile and fixed sites, including 4.9GHz and other frequencies
and network protocols (WiMax, etc.),
• evaluate the efforts of the CTC Wireless / Fiber to the Home vendor study and providing
recommendations on implementation opportunities.
City of Palo Alto Page 1
• provide recommendations in the use of wireless technologies for the public safety
vehicle fleet and fixed facilities; conduct related research and determine network
configurations to assist in the implementation of such recommendations.
• evaluate existing networks and interoperability with microwave, satellite, fiber, and
other connectivity, both internal to the City as well as to the Internet and other
agencies.
• evaluate options for improving network resilience among EOCs and 9-1-1 centers in the
northern Santa Clara County area.
• provide required radio communications design, implementation, operational, and
maintenance support for the Mobile Emergency Operations Center.
• assist OES staff in maintaining telecommunications systems and provide
communications technician assistance during MEOC deployments on an ad hoc basis.
To meet these needs, OES initiated this contract in April 2016 for three years for a total of
$60,000. The period of performance ends on April 3, 2019. However, OES requires additional
services to allow this vendor to continue with projects and efforts already underway.
Additionally this vendor will assist with new applications such as the Nationwide Public Safety
Broadband Network (NPSBN also known as "FirstNet"). The pace of public safety innovations
continues to increase, and with it, so does our local capabilities to maintain this pace.
Resource Impact
The total five-year cost of $100,000 is available in OES operating funds, which includes $40,000
allocated in fiscal years 2019-2021.
Attachments:
• ATTACHMENT A - Brad Horak Consulting
City of Palo Alto Page 2
DocuSign Envelope ID: 70DOFBCF-9E8B-41 F8-930B-D8C5D82FEA75
AMENDMENT NO. ONE TO CONTRACT NO. S16163447
BETWEEN THE CITY OF PALO ALTO AND
BRAD HORAK CONSULTING
This Amendment No. One to Contract No. S16163447 ("Contract") is entered into
June 11, 2018, by and between the CITY OF PALO ALTO, a California chartered municipal
corporation ("CITY"), and BRAD HORAK CONSULTING, a sole proprietor, located at P.O. Box 60700,
Palo Alto, CA 94306 ("CONSULTANT").
RECITALS
A. The Contract was entered into between the Parties for the CONSULTANT to
provide of enhancement of wireless and mobile network communications for Public Safety
capabilities and larger emergency response and recovery applications.
B. The Parties now desire to increase the "Not -to -Exceed" amount under the
Contract by Forty Thousand Dollars ($40,000) from Sixty Thousand Dollars ($60,000) to a "Not -to -
Exceed" amount of One Hundred Thousand Dollars ($100,000).
C. The Parties now also desire to extend the Term of the Contract by two years
from its current expiration date of April 3, 2019 to April 3, 2021.
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 April 3, 2021 unless terminated earlier pursuant to Section 19 of this
Agreement."
SECTION 2. Section 4. NOT TO EXCEED COMPENSATION is hereby amended to read
as follows:
"SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to
CONSULTANT for performance of the Services described in Exhibit "A", including
both payment for professional services and reimbursable expenses shall not
exceed One Hundred Thousand Dollars ($100,000)."
SECTION 3. 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 refer-
ence:
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a. Exhibit "A" entitled "SCOPE OF WORK".
SECTION 4. Except as herein modified, all other provisions of the Contract, including
any exhibits and subsequent amendments thereto, shall remain in full force and effect.
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
Attachments:
EXHIBIT "A": SCOPE OF WORK
BRAD HORAK CONSULTING
DocuSigned by:
By: ihV'ck
CC7F473F6836415._.
Name: Brad Horak
Title:
Consultant
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EXHIBIT "A"
SCOPE OF SERVICES
Consultant shall work with the City of Palo Alto's Office of Emergency Services (OES), in
coordination with other Public Safety departments, on the following projects and topics:
1. Public Safety Wireless Networks: review vendors and network architecture for mobile and
fixed sites, including 4.9GHz and other frequencies and network protocols (WiMax, etc.)
a. Follow the CTC Wireless / Fiber to the Home vendor study to include follow on phases,
review consultant and staff reports, and provide recommendations on implementation
opportunities.
b. Provide recommendations in the use of wireless technologies for the public safety vehicle
fleet and if necessary fixed facilities; conduct related research and determine network
configurations to assist in the implementation of such recommendations.
2. Emergency data network resilience: evaluate existing networks and interoperability with
microwave, satellite, fiber, and other connectivity, both internal to the City as well as to the
Internet and other agencies.
a. Provide recommendations in the implementation of a terrestrial satellite system that
provides redundant data connectivity to essential city and business continuity operations in
the absence of conventional fiber networks.
3. Public Safety Answering Point (PSAP) 911 Center connectivity:
a. evaluate options for improving network resilience among PSAPs in the northern Santa
Clara County area.
b. Advise on feasibility/represent public safety interests in terms of wireless planning being
conducted by City / Regional organizations.
4. Provide radio communications support for the Mobile Emergency Operations Center.
Assist OES staff in maintaining radio systems and provide communications technician
assistance during MEOC deployments on an ad hoc basis.
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CITY OF
PALO
ALTO
City of Palo Alto (ID # 9078)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 6/11/2018
Summary Title: Approval of Contract No. C18171028A for Landfill Gas
Monitoring and Reporting Services
Title: Approval of Contract Number C18171028A with SCS Field Services for a
Not -To -Exceed Amount of $373,362 for Landfill Gas and Leachate Control
Systems Monitoring and Reporting Services at the Palo Alto Landfill Over a
Term of Three Years
From: City Manager
Lead Department: Public Works
Recommendation
Staff recommends that Council approve, and authorize the City Manager or his
designee to execute the attached Professional Services contract with SCS Field
Services and Engineers (Attachment A) in an amount not to exceed $373,362, for
landfill gas and leachate control systems monitoring and reporting services,
including $339,420 for basic services and $33,942 for additional services for a
period of three (3) years.
Background
State and federal regulations require that landfill operators provide effective
environmental control and monitoring systems to prevent the buildup and release
of landfill gas and leachate from the buried wastes. Specific landfill gas control
activities are listed in the landfill's Title V "Air" Permit and in the Bay Area Air
Quality Management District's (BAAQMD's) Regulation 8, Rule 34. Leachate is
required to be controlled under the landfill's Waste Discharge Requirements
issued by the San Francisco Bay Regional Water Quality Control Board as well as
by the California Code of Regulations, Title 27.
The environmental control systems monitoring and reporting tasks are required
after the landfill closure for as long as the landfill continues producing methane
City of Palo Alto Page 1
and leachate (estimated for a minimum period of 30 years).
Discussion
The attached contract with SCS Field Services and Engineers is to provide services
for monitoring and reporting for the landfill gas and leachate control systems for
the Palo Alto Landfill as required by state and federal regulations.
Due to the nature and quantity of the work, outside resources from a contracting
firm are required. This work requires specialized instruments, tools, equipment
and trained personnel in order to meet the stringent requirements of the State
and local oversight agencies. City staff will provide administrative oversight of the
contract to ensure that these landfill control systems are maintained and
operated properly, efficiently, cost-effectively and in compliance with all laws and
regulations.
The work to be performed under this contract includes:
1. Performing routine landfill gas collection and emission control system
monitoring and reporting;
2. Performing annual landfill flare stack emissions sampling, analyses and
reporting;
3. Compiling and preparing various landfill gas reports and providing
miscellaneous engineering support services as directed by Staff.
Selection Process
A request for proposals (RFP) for the project was posted on the Planet Bids
Vendor Portal and was emailed to five contractors. The solicitation period was 17
days. Three proposals were received on March 29, 2018.
Proposal Description / Number
Landfill Environmental Control Systems
Monitoring and Reporting / RFP #
171028
Proposed Length of Project
36 months
Number of Proposals Mailed
5+ RFP posted on City's eProcurement
system and multiple builder's
City of Palo Alto
Page 2
exchanges
Total Days to Respond to Proposal
17
Pre -proposal Meeting Date
N/A
Number of Proposals Received
3
Cost Range (Basic Services)
$339,420.00
years
- $460,080.00 over three
An evaluation committee, consisting of three staff members from the Public
Works Environmental Services Division, reviewed and evaluated the proposals.
The committee ensured that the firms were responsive to the criteria identified in
the RFP.
The criteria used to select the recommended firm included:
• Quality and completeness of proposal;
• Quality, performance and effectiveness of the services to be provided;
• Proposer's experience, including experience of staff assigned to the work;
• Cost to the City;
• Proposer's financial stability;
• Proposer's ability to perform the work within the time specified;
• Firm's prior record of performance with the City;
• Proposer's ability to provide future services; and
• Proposer's compliance with laws, regulations and policies.
SCS Field Services and Engineers was selected because of the quality and
effectiveness of their services, the experience of their field staff and their ability
to provide future field services. SCS Field Services and Engineers cost of basic
services ($339,420) was also lower than the other 2 proposals ($366,843 and
$460,000). SCS Field Services and Engineers was rated highest based on all of the
criteria specified above. SCS Field Services and Engineers has been the current
provider of these professional services for the City for over 15 years; the previous
contract was for $126,418 annually, or $379,254 over three years.
Resource Impact
Funding for the first year term of this contract is available in the FY 2018 Refuse
Fund operating budget. Subsequent years of the contract are subject to City
Council approval of annual operating budget.
City of Palo Alto Page 3
Policy Implications
This project does not represent any change to existing City policies.
Environmental Review
This work is exempt from the California Environmental Quality Act (CEQA) under
Class 1 categorical exemptions Article 19, Section 15301. This work involves
monitoring of existing facilities and involves no expansion of the existing use.
Attachments
A - Professional Services Contract C18171028A Landfill Gas Monitoring (PDF)
Attachments:
• Attachment A: Contract C18171028A SCS Field Services
City of Palo Alto Page 4
DocuSign Envelope ID: 3BDE3C3B-F2EE-4A4D-AA7E-DEA62AE637F3
CITY OF PALO ALTO CONTRACT NO. C18171028A
AGREEMENT BETWEEN THE CITY OF PALO ALTO AND STERNS, CONRAD AND
SCHMIDT, CONSULTING ENGINEERS, INC., dba SCS FIELD SERVICES
FOR PROFESSIONAL SERVICES
This Agreement is entered into on this 25th day of June, 2018, ("Agreement") by
and between the CITY OF PALO ALTO, a California chartered municipal corporation
("CITY"), and STEARNS, CONRAD AND SCHMIDT, INC. DBA SCS FIELD SERVICES,
a VIRGINIA corporation, located at 4730 Enterprise Way, Suite A. Modesto, CA 95356
("CONSULTANT").
RECITALS
The following recitals are a substantive portion of this Agreement.
A. CITY owns and operates an unlined, class III municipal solid waste disposal site
("Landfill") which includes landfill gas and leachate collection systems that require monitoring
and related reporting.
B. CONSULTANT has represented that it has the necessary professional expertise,
qualifications, and capability, and all required licenses and/or certifications to provide the landfill
gas and leachate collection systems monitoring and reporting services as more fully described in
Exhibit "A", attached to and made a part of this Agreement ("Services").
C. CITY in reliance on these representations desires to engage CONSULTANT to provide
the Services.
NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions,
in this Agreement, the parties agree:
AGREEMENT
SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described at
Exhibit "A" in accordance with the terms and conditions contained in this Agreement. The
performance of all Services shall be to the reasonable satisfaction of CITY.
❑ Optional On -Call Provision (This provision only applies if checked and only applies to on -
call agreements.)
Services will be authorized by CITY, as needed, with a Task Order assigned and approved by
CITY's Project Manager. Each Task Order shall be in substantially the same form as Exhibit A-
1. Each Task Order shall designate a CITY Project Manager and shall contain a specific scope of
work, a specific schedule of performance and a specific compensation amount. The total price of
all Task Orders issued under this Agreement shall not exceed the amount of Compensation set
forth in Section 4 of this Agreement. CONSULTANT shall only be compensated for work
performed under an authorized Task Order and CITY may elect, but is not required, to authorize
work up to the maximum compensation amount set forth in Section 4.
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SECTION 2. TERM.
The term of this Agreement shall be from the date of its full execution through completion of the
services in accordance with the Schedule of Performance attached at Exhibit "B" unless
terminated earlier pursuant to Section 19 of this Agreement.
SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance
of Services under this Agreement. CONSULTANT shall complete the Services within the term
of this Agreement and in accordance with the schedule set forth in Exhibit "B", attached to and
made a part of this Agreement. Any Services for which times for performance are not specified
in this Agreement shall be commenced and completed by CONSULTANT in a reasonably
prompt and timely manner based upon the circumstances and direction communicated to the
CONSULTANT. CITY's agreement to extend the term or the schedule for performance shall
not preclude recovery of damages for delay if the extension is required due to the fault of
CONSULTANT.
SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to
CONSULTANT for performance of the Services described in Exhibit "A" ("Basic Services"),
and reimbursable expenses, shall not exceed Three Hundred Thirty -Nine Thousand Four
Hundred Twenty Dollars ($339,420.00). CONSULTANT agrees to complete all Basic Services,
including reimbursable expenses, within this amount. In the event Additional Services are
authorized, the total compensation for Basic Services, Additional Services and reimbursable
expenses shall not exceed Three Hundred Seventy -Three Thousand Three Hundred Sixty -Two
Dollars ($373,362.00). The applicable rates and schedule of payment are set out at Exhibit "C-
1", entitled "HOURLY RATE SCHEDULE," which is attached to and made a part of this
Agreement. Any work performed or expenses incurred for which payment would result in a total
exceeding the maximum amount of compensation set forth herein shall be at no cost to the
CITY.
Additional Services, if any, shall be authorized in accordance with and subject to the provisions
of Exhibit "C". CONSULTANT shall not receive any compensation for Additional Services
performed without the prior written authorization of CITY. Additional Services shall mean any
work that is determined by CITY to be necessary for the proper completion of the Project, but
which is not included within the Scope of Services described at Exhibit "A".
SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly
invoices to the CITY describing the services performed and the applicable charges (including an
identification of personnel who performed the services, hours worked, hourly rates, and
reimbursable expenses), based upon the CONSULTANT's billing rates (set forth in Exhibit "C-
1"). If applicable, the invoice shall also describe the percentage of completion of each task. The
information in CONSULTANT's payment requests shall be subject to verification by CITY.
CONSULTANT shall send all invoices to the City's project manager at the address specified in
Section 13 below. The City will generally process and pay invoices within thirty (30) days of
receipt.
SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be
performed by CONSULTANT or under CONSULTANT's supervision. CONSULTANT
represents that it possesses the professional and technical personnel necessary to perform the
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Services required by this Agreement and that the personnel have sufficient skill and experience
to perform the Services assigned to them. CONSULTANT represents that it, its employees and
subconsultants, if permitted, have and shall maintain during the term of this Agreement all
licenses, permits, qualifications, insurance and approvals of whatever nature that are legally
required to perform the Services.
All of the services to be furnished by CONSULTANT under this agreement shall meet the
professional standard and quality that prevail among professionals in the same discipline and of
similar knowledge and skill engaged in related work throughout California under the same or
similar circumstances.
SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of
and in compliance with all federal, state and local laws, ordinances, regulations, and orders that
may affect in any manner the Project or the performance of the Services or those engaged to
perform Services under this Agreement. CONSULTANT shall procure all permits and licenses,
pay all charges and fees, and give all notices required by law in the performance of the Services.
SECTION 8. ERRORS/OMISSIONS. CONSULTANT is solely responsible for costs,
including, but not limited to, increases in the cost of Services, arising from or caused by
CONSULTANT's errors and omissions, including, but not limited to, the costs of corrections
such errors and omissions, any change order markup costs, or costs arising from delay caused by
the errors and omissions or unreasonable delay in correcting the errors and omissions.
SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works
project, CONSULTANT shall submit estimates of probable construction costs at each phase of
design submittal. If the total estimated construction cost at any submittal exceeds ten percent
(10%) of CITY's stated construction budget, CONSULTANT shall make recommendations to
CITY for aligning the PROJECT design with the budget, incorporate CITY approved
recommendations, and revise the design to meet the Project budget, at no additional cost to
CITY.
SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in
performing the Services under this Agreement CONSULTANT, and any person employed by or
contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act
as and be an independent contractor and not an agent or employee of CITY.
SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of
CONSULTANT are material considerations for this Agreement. CONSULTANT shall not
assign or transfer any interest in this Agreement nor the performance of any of
CONSULTANT's obligations hereunder without the prior written consent of the city manager.
Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any
assignment made without the approval of the city manager will be void.
SECTION 12. SUBCONTRACTING.
❑Option A: No Subcontractor: CONSULTANT shall not subcontract any portion of the work
to be performed under this Agreement without the prior written authorization of the city manager
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or designee.
®Option B: Subcontracts Authorized: Notwithstanding Section 11 above, CITY agrees that
subconsultants may be used to complete the Services. The subconsultants authorized by CITY to
perform work on this Project are:
Best Environmental
CONSULTANT shall be responsible for directing the work of any subconsultants and for any
compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning
compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a
subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval
of the city manager or his designee.
SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Anton
Svorinich as the Northwest Region Manager to have supervisory responsibility for the
performance, progress, and execution of the Services and Arthur Jones, Jr. as the project
manager to represent CONSULTANT during the day-to-day work on the Project. If
circumstances cause the substitution of the project director, project coordinator, or any other key
personnel for any reason, the appointment of a substitute project director and the assignment of
any key new or replacement personnel will be subject to the prior written approval of the CITY's
project manager. CONSULTANT, at CITY's request, shall promptly remove personnel who
CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a
threat to the adequate or timely completion of the Project or a threat to the safety of persons or
property.
CITY's project manager is Elise Sbarbori, Public Works Department, Environmental Services
Division, 3201 E. Bayshore Road Palo Alto, CA 94303, Telephone: 650-496-5958,
Elise.Sbarbori@CityofPaloAlto.org. The project manager will be CONSULTANT's point of
contact with respect to performance, progress and execution of the Services. CITY may
designate an alternate project manager from time to time.
SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including
without limitation, all writings, drawings, plans, reports, specifications, calculations, documents,
other materials and copyright interests developed under this Agreement shall be and remain the
exclusive property of CITY without restriction or limitation upon their use. CONSULTANT
agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall
be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other
intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if
any, shall make any of such materials available to any individual or organization without the
prior written approval of the City Manager or designee. CONSULTANT makes no
representation of the suitability of the work product for use in or application to circumstances not
contemplated by the scope of work.
SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time
during the term of this Agreement and for three (3) years thereafter, CONSULTANT' s records
pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and
retain such records for at least three (3) years after the expiration or earlier termination of this
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Agreement.
SECTION 16. INDEMNITY.
® [Option A applies to the following design professionals pursuant to Civil Code Section
2782.8: architects; landscape architects; registered professional engineers and licensed
professional land surveyors.] 16.1. To the fullest extent permitted by law, CONSULTANT
shall protect, indemnify, defend and hold harmless CITY, its Council members, officers,
employees and agents (each an "Indemnified Party") from and against any and all demands,
claims, or liability of any nature, including death or injury to any person, property damage or any
other loss, including all costs and expenses of whatever nature including attorneys fees, experts
fees, court costs and disbursements ("Claims") that arise out of, pertain to, or relate to the
negligence, recklessness, or willful misconduct of CONSULTANT, its officers, employees,
agents or contractors under this Agreement, regardless of whether or not it is caused in part by an
Indemnified Party.
❑ [Option B applies to any consultant who does not qualify as a design professional as
defined in Civil Code Section 2782.8.] 16.1. To the fullest extent permitted by law,
CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members,
officers, employees and agents (each an "Indemnified Party") from and against any and all
demands, claims, or liability of any nature, including death or injury to any person, property
damage or any other loss, including all costs and expenses of whatever nature including
attorneys fees, experts fees, court costs and disbursements ("Claims") resulting from, arising out
of or in any manner related to performance or nonperformance by CONSULTANT, its officers,
employees, agents or contractors under this Agreement, regardless of whether or not it is caused
in part by an Indemnified Party.
16.2. Notwithstanding the above, nothing in this Section 16 shall be construed
to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the
active negligence, sole negligence or willful misconduct of an Indemnified Party.
16.3. The acceptance of CONSULTANT's services and duties by CITY shall
not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall
survive the expiration or early termination of this Agreement.
SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any
covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance
or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions,
ordinance or law, or of any subsequent breach or violation of the same or of any other term,
covenant, condition, provision, ordinance or law.
SECTION 18. INSURANCE.
18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in
full force and effect during the term of this Agreement, the insurance coverage described in
Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement
naming CITY as an additional insured under any general liability or automobile policy or
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policies.
18.2. All insurance coverage required hereunder shall be provided through
carriers with AM Best's Key Rating Guide ratings of A -:VII or higher which are licensed or
authorized to transact insurance business in the State of California. Any and all contractors of
CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in
full force and effect during the term of this Agreement, identical insurance coverage, naming
CITY as an additional insured under such policies as required above.
18.3. Certificates evidencing such insurance shall be filed with CITY
concurrently with the execution of this Agreement. The certificates will be subject to the
approval of CITY' s Risk Manager and will contain an endorsement stating that the insurance is
primary coverage and will not be canceled, or materially reduced in coverage or limits, by the
insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of
the cancellation or modification. If the insurer cancels or modifies the insurance and provides
less than thirty (30) days' notice to CONSULTANT, CONSULTANT shall provide the
Purchasing Manager written notice of the cancellation or modification within two (2) business
days of the CONSULTANT's receipt of such notice. CONSULTANT shall be responsible for
ensuring that current certificates evidencing the insurance are provided to CITY's Chief
Procurement Officer during the entire term of this Agreement.
18.4. The procuring of such required policy or policies of insurance will not be
construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification
provisions of this Agreement. Notwithstanding the policy or policies of insurance,
CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss
caused by or directly arising as a result of the Services performed under this Agreement,
including such damage, injury, or loss arising after the Agreement is terminated or the term has
expired.
SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES.
19.1. The City Manager may suspend the performance of the Services, in whole
or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior
written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will
immediately discontinue its performance of the Services.
19.2. CONSULTANT may terminate this Agreement or suspend its
performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but
only in the event of a substantial failure of performance by CITY.
19.3. Upon such suspension or termination, CONSULTANT shall deliver to the
City Manager immediately any and all copies of studies, sketches, drawings, computations, and
other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or
given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such
materials will become the property of CITY.
19.4. Upon such suspension or termination by CITY, CONSULTANT will be
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paid for the Services rendered or materials delivered to CITY in accordance with the scope of
services on or before the effective date (i.e., 10 days after giving notice) of suspension or
termination; provided, however, if this Agreement is suspended or terminated on account of a
default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that
portion of CONSULTANT's services which are of direct and immediate benefit to CITY as such
determination may be made by the City Manager acting in the reasonable exercise of his/her
discretion. The following Sections will survive any expiration or termination of this Agreement:
14, 15, 16, 19.4, 20, and 25.
19.5. No payment, partial payment, acceptance, or partial acceptance by CITY
will operate as a waiver on the part of CITY of any of its rights under this Agreement.
SECTION 20. NOTICES.
All notices hereunder will be given in writing and mailed, postage prepaid, by
certified mail, addressed as follows:
To CITY:
Office of the City Clerk
City of Palo Alto
Post Office Box 10250
Palo Alto, CA 94303
With a copy to the Purchasing Manager
To CONSULTANT: Attention of the project director
at the address of CONSULTANT recited above
SECTION 21. CONFLICT OF INTEREST.
21.1. In accepting this Agreement, CONSULTANT covenants that it presently
has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which
would conflict in any manner or degree with the performance of the Services.
21.2. CONSULTANT further covenants that, in the performance of this
Agreement, it will not employ subconsultants, contractors or persons having such an interest.
CONSULTANT certifies that no person who has or will have any financial interest under this
Agreement is an officer or employee of CITY; this provision will be interpreted in accordance
with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the
State of California.
21.3. If the Project Manager determines that CONSULTANT is a "Consultant"
as that term is defined by the Regulations of the Fair Political Practices Commission,
CONSULTANT shall be required and agrees to file the appropriate financial disclosure
documents required by the Palo Alto Municipal Code and the Political Reform Act.
SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section
2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not
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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. CONSULTANT acknowledges that it has read
and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to
Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all
requirements of Section 2.30.510 pertaining to nondiscrimination in employment.
SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO
WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY's Environmentally
Preferred Purchasing policies which are available at CITY's Purchasing Department,
incorporated by reference and may be amended from time to time. CONSULTANT shall comply
with waste reduction, reuse, recycling and disposal requirements of CITY's Zero Waste
Program. Zero Waste best practices include first minimizing and reducing waste; second,
reusing waste and third, recycling or composting waste. In particular, CONSULTANT shall
comply with the following zero waste requirements:
(a) All printed materials provided by CCONSULTANT to CITY generated from a
personal computer and printer including but not limited to, proposals, quotes,
invoices, reports, and public education materials, shall be double -sided and
printed on a minimum of 30% or greater post -consumer content paper, unless
otherwise approved by CITY's Project Manager. Any submitted materials printed
by a professional printing company shall be a minimum of 30% or greater post -
consumer material and printed with vegetable based inks.
(b) Goods purchased by CONSULTANT on behalf of CITY shall be purchased in
accordance with CITY's Environmental Purchasing Policy including but not
limited to Extended Producer Responsibility requirements for products and
packaging. A copy of this policy is on file at the Purchasing Division's office.
(c) Reusable/returnable pallets shall be taken back by CONSULTANT, at no
additional cost to CITY, for reuse or recycling. CONSULTANT shall provide
documentation from the facility accepting the pallets to verify that pallets are not
being disposed.
SECTION 24. COMPLIANCE WITH PALO ALTO MINIMUM WAGE ORDINANCE.
CONSULTANT shall comply with all requirements of the Palo Alto Municipal Code Chapter
4.62 (Citywide Minimum Wage), as it may be amended from time to time. In particular, for any
employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of
work in a calendar week within the geographic boundaries of the City, CONSULTANT shall pay
such employees no less than the minimum wage set forth in Palo Alto Municipal Code section
4.62.030 for each hour worked within the geographic boundaries of the City of Palo Alto. In
addition, CONSULTANT shall post notices regarding the Palo Alto Minimum Wage Ordinance
in accordance with Palo Alto Municipal Code section 4.62.060.
SECTION 25. NON -APPROPRIATION
25.1. This Agreement is subject to the fiscal provisions of the Charter of the
City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any
penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the
following fiscal year, or (b) at any time within a fiscal year in the event that funds are only
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appropriated for a portion of the fiscal year and funds for this Agreement are no longer available.
This section shall take precedence in the event of a conflict with any other covenant, term,
condition, or provision of this Agreement.
SECTION 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC
WORKS CONTRACTS
❑ 26.1 This Project is not subject to prevailing wages. CONSULTANT is not
required to pay prevailing wages in the performance and implementation of the Project in
accordance with SB 7 if the contract is not a public works contract, if the contract does not
include a public works construction project of more than $25,000, or the contract does not
include a public works alteration, demolition, repair, or maintenance (collectively,
`improvement') project of more than $15,000.
OR
26.1 CONSULTANT is required to pay general prevailing wages as defined in
Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and
Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the
Labor Code of the State of California, the City Council has obtained the general prevailing rate
of per diem wages and the general rate for holiday and overtime work in this locality for each
craft, classification, or type of worker needed to execute the contract for this Project from the
Director of the Department of Industrial Relations ("DIR"). Copies of these rates may be
obtained at the Purchasing Division's office of the City of Palo Alto. CONSULTANT shall
provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the
adopted prevailing wage rates as a minimum. CONSULTANT shall comply with the provisions
of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813,
of the Labor Code pertaining to prevailing wages.
26.2 CONSULTANT shall comply with the requirements of Exhibit "E" for any
contract for public works construction, alteration, demolition, repair or maintenance.
SECTION 27. MISCELLANEOUS PROVISIONS.
27.1. This Agreement will be governed by the laws of the State of California.
27.2. In the event that an action is brought, the parties agree that trial of such
action will be vested exclusively in the state courts of California in the County of Santa Clara,
State of California.
27.3. The prevailing party in any action brought to enforce the provisions of this
Agreement may recover its reasonable costs and attorneys' fees expended in connection with that
action. The prevailing party shall be entitled to recover an amount equal to the fair market value
of legal services provided by attorneys employed by it as well as any attorneys' fees paid to third
parties.
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27.4. This document represents the entire and integrated agreement between the
parties and supersedes all prior negotiations, representations, and contracts, either written or oral.
This document may be amended only by a written instrument, which is signed by the parties.
27.5. The covenants, terms, conditions and provisions of this Agreement will
apply to, and will bind, the heirs, successors, executors, administrators, assignees, and
consultants of the parties.
27.6. If a court of competent jurisdiction finds or rules that any provision of this
Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this
Agreement and any amendments thereto will remain in full force and effect.
27.7. All exhibits referred to in this Agreement and any addenda, appendices,
attachments, and schedules to this Agreement which, from time to time, may be referred to in
any duly executed amendment hereto are by such reference incorporated in this Agreement and
will be deemed to be a part of this Agreement.
27.8 In the event of a conflict between the terms of this Agreement and the
exhibits hereto or CONSULTANT's proposal (if any), the Agreement shall control. In the case
of any conflict between the exhibits hereto and CONSULTANT's proposal, the exhibits shall
control.
27.9 If, pursuant to this contract with CONSULTANT, CITY shares with
CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d)
about a California resident ("Personal Information"), CONSULTANT shall maintain reasonable
and appropriate security procedures to protect that Personal Information, and shall inform City
immediately upon learning that there has been a breach in the security of the system or in the
security of the Personal Information. CONSULTANT shall not use Personal Information for
direct marketing purposes without City's express written consent.
27.10 All unchecked boxes do not apply to this agreement.
27.11 The individuals executing this Agreement represent and warrant that they
have the legal capacity and authority to do so on behalf of their respective legal entities.
27.12 This Agreement may be signed in multiple counterparts, which shall, when
executed by all the parties, constitute a single binding agreement
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CONTRACT No. C18171028A SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have by their duly authorized
representatives executed this Agreement on the date first above written.
CITY OF PALO ALTO
City Manager or Designee
APPROVED AS TO FORM:
City Attorney or designee
Attachments:
EXHIBIT "A":
EXHIBIT "B":
EXHIBIT "C":
EXHIBIT "C-1":
EXHIBIT "D":
STEARNS, CONRAD AND SCHMIDT
CONSULTING ENGINEERS, INC.
DocuSig ned by:
By:
avow SaritA.iclt,
F41 B0D72A06B4C8_.
Name: Anton svori ni ch
Title:
SCOPE OF SERVICES
SCHEDULE OF PERFORMANCE
COMPENSATION
SCHEDULE OF RATES
INSURANCE REQUIREMENTS
vice President
11
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EXHIBIT "A"
SCOPE OF SERVICES
LANDFILL GAS AND LEACHATE CONTROL SYSTEMS MONITORING AND
REPORTING SERVICES
CONSULTANT shall perform monitoring and reporting services for the CITY's Landfill's
environmental control systems (landfill gas and leachate collection systems).
I. Background
History and Phasing: CITY owns and operates an unlined, class 11 1 municipal solid waste disposal
site, located at 2830 Embarcadero Road in Palo Alto, California. The landfill reached refuse
capacity and ceased accepting waste in 2011 and underwent final capping and regulatory
closure in 2015. The landfill occupies approximately 126 acres of the 1800 -acre, CITY owned
Byxbee Park and Baylands parcel. The landfill is divided into phases, Phase I, Phase IIA, Phase
IIB, and Phase IIC based on the timing of closure and conversion to parkland. Phase !comprises
approximately 29 acres and was closed and developed into parkland in 1990. Phases IIA (23
acres), IIB (24 acres) and IIC (51 acres) were closed and converted to parkland in 1992, 2000 and
2015 respectively. Smaller areas of the landfill are closed off to park users on an as -needed
basis for control system maintenance and settlement repairs.
The environmental control systems within the landfill consist of a vertical landfill gas extraction
system and a retrofitted vertical leachate extraction system.
Landfill Gas System: CITY's landfill gas (LFG) collection system consists of 102 vertical extraction
wells. Most of the gas wells are spaced approximately 200 feet apart, have been constructed
with a 4 to 6 -inch diameter schedule 40 PVC casings or high -density polyethylene (HDPE)
casings placed within 24 -inch diameter boreholes and have an average depth of approximately
35 feet below the landfill surface. An HDPE piping network collects and transmits gas from the
extraction wells to a blower -flare facility located on Palo Alto Regional Water Quality Control
Plant Property (PARWQCP) near the landfill northwest boundary. Landfill gas is either
combusted in the landfill flare or transferred to the Water Quality Control Plant (RWQCP)
incinerator where the landfill gas supplements the natural gas to incinerate sewage solids. The
pipe network is below grade throughout the landfill facility, buried within the final cover
system. In the Phases that were capped with a clay layer (Phase I, IIA, IIB), the gas collection
system pipes are buried above the clay cap within a thickened vegetative soil layer. In Phase IIC
the pipes are buried within a 4 -ft thick layer of evapotranspirative cover material.
CITY is in the process of placing 24 leachate wells under vacuum and adding them to the landfill
gas collection system due to the detection of methane above regulatory limits inside and/or
outside some wells. The leachate wells have monitoring requirements similar to the gas wells
once they have been connected to the landfill gas collection system.
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Leachate System: CITY's Leachate Collection and Removal System (LCRS) consists of 24 vertical
extraction wells. These wells are typically constructed with 6 -inch diameter Schedule 80 PVC
casings, and strategically distributed throughout the landfill. Well spacing averages
approximately 300 feet, with locations being selected based upon historic information and local
leachate levels at the time of installation. Each well has a dedicated pneumatic pump, and
compressed air is delivered to each well from a centrally located compressor via a network of
welded HDPE piping. Leachate is collected from the wells and transported via the piping
network to the CITY sanitary sewer main adjacent to the western boundary of the landfill.
As mentioned above, CITY is in the process of placing 24 leachate wells under vacuum and
adding them to the landfill gas collection system because several have been found to register
methane concentrations above regulatory limits around the wellheads and components.
Currently, five leachate wells are connected to the gas collection system. Any monitoring
required under the regulations of landfill gas wells would include those leachate wells that have
been hooked up to the landfill gas collection system.
Leachate elevations within the refuse mass are measured through a set of 17 vertical
piezometers.
Condensate Collection: Gas condensate produced by the LFG collection system is collected in
traps and pumped into the facility's LCRS via pneumatic submersible pumps. There are
currently eleven (11) condensate sumps located in Byxbee Park (Phase I), Phase IIA, Phase IIB
and Phase IIC, combined.
11. General Requirements:
This scope of services includes: 1) Performing routine LFG collection and emission control
system monitoring and reporting; 2) Performing annual landfill flare stack emissions sampling,
analyses and reporting; and 3) Compiling and preparing various LFG reports and providing
miscellaneous engineering support services.
A. CONSULTANT shall comply with all requirements of the Landfill's Title V Air Permit
(#A2721)(including any latest change of permit conditions), Regulation 8, Rule 34 of the
Bay Area Air Quality Management District's (BAAQMD's) regulations, including the
regulations for Methane Emissions from Municipal Solid Waste Landfills, CCR Title 17,
§95460-95476, and the EPA Greenhouse Gas Rule (40 CFR Part 98, Subpart HH) as well
as all pertinent plans and specifications relating to work associated with maintenance
and operation of the site's environmental control systems.
B. CONSULTANT shall provide all necessary services, labor, tools, materials, equipment,
vehicles, and instrumentation for the routine scope of services under this Agreement
including, but not limited to monitoring equipment for detecting LFG and any other
equipment necessary to perform the routine scope of services contained herein. These
items of equipment are considered necessary items for CONSULTANT, and separate
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charges for use of these items in the course of the routine work, shall not be paid by
CITY.
C. All routine operation or monitoring work shall take place either aboveground or in
buried shallow vaults (less than three feet in depth). CITY shall provide all applicable
permits for work performed under this Agreement. CONSULTANT shall not be
responsible for the overall quality of the gas with regard to trace components and shall
not take "generator status" for any waste produced at the landfill deemed hazardous.
The CITY has a landfill maintenance contractor that will perform repairs to the gas and
leachate collection systems as needed.
D. Personnel job titles and required experience levels are listed below. All field personnel
performing work under this Agreement shall have the following minimum qualifications:
Senior Technician (or equivalent)
• Five (5) years experience performing work on LFG and LCRS systems;
• Ability to tune and optimize the vacuum on the LFG collection system without
supervision or close oversight;
• Ability to detect LFG system and LCRS leaks and diagnose potential failures before
they occur; and,
• General understanding of landfill regulations relating to the LCRS and LFG systems.
Technician (or equivalent)
• Two (2) years experience performing work on LFG and LCRS systems;
• Ability to detect LFG system and LCRS Teaks and diagnose potential failures before
they occur; and,
• General understanding of landfill regulations relating to the LCRS and LFG systems.
CITY may approve of field Technicians that do not have the minimal qualifications listed
above on a case -by -case basis, and only when: 1) the scope of the Technician's work is
specific to the Technician's skill set; and 2) the Technician has proper oversight and
supervision by appropriately qualified personnel. CITY's approval is required prior to
any such Technician performing work under this Agreement.
E. CITY will authorize site access for CONSULTANT personnel, equipment, and materials for
the completion of the work. CONSULTANT personnel shall be responsible for
communication and coordination of onsite work by notifying appropriate CITY personnel
at the landfill office prior to beginning work onsite.
111. Task 1:
Work To Be Performed
Task 1— Routine LFG System, Flare, Well -Head Monitoring, and Surface Monitoring and
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Reporting
Definition For Task 1:
CONSULTANT shall provide a Senior Technician (or equivalent) with an experience and skill level
defined above, at the hourly rates specified in the Fee Schedule for the performance of routine
LFG system monitoring, well -head monitoring and surface monitoring and reporting.
A) Senior Technician (or equivalent) 613 hours onsite expected for year one of the contract.
Much of this routine work for the final two years of this Agreement is anticipated to be
conducted by CITY with the exception that CONSULTANT may continue surface monitoring,
review and compilation of gas well data and all reporting. Field Time Estimate breakdown for
Task 1 during year 1 is expected to be:
• One 8 hour day (onsite) per week for well and component adjustment and monitoring
(416 hours per year);
• One 16 hour event (onsite) per quarter for surface and component monitoring (64 hour
per year); and
• Miscellaneous additional follow-up time for adjusting high -oxygen LFG and Leachate
wells (133 hours onsite per year).
B) Management/Supervisor/Office Support Staff to support Task 1.
General Scope of Services For Task 1
Unless otherwise specified by CITY, a date -specific schedule or a set day of the week schedule
shall be submitted by CONSULTANT for approval by CITY, and shall specify when the LFG
maintenance needs to occur as prescribed in the current Title V Permit, Permit To Operate,
and/or Rule 8-34 regulations. Generally, for year one of this Agreement, Task 1 services shall
include the following:
a. Monitoring once per week of 109 LFG well -heads, up to 24 leachate well -heads
(connected to the gas collection system), 15 condensate sumps, flare station and other
valves, fittings and components;
b. Monthly measurement of methane and non -methane organic compounds (NMOC),
oxygen concentration and pressure within each well -head (landfill gas wells and
leachate wells which are connected to the gas collection system) in accordance with
Regulation 8, Rule 34, and Title 17, Section 95469. lithe well head does not meet the
standards of Regulation 8, Rule 34, Section 305, and Title 17, §95469, then
CONSULTANT shall document and make adjustments following Regulation 8, Rule 34,
Section 414 scheduling requirements. It is anticipated that some follow up visits shall be
necessary by the Senior Technician for the purpose of monitoring and adjusting wells
with high oxygen content. CONSULTANT shall make recommendations to CITY for
further repairs if necessary. CONSULTANT shall compile the wellhead information,
including all follow-up monitoring results and submit monthly reports to CITY, within 21
days from the end of each month. At CITY discretion, CONSULTANT shall train CITY
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while completing the field work portion of this work. The monitoring requirements of
the rule are located in §95469 and §95470. These requirements are listed below:
i. Monthly wellhead monitoring and requirement to achieve negative pressure at
all wellheads, including corrective action/re-monitoring.
ii. Quarterly instantaneous surface emissions monitoring (SEM) at 25 -foot spacing
with a 500 ppmv methane limit, including testing of cover penetrations, with
corrective action/re-monitoring.
iii. Quarterly leak testing of GCCS components not under vacuum at a 500 ppmv
methane limit, including corrective action/re-monitoring.
iv. Quarterly integrated surface sampling with a limit of 25 ppmv methane.
v. Continuous flow and temperature monitoring.
vi. Quarterly monitoring of flare and Regional Water Quality Control Plant landfill
gas piping and incinerator components which contain landfill gas and/or which
contain landfill gas under positive pressure.
c. In addition to the monthly well head monitoring, CONSULTANT shall monitor and
compile records to support the LFG component quarterly leak monitoring requirements
of the BAAQMD's Regulation 8, Rule 34, Section 501 and 503 and Title 17, §95460-
95476. Separate Quarterly Component Monitoring reports shall be submitted to CITY
within 21 days from the end of each quarter. At CITY discretion, CONSULTANT shall train
CITY while completing the field work portion of this work
d. Adjust/tune and optimize the vacuum on the individual wells in order to maximize
methane extraction while minimizing oxygen intrusion into the landfill; At CITY
discretion, CONSULTANT shall train CITY while completing the field work portion of this
work
e. Quarterly measurement of methane and NMOC concentration on the landfill surface in
accordance with site surface monitoring plan and Regulation 8, Rule 34, Section 501 and
506 and including the newly adopted regulations for Surface Emissions Monitoring
(SEM), CCR Title 17, §95469 listed below:
i. Quarterly instantaneous surface emissions monitoring (SEM) at 25 -foot spacing with
a 500 ppmv methane limit, including testing of cover penetrations, with corrective
action/re-monitoring.
ii. Quarterly leak testing of GCCS components not under vacuum at a 500 ppmv
methane limit, including corrective action/re-monitoring.
iii. Quarterly integrated surface sampling with a limit of 25 ppmv methane.
f. CONSULTANT shall establish a portable wind station or obtain measurements from the
Palo Alto Airport to document compliance with meteorological conditions during the
monitoring events. A detailed written report summarizing the results of the monitoring
activities shall be provided to CITY within 21 days of the end of each quarter. A date -
specific schedule shall be developed by CONSULTANT and submitted for approval by
CITY. At CITY discretion, CONSULTANT shall train CITY while completing the field work
portion of this work.
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g. Weekly monitoring of the flare station, including download of the data logger.
Document and collect all data including all startup, shutdown and malfunction
paperwork. Data to be collected, recorded, and stored in a computer or web data base
(with current security access provided to CITY) includes the following:
i. Date, time, and monitoring personnel.
ii. Meteorological condition (i.e., wind velocity, barometric pressure ambient
temperature, weather conditions, etc.).
iii. Extraction blower operating inlet and outlet temperatures and pressures.
iv. Methane gas, oxygen gas, carbon dioxide and balance gas concentrations at flare
inlet or Regional Water Quality Control Plant Incinerator as required by the
BAAQM D.
v. Flare exit gas temperature (only when flare operational).
vi. LFG flow rate to flare, or CITY incinerator.
vii. Flare combustion louver (only when flare is operational).
viii. Flow control valve positions.
ix. Check pilot ignition system propane storage tank level.
x. LFG control system blowers, flame arresters, flares, control panel, well fields,
and condensate pump systems shall be observed for the following:
• Accessibility.
• Vandalism.
• Malfunctions.
• Leaks.
xi. Weekly record blower running hours;
h. Once per quarter, hydrogen sulfide (H2S) shall be tested at the Flare Station inlet
utilizing field Draeger test tubes as required by the Title V permit; Inspect flame
arrester; and, inspect burner heads.
i. CONSULTANT shall obtain information from the RWQCP to prepare the necessary
reports.
j. Compile all data from the tasks listed above to be utilized by CONSULTANT in preparing
the Title V Semi-annual reports (Task 3).
k. CONSULTANT shall provide one (1) copy of all field records generated during on -site
service before leaving the site for the day.
IV. Task 2:
Task 2 Routine Landfill Flare Stack Emission Sampling, Analytical Testing and Reporting
CONSULTANT shall conduct the flare source test on the Flare located at the Regional Water
Quality Control Plant in accordance with the Title V Major Facility Review Permit No. A2721,
dated June 4, 2012 ("Title V Permit"), Condition 1028, Item Nos. 15 and 16 including
determination of flare destruction efficiency. Additionally, because the landfill is subject to the
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AB32 Landfill Methane Rule (see Task 3 of this Scope of Services), the flare must be tested
annually to document compliance with Rule's 99% methane destruction requirement, as
specified in Section §95471 of the Rule. CONSULTANT shall perform the annual flare testing
while the contract is in place. In accordance with Item No. 15 of the Title V Permit,
CONSULTANT shall notify the Bay Area Air Quality Management District (BAAQMD) at least 14
days in advance of the test and shall submit to BAAQMD the compliance plan for the source
test. CONSULTANT shall submit a report summarizing the results of the source test to CITY and
BAAQMD within 45 days of completion of the test.
V. Task 3:
Task 3 Routine Report Preparation and Engineering Services
Task 3 is outlined below and includes report preparation in compliance with the Title V permit
and Bay Area Air Quality Management District (BAAQMD) Rule 8-34, as listed below.
CONSULTANT shall provide a draft of each report to CITY for review prior to submittal to
BAAQMD, and shall incorporate CITY's comments into the final reports for submittal. The final
reports and certifications shall be signed by the responsible CITY official.
A. Title V Semi -Annual Monitoring Reports (Two Reports)
The Title V Permit for the CITY includes a requirement for the preparation and submittal of
semi-annual monitoring reports associated with permit compliance. CONSULTANT shall collect
the required information for completion of these reports and prepare the reports on behalf of
CITY for submittal to the BAAQMD. City generated data and documentation for Title V
monitoring will be provided to CONSULTANT in a timely and complete manner for inclusion in
the report, with the exception of information CONSULTANT collects and maintains in
accordance with the Scope of Services under this Agreement. The regulations require two
semiannual reports. One reporting period covers June 1st through November 30th and the
second reporting period covers December 1St through May 31St. Both reports are due the last
day of the month after the end of the reporting period.
B. Semi -Annual Rule 8-34 NSPS Reports (Two Reports)
CONSULTANT shall prepare the semi-annual Rule 8-34 annual reports required by the BAAQMD.
CONSULTANT shall collect the necessary data to complete this reports under Section 411 of
Rule 8-34 and Part 40 Code of Federal Regulations (CFR) 60.757(f) of the New Source
Performance Standards (NSPS) for Municipal Solid Waste Landfills (40 CFR Part 60, Subpart
WWW). The reports shall be developed in the format prescribed by the BAAQMD. The
regulations require two semiannual reports. One reporting period covers June 1St through
November 30th and the second reporting period covers December 1st through May 31st. Both
reports are due the last day of the month after the end of the reporting period. The semi-
annual reports shall contain the following information, as required:
1) Operating Records Required by Section 501:
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a) All collection system downtime, including individual well shutdown times, length of time
for shutdown, and the reason for the shutdown. All periods greater than five (5) days
when the collection system was not operating.
b) All emission control system downtime, length of time for shutdown, and the reason for
the shutdown. Description and duration of all periods when the control device was not
operating for greater than one (1) hour and the length of time that the device was not
operating.
c) Continuous temperature records (data logger) for all operating flares and any enclosed
combustors with a listing of the dates/times when flare temperature went below limit
allowed in the Title V permit and any times when temperature gauge was off-line or not
operational.
d) Monthly LFG flow meter readings.
e) Records of all quarterly LFG system component leak testing, including monitoring dates,
leak concentration by volume if in excess of 1,000 parts per million, by volume (ppmv),
location of leak, date of discovery, the actions taken by the City or its maintenance
contractor to repair the leak, date of repair, date of any required re -monitoring, and the
re -monitored concentration in ppmv.
f) Continuous gas flow rate records (data logger information) with a listing of the
dates/times when flow rate went above limit allowed in the Title V permit and any times
when the flow meter was off-line or not operational.
g)
Records of all quarterly surface emissions monitoring, including monitoring dates,
surface emission concentration by volume if in excess of 500 ppmv, location of
exceedance, date of discovery, the actions taken by the CITY or its maintenance
contractor to repair the exceedance, date of repair, date of any required re -monitoring,
and the re -monitored concentration in ppmv.
h) For monthly wellhead monitoring (temperature, vacuum, and oxygen or nitrogen
content), records of all monitoring dates and any excesses of the limits stated in Section
8-34-305, Title 17, §95460-§95476, and below (or alternative limits approved in the Title
V Permit), including well identification number, the measured excess, the action taken
by the CITY or its maintenance contractor to repair the excess, and the date of repair,
date of any required re -monitoring, and the re -monitored value.
Gas wells
i) A minimum of monthly recording of gauge pressure at all wellheads (all wells must
operate under negative pressure conditions).
ii) Monthly monitoring of oxygen or nitrogen concentrations at all wellheads (oxygen
must not exceed 5 percent or nitrogen over 20 percent).
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iii) Monthly monitoring of temperatures at all wellheads (temperature shall not exceed
55°C (131°F)).
Leachate wells (connected to the GCCS)
i) A minimum of monthly recording of gauge pressure, oxygen content, methane
content, and temperature at each wellhead (the well(s) must be connected to
vacuum if any pressure is detected);
iv) Monthly monitoring of oxygen concentrations at wellheads (oxygen must not exceed
15 percent by volume). If the oxygen concentration exceeds 15 percent by volume
the vacuum to the leachate well may be turned off;
v) Monthly monitoring of temperatures at all wellheads (temperature shall not exceed
55°C (131°F)). If temperature exceeds 55°C (131°F) the vacuum to the leachate well
may be turned off;
2) Calibration information for monitoring equipment used for the various monitoring activities
listed above (e.g., OVA, GEM -500 unit, flow meter, temperature, etc.).
3) Description and duration of all periods when the gas stream was diverted from the control
device through a bypass line to the WQCP incineration.
4) The date of installation and location of all wells or system expansions as the result of
monitoring exceedances during previous reporting period.
5) Data upon which the density of well and equipment sizing were based.
6) Gas generation rate estimates.
7) Provisions for increasing LFG extraction capacity as gas generation increases.
8) The provisions for the control of LFG migration.
C. Semi -Annual Startup Shutdown and Malfunction Plan Reports (Two Reports)
The landfill is subject to 40 CFR Part 63, Subpart AAAA, the National Emission Standard for
Hazardous Air Pollutants (NESHAPs) for Municipal Solid Waste Landfills. In accordance with
NESHAPs requirements, a start-up, shutdown, and malfunction (SSM) plan was prepared for the
Palo Alto landfill. This SSM Plan documents the procedures for operating and maintaining the
affected elements of the landfill gas collection and control system during startup shutdown and
malfunction. In addition to the requirements to prepare an SSM plan, CFR 40 contains
provisions requiring periodic SSM reports at a minimum semi-annual basis. CONSULTANT shall
prepare the required SSM reports on a semi-annual basis.
D. Annual Compliance Certification (One Report)
The Title V permit for the CITY also includes a requirement for the preparation and submittal of
an annual compliance certification. CONSULTANT shall collect the required information for
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completion of a report to accompany this certification and prepare the report on behalf of CITY
for submittal to the BAAQMD. CONSULTANT shall provide a draft of the report to CITY for
review prior to submittal to BAAQMD, and shall incorporate CITY's comments into the final
reports for submittal. The reporting period covers June 1st through November 30th. The report
is due the last day of the month after the end of the reporting period.
E. AB32 — Landfill Methane Rule Annual Reporting (One Report)
CITY is subject to the AB32 Landfill Methane Rule (Title 17 California Code of Regulations (CCR),
Chapter 10, Article 4, Sub -article 6, §95462 through §95476), which has an annual reporting
requirement. The required annual report under this Rule must be submitted by March 15 of
each year for the previous calendar year data.
Annual Reports must include the following information, as specified in §95470 of the Rule:
• General site information
• Total volume of LFG collected (reported in standard cubic feet (scf)),
• Average composition of LFG collected over the reporting period (reported in percent
methane and percent carbon dioxide by volume),
• Gas control device type, installation, rating, fuel type, and total LFG combusted in each
control device,
• Date GCCS installed
• Percent methane destruction efficiency
• Volume and composition of gas shipped off -site
• Type and amount of supplemental fuels burned with the LFG.
• Recent topographic map, and
• All required monitoring data.
CONSULTANT shall compile the required data into a report in a format suitable for submittal to
the California Air Resources Board (CARB) Executive Officer. CONSULTANT shall provide a draft
of the report to CITY for review. CONSULTANT shall incorporate CITY comments into the final
report and submit to CARB on behalf of the CITY.
F. EPA — Greenhouse Gas Annual Reporting (online submittal)
CITY is required under the EPA GHG reporting rule, 40 CFR Part 98, Subpart HH, to submit a
report annually. CONSULTANT shall compile the required data and input into an appropriate
electronic format in accordance with EPA GHG rule specifications for upload to the EPA's online
reporting tool (e-GRRT). CONSULTANT shall submit draft data file to CITY for review.
CONSULTANT shall incorporate CITY comments into the final report and submit to EPA via e-
GRRT. CONSULTANT will be added to the website as CITY agent and shall manage the website
reports on behalf of CITY.
The data to be reported is for calendar year 2018, 2019 and 2020, and the reporting deadline is
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March 30 of the following year. As specified in the EPA Rule, the following information is
required:
• Landfill Operations (Open/closed/Year)
• Waste Disposal Calculations
• Waste Composition (If Available)
• Modeling Parameters Used
• Methane Data
• Landfill Area, Cover Types by Area, and Oxidation Fractions Used
• LFG Modeling Results
• Emissions from stationary combustion units.
• Flow of collected LFG
• Methane content of LFG
• Temperature and pressure data for LFG
• Description of control device(s) both on- and off -site
• Control device operating hours
• Description of GCCS, landfill areas and waste depths
• Computed methane volume captured
• Computed methane generated (corrected for oxidation using EPA model)
• Computed methane generated (corrected for oxidation using LFG recovery flow and
collection efficiency)
• Methane Emissions, Method 1 (Modeling)
• Methane Emissions, Method 2 (Gas Captured and Estimated Collection Efficiency)
Other Engineering Services
On occasion, CITY may ask CONSULTANT to evaluate the performance and design of the gas
system using the services of a qualified LFG engineer. CONSULTANT shall provide engineering
services for duties including, but not limited to possible LFG and LCRS system design, permitting
and equipment change -out. Work on these engineering services requires written approval
from CITY prior to CONSULTANT working on or billing to these subtasks. Typically,
CONSULTANT shall develop and submit a written cost estimate prior to work on these subtasks.
End Scope of services
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EXHIBIT "B"
SCHEDULE OF PERFORMANCE
CONSULTANT shall perform the Services so as to complete each milestone by the dates and/or
with the frequencies specified on the Schedule. CONSULTANT shall submit a Monitoring and
Reporting Schedule for approval by CITY within 2 weeks issuance of the notice to proceed. The
schedule shall include date -specific reporting milestones and specify the set day -of -the -week and
frequencies of regularly -scheduled monitoring events as prescribed in the current Title V Permit,
Permit to Operate, and Rule 8-34 regulations.
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EXHIBIT "C"
COMPENSATION
The CITY agrees to compensate the CONSULTANT for the Services performed in
accordance with the terms and conditions of this Agreement, and as set forth in the budget
schedule below. Compensation shall be calculated based on the hourly rate schedule
attached as Exhibit C-1 up to the not to exceed budget amount for each task set forth
below.
CONSULTANT shall perform the tasks and categories of work as outlined and budgeted
below. The CITY's Project Manager may approve in writing the transfer of budget
amounts between any of the tasks or categories listed below provided the total
compensation for Basic Services, including reimbursable expenses, and the total
compensation for Additional Services do not exceed the amounts set forth in Section 4 of
this Agreement.
BUDGET SCHEDULE NOT TO EXCEED AMOUNT
Task 1 $191,400.00
(Routine LFG System, Flare, Wellhead Monitoring, and Surface Monitoring)
Task 2 $25,020.00
(Routine Landfill Flare Stack Emission Sampling, Analytical Testing and Reporting)
Task 3 $108,000.00
(Routine Report Preparation and Engineering Services)
Sub -total Basic Services $324,420.00
Reimbursable Expenses $15,000.00
Total Basic Services and Reimbursable expenses $339,420.00
Additional Services (Not to Exceed) $33,942.00
Maximum Total Compensation $373,362.00
REIMBURSABLE EXPENSES
The administrative, overhead, secretarial time or secretarial overtime, word processing,
photocopying, in-house printing, insurance and other ordinary business expenses are
included within the scope of payment for services and are not reimbursable expenses.
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CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost.
Expenses for which CONSULTANT shall be reimbursed are: ongoing cost / support for
SCS Remote Monitoring and Control.
A. Travel outside the San Francisco Bay area, including transportation and meals, will be
reimbursed at actual cost subject to the City of Palo Alto's policy for reimbursement of
travel and meal expenses for City of Palo Alto employees.
B. Long distance telephone service charges, cellular phone service charges, facsimile
transmission and postage charges are reimbursable at actual cost.
All requests for payment of expenses shall be accompanied by appropriate backup
information. Any expense anticipated to be more than $1,000.00 shall be approved in
advance by the CITY's project manager.
ADDITIONAL SERVICES
The CONSULTANT shall provide additional services only by advanced, written
authorization from the CITY. The CONSULTANT, at the CITY's project manager's
request, shall submit a detailed written proposal including a description of the scope of
services, schedule, level of effort, and CONSULTANT's proposed maximum
compensation, including reimbursable expense, for such services based on the rates set
forth in Exhibit C-1. The additional services scope, schedule and maximum
compensation shall be negotiated and agreed to in writing by the CITY's Contracts
Administration and CONSULTANT prior to commencement of the services. Payment for
additional services is subject to all requirements and restrictions in this Agreement
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EXHIBIT "C-1"
SCHEDULE OF RATES
Technical Field Personnel Rate/Hour
Technician 65
Sr. Technician 85
Foreman 104
Superintendent 135
management/support Personnel
Rate/Hour
Secretarial 56
Project Administrator 85
Designer/Drafter 106
Project Coordinator 115
Project Manager 165
Senior Project Manager 185
Regional Manager/Project Director 220
SCS ENGINEERS
Rate/Hour
Senior Engineering Technician 96
Staff Professional 120
Engineering Project Professional 147
Senior Project Professional 165
Certified Industrial Hygienist 185
Engineering Project Manager 200
Senior Project/Technical Manager 220
Engineering Project Director 255
Principal 295
Senior Executive 310
SCS FIELD SERVICES
STANDARD FEE SCHEDULE FOR EQUIPMENT AND ANALYSIS
(Effective May 1, 2018 through May 31, 2019)
GEM 5000 Gas Analyzer $185/day
H2S Gas Pod $10/day
TVA2020 Emissions Monitor $185/day
Q Rae Gas Analyzer 02/H2S/CO/Combustibles $50/day
Micro Max Gas Analyzer 02/H2S/CO/Combustibles $50/day
Gas -Tech Tritector Gas Analyzer 02/H2S/Combustibles $45/day
MagnehelicPressureSet $20/day
Kurz Air Velocity Meter $35/day
Digital ReadoutThermocouple $25/day
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Gastech DetectorTubes/Pump $15/each
Metal Bel lows Vacuum Pump $35/day
Barpunch $10/day
Fisher M95 Metal Detector $30/day
Dewatering Pump (Trash Pump) $45/day
TVA 2020 Flame Ionization Detector
- Daily Rate $110/day
- Weekly Rate $500/week
- Monthly Rate $1400/month
MiniRae 2000PID
- Daily Rate $100/day
- Weekly Rate $400/week
- Monthly Rate $1200/month
Air Sampling Station
-Daily Rate $40/day
-Weekly Rate $175/week
Transit
-Daily Rate $15/day
-Weekly Rate $75/week
-Monthly Rate $250/month
Level
-Daily Rate $15/day
- Weekly Rate $65/week
- Monthly Rate $195/month
Pipe Laser
- Daily Rate $50/day
- Weekly Rate $220/week
- Monthly Rate $650/month
Water Trailer $ 75/day
PAS 3000 Air Sampling Pump $ 25/day
Tedlar Bag (1 Liter) $ 20/ea
Non -Contaminating Air Sampling Pump $25/day
Fyrite Carbon Dioxide Indicator $15/day
Interface Probe $50/day
Submersible Pump $50/day
Water Level Indicator $25/day
Teflon Well Bailer $10/day
Minuteman Drill Rig (excluding operator) $60/hour
Vacuum Box/Carbon Canister & Blower $25/day
Tool Truck $18/hour
No. 28 P.E. Fusion Machine (2"-8") $150/day
No. 14 P.E. Fusion Machine (1"-4") $80/day
412 P.E. Fusion Machine (4"-12") $225/day
618 P.E. Fusion Machine and Tool Truck $400/day
Trackstar 500 Fusion Machine $425/day
Sidewinder P.E. Fusion Machine $100/day
Air Compressor $60/day
Arc Welder $75/day
Generator (5000 Watt) $60/day
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Generator (3500 Watt) $45/day
Isolation Pinch Off Tools $60/day
Leister Extrusion Welding Gun $120/day
Plate Compactor $75/day
Safety Equipment
- Tyvek Suit - each $15/ea
- Polyethylene suit - each $20/ea
- Nitrile gloves - per pair $15/ea
- PVC Gloves - per pair $15/ea
- Rubber booties - per pair $15/ea
- Organic Vapor Cartridges - per pair $ 20/ea
- Organic Vapor/Acid Cartridges - per pair $ 25/ea
- Cartridges pre -filters - per pair $ 15/ea
- Full face respirator - each $25/day
- Half face respirator - each $20/day
-Ventilator/manhole blowers $25/day
-Parachute harness $10/day
-Tripod $35/day
-SCBA $75/day
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EXHIBIT "D"
INSURANCE REQUIREMENTS
CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT
OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY
COMPANIES WITH AM BEST'S KEY RATING OF A -:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT
INSURANCE BUSINESS IN THE STATE OF CALIFORNIA.
AWARD IS CONTINGENT ON COMPLIANCE WITH CITY'S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW:
MINIMUM LIMITS
REQUIRED
TYPE OF COVERAGE
REQUIREMENT
EACH
OCCURRENCE
AGGREGATE
YES WORKER'S COMPENSATION
STATUTORY
YES EMPLOYER'S LIABILITY
STATUTORY
BODILY INJURY
$1,000,000
$1,000,000
YES GENERAL LIABILITY, INCLUDING
PERSONAL INJURY, BROAD FORM
PROPERTY DAMAGE
$1,000,000
$1,000,000
PROPERTY DAMAGE BLANKET
CONTRACTUAL, AND FIRE LEGAL
BODILY INJURY & PROPERTY DAMAGE
$1,000,000
$1,000,000
LIABILITY
COMBINED.
BODILY INJURY 1
$1,000,000
$1,000,000
- EACH PERSON
$1,000,000
$1,000,000
- EACH OCCURRENCE
$1,000,000
$1,000,000
YES AUTOMOBILE LIABILITY, INCLUDING
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
$1,000,000
YES
THE CITY OF PALO ALTO IS TO BE
NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND
EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY
RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR, IF ANY,
BUT ALSO, WITH THE EXCEPTION OF WORKERS' COMPENSATION, EMPLOYER'S LIABILITY AND PROFESSIONAL INSURANCE,
NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES.
I. INSURANCE COVERAGE MUST INCLUDE:
A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF REDUCTION
IN COVERAGE OR OF COVERAGE CANCELLATION; AND
B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR
CONTRACTOR'S AGREEMENT TO INDEMNIFY CITY.
C. DEDUCTIBLE AMOUNTS IN EXCESS OF $10,000 REQUIRE CITY'S PRIOR APPROVAL.
IL CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE AT
THE FOLLOWING IRL: 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.
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B. CROSS LIABILITY
THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY
SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER,
BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL
LIABILITY OF THE COMPANY UNDER THIS POLICY.
C. NOTICE OF CANCELLATION
1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON
OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE
CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE
OF CANCELLATION.
2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-
PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN
(10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
VENDORS ARE REQUIRED TO FILE THEIR EVIDENCE OF INSURANCE
AND ANY OTHER RELATED NOTICES WITH THE CITY OF PALO ALTO
AT THE FOLLOWING URL:
HTTPS://W W W.PLANETBIDS.COM/PORTAL/PORTAL.CFM?COMPANYID=25569
OR
HTTP://WWW.CITYOFPALOALTO.ORG/GOV/DEPTS/ASD/PLANET BIDS HOW TO.ASP
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_________,
^ R/3 CERTIFICATE OF LIABILITY INSURANCE
DATE(MM/DD/YYYY)
03/29/2018
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS
CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES
BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED
REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER.
IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must have ADDITIONAL INSURED provisions or be endorsed. If
SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this
certificate does not confer rights to the certificate holder in lieu of such endorsement(s).
PRODUCER
Aon Risk Insurance Services West, Inc,
Los Angeles CA Office
707 Wilshire Boulevard
Suite 2600
Los Angeles CA 90017-0460 USA
CONTACT
PHONE FAX
(A/C. No. Ex1): (866) 283-7122 l No ): 800-363-0105
E-MAIL
ADDRESS:
INSURER(S) AFFORDING COVERAGE
NAIC #
INSURED
SCS Field Services
3900 Kilroy Airport Way, suite 100
Long Beach CA 90806-6816 USA
INSURER A: Steadfast Insurance Company
26387
INSURER B: Zurich American Ins Co
16535
INSURER C.
INSURER D:
INSURER E:
INSURER F:
COVERAGES
CERTIFICATE NUMBER: 570070622307
REVISION NUMBER:
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD
INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS
CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. Limits shown are as requested
1NSR
LTR
TYPE OF INSURANCE
AGM
INS°
SUER
WVD
POLICY NUMBER
POIICYEFF
(cMM/OD/YYYY
PODGY EXP
}MM/Q DIYYYYI
LIMITS
B
X
COMMERCIAL GENERAL LIABILITY
GL001127803
03/31/2018
03/31/2019
EACH OCCURRENCE
$2,000,000
DAMAGE TO RENTED
PREMISES (Ea occurrence)
$1,000,000
CLAIMS -MADE X OCCUR
MED EXP (Any one person)
$25,000
PERSONAL B ADV INJURY
$2,000,000
GEN'L
-1
AGGREGATE
POLICY
OTHER:
OTHER:
X
LIMIT APPLIES
JECT PRO -
PER:
LOC
GENERAL AGGREGATE
$4,000,000
PRODUCTS - COMP/OP AGG
$4,000,000
B
AUTOMOBILE
X
—
—
—
LIABILITY
ANY AUTO
OWNED
AUTOS ONLY
HIRED AUTOS
ONLY
—
_
_
SCHEDULED
AUTOS
NON -OWNED
AUTOS ONLY
BAP 0112780-03
04/01/201804/01/2019
COMBINED SINGLE LIMIT
(Ea accidenll
$2,000,000
BODILY INJURY ( Per person)
BODILY INJURY (Per accident)
PROPERTY DAMAGE
(Per accidenS
UMBRELLA LIAB
EXCESS LIAB
OCCUR
CLAIMS -MADE
EACH OCCURRENCE
AGGREGATE
DED RETENTION
B
WORKERSCOMPENSATIONAND
EMPLOYERS' LIABILITY Y / N
ANY PROPRIETOR / PARTNER / EXECUTIVE
OFFICER/MEMBER EXCLUDED? I N I
(Mandatory In NH)
Byes, describe under
DESCRIPTION OF OPERATIONS below
N/ A
wc011277903
04/01/2018
04/01/2019
x I PER STATUTE IOTERH-
E L. EACH ACCIDENT
$1,000,000
E L. DISEASE -EA EMPLOYEE
$1,000,000
E L. DISEASE -POLICY LIMIT
S1,000,000
A
Env Prof (E&0)
IPR379235302
Prof Liab - Claims Made
03/31/2017
03/31/2020
Per Claim
Aggregate
32,000,000
$2,000,000
DESCRIPTION OF OPERATIONS / LOCATIONS I VEHICLES (ACORD 101, Additional Remarks Schedule, may be ttached if more space is required)
Re: Job Number: 07206022.17, Job Description: Palo Alto Landfill OM&M -
city of Palo Alto, its council, members, officers, agents and employees are included as Additional Insured with respect to the
General Liability policy; and the General Liability policy evidenced herein is Primary and Non -Contributory to other insurance
available, as required by written contract, but limited to the operations of the Insured under said contract.
CERTIFICATE HOLDER
CANCELLATION
Holder Identifier : A
570070622307
Certificate No
city of Palo Alto
Attn: Purchasing
& Contract Administration
PO Box 10250
Palo Alto CA 94303 USA
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE
POLICY PROVISIONS.
AUTHORIZED REPRESENTATIVE
ACORD 25 (2016/03)
@1988-2015 ACORD CORPORATION. All rights reserved.
The ACORD name and logo are registered marks of ACORD
DocuSign Envelope ID: 3BDE3C3B-F2EE-4A4D-AA7E-DEA62AE637F3
Additional Insured — Automatic — Owners, Lessees Or
Contractors
ZURICH
Policy No.
Eff. Date of Pol
Exp. Date of Pol.
Eff. Date of End.
Producer No.
Add'I. Prem
Return Prem.
GLO 0112778-03
03/31/2018
03/31/2019
03/31/2018
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
Named Insured: Stearns, Conrad and Schmidt, Consulting Engineers, Inc.
Address (including ZIP Code): 3900 Kilroy Airport Way, Ste. 100, Long Beach, CA 90806
This endorsement modifies insurance provided under the:
Commercial General Liability Coverage Part
A. Section II — Who Is An Insured is amended to include as an additional insured any person or organization whom you
are required to add as an additional insured on this policy under a written contract or written agreement. Such person
or organization is an additional insured only with respect to liability for "bodily injury", "property damage" or "personal
and advertising injury" caused, in whole or in part, by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf,
in the performance of your ongoing operations or "your work" as included in the "products -completed operations
hazard", which is the subject of the written contract or written agreement.
However, the insurance afforded to such additional insured:
1. Only applies to the extent permitted by law; and
2. Will not be broader than that which you are required by the written contract or written agreement to provide for
such additional insured.
B. With respect to the insurance afforded to these additional insureds, the following additional exclusion applies:
This insurance does not apply to:
"Bodily injury", "property damage" or "personal and advertising injury" arising out of the rendering of, or failure to
render, any professional architectural, engineering or surveying services including:
a. The preparing, approving or failing to prepare or approve maps, shop drawings, opinions, reports, surveys,
field orders, change orders or drawings and specifications; or
b. Supervisory, inspection, architectural or engineering activities.
This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the
supervision, hiring, employment, training or monitoring of others by that insured, if the "occurrence" which caused the
"bodily injury" or "property damage", or the offense which caused the "personal and advertising injury", involved the
rendering of or the failure to render any professional architectural, engineering or surveying services.
U -GL -1175-F CW (04/13)
Page 1 of 2
Includes copyrighted material of Insurance Services Office, Inc., with its permission.
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C. The following is added to Paragraph 2. Duties In The Event Of Occurrence, Offense, Claim Or Suit of Section IV —
Commercial General Liability Conditions:
The additional insured must see to it that:
1. We are notified as soon as practicable of an "occurrence" or offense that may result in a claim;
2. We receive written notice of a claim or "suit" as soon as practicable; and
3. A request for defense and indemnity of the claim or "suit" will promptly be brought against any policy issued by
another insurer under which the additional insured may be an insured in any capacity. This provision does not
apply to insurance on which the additional insured is a Named Insured if the written contract or written agreement
requires that this coverage be primary and non-contributory.
D. For the purposes of the coverage provided by this endorsement:
1. The following is added to the Other Insurance Condition of Section IV — Commercial General Liability
Conditions:
Primary and Noncontributory insurance
This insurance is primary to and will not seek contribution from any other insurance available to an additional
insured provided that:
a. The additional insured is a Named Insured under such other insurance; and
b. You are required by written contract or written agreement that this insurance be primary and not seek
contribution from any other insurance available to the additional insured.
2. The following paragraph is added to Paragraph 4.b. of the Other Insurance Condition of Section IV — Commercial
General Liability Conditions:
This insurance is excess over:
Any of the other insurance, whether primary, excess, contingent or on any other basis, available to an additional
insured, in which the additional insured on our policy is also covered as an additional insured on another policy
providing coverage for the same "occurrence", offense, claim or "suit". This provision does not apply to any policy
in which the additional insured is a Named Insured on such other policy and where our policy is required by a
written contract or written agreement to provide coverage to the additional insured on a primary and non-
contributory basis.
E. This endorsement does not apply to an additional insured which has been added to this policy by an endorsement
showing the additional insured in a Schedule of additional insureds, and which endorsement applies specifically to
that identified additional insured.
F. With respect to the insurance afforded to the additional insureds under this endorsement, the following is added to
Section III — Limits Of Insurance:
The most we will pay on behalf of the additional insured is the amount of insurance:
1. Required by the written contract or written agreement referenced in Paragraph A. of this endorsement; or
2. Available under the applicable Limits of Insurance shown in the Declarations,
whichever is less.
This endorsement shall not increase the applicable Limits of Insurance shown in the Declarations.
All other terms and conditions of this policy remain unchanged.
U -GL -1175-F CW (04/13)
Page 2 of 2
Includes copyrighted material of Insurance Services Office, Inc., with its permission.
CITY OF
PALO
ALTO
City of Palo Alto (ID # 9279)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 6/11/2018
Summary Title: Community Engagement Block Program
Title: Approval of a 1.5 -year Contract With the Empowerment Institute for
$25,000 for Community Engagement Block Program (Continued From April 2,
2018)
From: City Manager
Lead Department: City Manager
Recommendation
Approval of a contract with Global Action for the Earth (the Empowerment Institute) for
$25,000 in direct costs for the Beta 2 Pilot of the Community Engagement Block
Program (Cool Block) to assist with neighborhood participation in Citywide initiatives.
Executive Summary:
In an effort to create a program to better connect the community to one another and
the City, staff brought a report (CMR ) to the City Council on March 5 and April 2,
2018. The report recommended the adoption of a contract with the Empowerment
Institute for continued support of the Cool Block program. The report prompted
additional questions from the City Council and community which resulted in the City
Council continuing the item to a future meeting. This current report revises the program
proposal in response to expressed concerns, answers many of the concerns
(Attachment A), and provides details about the next steps of the recommended Beta 2
Pilot Cool Block program. The revised proposal is a smaller investment for the City and
leaves the maximum amount of flexibility for the City to determine what to do after the
Beta 2 Pilot. Lastly, if successful, it provides the City with helpful tools and builds the
City's capacity to connect with the community better than before.
Background:
The City and the Empowerment Institute began working together in 2012 to think
outside the box and develop a block -by -block citizen engagement program to build
social capital through encouraging a low carbon lifestyle, green living, livable
neighborhoods, and disaster resilience. In 2016, the program was renamed "the Cool
Block" program and the City Council formally agreed to participate in the program. The
program aligns with other City programs (e.g., Know Your Neighbors Grant Program).
City of Palo Alto Page 1
Cool Block had two pilot programs with the City of Palo Alto: the Alpha Pilot program
and the Beta Pilot program. The Alpha Pilot program was conducted in 2016 with 15
community members volunteering as block leaders in their respective neighborhoods.
While the participants focused on many of the Cool Block action topics, neighbors
getting to know one another was the most valuable benefit of the pilot program.
Participants were able to track their progress and also had a web platform with
resources necessary to help achieve the actions they chose to complete. Some actions
were done as individual actions and others were Cool Block team actions.
The second Cool Block pilot, the Beta Pilot program, was conducted in spring 2017. The
Beta pilot program took place over four and a half months with 24 blocks participating,
representing approximately 175 households. The program goal was the same as the
Alpha Pilot (engaging residents at the block level to learn, share and act to live a low
carbon and environmentally sustainable lifestyle, increase disaster resilience, and
enhance the livability of the block). The program consisted of nine meetings led by a
block leader and largely self -directed by a team of five to eight households on a block.
Revised Cool Block Proposal for Beta 2:
In response to the concerns raised by the City Council and some of the community
about the Cool Block program, staff revamped the program design for the Beta 2 Pilot
program. The key changes to the Beta 2 Pilot program in comparison to the previous
report to the City Council are:
1. Pilot Name: the previous report referred to this new pilot as a "anew pilot"
program. To help clarify the different pilot programs, staff and the Empowerment
Institute renamed this pilot program as the "Beta 2 Pilot" program, building on
the progress of the Alpha and Beta pilot programs.
2. Lower Cost: The Beta 2 Pilot program will be a lower direct cost to the City at
only $25,000 and in -kind staff time not to exceed $75,000 in time and value
(compared to the previous direct costs of $100,000). The $75,000 in -kind time
and resources are aligned with existing staff efforts to promote Cool Block goals.
3. Staffing: In the previous Cool Block proposal, staff recommended spending
$100,000 which would include $75,000 for resident leader, Sandra Slater, as a
subconsultant for the Empowerment Institute. In this revised Beta 2 Pilot
program proposal, and as mentioned above, staff recommends the usage of
existing staff to learn the program and implement the program in alignment with
existing and complimentary City efforts as part of the City's investment in this
program. The Empowerment Institute will pay for its subconsultants.
4. What happens after the Beta 2 Pilot (year 1): With the revised Beta 2 Pilot
program, the City has much more flexibility over what to do upon the conclusion
of the Beta 2 Pilot program. The proposed Beta 2 Pilot agreement does not
City of Palo Alto Page 2
automatically commit the City to a Phase 2 of work although the Empowerment
Institute has offered some suggestions for what that partnership might look like.
5. Creating a Finite End with a Built in Next Step: In the previous proposal, the City
would have been requested to spend over $1 Million for Phase 2 upon
completion of the Beta 2 Pilot program and it was less clear of how the City
could take this program forward without such an investment. In this revised Beta
2 Pilot proposal, the cost of Phase 2 (after year 1) would be significantly less.
Additionally, the program is now built for existing staff to learn the program,
build capacity to operate the program, and prepare for the City to run this
program independently for broader community engagement.
Beta 2 Pilot Program Details:
The Empowerment Institute will advance, in partnership with the City, a Beta 2 Pilot
community engagement block program that builds social capital (defined here as a
network of quality, supportive relationships among people who live on the same block).
Through this contract, the City plans to progress a comprehensive program that
connects several City priority interests for building and strengthening community. The
Empowerment Institute will help to target and engage groups of residents that live
together on a block or in another defined area of approximately 25 adjacently
connected households. Many City departments (Utilities, Library, Public Works,
Administrative Services, Community Services, and the City Manager's Office, especially
the Sustainability Office) are already advancing their work through the Cool Block
program and look forward to further opportunities for growth.
Beta 2 Pilot Program Goals:
The community engagement goals of this strategic partnership between City and the
Consultant include:
1. Increased residential participation in the City's Sustainability Implementation Plan
and Utilities Strategic Plan to reduce the city's carbon footprint with an emphasis
on Electric Vehicle (EV) uptake, building efficiency and electrification.
2. Increased residential participation in the City's Emergency Preparedness Plan to
increase household and block disaster resiliency and recruitment of volunteers
for the Emergency Services Volunteer Program.
3. Increased residential participation in the City's Healthy City, Healthy Community
Initiative to address the social determinants of health through greater neighbor -
to -neighbor connectivity, community and social capital.
4. Increased residential participation in City programs addressing the following
topics: carbon reduction, energy efficiency, transportation efficiency, solid waste
reduction, water stewardship, emergency preparedness, safety, health,
community building, and social cohesiveness.
5. Increased community engagement through helping strengthen the partnership
between Palo Alto residents and the City government.
City of Palo Alto Page 3
Beta 2 Pilot Target Metrics:
The Beta 2 Pilot program follows two previous pilot programs, the Palo Alto Cool Block
Alpha and Beta pilot programs. In those pilots, 24 blocks and 175 households
participated. The Beta 2 pilot program target metrics are based on results of those
previous pilot programs and translate the Beta 2 goals into measurable targets. Both
partners will evaluate the results of the Beta 2 pilot against the pilot goals along with
the Alpha and Beta 1 results achieved on 24 blocks. These metrics are as follows:
1. Carbon savings per household: minimum 25% reduction.
2. Emergency preparedness per household: minimum of 7 priority household
actions.
3. Livability improvement per block: minimum of 3 livability improvement actions to
increase the health, safety, beautification, greening, resource sharing and
community building on the block.
4. Social capital per block: minimum of 2 post program block level actions to
sustain the social capital generated by neighbor -to -neighbor connectivity and
collaboration during the program.
5. Participation in City programs: awareness of relevant City programs by Cool
Block participants to help evaluate resident engagement levels in these programs
through feedback from Cool Block website click -through rates to City programs.
6. Citizen engagement per household: minimum of 20 Cool Block actions across the
topics of sustainability, resiliency, livability and civic engagement.
Note, the "actions" are defined as a list of specific tasks that Cool Block participants can
choose to do in each of the subject areas.
Beta 2 Pilot Program Budget:
In an effort to be shared partners, the Empowerment Institute and the City are sharing
investments in the Beta 2 Pilot program. This shared investment is shaped as a staffing
investment from both the Empowerment Institute as well as the City, in addition to
$25,000 additional investments from both parties for a 9 -month period with 30 blocks
anticipated participation. The combined budget for Beta 2 is as follows:
• City of Palo Alto staffing: City to contribute existing staffing in an amount
equivalent to $75,000 (For community organizing which includes recruiting,
training and coaching block leaders; and program integration into participating
city departments).
City of Palo Alto Page 4
• Empowerment Institute local staffing: EI to pay $75,000 (For community
organizing which includes recruiting, training and coaching block leaders; and
training and interface with City staff).
• Empowerment Institute Management Fee: City to pay $25,000 (For use of
The Cool Block platform; training and consulting on EI's community engagement
and citizen empowerment strategies and tools; project management; and
administrative costs).
• Research: EI to pay $15,000 (Lawrence Berkeley National Laboratory for
development of a Palo Alto specific cost/benefit study regarding Cool Block's
demand management benefits on the City's infrastructure, service delivery and
S/CAP Sustainability Implementation Plan costs; and the cost/benefits of disaster
resiliency, social cohesiveness and social capital).
• Communication: EI to pay $10,000 (For program related videos showcasing the
city's high priority Cool Block actions).
The total investment from each party will be $25,000 in direct costs and $75,000 in
staffing costs.
Phase 2 of the Beta 2 Pilot Program:
The City has full discretion over how to proceed with the Cool Block program after this
year of the Beta 2 Pilot program. A thorough evaluation report about the program will
provide the City with necessary information to determine next steps to help with
community engagement.
Timeline:
Phase I of Beta 2 Pilot is estimated for completion either in calendar year 2018 or 2019.
Resource Impact:
The Beta 2 Pilot program will cost the City $25,000 in direct costs and an equivalent of
$75,000 in costs for existing staff. Staff recommends using the City Manager's
Contingency fund, which has a current balance of $44,766, to fund the Beta 2 Pilot
program and the in -kind department support will be absorbed with existing resources.
Policy Implications:
The Cool Block program relates to three Major Themes of the Comprehensive Plan:
Building Community and Neighborhoods; Keeping Palo Alto Prepared; and Providing
Responsive Governance and Regional Leadership. Cool Block touches each of these
themes through connecting citizens on a block level and strengthening their connection
to city government.
Comprehensive Plan Goal 5-C, Policy C-5-7 references the Healthy City, Healthy
Community Resolution. The Cool Block program contributes to this goal. One sub -goal
of Health City, Healthy Community is to promote a healthy culture where the City
City of Palo Alto Page 5
"promotes and provides opportunities for social interaction." Another sub -goal is to
promote a healthy environment where the City "supports, protects and connects Palo
Alto to the natural environment and cultural resources." Cool Block contributes to these
goals by creating the opportunity for Palo Altans to have neighbor -to -neighbor
interactions to advance other safety, cultural, and environmental goals.
Other relevant plans include the Sustainability Implementation Plan and the S/CAP.
Environmental Review:
This contract is exempt from the California Environmental Quality Act (CEQA) under
section 15061(b)(3) of the CEQA Guidelines. (See Cal Code Reg., Title 14, Chapter 3, §
15061(b)(3)).
Attachments:
• Attachment A: Responses to Concerns about the Cool Block Program
• Attachment B: Alpha and Beta Pilot Program Results & Testimonials -2016-17
• Attachment C: Public Letters to Council
City of Palo Alto Page 6
Responses to Concerns Submitted to Council about the Cool Block Program
When staff took the Cool Block proposal to City Council in March and April 2018, the
City Council and the community relayed some concerns to staff. The information below
includes staff responses to the most commonly expressed questions. The responses
factor in the suggested program changes of the updated Beta 2 Pilot proposal.
Q1. Why is the program cost so high?
A. Staff negotiated a new program pricing structure upon hearing Council's
concerns about the previous cost. The March/April proposal to City Council
requested $100,000 of the City and $100,000 (in -kind) from the Empowerment
Institute. As shown in this June report, the new Beta 2 Pilot cost for the City is
$25,000 direct funding, and in -kind existing staff support equivalent to $75,000.
The City Return on Investment for this program can be seen over time through:
• Potential longer -term savings on the City's infrastructure and service delivery
expenditures from increased residential energy efficiency, transportation
efficiency, water stewardship, and solid waste reduction.
• Potential increased intake related to the City's estimated multi -million -dollar
yearly investment in its S/CAP implementation from significant reduction in
the residential carbon footprint.
• Potential increased intake in the number of residents prepared for natural
disasters and able to achieve deep household emergency preparedness and
disaster resilient blocks that include support for the elderly, infirmed and
disabled which helps the City recover more efficiently after disasters.
• The City's investment in creating greater collaboration and social capital
among neighbors living on a block or in a building, and civic engagement and
citizenship within the community.
Q2. What is Phase 2 and how much does it cost?
A. As explained above, Phase 2, which would come after the Beta 2 Pilot program,
is at the sole discretion of the City Council in determining next steps. With the
updated Beta 2 Pilot program, it will cost significantly less than the March/April
staff report referenced.
In the March/April 2018 staff report, staff included additional information about
the Cool Cities Challenge, which, from early estimations, could have cost over $1
million. But with staff working with the Empowerment Institute to refine the
details of what a Phase 2 could look like, the Phase 2 cost is much lower. More
importantly, the City does not have to engage in a Phase 2 unless desired at the
completion of the Beta 2 Pilot. If the City continued to partner with the
Empowerment Institute for Phase 2 to have 375 blocks (25% of Palo Alto's
blocks) participate in the program, the City is not obligated to use the
Empowerment Institute to further build this program, especially with City staff
learning the program during the Beta 2 Pilot.
1
Responses to Concerns Submitted to Council about the Cool Block Program
Q3. Why is this a separate program from existing organizations or programs, such as
Palo Alto Neighborhoods, Emergency Service Volunteers, or the Sustainability
Implementation Plan?
A. The Cool Block program is intended to create a space for neighbors to get
together, create social capital, and to learn from one another and guests. It is
multi -disciplinary and thus does not fit squarely into any one City department. It
also allows the Cool Block groups to be nimble as a smaller group instead of a
whole neighborhood convening. The program is complementary of existing City
efforts, especially in the energy and waste reduction realms as it expands the
City's direct contact reach and provides a space where neighbors can discuss
their individual progress and encourage neighbors to consider changes as well.
Q4. Other programs (such as the Emergency Services Volunteers) do not receive
financial investments from the City, why should this program?
A. Other City programs, such as the Emergency Services Volunteer program, have
dedicated existing staff support and resources through City departments. The
proposed amount for the Cool Block program is significantly less than the staffing
support provided to similar volunteer -based programs.
Q5. My neighbors are already connected, why do we need a program which purports
to do the same thing?
A. While some neighbors and blocks are very well connected, the National Citizen
Survey, annually conducted by the City of Palo Alto, has shown that the overall
sense of community in Palo Alto has decreased over time. In 2003, the survey
results showed that 70 percent of survey respondents found that the sense of
community in Palo Alto was good or excellent. In 2017, only 56 percent of
respondents found the sense of community to be good or excellent. In the period
in between 2003 and 2017, the average satisfaction rate (rating it as good or
excellent) was 66 percent. These survey results, as one data source, reflect the
growing need of neighbors' desire to feel connected to one another. When asked
in the National Citizen Survey what "Sense of Community" means, the most
common answer was "[being] Friendly/neighborly, offering helping hands and
working together." Forty-two percent (42%) of those respondents offering
comments provided this response.
The survey also showed that respondents feel that the "Neighborliness of
residents in Palo Alto" has decreased. It was 64% in 2014 and only 60% in 2017.
Q6. What will the Empowerment Institute be putting forward for this program if the
City has to put up money?
A. The Empowerment Institute will contribute the same amount as the City: one
staff person as well as $25,000 in direct costs for the Beta 2 Pilot program.
2
Responses to Concerns Submitted to Council about the Cool Block Program
Q7. Explain the City Manager's connection to the Empowerment Institute.
A. The City Manager has been part of the conversations between the City of Palo
Alto and the Empowerment Institute about potential partnerships going back to
2012 along with City Council members. He did not participate in the RFP process.
Q8. Why don't the Alpha and Beta Pilot results reflect all previous participants? How
is the carbon reduction calculated? Why do you allow blocks to pick whatever
actions they want?
A. As with any program, 100% of participants do not respond to surveys about their
experience, nor submit all documentation about their experience. This is why
only 97 of 175 households are accounted for in the metrics shown for the Alpha
and Beta Pilot programs. However, since the Alpha and Beta Pilot programs, the
Empowerment Institute has changed their online interface to make the 'action -
tracking' tool into an easy -to -interface online platform. With this upgrade, the
program participants will be able to more easily track their actions instead of
needing to fill out paper forms and submit them. This should help with increasing
the "reporting household" numbers.
Carbon reduction is measured by the carbon calculator in the toolkit on the Cool
Block website. It is a modified version of the carbon calculator provided by the
Environmental Protection Agency (EPA). It is used to measure the difference
between a household's energy usage at the start of the program versus at the
end of the program. The usage is measured on a per household basis and is not
compared to any larger data point such as city/county/state, etc. The goal is to
help households to be able to have a tangible way to estimate how their
behavior changes contribute to changes in their overall carbon footprint which
contributes to the City's larger sustainability implementation efforts.
Lastly, the program is designed to let each block group determine the actions
that are most fitting for their specific block instead of mandating that each block
across the whole city perform the same actions. This leaves the flexibility for
each block to address their specific needs. This also allows each block to
determine tangible actions to pursue based on the availability and bandwidth of
the individual household participants.
3
Attachment B
Pilot Program Results and Participant Testimonials
Source: The Empowerment Institute
The City of Palo Alto Alpha and Beta Cool Block Pilot Programs achieved the results summarized below.
Key Program Results:
• Number of Palo Alto Cool Blocks: 24
• Number of participating households (approximate): 175
• Number of household member participants (approximate -2.5 per household): 440
• Average households participating on Cool Block teams: 6.5
• Percentage of households on a block participating on a Cool Block team: 41%
• Average recruitment rate per block (people invited who participated): 55%
• Average carbon reduction per household: 7 tons (14,000 pounds)
• Average CO2 reduction per household: 32% (goal was 25%)
• Average number of disaster resiliency actions taken per household: 9 (goal was 7)
• Average number of program actions taken per household: 27
Participating Blocks: The Empowerment Institute formed Cool Block teams on 24 diverse blocks in a
variety of neighborhoods including Professorville, Community Center, Duveneck/St Francis, Triple E,
Midtown, Cal Ave, Barron Park, Palo Verde, and St. Claire Gardens.
Household Recruitment Results:
Recruitment Results Achieved on Participating Blocks
Percentage
Interested Blocks
(Percentage of households who agreed (said Yes) to an in -person
information meeting)
67.9%
Followed Through
(Percentage who showed up of those who said Yes)
84.5%
Information Meeting Recruitment Rate
(Percentage who agreed to join a team, of those who showed up)
67.4%
Overall Recruitment Rate
(Percentage who agreed to join a team of those who said Yes to
the information meeting)
54.9%
Actions Taken:
Results of Actions
Total
Pilot Average*
Pounds of CO2 Saved
1,306,707
13,471
Total Actions Taken
2,625
27
Average % CO2 Reduction
31.8%
*With 97 Households Reporting
Attachment B
Theme of Actions
Total Actions Taken
Carbon Reduction
787
Water Stewardship
585
Resiliency
949
Livability
298
Empowerment of Others
26
Action Analysis:
The most popular carbon -reducing actions were reducing waste, using less hot water in
personal and kitchen use, moving toward a vegetarian diet, efficient lighting, shopping less,
ensuring an efficient car. In addition, over 25% of reporting households did retrofit actions.
— The most popular resiliency actions were creating seven-day stores of food and water,
establishing an alternate lighting and news source, and preparations for fires and earthquakes.
— The most popular water -reducing actions were reducing water used in personal care,
gardening, and car washing. Many households (35-40%) also acted to reduce toxins in the
environment.
— The most popular livability actions taken up at the block level were safety, block parties, tool -
sharing, and helping neighbors when needed.
Partnership with the City of Palo Alto: The Palo Alto Cool Block Program Manager gathered over 65 local
resources for the program. These resources span four key themes addressing carbon reduction (20),
resiliency (30), water stewardship (3), and livability (10). Each resource was mapped to relevant Cool
Block action recipes and made available on an action -by -action basis through the Cool Block website.
The City provided in -person demonstrations and videos at the team meetings to encourage uptake of
the City's various programs. These included demonstrations on Zero Waste, energy auditing, emergency
preparation, and a short video on keeping toxins out of the City's watershed.
Software Platform: A new and improved user experience was designed for the Beta Pilot, and a strong
level of data reporting was achieved. Improvements were identified and will be addressed through
software evolution in the next phases of the Cool Block Program.
Coaching: Four volunteer coaches emerged from successful alpha pilot teams to support beta pilot
teams. This enabled beta teams to sustain their commitment and achieve good results.
Cultural Adaptation: The Empowerment Institute added Google language translation functionality into
the Cool Block website. It supports a wide range of languages. As a result of this functionality, program
managers received feedback that it allowed non-English speaking residents to engage with the program
in a meaningful way.
Attachment B
Participant Testimonials
Victoria Thorp, Cool Block Leader:
"The Cool Block program has surpassed my expectations on every level. I was worried that it
would be difficult to recruit neighbors, but I had more people eager to join than I could ever
have anticipated. And the group that we have formed has supported each other to reduce
carbon and energy, shared ideas for water reduction and provided helpful support for
disaster preparedness. But more than anything, we've built lasting relationships between
neighbors who may have never otherwise met each other, allowing longtime residents to
connect with newcomers to Palo Alto. Our group has already shared expertise about drip
irrigation, exchanged homemade bread and borrowed tools, and we are just beginning to
tap into the knowledge and skills of the people all around us. Our team -and the many
others across Palo Alto — are proving that the most powerful engine of change may indeed
reside right here in our neighborhoods."
Lorrie Castellano, Alpha Cool Block Leader/Beta Coach:
"I was ready to move," Cecilia tells me. "There was no sense of community here." I smile,
happy I persevered knocking on my neighbors' doors.
Cool Block has changed things in our neighborhood. Not only have we lowered our carbon
footprints and prepared our block for any emergency, but we actually talk to each other,
wave to each other and get together regularly even after the program is over.
There was some grumbling when I told them that the Cool Block Pilot required meeting 9
times. There was more of a gasp when they saw the size of the book we'd use to get the
hard work done. But that all melted away once we sat down over coffee and sweets for our
team -building meeting and we found we actually liked being with each other.
What I saw was that people are hungry for community and that's what the Cool Block
offers. But it is so much more. We helped each other go through lowering our carbon
footprints as individuals and as a group. And once we learned we'd need each other in an
emergency, we prepared our block by stocking food and sharing information about who has
a generator, tools, things needed to survive.
It's been a year but we don't want to stop. We meet once a month for Happy Hour, we have
a Cool Block Book Club and we are more involved in the City of Palo Alto. We come to City
Council Meetings and other political gatherings as a group. The benefits have been far more
than we ever expected.
This is a program I believe in so I continue my participation as a Coach for the next pilot
phase, the Betas. And my neighbors keep thanking me for taking that first step to bring
them together. I'm happy I persevered and knocked on that first door."
Attachment B
Monica Stone, Beta Cool Block Leader:
"They reached out to me to ask me to lead my block in the Cool Block program. My first
task was to walk my block, ring doorbells, and ask my neighbors to come to an
informational meeting at my house. Many of my neighbors I had never met before!
Now as my Team Holly Oak Cool Block ends our 4.5 -month journey, I have changed my
perspective on living in Palo Alto considerably. I feel more a part of the community through
participating in various endeavors to reduce our carbon footprint, get organized for disaster
and work together in a way that makes me feel very connected to my neighbors and my
city.
Many of us have reduced our carbon footprint by 25%, saving the city energy costs, have
put together our emergency preparedness kits in our homes and cars, ensuring a better
recovery for the city from disaster, and participated in city-wide activities together like the
Earth Day celebration.
The social capital we have built together makes me feel great. I know my neighbors, call
them by name, and truly now feel comfortable borrowing the eponymous 'cup of sugar.""
City of Palo Alto 1 City Clerk's Office 1 5/30/2018 2:07 PM
Carnahan, David
From: A.C. Johnston <ac.johnston@me.com>
Sent: Tuesday, May 29, 2018 10:28 PM
To: Council, City
Subject: Cool Block Program
Attachments: Letter to City Council re Cool Block.pdf
Dear Mayor Kniss, Vice -Mayor Filseth, and City Council Members,
Please see the attached letter regarding the City Council's consideration of the Cool Block program.
Respectfully,
A.C. Johnston
1
A.C. Johnston
325 Channing Ave. #301
Palo Alto, California 94301
May 29, 2018
City Council
City of Palo Alto
250 Hamilton Ave.
Palo Alto, CA 94301
Re: Cool Block Program
Dear Mayor Kniss, Vice Mayor Filseth, and City Council Members,
I understand that you may shortly be considering a proposed contract between the City of Palo
Alto and the Empowerment Institute for funding regarding the Community Engagement Block
Program (Cool Block). I urge you to approve the contract and support the Cool Block pilot
program.
1 am a member of the Utilities Advisory Commission, but I am writing as an individual citizen
and not on behalf of the UAC. A number of my comments, however, reflect issues that the UAC
has been discussing.
Early this year, residents of the condominium in the University South neighborhood in which I
live agreed to participate as a Cool Block beta site. I believe we were one of the first "vertical
blocks" in Palo Alto. Since then we have had 8 meetings over nearly 4 months following the
Cool Block curriculum. Eight of our neighbors participated in nearly all of the meetings. Based
on my experience with the program, I believe that it was very effective for our Cool Block, and I
believe it will be very effective for others as well.
Overall, the goals of the program are to help households:
• reduce their carbon footprint
• conserve water
• become more disaster resilient
• create healthier, safer, greener, more socially connected blocks
In addition to being "the right thing to do," these goals are right in line with many of the City's
goals as reflected in the City's Sustainability/Climate Action Plan and the Sustainability
Implementation Plan, the CPAU's effort to reduce water usage and to conserve electricity and
natural gas usage, and Zero Waste Palo Alto.
We asked each of the participants in our group to take responsibility for one of the meetings and
to present on the topic for that meeting following the Cool Block curriculum. In addition, we
had Wendy Hediger and Sarah Fitzgerald from Zero Waste Palo Alto come to one of our
meetings to discuss composting and recycling and give us clear guidelines for doing so. We will
also be inviting Scott Mellberg, the Home Efficiency Genie sponsored by the City of Palo Alto
Utilities, to attend our last meeting to demonstrate more things that we can do to make our
residences more energy efficient.
Since we began the program, residents in our building have reported that they have replaced
incandescent light bulbs with LEDs, reduced hot water use, reduced water use in toilets, and
greatly increased use of composting. Individuals have purchased and stored emergency supplies,
and the homeowners' association Board is putting together a list of emergency supplies that we
will buy for our whole community. We have identified secure locations within the building for
storing these supplies. We have also begun a "phone tree" to be sure that everyone in the
building can be contacted in an emergency and prepared a booklet with emergency information
for our residents such as how to shut off water and gas to our units in an emergency. We are also
investigating options to install solar panels on our roof.
Best of all, however, has been the sense of community that the program has fostered within our
building by encouraging residents to meet together and discuss how to solve both individual and
community problems. The fact that we have sat down together to discuss ways we can meet the
program goals and to report to each other on what we have done, individually and collectively, to
fulfill those goals has definitely created a sense of accountability and group support. There is no
pressure like peer pressure to encourage behavior change!
I understand that the Cool Block contract may be on the consent agenda for a council meeting
soon. I may not be able to attend that meeting in person, but I strongly hope that the City
Council will approve the proposed contract with the Empowerment Institute and take the steps
necessary to allow the Cool Block program to reach more Palo Alto neighbors. We will all be
the better for it.
Thank you for your consideration.
Sincerely yours,
CITY OF
PALO
ALTO
TO: HONORABLE CITY COUNCIL
FROM: JAMES KEENE, CITY MANAGER
DATE: JUNE7,2018
SUBJECT: REMOVE ITEM FROM CONSENT AGENDA — ITEM NUMBER 7 — Approval of a
Contract with the Empowerment Institute for $25,000 for Community
Engagement Block Program
Staff requests for Agenda Item #7 to be pulled from the June 11th Consent Agenda and moved
to the August 13, 2018 Consent Agenda in order to complete the updated contract with the
Empowerment Institute and to share a few additional program details.
mes Keene'
City Manager
1 of 1
CITY OF
PALO
ALTO
City of Palo Alto (ID # 9270)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 6/11/2018
Summary Title: Finding California Avenue Parking Garage Substantially
Complex
Title: PUBLIC HEARING: Approval of a Finding That the California Avenue
Parking Garage Project (CIP PE -18000) is "Substantially Complex" Under
Public Contract Code Section 7201 and Direction to Increase the Retention
Schedule From Five Percent to Ten Percent
From: City Manager
Lead Department: Public Works
Recommendation
Staff recommends that Council:
1. Approve a finding that the proposed California Avenue Parking
Garage Project is "substantially complex" under Public Contract Code
Section 7201 based on the reasons set forth in the staff report, and
2. Direct this project to be advertised for bid with a retention amount
of ten percent (10%).
Executive Summary
State law limits the City to five percent (5%) retention on public works
projects unless City Council approves a finding that the project is
"substantially complex." This finding must be made before the project is
advertised for bid. Staff is preparing to issue the formal Invitation for Bids
(IFB) for the California Avenue Parking Garage Project. The IFB is expected
to be released in July 2018.
Background
Public Contract Code Section 7201 requires public agencies to limit contract
retention on public works projects to 5% unless the project is found to be
City of Palo Alto Page 1
"substantially complex" and therefore requires a higher retention amount.
Retention is a contractual withholding of money by the City to cover any
unexpected expenses, such as liens or poor workmanship, that may occur
before the project is completed and accepted. The standard procedure is to
return the retention once the following occurs: work is completed, the
contractor provides the maintenance bond, the City accepts the project,
and the lien period expires.
Public Contract Code Section 7201(b)(1) generally caps the retention
amount that may be withheld at five percent (5%) of the contract price.
However, Section 7201(b)(4) permits an awarding agency to withhold in
excess of 5% on specific projects where the governing body approves a
finding, during a properly noticed and normally scheduled public hearing
and prior to bidding, that the project is substantially complex and therefore
requires a higher retention amount. Section 7201(5) such a finding to
"include a description of the specific project and why it is a unique project
that is not regularly, customarily, or routinely performed by the agency or
licensed contractors."
The awarding entity must include in the bid documents details explaining
the basis for the finding and the actual retention amount. Staff will include
this information in the bid documents.
Discussion
The California Avenue Parking Garage Project is part of the Council
Infrastructure Plan. Construction of the garage is a key step in the delivery
of a new Public Safety Building (PSB). The PSB will be built on the adjacent
property at 250 Sherman Avenue that currently provides approximately
150 public parking stalls. The new garage will replace these stalls and
provide approximately 310 new parking stalls to the California Avenue
business district. The garage construction involves 2 subterranean levels
and 4 above -ground levels to provide a total of 636 parking stalls.
Construction will involve a cut-off wall to limit groundwater impact, cast -in -
place post -tensioned structural concrete, provisions for an integrated solar
canopy, and a signature grand stairway along Birch Street.
The construction cost is estimated to be $35 million and is expected to be
City of Palo Alto Page 2
completed in early 2020. The contractor will be required to subcontract for
numerous specialties including shoring engineering, fire sprinklers, backup
power, and ventilation systems. The project will require the coordination of
multiple construction disciplines while maintaining right-of-way access
within a heavily used business district.
City staff has determined and recommends that Council find that the
California Avenue Parking Garage Project is "substantially complex" and
therefore requires a higher retention amount of 10%, based on the large
amount of work required, the multi -faceted nature of the project, the
project cost, and the numerous specialized disciplines and trades involved
in the construction. The City Clerk has published the required notice of this
hearing in the newspaper starting on June 1, 2018.
The retention will be released as described in the City of Palo Alto's
standard contract General Conditions Section 9.8.1 which states, "Upon
receipt of notice from Contractor that the Work is ready for final
inspection, City will make such inspection. The City will file a Notice of
Completion (NOC) with the County Clerk within ten (10) days after
Acceptance by the City. Thirty-five (35) Days after filing the NOC, the City
may release the final retention provided the requirements in this paragraph
are met."
Timeline
Staff plans to issue an IFB for the project in July. Construction of the
California Avenue Parking Garage is expected to begin in October with
completion anticipated in early 2020.
Resource Impact
There are no resource impacts associated with finding the project
"substantially complex". Funding for the California Avenue Parking Garage
Project is available in Capital Improvement Program (CIP) Project PE -18000.
Policy Implications
The proposed action is consistent with City policy.
Environmental Review
City of Palo Alto Page 3
Under the California Environmental Quality Act (CEQA), the PSB and
California Avenue Parking Garage are considered as a single project
because the public parking garage will mitigate for the loss of
approximately 310 existing public surface parking spaces on both sites. The
City of Palo Alto published the Draft Environmental Impact Report (EIR) for
public review and comments on January 8, 2018; the public comment
period closed February 22, 2018. During the public review period, both the
Architectural Review Board and Planning and Transportation Commission
held public meetings, on January 18th and January 31st, respectively, to
take public testimony on the Draft EIR. Substantive public comments
received at these meetings and in writing have been responded to in the
Final EIR, provided to the Council in hard copy and published on May 11,
2018, on the Public Works webpage for the project. The Final EIR was also
distributed via email to members of the public and agencies who
commented on the Draft EIR.
Following Council certification of the Environmental Impact Report (EIR)
and approval of the California Avenue Parking Garage, staff will file a Notice
of Determination (NOD) reflecting approval with the County of Santa Clara.
City of Palo Alto Page 4
CITY OF
PALO
ALTO
City of Palo Alto (ID # 9324)
City Council Staff Report
Report Type: Action Items
Meeting Date: 6/11/2018
Summary Title: Downtown Palo Alto Business Improvement District
Title: PUBLIC HEARING: to Hear Objections to the Levy of Proposed
Assessments on the Palo Alto Downtown Business Improvement District;
Adoption of a Resolution Confirming the Report of the Advisory Board and
Levying Assessments for Fiscal Year 2019 on the Downtown Palo Alto
Business Improvement District
From: City Manager
Lead Department: City Manager
Recommendation
1. Hold a public hearing on the levy of proposed assessments in Fiscal Year 2019 in connection
with the Downtown Palo Alto Business Improvement District (BID); and
2. Approve the resolution at Attachment B confirming the report of the Advisory Board and
levying an assessment for Fiscal Year 2019 on the Downtown Palo Alto Business
Improvement District.
Background
On May 29, 2018, the Council preliminarily approved the BID Advisory Board's 2019 Annual
Report and adopted a Resolution of Intention to Levy Assessments in the BID for Fiscal Year
2019, setting a date and time for the public hearing on the levy of the proposed assessments
for June 11, 2018, at 6:00 PM, or thereafter, in the City Council Chambers.
The City contracts with Palo Alto Downtown Business and Professional Association (PADBPA) to
provide services to businesses in the BID. (A copy of the contract between the City and PADBPA
is attached as Attachment F). PADBPA addresses issues facing downtown businesses such as
cleanliness, safety, and attractiveness. PADBPA also assists with communication about the
City's capital improvement projects such as Upgrade Downtown, the new parking garage,
mobility projects and other City policy matters affecting downtown businesses. Assessments for
BID businesses are based on the size, type and location of the business. Assessments range
from $50 for individually owned professional businesses to $500 annually for financial
institutions. The PADBPA has monthly open meetings governed by the Brown Act which any
business or individual can attend.
City of Palo Alto Page 1
The BID was established by the City Council in 2004 pursuant to the California Parking and
Business Improvement Area Law to promote the economic revitalization and physical
maintenance of the Palo Alto Downtown business district. The Council appointed the Board of
Directors of PADBPA, a non-profit corporation, as the Advisory Board for the BID. The Board's
purpose is to advise the Council on the method and basis for levy of assessments in the BID and
the expenditure of revenues derived from the assessments.
After an initial 10 -year term, running from 2004 to 2014, the agreement between the City and
PADBPA has been renewed annually for a one-year period through approval of the Annual
Report (subject to termination by either party on 90 days written notice). If Council declines to
approve PADBPA's Annual Report as originally filed, Council may propose amendments to
PADBPA's budget and proposed activities for FY 2019. If the Council proposes modifications to
the Annual Report, the agreement between the City and PADBPA provides that final approval
should be stayed for a period of up to 30 days to provide time for PADBPA to respond to
Council's concerns and for City staff and PADBPA to confer.
Discussion
The PADBPA Annual Report is attached and provides a summary of activities from Fiscal Year
2018 and presents the budget for Fiscal Year 2019. The proposed budget reduces expenses by
$22,464 for Fiscal Year 2019. To save costs, streamline efforts and provide businesses with one
annual invoice, PADBPA and city staff intend to align the BID and Business Registry Certificate
(BRC) fee collection timeline.
BID fee collection has been conducted by MuniServices, LLC for the last several years. On
December 4, 2017 staff informed City Council that MuniServices, LLC will be administering the
BRC payment collection. In Fiscal Year 2019, the BID invoice will be sent in January 2019 along
with the BRC invoice. Currently BID invoices are sent in July of each fiscal year. Details of this
change are being coordinated with MuniServices, LLC. Staff may return to City Council for
approval of a new contract with MuniServices, LLC for combined collection.
Absent a majority protest at the public hearing, the Council may adopt the attached resolution
approving the report for Fiscal Year 2019 as filed or as modified by the Council at the conclusion
of the public hearing. The adoption of the resolution constitutes the levying of the BID
assessments for Fiscal Year 2019.
Resource Impacts
Adoption of the proposed BID budget does not impact City revenue. BID assessments are
restricted for use exclusively by the BID. A healthy BID will encourage vitality in the retail
community and consequently result in additional sales tax revenue for the City.
Staff time from the City Manager's Office and Development Services Department will be utilized
to provide oversight to the BID, administer the contract with MuniServices, liaise with
stakeholders and prepare the annual reauthorization. The Attorney's Office will continue to
City of Palo Alto Page 2
provide legal oversight to the BID during the annual reauthorization process.
Attachments:
• Attachment A - May 29, 2018 Staff Report
• Attachment B - RESOLUTION - Confirming Report of BID and Levying Assessment For
FY19
• Attachment C - Exhibit A - BID Map
• Attachment D - Exhibit B - BID Fee Schedule
• Attachment E - Annual Report
City of Palo Alto Page 3
CITY OF
PALO
ALTO
City of Palo Alto (ID # 9248)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 5/29/2018
Summary Title: Downtown Palo Alto Business Improvement District
Title: Preliminary Approval of the Downtown Business Improvement District
(BID) 2018-2019 Annual Report; Adoption of a Resolution Declaring an
Intention to Levy an Assessment Against Businesses Within the BID for Fiscal
Year 2019 and Setting a Time and Place for a Public Hearing on June 11, at
6:00 PM or Thereafter, in the City Council Chambers
From: City Manager
Lead Department: City Manager
Recommendation
Staff recommends that City Council:
1. Preliminarily approve of the Business Improvement District (BID) Advisory Board's 2019
Annual Report for the BID (Attachment A) and;
2. Adopt a Resolution of Intention to Levy Assessments in the Palo Alto Downtown Business
Improvement District for Fiscal Year 2019 (Attachment B), setting a date and time for the
public hearing on the levy of the proposed assessments for June 11, 2018, at 6:00 PM, or
thereafter, in the City Council Chambers.
Executive Summary
This City Council action (a) preliminarily approves the BID Advisory Board's annual report, and
(b) sets a time and place for a public hearing to receive a presentation by the Palo Alto
Downtown Business and Professional Association (PADBPA), the entity with which the City
contracts to provide services to businesses in the Downtown, and consider any objections to
the assessments. PADBPA addresses issues facing downtown businesses such as cleanliness,
safety, and attractiveness. PADBPA also assists with communication about the City's capital
improvement projects such as Upgrade Downtown, the new parking garage, mobility projects
and other City policy matters affecting downtown businesses. Assessments for BID businesses
are based on the size, type and location of the business. Assessments range from $50 for
individually owned professional businesses to $500 annually for financial institutions. The
PADBPA has monthly open meetings governed by the Brown Act which any business or
individual can attend.
Background
City of Palo Alto Page 1
The BID was established by the City Council in 2004 pursuant to the California Parking and
Business Improvement Area Law to maintain economic vitality and physical maintenance of the
Palo Alto Downtown business district. The Council appointed PADBPA, a non-profit corporation,
as the Advisory Board for the BID. PADBPA acting through its independent Board of Directors
advises the Council on the method and basis for levy of assessments in the BID and the
expenditure of revenues derived from the assessments.
Pursuant to BID law, PADBPA must annually submit to the Council a report that proposes a
budget for the upcoming Fiscal Year for the BID. The report must: 1) propose any boundary
changes in the BID; 2) list the improvements and activities to be provided in the Fiscal Year; 3)
estimate the cost to provide the improvements and activities; 4) set forth the method and basis
for levy of assessments; 5) identify surplus or deficit revenues carried over from the prior Fiscal
Year; and 6) identify amounts of contributions from sources other than assessments.
Each year the Council: 1) reviews the report and preliminarily approves it as proposed or with
modifications; 2) adopts a resolution of intention to levy the assessments for the upcoming
Fiscal Year; and 3) sets a date and time for the public hearing on the levy of assessments in the
BID. Absent a majority protest at the public hearing proposed for June 11, 2018, at the
conclusion of the public hearing, the Council may adopt a resolution confirming the report for
Fiscal Year 2019 as filed or as modified by the Council. The adoption of the resolution
constitutes the levying of the BID assessments for Fiscal Year 2019.
The proposed BID budget for Fiscal Year 2019 was reviewed and approved by PADBPA at their
May 9, 2018 meeting. The budget reduced expenses by $22,464 as noted in the Annual Report.
As required by BID law, the report has been filed with the City Clerk and contains a list of the
improvements, activities, and associated costs proposed in the BID for Fiscal Year 2019.
Resource Impact
The BID is set up as a separate fund within the City's general ledger and does not impact the
general fund. Per the contract with PADBPA, the City acts as the collection agent for BID
revenues and reimburses PADBPA's expenses after receipt and verification of invoices. Upon
approval of the Annual Report, the City designates funds for reimbursement according to the
approved budget. Revenues are collected throughout the fiscal year to offset BID expenses.
Additional resources included staff time from the City Manager's Office and Development
Services Department to provide oversight to the BID, administer the contract with
MuniServices, liaise with stakeholders and prepare the annual reauthorization.
Attachments:
• Attachment A - Annual Report
• Attachment B - RESOLUTION Declaring Intention to Levy BID FY19
• Attachment C - Exhibit A - BID Map
• Attachment D - Exhibit B - BID Fee Schedule
City of Palo Alto Page 2
Not Yet Approved
Resolution No.
Resolution of the Council of the City of Palo Alto Confirming the Report of
the Advisory Board and Levying an Assessment for Fiscal Year 2019 on
the Downtown Palo Alto Business Improvement District
THE CITY COUNCIL OF THE CITY OF PALO ALTO HEREBY FINDS, DECLARES, AND
ORDERS AS FOLLOWS:
SECTION 1. The Parking and Business Improvement Area Law of 1989,
California Streets and Highways Code Sections 36500 et seq. (the "Law"), authorizes the
City Council to levy an assessment against businesses within a parking and business
improvement area which is in addition to any assessments, fees, charges, or taxes
imposed in the City.
SECTION 2. Pursuant to the Law, the City Council adopted Ordinance No. 4819
establishing the Downtown Palo Alto Business Improvement District (the "District") in
the City of Palo Alto.
SECTION 3. The City Council, by Resolution No. 8416, appointed the Board of
Directors of the Palo Alto Downtown Business & Professional Association, a California
nonprofit mutual benefit corporation, to serve as the Advisory Board for the District (the
"Advisory Board").
SECTION 4. In accordance with Section 36533 of the law, the Advisory Board
prepared and filed with the City Clerk a report entitled "Downtown Palo Alto Business
Improvement District, Annual Report 2018-2019" (the "Report"), and, by previous
resolution, the City Council preliminarily approved such report as filed.
SECTION 5. The boundaries of the District are within the City limits of the City of
Palo Alto (the "City") and encompass the greater downtown area of the City, generally
extending from El Camino Real to the West, Webster Street to the East, Lytton Avenue
to the North and Addison Avenue to the South (east of Emerson Street, the boundaries
extend only to Forest Avenue to the South). Reference is hereby made to the map of the
District attached hereto as Exhibit "A" and incorporated herein by reference for a
complete description of the boundaries of the District.
SECTION 6. The City Council has adopted a Resolution of Intention, Resolution
No. [insert number after consent item has been approved] declaring its intention to levy
and collect an assessment for fiscal year 2019 against the businesses in the District.
SECTION 7. Following notice duly given pursuant to law, the City Council has
held a full and fair public hearing regarding the levy and collection of an assessment
within the District for fiscal year 2019. All interested persons were afforded the
opportunity to hear and be heard regarding protests and objections to the levy and
1
Not Yet Approved
collection of the assessment for fiscal year 2019. The City Council finds that there was
no majority protest within the meaning of the Law. All protests and objections to the
levy and collection of the assessment and any and all protests and objections are hereby
overruled by the City Council.
SECTION 8. Based on its review of the Report, a copy of which has been
presented to the City Council and has been filed with the City Clerk, and other reports
and information, the City Council hereby finds and determines that (i) the businesses in
the District will be benefited by the expenditure of funds raised by the assessment (ii)
the District includes all of the businesses so benefited; and (iii) the net amount of the
assessment levied within the district for the 2019 fiscal year in accordance with the
Report is apportioned by a formula and method which fairly distributes the net amount
in proportion to the estimated benefits to be received by each such business.
SECTION 9. The City Council hereby confirms the Report as filed by the Advisory
Board. New businesses established in the District after the beginning of any fiscal year
shall be exempt from the levy of the assessment for that fiscal year. In addition, non-
profit organizations, newspapers and professional "single -person businesses," defined
as those businesses which have 25% or less full time equivalent employees, including
the business owner, shall be exempt from the assessment.
SECTION 10. The Adoption of this resolution constitutes a levy of an assessment
for the fiscal year 2019 (commencing July 1, 2018, and ending June 30, 2019). The
assessment formula, including the method and basis of levying the assessment, is set
forth Exhibit "B" attached hereto and incorporated herein by reference. New businesses
established in the District after the beginning of any fiscal year shall be exempt from the
levy of the assessment for that fiscal year. In addition, non-profit organizations,
newspapers and professional "single -person businesses," defined as those businesses
which have 25% or less full time equivalent employees, including the business owner,
shall be exempt from the assessment.
SECTION 11. The City Council hereby declares that the proposed uses of the
revenues derived from the assessments levied against the businesses in the District are
for the following facilities and activities: The types of improvements to be funded by the
levy of an assessment against businesses within the District are the acquisition,
construction, installation or maintenance of any tangible property with an estimated
useful life of five years or more. The types of activities to be funded by the levy of an
assessment against businesses within the District are the promotion of public events
which benefit businesses in the area and which take place on or in public places within
the District; the furnishings of music in any public place in the District; and activities
which benefit businesses locating and operating in the District.
//
//
2
Not Yet Approved
SECTION 12. The Council finds that the adoption of this resolution does not
meet the definition of a project under Section 21065 of the California Environmental
Quality Act and, therefore, no environmental impact assessment is necessary.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Mayor
APPROVED:
City Attorney City Manager
Director of Administrative Services
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EXHIBIT B
Downtown Palo Alto Business Improvement District
Annual BID Assessments
ZONE A
Retailers
and Restaurants $225.00 (Under 6 FTE employees) (50%)
(100%) $340.00 (6 to under 11 FTE employees) (75%)
$450.00 (11+ FTE employees) (100%)
ZONE B
(75%)
$170.00
$260.00
$340.00
Service
Businesses $170.00 (Under 4 FTE employees) (50%) $130.00
(75%) $260.00 (4 to under 7 FTE employees) (75%) $200.00
$340.00 (7+ FTE employees) (100%) $260.00
Professional EXEMPT (25% or fewer FTE employees, including the business owner)
Businesses $ 60.00 (26% to under 1 FTE employees) (25%) $ 50.00
(50%) $110.00 (2 to 4 FTE employees) (50%) $ 90.00
$170.00 (5 to 9 FTE employees) (75%) $130.00
$225.00 (10+ FTE employees) (100%) $170.00
Lodging
Businesses $225.00 (up to 20 rooms) (50%) $170.00
(100%) $340.00 (21 to 40 rooms) (75%) $260.00
$450.00 (41+ rooms) (100%) $340.00
Financial
Institutions $500.00 $500.00
Note 1: For retail, restaurant, service, and professional businesses, size will be determined by
number of employees either full-time or equivalent (FTE) made up of multiples of part-time
employees. A full FTE equals approximately 2000 hours annually. Lodging facilities will be
charged by number of rooms available and financial institutions will be charged a flat fee.
Note 2: Second floor (and higher) businesses located within Zone A, will be assessed the same
as similar street -level businesses located within Zone B.
Note 3: Assessment amounts are rounded to the nearest ten dollars. The minimum assessment
will be $50.00.
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Downtown
Palo Alto •
Palo Alto
Downtown
Business and
Professional
Association
Annual Report
2018-19
Prepared by
Russ Cohen, Executive Director
Introduction
This report from the Advisory Board of the Palo Alto Downtown Business & Professional
Association ("PADB&PA") was prepared for City Council to review for the annual
reauthorization of the Downtown Palo Alto Business Improvement District ("BID") pursuant to
Section 36533 of the Parking and Business Improvement Law of 1989 (Section 36500 and
following of the California Streets and Highways code) (the "Law"). This report is for the
proposed fiscal year for the BID commencing July 1, 2018 and ending June 30, 2019. ("Fiscal
Year 2018-19").
As required by the Law, this report contains the following information:
I. Any proposed changes in BID boundaries and benefit zones within the BID;
II. The improvements and activities to be provided for Fiscal Year 2018-19;
III. An estimate of the cost of providing the improvements and the activities for Fiscal Year 2018-
19;
IV. The method and basis of levying the assessment in sufficient detail to allow each business owner
to estimate the amount of the assessment to be levied against his or her business for Fiscal Year
2018-19.
V. The amount of any surplus or deficit revenues to be carried over from a previous fiscal year.
VI. The amount of any contributions to be made from sources other than assessments levied pursuant
to the Law.
Submitted by Brad Ehikian, Chair, and Russ Cohen, Executive Director on behalf of the
Advisory Board ("Advisory Board") of the Palo Alto Downtown Business & Professional
Association ("PADB&PA").
The Advisory Board approved this report on May 9, 2018. Received on file in the Office of the
City Clerk of the City of Palo Alto on May 9, 2018.
On June 6, 2016, City Council directed City staff to work with PAd to:
1. Review mechanisms for modifying the Fee Structure to require larger companies to pay a larger
portion of the district costs; and
2. Review mechanisms for modifying the contract with the Downtown Business and Professional
Association so that activities are not construed to include lobbying; and
3. Investigate other structures for the Business Improvement District (BID) that may provide a
more efficient use of the funds that minimizes staff and administrative overhead and focuses
more on direct services; and
4. Evaluate the boundaries of the BID to align with other Downtown boundaries.
On November 22, 2016 PADB&PA issued a letter to the City further elaborating on the City
Council's direction. During the Fiscal Year 2018 reauthorization, City staff and PAd informed
City Council that work had been done with regards to define appropriate and inappropriate uses
of District funds, including the Association's work as a liaison between businesses and City
departments, advocacy on behalf of member businesses, and lobbying.
During Fiscal Year 2018, the PADB&PA taskforce designated to resolve this matter also
reviewed the assessment structure and district boundaries. As noted in the November 22, 2016
letter PADB&PA does not support changing the boundaries. This position did not change in
discussion with City staff. Regarding the more efficient use of funds, as part of the Fiscal Year
2019 budget PAd is reducing the budget by $22,464 with the elimination of $8,500 for invoicing,
reducing contingencies by $2,500, banners by $7,000, location specific banner by $1,264, events
by $700, outreach and communication by $500, and contributions to Downtown Street team by
$2,000. PADB&PA is aware that Fiscal Year 2018 Revenue are trending low compared to
previous years. Additionally, that revenue projections in previous budget were larger than the
five year average trend of $97,315.
The attached proposed budget for Fiscal Year 2019 further aligns revenues with expenditures.
Reducing the PAd budget by $22,464 is a significant change for one year. PADB&PA is
working with City staff and the payment collections contractor, MuniServices, to collect revenue
from unpaid businesses.
PADB&PA's takes great pride in the programs and services that it has contributed since
inception. Several are listed here:
• Creation of the Downtown Streets Team (PADB&PA started the effort in 2005.)
• Display of American Flags during national holidays ( began in 2012.)
• Holiday Tree Lighting (this program was brought back in 2011 after a long hiatus.)
"Art" benches and replacement of the over twenty year old utilitarian benches (these programs
were initiated with both Public Works and Public Arts in 2015.)
• Free summer concerts (began in 2013.)
• Increase in steam -cleaning sidewalks, replacement of trashcans and increase in patrols of the
parking garages (all programs initiated by PAd in conjunction with Public Works, PAPD,
Downtown Streets Team and the Parking Assessment District.)
• Streetlight banner program branding and promoting downtown as a great destination (began in
2012.)
• "No smoking" ordinance and "no amplified music" ordinance (both initiated in 2014.)
• Lytton Plaza umbrellas and new foliage (partnership with the PAd, City and the Friends of
Lytton Plaza, beginning in 2014.)
• University Avenue Tunnels repainting.
• Additional partnerships between the City of Palo Alto and the business community for
communications about encroachment permit enforcement, downtown infrastructure improvement
impacts, Residential Permit Parking issues, TMA, World Music Day and other street closure
events.
PAd's contribution illustrates the ongoing benefit of an organization dedicated to enhancing the
quality of life for residents and patrons of Downtown Palo Alto. Further accomplishments for
Fiscal Year 2018 are listed below in the Annual Report.
Section L: BID boundaries and Benefit Zones
There have been no changes in the BID boundaries or benefit zones within the BID and no
changes are proposed. The current boundaries are depicted on the map below. The area of the
BID is referred to as "Downtown."
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Overview:
Downtown Palo Alto is a far different place than it was when the organization was founded in 2004.
Downtown is now a dynamic, entrepreneurial neighborhood that boasts clean and safe walkable streets,
a well balanced confluence of small, medium and large businesses and an almost even balance of
independently owned retail and restaurants operating along side national chains. It is a globally
recognized mecca for innovating the social and the technical. Without hyperbole, it is not only a
valuable asset to the City of Palo Alto; it has become a valuable asset for the rest of the country if not
the world.
It is the second largest generator of sales tax revenue for the City of Palo Alto, with Apple, Houzz and
Pace Gallery being the three largest sales tax generators in downtown.
Strategic partnerships, execution and outcomes:
Real estate investments in the past decade have drawn the spotlight to the area and paved the way for
growth. While some nearby cities have emulated Downtown Palo Alto's live/work/play environment,
this growth has not surprisingly resulted in a variety of challenges. To maximize our efforts to address
those new and ongoing challenges we brought together partners to facilitate dialogue and develop
programs between business, government and non -profits that have resulted in positive outcomes.
Programs that help the public good as well as members:
• Spearheaded the effort on the systematic replacement of downtown benches to both enhance the
esthetics of downtown and inhibit loitering. A combination of a more utilitarian bench design along with
a small variety of artful benches have been installed, this in partnership with City of Palo Alto Public
Works Division and the Public Arts Commission. Funding to keep and maintin these benches has been
secured through a partnership with the Arts Commission and the Public Utilities Department.
• Initiated a plan to partner with Zero Waste to enhance the cleanliness of the alleyways throughout
downtown.
• Designed and managed the downtown lamppost banner program which provided Holiday, Spring and
Summer banners and now has compiled a library of banner designs that can be used in years to come.
Brand building continues to promote downtown as the special place it is.
• Initiated, developed, managed and promoted the 6 week long Summer concert series, "Music On the
Plaza" including the development and design of social media, web and print efforts as well as raising the
$40K in sponsorships needed to execute the series. We have moved the series to Lytton Plaza and closed
a small section of Emerson to accommodate staging in order to accommodate partipants. This move
resulted in larger crowds and even larger crowds are anticipated this year.
• Met with the Palo Alto Police Department leaders as well as leaders of the Downtown Streets Team to
discuss homeless and panhandling issues. As a result, parking garage issues have decreased dramatically
and outreach efforts have increased to individuals throughout downtown.
• Partnered with the Friends of Lytton Plaza and the City of Palo Alto to maintin umbrellas, foliage,
public art and banners to the plaza to enliven and soften the hardscape of the plaza.
• Partnered with restaurant group and the California Restaurant Association regarding the possible
devlopment of "service fees" as a partial remedy for the rise in operating costs due to impending rise in
minimum wage and other rising costs.
• Initiated a comprehensive review of all newsrack conditions. Provided City Engineering staff with this
report. Met with other municipalities to compare those city's newsrack ordninaces in order to make
recommendations regarding how to refine our current ordinance.
• Held a public forum regarding the state of retail called, "Brick and Mortality," which brought together
industry experts in order for city leadrs and downtown BID members to better understand how to
anticipate the challenges that are facing retail today and into the future. It was well attended by a
variety of sector from dowtown.
Member outreach and partnering for district and association efficiencies:
• Organized a meeting with Santa Clara County Small Business Administration to educate restaurants
about the county's new health inspection regulations and placard program.
• Initiated member outreach through,to date, 11 email newsletters. These newsletters have earned
recognition from ConstantContact for their high open rate, which has consistently been above 35%, (
average is below 18%)
• Partnered with PA Utilities Department on feedback and member outreach regarding ongoing
infrastructure improvements throughout downtown.
• Partnered with PA Transportation staff on feedback and member outreach regarding ongong RPP
program changes
• Partenered with PA TMA on member outreach regarding the TMA's services and programs
Association maintenance and enhancement:
• Built upon the downtown brand and welcomed new businesses to Downtown Palo Alto with the
presentation for the "Downtown Crown" at grand openings.
• Engaged in annual new board member recruitment and nomination process including the development
and execution of election materials.
• Provided administrative oversight of the Palo Alto Downtown Parking Assessment District
subcommittee.
• Provided administrative oversight of the Friends of Lytton Plaza subcommittee.
• Initiated procedures with MuniServices LLC to provide invoicing, database management, reporting and
collections on a more timely and transparent manner.
• Updated database with businesses that may or may not be registered through the City's Business
Registry process or have vacated and/or have opened for business within the district.
Section III. Budget for 2018-19
The total funds available for activities for this fiscal year are estimated to be $133,500. The budget for
providing the activities is set forth as follows:
BID 2018/19 Budget
INCOME
Total
Non -Assessment Sources
Assessments
$112,500
Allowance for Uncollectible Assessments
($25,000)
Other Revenue
$21,000
$21,000
TOTAL INCOME
$133,500
EXPENSES
Operating Expenses
Staff Salaries
Executive Director Salary
$74,600
Payroll taxes and expense
$17,260
Office Supplies & Expenses
$150
Internet/Website/ Phone Maintenance
$1000
Reauthorization Advertising
$2,690
Audit -Tax Returns
$6,500
Legal
$1,000
$1,000
Insurance - Liability
$2,300
Nominating
$1,500
Contingencies
$500
Subtotal -- Operating Expenses
$107,500
$1,000
Programs, Marketing and Events
Banners
$1000
Location Specific Banners
$0
Summer Concert Series
$20,000
$20,000
Events
$500
Outreach & Communication
$500
Downtown Streets Team
$3000
District Opportunity Reserve
$1000
Subtotal --Programs, Marketing & Events
$26,000
$21,000
TOTAL EXPENSES
$133,500
Section IV: Method and Basis of Levying the Assessment
Cost Benefit Analysis / Bid Assessments
The method and basis of levying the assessment is provided in sufficient detail to allow each business
owner to estimate the amount of the assessment to be levied against his or her business for Fiscal Year
2018-19 and is not changed from the FY 2018-19 assessment.
There have been no changes made to the Cost -Benefit Analysis or to the BID Assessments since they
were approved by City Council on February 2, 2004.
The method of calculation used to determine the cost and benefit to each business located in the BID is
described below. The BID assessments are based on three criteria: the type of business, the location of
the business and the size of the business.
It has been consistently demonstrated that the typical BID program places a higher priority on activities
such as commercial marketing. As a result, the retail and restaurant establishments in the BID are
assessed more than service and professional businesses in the district.
While service -oriented businesses benefit from a BID less than retailers and restaurateurs, they benefit
more than professional businesses such as medical, dental, architectural, consultant and legal offices
with their minimal advertising and promotion needs.
For these reasons, various business types are assessed according to the benefit that they receive from the
BID, as follows:
➢ Retail and Restaurant 100% of base amount
➢ Service 75% of base amount
➢ Professional 50% of base amount
Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of
location or size and lodging businesses that are typically charged by total rooms.
The location of a business also determines the degree of benefit that accrues to that business. Centrally
located businesses tend to benefit more, as do businesses located on the ground floor.
For this reason, A and B benefit zones have been identified for the BID.
In Palo Alto, Zone A benefit businesses are assessed 100% of the base benefit assessment while Zone B
businesses are assessed 75%.
A third criterion is used in the BID to determine benefit. This criterion, the size of the business, takes
into consideration the number of full time employees employed by the business. Please refer to
Attachment 1 for a more complete understanding of the application of these three variables to establish
BID benefit.
Attachment 2 is the BID assessment for each business located within the BID boundaries. Applying the
criteria identified in Attachment 1, a summary of the assessment that applies to each business by size,
type and location is outlined. In addition to the Cost -Benefit Analysis, the assessments include the
following criteria:
➢ An exemption for "single person professional businesses" that have 25% or fewer full time
equivalent ("FTE"), including the business owner. This covers employees who work less than
10 hours a week (based on a 40 hour work week; an FTE equals approximately 2000 hours
annually)
) An assessment specifically for "single person businesses" that have 26% FTE to 1 FTE in the
professional business category of the BID (An FTE equals approximately 2000 hours annually)
➢ The tiering of other professional businesses by size based (according to benefit) on the "single
person business" criteria
This outline provides information by which a business can determine its annual assessment based on
objective criteria.
Except where otherwise defined, all terms shall have the meanings identified below:
Definitions of Business Types in the Downtown Business Improvement District
Retailers and Restaurants: Businesses that buy or resell goods such as clothing stores, shoe stores,
office supplies as well as businesses that sell prepared food and drink.
Service Businesses: Businesses that sell services such as beauty or barber shops, repair shops, most
automotive businesses, dry cleaners, art and dance studios, printing firms, film processing companies,
travel agencies, entertainment businesses such as theatres, etc.
Hotel and Lodging: These include businesses that have as their main business the lodging of customers.
This is restricted to residential businesses that provide lodging services to customers for less than 30
days.
Professional Businesses: Businesses that require advanced and/or specialized licenses or academic
degrees such as architects, engineers, attorneys, chiropractors, dentists, doctors, accountants,
optometrists, realtors, insurance brokers, venture capital firms, consultants, advertising and marketing
professionals and mortgage brokers and similar professions.
Financial Institutions: Includes banking, savings and loan institutions and credit unions.
Additional clarification on business definitions will be defined according to Section 18.04.030
(Definitions) of the Palo Alto Municipal Code.
The Advisory Board recommends that the following businesses be exempt from the BID assessment:
➢ New businesses established in the BID area following the annual assessment for the year
in which they locate in the BID area
➢ Non-profit organizations
➢ Newspapers
➢ "Single person professional businesses" that have 25% or less FTE, including the
business owner
Section V: Revenue Deficit
The Assessment calculated shall be paid to the City no later 30 days after receipt of the invoice with the
amount of the annual assessment sent by the City. A second notice will be mailed as a reminder to
businesses that have not remitted payment by that date. Late payment will be subject to a 10% late fee.
Expected expenses for the remainder of FY 18-19 are as follows:
Expected expenses for remaining FYE 6/30/2018
Staff Salaries
$14,100
Payroll Taxes
$3,840
Banners
$0000
Downtown Streets Team
$0
Rent
$0
Insurance/Workers Comp
$3076
Audit & Tax Return
$6,500
District Opportunity Reserve
$0
Nominating/elections
$0
Invoicing
$0
Office Expense
$0
Internet maintenance
$119
Reauthorization advertising
$2675
Contingencies
$100
Outreach & Communication
$300
DST
$5000
Total Expected Expense
$35,710.00
Section VI: Non -assessment Income:
It is estimated that $21,000.00 will be raised in fundraising, and sponsor support. Additionally, we
anticipate in kind contribution towards expenses for fiscal year 2018-19.
Projected Additional/In-kind Income for Fiscal Year 2018-19
Legal (donation)
$1,000
Banners
$0
Summer Concert Series
$20,000
Events
$0
Total
$21,000
Section VI: PADB&PA Board of Directors by Business Type
Retailers and Restaurants
Georgie Gleim, Gleim the Jeweler
Jill Bibo, McRoskey Mattress
Rob George, Lemonade
Jeff Selzer, Palo Alto Bicycles
Nancy Coupal, Coupa Cafe
Hospitality
Barbara Gross, Garden Court Hotel
Stephanie Wansek, Cardinal Hotel
Financial Institutions
Ali Agah, Boston Private Bank & Trust Company
Katie Seedman, Presidio Private Bank and Trust
Professional Organizations
Brad Ehikian, Premier Properties
Patty McGuigan, Cornish & Carey Commercial
Non Profit Organizations
Kyle Morgan, Downtown Street Team
COMMUNITY PARTNERS
Palo Alto Chamber of Commerce
Judy Kleinberg, President & CEO
Downtown Streets Team
Eileen Richardson, Executive Director
City Of Palo Alto
Greg Tanaka, Palo Alto City Council Liaison
Khashayar "Cash" Alaee, Senior Management Analyst, City Manager's Office
Michelle Flaherty, Deputy City Manager, City Manager's Office
ATTACHMENT 1
A General Statement Regarding Cost -Benefit Analysis For
BID Businesses Using The Traditional Three Criteria Formula
Criteria 1) Type of Business:
Statement Concerning Cost -Benefit Formula For BID Businesses Regarding Type Of Business:
In a review of 200 California Business Improvement Districts, it is consistently demonstrated that the
typical BID Program places a higher priority on Commercial Marketing Programs than on Civic
Beautification and Commercial Recruitment Programs. With that trend in mind, retail and restaurant
businesses, with their emphasis on, and need for, commercial marketing, are traditionally assessed more
than less marketing -sensitive service -oriented or professional -oriented businesses.
However, while service -oriented businesses benefit from a BID less than retailers and restaurateurs, they
benefit more, (from commercial marketing programs), than professional businesses such as medical,
dental and legal offices with their minimal advertising and promotion needs.
Therefore, set forth below, is an example of how various business types might be considered regarding
the computation of the annual benefit assessment.
• Retail and Restaurant:
• Service:
• Professional:
100% of base amount
75% of base amount
50% of base amount
Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of
location or size and lodging businesses that are typically charged by total rooms. Lodging businesses are
assessed based on the total number of rooms because it is a more equitable manner of determining size.
Many lodging businesses have many part time employees, but revenues are based on the room
occupancies of the hotel, not the goods sold or serviced provided by employees.
Criteria 2) Location of Business:
Statement Concerning Cost -Benefit Formula For BID Businesses Regarding Location of Business:
It has also been consistently demonstrated that the more centrally located businesses tend to benefit from
BID activities and services to a greater degree than businesses located toward the periphery of the
proposed BID boundaries. Events and activities tend to originate in the central core of the Downtown
area and spread benefit to the outer areas with diminishing energy and impact, much like the ripple
effect of a stone tossed into a body of calm water.
Furthermore, ground floor businesses tend to benefit to a greater degree than businesses located in upper
floors. Therefore, in some cases, a new BID's annual benefit assessment formula also takes these street
level criteria into account.
As mentioned above, special events, fairs, festivals and other activities tend to take place within, or
along, the Main Street core rather than in the areas at the periphery of the Downtown core. Additionally,
BID -sponsored seasonal decorations, public art projects, street banners and street furniture tend to be
located within the immediate core area.
Therefore, businesses located within the most central area of the proposed BID are considered to be
within "Zone A" which should be considered the primary benefit zone. There is typically a "secondary
zone" or "Zone B" within most proposed BID areas. This area receives less benefit than Zone A and
should be assessed accordingly.
An example of how different zones might be treated regarding the computation of the annual benefit
assessment is as follows.
• Zone A: 100% of base benefit assessment
• Zone B: 75% of base benefit assessment
In the case of Downtown Palo Alto, it is recommended that all Zone A upper floor businesses, as well as
any other businesses located at the periphery of the proposed BID, be considered as Zone B businesses.
Please refer to the map in Attachment I.
Criteria 3) Size of Business:
Statement Concerning Cost -Benefit Formula For BID Businesses Regarding Size of Business:
In approximately 50% of newly established BIDs, a third assessment criterion is used. This criterion
involves the size of each individual business that is based upon the businesses' total number of full-time
employees. Full-time employees are those working a total of 2,000 hours per year. Part-time employees
are grouped into full-time job positions, i.e., two half-time employees total one full-time. Fractions are
rounded down to the nearest whole number with no less than one person as a minimum for business.
An example of how various business sizes might be treated regarding the computation of the annual
benefit assessment is as follows:
Retail/Restaurants
Service Businesses
Small
50% of base amount
Under 6 FTE*
Under 4 FTE
Medium
75% of base amount
6 to under 11 FTE
4 to under 7 FTE
Large
100% of base amount
11 or more FTE
7 or more FTE
* FTE = full time employees
Additionally, an exemption was established for "single person professional businesses" that have 25% or
less FTE, including the business owner. This covers employees who work less 10 hours a week (based
on a 40 hour work week)
Since "single person businesses" that have 26% FTE to 1 FTE in the professional business category of
the BID benefit the very least from the assessment, their assessments have been tiered by size based
(according to benefit) on the new "single person business" criteria.
ATTACHMENT 2
Downtown Palo Alto Business Improvement District
Annual BID Assessments
ZONE A
ZONE B
(75% of Zone A
amount)
Restaurants & Retailers
Under 6 FTE (50% of base amount)
$225
$170
6 to under 11 FTE (75% of base amount)
$340
$260
11 or more FTE (100% of base amount)
$450
$340
Service Businesses
Under 4 FTE (50% of base amount)
$170
$130
4 to under 7 FTE (75% of base amount)
$260
$200
Over 7 FTE (100% of base amount)
$340
$260
Professional Businesses
25% or fewer FTE, including owner (0% of base
amount
Exempt
Exempt
26% FTE to under 1 FTE (25% of base amount)
$60
$50
2 to 4 FTE 50% of base amount
$110
$90
5 to 9 FTE 75% of base amount
$170
$130
10+ FTE (100% of base amount)
$225
$170
Lod in Businesses
Up to 20 rooms (50% of base amount)
$225
$170
21 to 40 rooms 75% of base amount
$340
$260
41+ rooms (100% of base amount)
$450
$340
Financial Institutions
$500
$500
Note 1: For retail, restaurant, service, and professional businesses, size will be determined by
number of employees either full-time or equivalent (FTE) made up of multiples of part-time
employees. A full FTE equals approximately 2000 hours annually. Lodging facilities will be
charged by number of rooms available and financial institutions will be charged a flat fee.
Note 2: Second floor (and higher) businesses located within Zone A will be assessed the same as
similar street -level businesses located within Zone B.
Note 3: Assessment amounts are rounded to the nearest ten dollars. The minimum assessment
will be $50.00.
CITY OF
PALO
ALTO
City of Palo Alto (ID # 9276)
City Council Staff Report
Report Type: Action Items
Meeting Date: 6/11/2018
Summary Title: FY 2019 Utility Rates and Financial Plans: Electric, Gas,
Water, Wastewater, Fiber, Storm Drain
Title: PUBLIC HEARING & PROPOSITION 218 HEARING: Staff
Recommendation That the City Council Adopt the Following Resolutions:
Approving the FY 2019 Electric Financial Plan; Adopting an Electric Rate
Increase of 6 Percent and Amending Utility Rate Schedules E-1, E-2, E -2-G, E-
4, E -4-G, E-4 TOU, E-7, E -7-G, E-7 TOU and E-14; Approving the FY 2019 Gas
Utility Financial Plan; Adopting a Gas Rate Increase of 4 Percent and
Amending Utility Rate Schedules G-1, G-2, G-3 and G10; Approving the FY
2019 Wastewater Collection Utility Financial Plan; Adopting a Wastewater
Collection Rate Increase of 11 percent and Amending Utility Rate Schedules
S-1, S-2, S-6 and S-7; Approving the FY 2019 Water Utility Financial Plan;
Adopting a Water Rate Increase of 3 Percent and Amending Utility Rate
Schedules W-1, W-2, W-3, W-4 and W-7; Amending Utility Rate Schedule D-1
to Increase Storm Drain Rates 2.9 Percent per Month per Equivalent
Residential Unit for FY 2019; Adopting a Dark Fiber Rate Increase of 2.9
Percent and Amending Utility Rate Schedules EDF-1 and EDF-2;
From: City Manager
Lead Department: Utilities
Recommendation
Staff and the Finance Committee recommend that the City Council approve and adopt the
following:
1. Resolutions of the City Council of the City of Palo Alto:
a. Approving the FY 2019 Electric Financial Plan (Attachments A, B & C);
b. Adopting an Electric Rate Increase of 6 Percent and Amending Utility Rate
Schedules E-1, E-2, E -2-G, E-4, E -4-G, E-4 TOU, E-7, E -7-G, E-7 TOU and E-14
(Attachments D & E);
c. Approving the FY 2019 Gas Utility Financial Plan (Attachment F & G);
d. Adopting a Gas Rate Increase of 4 Percent and Amending Utility Rate Schedules
City of Palo Alto Page 1
G-1, G-2, G-3 and G10 (Attachments H & 1);
e. Approving the FY 2019 Wastewater Collection Utility Financial Plan (Attachments
J & K);
f. Adopting a Wastewater Collection Rate Increase of 11 percent and Amending
Utility Rate Schedules S-1, S-2, S-6 and S-7 (Attachments L & M);
g. Approving the FY 2019 Water Utility Financial Plan (Attachments N & 0);
h. Adopting a Water Rate Increase of 3 Percent and Amending Utility Rate
Schedules W-1, W-2, W-3, W-4 and W-7 (Attachments P & Q);
i. Amending Utility Rate Schedule D-1 to Increase Storm Drain Rates 2.9 Percent
per Month per Equivalent Residential Unit for FY 2019 (Attachments R & S); and
j. Adopting a Dark Fiber Rate Increase of 2.9 Percent and Amending Utility Rate
Schedules EDF-1 and EDF-2 (Attachments T & U);
Executive Summary
During April and May 2018, the Finance Committee reviewed various rate changes
recommended by staff for Fiscal Year 2019. This report summarizes the hearings that occurred,
including all staff recommendations and changes to recommendations. This report includes
separate sections for each of the Utilities with recommended rate changes: electric, gas, dark
fiber, storm drain and surface water, water and wastewater collection. Each of these rate
changes is included in the FY 2019 budget assumptions. This report outlines the actions
requested, transmits the resolutions from these reviews, and requests City Council approval
and adoption.
Background
On April 3, 2018, Utilities and Public Works staff presented the Finance Committee two reports:
• Utilities Advisory Commission Recommendation that the City Council Adopt: (1) a
Resolution Approving the Fiscal Year 2019 Water Utility Financial Plan; and (2) a
Resolution Increasing Water Rates by 4% by Amending Rate Schedules W-1 (General
Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service
Connections),W-4 (Residential Master -Metered and General Non -Residential Water
Service), and W-7 (Non -Residential Irrigation Water Service) (Staff Report #90301); and
• Utilities Advisory Commission Recommend that the City Council Adopt: (1) a Resolution
Approving the Fiscal Year 2019 Wastewater Collection Financial Plan; and (2) a
Resolution Increasing Wastewater Rates by 11 Percent by Amending Rate Schedules S-1
(Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater
Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7
(Commercial Wastewater Collection and Disposal — Industrial Discharger) (Staff Report
#90162)
1 https://www.cityofpaloalto.org/civicax/filebank/documents/64244
2 https://www.cityofpaloalto.org/civicax/filebank/documents/64245
City of Palo Alto Page 2
The Finance Committee recommended approval of the wastewater collection rate increase on
April 3rd. The water rate increase was continued to April 17th (Staff Report #91433), with a
request for alternative rate increase proposals. Staff provided four alternative scenarios, and
the Finance Committee recommended Council approval of a plan with a 3% increase in FY 2019
(Alternative #2). The updated FY 2019 Water Financial Plan and Water Rate Schedules, as
recommended by the Finance Committee on April 17th, are provided at Attachments N through
Q.
As required by Article XIIID of the State Constitution (added by Proposition 218), the City mailed
a Notice of Public Hearing to property owners and customers on April 27, 2018 regarding the
proposed water and wastewater collection rate changes . This notice informed the public that
the proposed rate changes would be considered for Council adoption at a Public Hearing on
June 11, 2018 at 6 pm. All residents and interested persons may submit written or oral
testimony at the hearing, and may also submit written protests to any or all of the proposed
rate increases. Council may consider and adopt the proposed water and wastewater rates
unless written protests are filed by a majority of the affected customers. Any approved water
and/or wastewater collection rate changes will become effective July 1, 2018.
While in prior years rate change proposals have been considered during the Budget Adoption
Hearing, this year the Budget Adoption Hearing will occur on June 18th. The Public Hearing at
which Council will consider adoption of the proposed water and wastewater collection rates
must be opened on June 11th as stated in the notice, but may be continued, if needed.
Discussion
From March through May 2018, the Utilities Advisory Commission and Finance Committee
received and reviewed various utility financial plans, transfer requests, and rate changes
recommended by staff. This report outlines the actions requested, transmits the resolutions
from these reviews, and requests City Council approval and adoption.
Attached to this report are a number of documents, referenced throughout the
recommendation language and the report. In addition, this report also includes links to the
City's website for all the staff reports presented throughout the review process to the Utilities
Advisory Commission, Finance Committee, and City Council.
Staff and the Finance Committee recommend that the City Council approve the Utility financial
plans and rate changes listed below. These financial plans and rate changes were reviewed and
approved by the Utilities Advisory Commission between March and April of 2018, and by the
Finance Committee between April and May of 2018.
3 https://www.cityofpaloalto.org/civicax/filebank/documents/64557
City of Palo Alto Page 3
Proposed Rate Changes and Financial Plans (recommended for adoption in this report)
Electric
The FY 2019 Electric Utility Financial Plan (Attachment B) includes projections of the utility's
costs and revenues through FY 2028. For FY 2019, a 6% overall rate increase is proposed,
although different customer classes will see increases ranging from 3% to 8%. Beyond FY 2019,
a 3% increase is projected for the following fiscal year. However, even with these increases,
residential electric rates will remain approximately 35% to 45% below Pacific Gas & Electric
(PG&E) rates and comparable to Santa Clara and Roseville, other publicly -owned utilities that
maintain very low bills for customers. The proposed Electric rate schedules are included as
Attachment E.
To maintain adequate Operations Reserves, the following FY 2018 transfers are requested: 1)
up to $9 million from the Supply Rate Stabilization Reserve to the Supply Operations Reserve, 2)
up to $1 million from the Hydroelectric Stabilization Reserve to the Supply Operations Reserve,
and 3) up to $6 million from the Electric Special Projects Reserve to the Distribution Operations
Reserve. In addition, the Electric Utility Reserves Management Practices (Attachment C) have
been updated to reflect changes to the Hydroelectric Rate Stabilization Reserve and are
presented for approval along with the Financial Plan. For more information, see Staff Report
#91584, approved by the Finance Committee on May 15, 2018.
Gas
The FY 2019 Gas Utility Financial Plan (Attachment G) includes projections of the utility's costs
and revenues through FY 2028. The FY 2019 Gas Utility Financial Plan includes a distribution -
related gas rate increase which equates to a 4% overall bill increase. Distribution rates were last
increased in 2016. Future -year distribution -related rate increases are projected to be 7% to 8%
over the next three years. The proposed Gas rate schedules are included as Attachment I.
In addition, the Gas Utility Financial Plan includes proposed transfers to the Operations Reserve
of $129,000 and $2 million from the Rate Stabilization Reserve in FY 2018 and FY 2019,
respectively, to ensure that there are appropriate financial reserves for contingencies. For more
information, see Staff Report #91575, approved by the Finance Committee on May 15, 2018.
Wastewater Collection
The FY 2019 Wastewater Collection Utility Financial Plan (Attachment K) includes projections of
the utility's costs and revenues through FY 2028. Staff originally proposed a 10% increase for FY
2019, but the Utilities Advisory Commission and Finance Committee approved an 11% increase,
4 https://www.cityofpaloalto.org/civicax/filebank/documents/64921
5 https://www.cityofpaloalto.org/civicax/filebank/documents/64920
City of Palo Alto Page 4
with the goal of keeping reserves above the minimum guideline levels. Rate increases of 10 to
12% are projected for the next two years to bring revenues in line with ongoing costs. The
annual sewer bill for a Palo Alto resident is currently about 33% lower than the average of
neighboring communities, and is projected to remain below the overall average, even with the
future rate increases. The proposed Wastewater Collection rate schedules are included as
Attachment M. For more information, see Staff Report #9016, approved by the Finance
Committee on April 3, 2018.
Water
The FY 2019 Water Utility Financial Plan (Attachment 0) includes projections of the utility's
costs and revenues for FY 2018 through FY 2028. Staff originally proposed a 4% rate increase to
the UAC on March 7, 2018. The proposal passed unanimously and was presented to the Finance
Committee on April 3, 2018. The Finance Committee expressed concern over the proposed
future rate increases of 6% to 7% over the next three years, and requested that staff return
with an alternate proposal at the April 17, 2018 meeting.
Staff provided the Finance Committee with additional alternatives, based on updated cost
projections from the San Francisco Public Utilities Commission, utilizing a greater portion of
existing reserves, as well as possible debt financing and cost reduction scenarios. After review,
the Finance Committee recommended 'Alternative 2', which results in a 3% rate increase for FY
2019 and tentative 4% increases over the next three years.
As this proposal was agreed upon at the Finance Committee, the Financial Plan and Rate
schedules from the April 3rd and 17th meetings do not reflect the agreed upon alternative. The
FY19 Financial Plan and Rate Schedules have been revised and are presented here as
Attachments 0 and Q, respectively. For more information on the original proposal, see Staff
Report #9030, presented to the Finance Committee on April 3, 2018.
Storm Water and Surface Water Drainage
On April 11, 2017, a majority of Palo Alto property owners approved a ballot measure
approving a monthly Storm Water Management Fee. This fee will fund thirteen storm drain
capital improvement projects listed in the ballot measure, enhanced maintenance of the storm
drain system, and a variety of storm water quality protection programs. The approved ballot
measure includes an annual adjustment based on the Consumer Price Index (CPI). The Storm
Water and Surface Drainage Rate will increase 2.9% to reflect the annual CPI change, and the
Storm Drain Rate can be found as Attachment S. See Staff Report #90746 for more information.
6 https://www.cityofpaloalto.org/civicax/filebank/documents/64457
City of Palo Alto Page 5
Dark Fiber
Since 2007, the EDF-1 and EDF-2 rates for Dark Fiber (Attachment U) customers have increased
annually by the annual December change in the Consumer Price Index for All Urban Consumers
(CPI -U) in the San Francisco area, as stated in their dark fiber contract agreements. Based on
prior Utilities Advisory Committee and City Council direction, these rate changes are routinely
included as part of the Budget adoption process and rather than in a separate staff report. This
year's change in CPI -U was 2.9%, as reported by the Bureau of Labor Statistics.
Timeline
Water and Wastewater Collection Rates
After the June 11 Public Hearing is opened and testimony from members of the public
accepted, City Council may choose to:
1. Close the hearing and take action; or
2. Close the hearing and defer action until the Budget Adoption Hearing on June 18th; or
3. Continue the hearing until the Budget Adoption Hearing on June 18th, then on the 18th
reconvene the hearing, take any additional water and wastewater collection rate
testimony, close the hearing, and take action.
The latter option has been used in prior years when the Budget Adoption process has spanned
multiple City Council meetings. It is customary in such circumstances to continue to accept
written protests up until the hearing is closed. Unless written protests are filed by a majority of
affected water and wastewater customers, Council may vote on the proposed rate actions. If
approved, the water and wastewater rates would become effective July 1, 2018.
Electric, Gas, Dark Fiber and Storm Drain rates, as well as Utility Financial Plans
The written majority protest process described above is set forth by the California Constitution
and applies to changes to the City's water and refuse rates. The electric, gas, dark fiber and
storm drain rates and plans are will also be considered at the June 11, 2018 public hearing.
Should the City Council take action to approve any or all of these rates or plans, they will
become effective July 1, 2018.
Resource Impact
Resource impacts related to the proposed Water, Wastewater Collections, Electric, Gas, Dark
Fiber, and Storm Drain rate actions are detailed fully in the attached Finance Committee
reports and are in alignment with assumptions used in the development of the FY 2019 budget
that is to be considered by the City Council on June 18, 2018.
Policy Implications
Policy Implications related to the proposed Water, Wastewater Collections, Electric and Gas
rate actions are detailed fully in the linked Finance Committee reports.
City of Palo Alto Page 6
There are no policy changes contained in the adoption of the proposed new Dark Fiber and
Storm Drain Rates.
Environmental Review
Adoption of the attached Financial Plans and budgeted transfers does not meet the California
Environmental Quality Act's definition of a project, pursuant to Public Resources Code Section
21065 and CEQA Guidelines Section 15378(b)(4) and (5), because it is a governmental fiscal and
administrative activity which will not cause a direct or indirect physical change in the
environment. Adoption of the proposed electric, gas, water, wastewater collection and dark
fiber rates to meet operating expenses, purchase supplies and materials, meet financial reserve
needs and obtain funds for capital improvements necessary to maintain service is not subject to
the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code
Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After
reviewing the staff report and all attachments presented to Council, the Council incorporates
these documents herein and finds that sufficient evidence has been presented setting forth
with specificity the basis for this claim of CEQA exemption.
Attachments:
• Attachment A: Resolution Approving FY 2019 Electric Utility Financial Plan
• Attachment B: FY 2019 Electric Utility Financial Plan
• Attachment C: Proposed Changes to Electric Utility Reserve Policies
• Attachment D: Resolution Amending Electric Utility Rates Effective FY 2019
• Attachment E: Amended Electric Rate Schedules E-1, E-2, E -2-G, E-4, E -4-G, E-4-TOU, E-7,
E -7-G, E-7-TOU and E-14
• Attachment F: Resolution Approving FY 2019 Gas Utility Financial Plan
• Attachment G: FY 2019 Gas Utility Financial Plan
• Attachment H: Resolution Amending Gas Rates Utility for FY 2019
• Attachment 1: FY 2019 Amended Gas Rate Schedules G-1, G-2, G-3 and G-10
• Attachment J: Resolution Approving FY 2019 Wastewater Collection Utility Financial Plan
• Attachment K: FY 2019 Wastewater Collection Financial Plan
• Attachment L: Resolution Amending FY 2019 Wastewater Collection Rates
• Attachment M: Amended Wastewater Collection Rate Schedules S-1, S-2, S-6 and S-7
• Attachment N: Resolution Adopting FY 2019 Water Financial Plan
• Attachment 0: Amended FY 2019 Water Utility Financial Plan
• Attachment P: Resolution Adopting Water Rates Effective July 1, 2018
• Attachment Q: Amended Water Rates W-1, W-2, W-3, W-4 and W-7
• Attachment R: Resolution Amending Utilty Rate Schedule for Storm Surface Water
• Attachment S: Amended General Storm and Surface Water Drainage Rate Schedule
• Attachment T: Resolution Amending Dark Fiber Rates
• Attachment U: Amended Dark Fiber Rate Schedules EDF-1 and EDF-2
• Attachment V: Citizen Email Regarding Rate Changes
City of Palo Alto Page 7
Attachment A
* NOT YET APPROVED *
Resolution No.
Resolution of the Council of the City of Palo Alto Approving the Fiscal
Year 2019 Electric Utility Financial Plan
RECITALS
A. Each year the City of Palo Alto ("City") regularly assesses the financial position of
its utilities with the goal of ensuring adequate revenue to fund operations. This includes
making long-term projections of market conditions, the physical condition of the system, and
other factors that could affect utility costs, and setting rates adequate to recover these costs. It
does this with the goal of providing safe, reliable, and sustainable utility services at competitive
rates. The City adopts Financial Plans to summarize these projections.
B. The City uses reserves to protect against contingencies and to manage other
aspects of its operations, and regularly assesses the adequacy of these reserves and the
management practices governing their operation. The status of utility reserves and their
management practices are included in Reserves Management Practices attached to and made
part of the Financial Plans.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby approves the FY 2019 Electric Utility Financial Plan.
SECTION 2. The Council hereby approves the amended Electric Utility Reserves
Management Practices included in the FY 2019 Electric Utility Financial Plan.
SECTION 3. The Council finds that the adoption of this resolution does not meet the
the California Environmental Quality Act's (CEQA) definition of a project under Public Resources
Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative
governmental activity which will not cause a direct or indirect physical change in the
environment, and therefore, no environmental review is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
6055013
Attachment A
* NOT YET APPROVED *
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
6055013
ATTACHMENT B
FY 2019 ELECTRIC
UTILITY
FINANCIAL PLAN
FY 2019 TO FY 2028
FY 2019 ELECTRIC UTILITY
FINANCIAL PLAN
FY 2019 TO FY 2028
TABLE OF CONTENTS
Section 1: Definitions and Abbreviations 4
Section 2: Executive Summary and Recommendations 5
Section 2A: Overview of Financial Position 5
Section 28: Summary of Proposed Actions 6
Section 3: Detail of FY 2019 Rate and Reserves Proposals 6
Section 3A: Rate Design 6
Section 38: Current and Proposed Rates 6
Section 3C: Reserves Management Practices 7
Section 3D: Proposed Reserve Transfers 8
Section 4: Utility Overview 9
Section 4A: Electric Utility History 9
Section 48: Customer Base 11
Section 4C: Distribution System 11
Section 4D: Cost Structure and Revenue Sources 12
Section 4E: Reserves Structure 13
Section 4F: Competitiveness 14
Section 5: Utility Financial Projections 15
Section 5A: Load Forecast 15
Section 58: FY 2013 to FY 2017 Cost and Revenue Trends 17
Section 5C: FY 2017 Results 18
Section 5D: FY 2018 Projections 19
Section 5E: FY 2019 — FY 2028 Projections 19
21 Page
Section 5F: Risk Assessment and Reserves Adequacy 21
Section 5G: Long -Term Outlook 26
Section 6: Details and Assumptions 29
Section 6A: Electricity Purchases 29
Section 68: Operations 31
Section 6C: Capital Improvement Program (CIP) 32
Section 6D: Debt Service 33
Section 6E: Equity Transfer 34
Section 6F: Wholesale Revenues and Other Revenues 34
Section 6G: Sales Revenues 35
Section 7: Communications Plan 36
Appendices 37
Appendix A: Electric Utility Financial Forecast Detail 38
Appendix 8: Electric Utility Reserves Management Practices 42
Appendix C: Description of Electric utility Operational Activities 47
Appendix D: Samples of Recent Electric Utility Outreach Communications 48
31 Page
SECTION 1: DEFINITIONS AND ABBREVIATIONS
CAISO
CARB
CIP
CPAU
CPUC
CVP
GWh
California Independent System Operator
California Air Resources Board
Capital Improvement Program
City of Palo Alto Utilities Department
California Public Utilities Commission
Central Valley Project
a gigawatt-hour, equal to 1,000 MWh or 1,000,000 kWh. Commonly used for
discussing total monthly or annual electric load for the entire city, or the monthly or
annual output of an electric generator.
kWh a kilowatt-hour, the standard unit of measurement for electricity sales to customers.
kW a kilowatt, a unit of measurement used in reference a customer's peak demand (the
highest 15 minute average consumption level in a month), which is used for billing
large and mid -size commercial customers.
kV a kilovolt, one thousand volts, a unit of measurement of the voltage at which a
section of the distribution system operates. The transmission system operates at
115-500 kV, and this is lowered to 60 kV in the sub -transmission section of the
Electric Utility's distribution section, then 12 kV or 4 kV in the rest of the distribution
system, and finally 120, 240, or 480 volts at the electric outlet.
MWh a megawatt -hour, equal to 1,000 kWh. Commonly used for measuring wholesale
electricity purchases.
MW a megawatt, equal to 1,000 kW. Commonly used when discussing maximum
electricity demand for all customers in aggregate.
PG&E Pacific Gas and Electric
REC Renewable Energy Certificate
RPS Renewable Portfolio Standard
Sub -transmission System: The section of the Electric Utility's distribution system that operates
at 60 kV and which interfaces with PG&E's transmission system.
Transmission System: Sections of the electric grid that operate at high voltages, generally 115
kV or more. The voltage at the intersection of the Electric Utility's distribution system
and PG&E's transmission system is 115 kV. The Electric Utility does not own or
operate any transmission lines.
UCC Utility Control Center
SCADA Supervisory Control and Data Acquisition system, the system of sensors,
communications, and monitoring stations that enables system operators to monitor
and operate the system remotely.
WAPA, or Western: Western Area Power Administration, the agency that markets power from
CVP hydroelectric generators and other hydropower owned by the Bureau of
Reclamation.
4
SECTION 2: EXECUTIVE SUMMARY AND RECOMMENDATIONS
This document presents a Financial Plan for the City's Electric Utility for the next ten fiscal
years. This Financial Plan describes how revenues will cover the costs of operating the utility
safely over that time while adequately investing for the future. It also addresses the financial
risks facing the utility over the short term and long term, and includes measures to mitigate and
manage those risks.
SECTION 2A: OVERVIEW OF FINANCIAL POSITION
The Electric Utility's costs will increase substantially over the next few years, as shown in Table
1. Most of the increases are related to electric supply costs, which are increasing due to
increased transmission costs and the cost of new renewable energy projects coming online.
There are also inflationary increases in operations costs, and some above average capital
investment costs in the short term.
Table 1: Electric Utility Expenses for FY 2017 to FY 2028
Expenses
($000)
FY 2017
(act.)
FY 2018
(est.)
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
Power Supply
Purchases
80,467
83,506
91,925
94,233
95,111
98,655
98,668
99,059
102,252
103,535
103,178
106,193
Operations
53,034
53,881
54,757
56,293
57,053
57,839
59,600
60,146
56,720
57,677
58,660
59,668
Capital
Projects
11,558
20,961
22,684
18,287
20,097
13,632
14,011
14,400
14,800
15,211
15,633
16,068
TOTAL
145,060
158,348
169,366
168,812
172,261
170,126
172,279
173,605
173,772
176,422
177,471
181,929
To cover these increases in costs, revenues (and therefore rates) need to increase over the next
several years to balance costs and revenues, as shown in Table 2. The table also compares
current rate projections to those projected in last year's Financial Plan. The rate projections are
slightly higher over the forecast period than last year primarily due to lower actual and
projected sales, increases to transmission cost projections and increases to capital investment
spending.
Table 2: Projected Electric Rates, FY 2019 to FY 2028
Projection
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
FY 2024
FY 2025
FY 2026
FY 2027
FY 2028
Current
6%
3%
2%
0%
1%
1%
1%
1%
1%
1%
Last Year
7%
0%
0%
1%
2%
1%
1%
1%
1%
N/A
Table 3 shows the projected reserve transfers over the forecast period. The Supply Rate
Stabilization Reserve is projected to be drawn down entirely by the end of FY 2018. Funds are
also projected to be transferred from the Electric Special Projects (ESP) Reserve, and Council
approved the withdrawal of $10 million as part of the FY 2018 Electric Financial Plan. Any
transfers from the ESP Reserve require Council approval. Council also approved using all
51 Page
remaining funds ($11.2 million) from the Hydro Stabilization Reserve, but ending reserves show
that only $1 million is warranted at this point.
Table 3: Reserves Transfers for FY 2018 to FY 2028 ($000)
Reserve
FY 2018
FY 2019
FY 2020 to FY 2028
Supply Reserves
Electric Special Projects
(6,000)
(771)
(1,780)
Hydro Stabilization
(1,000)
-
-
Supply Rate Stabilization
(9,011)
-
-
Supply Operations
8,163
Distribution Reserves
Capital Improvement Program
-
-
-
Distribution Operations
7,848
771
1,780
SECTION 2B: SUMMARY OF PROPOSED ACTIONS
Staff proposes the following actions for the Electric Utility in FY 2019:
1. Increase rates effective July 1, 2018 for a 6% increase in system average rates.
2. Approve a transfer of up to $771,000 from the Electric Special Projects Reserve for
Smart Grid related funding.
SECTION 3: DETAIL OF FY 2019 RATE AND RESERVES PROPOSALS
SECTION 3A: RATE DESIGN
The rates discussed in the previous section are based on the cost of service methodology
established in "City of Palo Alto Electric Cost of Service and Rate Study" drafted by EES
Consulting, Inc. in 2015/16. Staff provided EES with updated sales and budget projections,
including projected transmission and distribution costs, power supply costs and billing data, in
order for EES to update individual cost of service model components and determine the
proposed rates. The COSA is based on design guidelines adopted by Council on September 15,
2015 (Staff Report 6061).
SECTION 3B: CURRENT AND PROPOSED RATES
The City adopted the current rates effective July 1, 2017, when CPAU increased electric rates by
14%. Table 4, below, summarizes the current and proposed rates for the four largest customer
1 Staff Report 6857 http://www.cityofpaloalto.org/civicax/filebank/documents/52274
61 Page
classes. The Electric Utility also has specialty rates for smaller groups of customers. These
include variations on its primary rates, such as time of use rates and solar net metering. Staff
proposes a 6% overall increase in revenue. Different customer classes may see different
percentage changes to their rates, based upon their usage of the system and cost to serve each
group.
Table 4: Current and Proposed Electric Rates
Current Rates
Proposed Rates
(7/1/18)
Change
$
E-1 (Residential)
Tier 1 Energy ($/kWh)
0.12159
0.12871
0.00711
5.8%
Tier 2 Energy ($/kWh)
0.19001
0.19279
0.00277
1.5%
Minimum Bill ($/day)
0.2938
0.3040
0.0102
3.5%
E-2 & E -2-G (Small Non -Residential)
Summer Energy ($/kWh)
0.18885
0.20090
001205
6.4%
Winter Energy ($/kWh)
0.13267
0.13861
0.00594
4.5%
Minimum Bill ($/day)
0.7328
0.7740
0.0412
5.6%
E-4 & E -4-G (Medium Non -Residential)
Summer Energy ($/kWh)
0.11673
0.12081
0.00408
3.5%
Winter Energy ($/kWh)
0.08890
0.09297
0.00407
4.6%
Summer Demand ($/kW)
21.05
24.11
3.06
14.5%
Winter Demand ($/kW)
15.36
18.52
3.16
20.6%
Minimum Bill ($/day)
14.8414
15.9946
1.1532
7.8%
E-7 & E -7-G (Large Non -Residential)
Summer Energy ($/kWh)
0.09802
0.10507
0.00705
7.2%
Winter Energy ($/kWh)
0.07188
0.07449
0.00261
3.6%
Summer Demand ($/kW)
23.84
26.77
2.93
12.3%
Winter Demand ($/kW)
15.59
17.01
1.42
9.1%
Minimum Bill ($/day)
42.3648
45.4758
3.111
7.3%
These proposed rates were prepared in conformance with the "FY 2017 City of Palo Alto Electric
Cost of Service and Rate Study," performed by EES Consulting (2016).
SECTION 3C: RESERVES MANAGEMENT PRACTICES
This financial plan proposes a change to Section 7 of the Electric Utility Reserves Management
Practices (See Appendix B: Electric Utility Reserves Management Practices), detailing a
procedure for calculating the amount of funds to transfer to or from the Hydroelectric
Stabilization Reserve.
71Page
SECTION 3D: PROPOSED RESERVE TRANSFERS
In the FY 2018 Electric Financial Plan, Council approved several proposed transfers for FY 2017
and FY 2018:
• Transfer up to $911 thousand from the Supply Rate Stabilization Reserve to the Supply
Operations Reserve.
• Transfer up to $9.0 million from the Hydroelectric Stabilization Reserve to offset
potential costs associated with low hydroelectric generation.
• Transfer up to $4.5 million from the Supply Operations Reserve to the Distribution
Operations Reserve to ensure reserve adequacy in the Distribution Operations Reserve.
• Transfer up to $10 million from the ESP Reserve to the Distribution Operations Reserve.
This transfer will be construed as a temporary transfer, to be repaid to the ESP Reserve
within five years.
Ending reserve balances for FY 2017 were higher than projected. Because of this, and to keep
some funds in the Hydroelectric Stabilization Reserve in case of drought, staff only projects that
$1 million will need to be transferred out of the Hydroelectric Stabilization Reserve in FY 2018.
The Electric Special Projects (ESP) reserve in future years shows additional transfers of $2.5
million, to help cover the upgrade of the Electric metering system to AMI. This item has been
discussed in prior years as a possible project to be funded from the ESP.
Proposed transfers for FY 2019 will not be requested by resolution at this time, but will be
requested as part of FY 2019 year-end should ending reserve balances require it.
Figure 8 (for Supply Fund Reserves) and Figure 9 (for Distribution Fund Reserves) in Section 5E:
FY 2019 - FY 2028 Projections show the impact of these transfers on reserves levels. Table 5
shows the projected balance of each of the Electric Utility reserves for the period covered by
this Financial Plan. See also: Appendix A: Electric Utility Financial Forecast Detail
Table 5: End of Fiscal Year Electric Utility Reserve Balances for FY 2017 to FY 2028
Ending Reserve
Balance ($000)
FY 2017
(Act.)
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
Re -appropriations
-
-
-
-
-
-
-
-
-
-
-
-
Commitments
2,971
2,971
2,971
2,971
2,971
2,971
2,971
2,971
2,971
2,971
2,971
2,971
Underground Loan
730
730
730
730
730
730
730
730
730
730
730
730
Public Benefits
681
-
-
-
-
-
-
-
-
-
-
-
Special Projects
51,838
45,838
45,067
42,757
43,247
42,847
42,847
42,847
42,847
42,847
42,847
42,847
Hydro Stabilization
11,400
10,400
10,400
10,400
10,400
13,900
13,900
13,900
13,900
13,900
13,900
13,900
Capital
880
880
880
880
880
880
880
880
880
880
880
880
Rate Stabilization
9,011
-
-
-
-
-
-
-
-
-
-
-
Operations
29,913
37,884
32,054
33,249
39,138
38,837
39,720
41,255
44,073
46,167
49,328
49,864
Unassigned
-
-
-
-
-
-
-
-
-
-
-
-
TOTAL
107,424
98,703
92,101
92,987
97,366
100,164
101,048
102,583
105,401
107,495
110,656
111,192
81 Page
SECTION 4: UTILITY OVERVIEW
This section provides an overview of the utility and its operations. It is intended as general
background information to help readers better understand the forecasts in Section 5: Utility
Financial Projections and Section 6: Details and Assumptions.
SECTION 4A: ELECTRIC UTILITY HISTORY
On January 16, 1900, Palo Alto began operating its own electric system. One of the earliest
sources of Palo Alto's electricity was a steam engine, which was later replaced by a diesel
engine in 1914 due to rising fuel oil costs. As the population and the demand for electricity
continued to grow, CPAU connected to PG&E's system in the early 1920s. Power from PG&E
proved more economical than the diesel engines, and by the late 1920s CPAU was using its own
diesel engines only during peak demand periods. At that time CPAU owned 45 miles of
distribution lines and the City used 9.7 GWh annually, less than 1% of today's annual
consumption. The diesel engines remained in operation until 1948, when they were retired.
From 1950 to 1970 electric consumption in Palo Alto grew dramatically, just as it did
throughout the rest of the country. In 1970 total annual sales were 602 GWh, twenty times the
sales in 1950 (30 GWh). Some of that growth was related to a development boom in Palo Alto,
which doubled the number of customers. Some was related to the proliferation of electric
appliances, as evidenced by the fact that residential customers were using three times more
electricity in 1970 than they had been in 1950. But the most notable factor was the growth of
industry in Palo Alto during that time. By 1970, commercial customers were using 20 times
more electricity per customer than they had been in 1950. These decades also saw several
other notable events, including:
• 1964: CPAU entered into a favorably priced 40 -year contract with the Federal Bureau of
Reclamation to purchase power from the Central Valley Project (CVP), a contract which
later was managed by the Western Area Power Administration (WAPA) an office of the
Department of Energy created in the 1970s to market power from various hydroelectric
projects operated by the Federal Government, including the CVP.
• 1965: The City began a long-term program to underground its overhead utility lines
(Ordinance 2231).
• 1968: Palo Alto joined several other small municipal utilities to form the Northern
California Power Agency (NCPA), a joint action agency intended to make the group less
vulnerable to actions by private utilities and to enable investment in energy supply
projects.
Palo Alto's first new power plant investment in over 50 years came in the mid -80s. Palo Alto
joined other NCPA members to invest in the construction and operation of the Calaveras
Hydroelectric Project on the Stanislaus River in the Sierra -Nevada Mountains. The project
commenced operation in 1990. The 1980s also saw an increased focus on infrastructure
maintenance. In 1987 the UCC was built to house the terminals for a new SCADA system, which
91 Page
enabled utility staff to monitor the distribution system in real time, improving response time to
outages. CPAU also commenced a preventative maintenance and planned replacement
program for its underground system in the early 1990s.
In the early 1990s the CPUC issued a ruling to deregulate the electric industry in California, and
in 1996 the State legislature passed Assembly Bill 1890, which, among other things, created the
California Independent System Operator (CAISO) to operate the transmission system and the
Power Exchange to facilitate wholesale energy transactions. This restructuring was anticipated
to bring lower costs to consumers, and while CPAU was not required to participate in the
industry restructuring, in 1997 the Council approved a Direct Access Program for the Electric
Utility2 that enabled CPAU to sell electricity outside its service territory and allowed customers
within CPAU's service territory to choose other providers. The utility unbundled its electric
rates, creating separate supply and distribution components, which would enable customers to
receive only distribution service while purchasing the electricity itself from another provider.
The energy crisis in 2000 to 2001 led to the suspension of direct access by the CPUC in
September 2001 as wholesale energy prices skyrocketed. The Electric Utility was less impacted
than other utilities by the 2000 to 2001 energy crisis thanks to the Calaveras project and its
contract with WAPA for CVP hydropower.
In 2001 CPAU began planning for the impacts associated with the new terms of its contract with
WAPA, set to take effect in 2005. The previous contract had provided 90% of Palo Alto's power
supply at favorable rates, and PG&E, as a party to the contract, had provided supplemental
power to balance the monthly and annual variability of CVP generation. The new contract
would provide only a third of Palo Alto's requirement, and the monthly and annual variability in
CVP generation would be passed directly to Palo Alto. As a result, electric supply costs would
increase and CPAU needed to more actively manage its supply portfolio. CPAU began
purchasing power from marketers and also investigated building a power plant in Palo Alto or
partnering in the development of a gas -fired power plant elsewhere. Climate change was also
becoming more of a concern to the community, and gradually CPAU shifted its focus to the
procurement of renewable energy. In 2002 CPAU adopted a goal of achieving 20% of its energy
supply from renewables by 2015. Subsequently CPAU signed its first contract for renewable
power, a contract for energy from a wind generator commencing deliveries in 2005. In 2011 the
renewable energy goal was increased to at least 33% by 2015, and in 2013 the City adopted a
plan to make its electric supply 100% carbon neutral, which it achieves through the
combination of its carbon -free hydroelectric supplies, purchases of long-term renewable energy
supplies, and short-term renewable energy purchases (RECs) to meet the balance of its needs.
2 Implementation of Direct Access for Electric Utility Customers, CMR:460:97, December 1, 1997
10 1 P
SECTION 4B: CUSTOMER BASE
The City of Palo Alto's Electric Utility
provides electric service to the Figure 1: Customer Consumption By Class (FY 2017)
residents, businesses, and other
electric customers in Palo Alto. There
are roughly 29,600 customers
connected to the electric system,
25 550 (86%) of which are residential 42%
and 4,050 (14%) of which are non-
residential. Residential customers
consumed 147 gigawatt-hours (GWh)
in FY 2017, approximately 16% of the
electricity sold, while non-residential
customers consumed 84% or 771
GWh. Residential customers use
electricity primarily for lighting,
refrigeration, electronics, and air conditioning.3 Non-residential
16%
6%
36%
customers
® Residential
El Small Comm.
❑ Med. Comm.
El Large Comm.
use the majority of
their electricity for cooling, ventilation, lighting, office equipment (offices), cooking
(restaurants), and refrigeration (grocery stores).4
As shown in Figure 1 large customer loads represent a large proportion of sales for the Electric
Utility. The proportion of sales to large vs. small customers is greater than for the City's other
utilities. For example, the largest customers (the 71 customers on the E-7 rate schedule)
account for around 42% of CPAU's sales. The next largest customer group (the 830 non-
residential customers on the E-4 rate schedule) represents another 36% of sales. In total, that
means that about 3% of customers account for nearly three quarters of the electric load.
SECTION 4C: DISTRIBUTION SYSTEM
The Electric Utility receives electricity at a single connection point with PG&E's transmission
system. From there the electricity is delivered to customers through nearly 472 miles of
distribution lines, of which 211 miles (45%) are overhead lines and 261 miles (55%) are
underground. The Electric Utility also maintains nine substations, roughly 2,000 overhead line
transformers, around 1,100 underground and substation transformers, and the associated
electric services (which connect the distribution lines to the customers' homes and businesses).
These lines, substations, transformers, and services, along with their associated poles, meters,
3 Source: Residential Appliance Saturation Survey, California Energy Commission, 2010
4 Source: Statewide Commercial End Use Study, California Energy Commission report, 2006.
111 Page
and other associated electric equipment, represent the vast majority of the infrastructure used
to deliver electricity in Palo Alto.
SECTION 4D: COST STRUCTURE AND REVENUE SOURCES
As shown in Figure 2, electric
commodity purchases accounted for
roughly 55% of the Electric Utility's 8%
costs in FY 2017. Operational costs
represented roughly 37%, and
capital investment was responsible
for the remaining 8%. CPAU's non -
hydro long-term commodity supply
is heavily dependent on long-term
contracts which have little variability 37%
in price. On average, costs for these
long-term contracts are not
predicted to increase as quickly as operations and CIP costs, and will steadily become a smaller
proportion of the Electric Utility's costs. Staff projects commodity supply costs to be
approximately 56% of total costs in FY 2028.
While average year purchase
costs for the electric utility
are predictable due to its
long-term contracts,
variability in hydroelectric
generation can result in
increased or decreased
costs. This is by far the
largest source of variability
the utility faces. Figure 3
shows the difference in costs
under high, projected, and
low hydroelectric generation
for FY 2019. Additional costs associated
with a very low generation scenario can
range from $9-11 million per year. For
the current hydroelectric risk assessment
see Section 5F: Risk Assessment and
Reserves Adequacy.
Figure 2: Cost Structure (FY 2017)
Figure 4: Hydroelectric Variability (FY 2019)
200%
150%
100%
50%
0%
scenarios
As shown in Figure 4 the Electric Utility
receives 81% of its revenue from sales of
electricity and the remainder from
55%
Low Hydro Average High Hydro
❑ Commodity
Supply
❑ Operations
❑ Capital
Surplus Hydro
(sales)
Market
Power/RECs
Hydro
Renewables
Load
Figure 3: Revenue Structure (FY 2017)
■ Sales of Electricity
El Other Revenue
121 Page
connection fees, interest on reserves, cost recovery transfers from other funds for shared
services provided by the electric utility, and other sources. Some revenue sources are primarily
accounting entries that reflect things such as CPAU's participation in a pre -funding program
associated with its contract with WAPA, as well as accounting entries associated with
occasional sales of surplus hydroelectric energy during wet years. Appendix A: Electric Utility
Financial Forecast Detail shows more detail on the utility's cost and revenue structures.
As discussed in Section 4B: Customer Base, nearly three quarters of the utility's electricity sales
are to the 900 largest customers, which provide a similar share of the utility's revenue stream.
The utility's retail rate schedules have no fixed charges, although about 24% of the utility's
revenue comes from peak demand charges on large non-residential customers. Due to
moderate weather and the prevalence of natural gas heating, however, loads (and therefore
revenues) are very stable for this utility, without the large seasonal air conditioning or winter
heating loads seen at some other utilities.
SECTION 4E: RESERVES STRUCTURE
CPAU maintains several reserves for its Electric Utility to manage various types of
contingencies. It also maintains two funds, the Supply Fund and the Distribution Fund, to
manage costs associated with electricity supply and electricity distribution, respectively. The
City established this separation of supply and distribution costs as the City prepared to allow its
customers a choice of electricity providers (referred to as "Direct Access") in the late 1990s and
early 2000s. Though the 2000/2001 energy crisis halted these plans, CPAU continues to
maintain separate funds to facilitate separation of supply and distribution costs in the rates.
This could be important if California ever decides to broadly reintroduce Direct Access, and may
also be useful for rate design as the nature of utility services evolves in response to higher
penetrations of distributed generation.
The summary below describes the various reserves, but see Appendix 8: Electric Utility Reserves
Management Practices for more detailed definitions and guidelines for reserve management:
• Reserves for Commitments: Reserves equal to the utility's outstanding contract
liabilities for the current fiscal year. Most City funds, including the General Fund, have a
Commitments Reserve.
• Reserves for Reappropriations: Reserves for funds dedicated to projects reappropriated
by the City Council, nearly all of which are capital projects. Most City funds, including
the General Fund, have a Reappropriations Reserve. This is currently an important
reserve for all utility funds, but changes in budgeting practices will change that in future
years, as described in Section 3C (Reserves Management Practices).
• Electric Special Projects (ESP) Reserve: This reserve was formerly called the Calaveras
Reserve, which was accumulated during deregulation of California's electric system to
fund the stranded costs associated primarily with the Calaveras hydroelectric resource
and the California -Oregon Transmission Project. When that reserve was no longer
needed for that purpose, the reserve was renamed and the purpose was changed to
131 Page
fund projects with significant impact that provide demonstrable value to electric
ratepayers.
• Hydroelectric Stabilization Reserve: This contingency reserve is used for managing
additional costs due to below average hydroelectric generation, or to hold surpluses
resulting from above average hydroelectric generation.
• Underground Loan Reserve: This reserve is an accounting tool used to offset receivables
associated with loans made through the underground loan program. It is adjusted
according to principal payments made on those loans.
• Public Benefits Reserve: CPAU's electric rates include a separate charge called the
"Public Benefits Charge" which generates revenue to be used for energy efficiency,
demand -side renewable energy, research and development, and low-income energy
efficiency services. Any funds not expended in the current year are added to the Public
Benefits Reserve for use in future years.
• Capital Improvement Program (CIP) Reserve: The CIP reserve is used to provide
working capital and contingency funds for the CIP program, as well as to accumulate
funds for major future one-time expenditures. This type of reserve is used in other
utility funds (Electric, Gas, and Wastewater Collection) as well.
• Supply and Distribution Rate Stabilization Reserves: These reserves are intended to be
empty unless one or more large rate increases are anticipated in the forecast period. In
that case, funds can be accumulated to spread the impact of those future rate increases
across multiple years. This type of reserve is used in other utility funds (Gas,
Wastewater Collection, and Water) as well.
• Supply and Distribution Operations Reserves: These are the primary contingency
reserves for the Electric Utility, and are used to manage yearly variances from budget
for operational costs and electric supply costs (aside from variances related to
hydroelectric generation). This type of reserve is used in other utility funds (Gas,
Wastewater Collection, and Water) as well.
• Unassigned Reserves (Supply/Distribution): As in the other utility funds, these reserves
are for any financial resources not assigned to the other reserves and are normally
empty.
SECTION 4F: COMPETITIVENESS
For the median consumption level the annual residential electric bill for calendar year 2017 was
$589.02 under current CPAU rates, 38% lower than the annual bill for a PG&E customer with
the same consumption and approximately 12% higher than the annual bill for a City of Santa
Clara customer. The bill calculations for PG&E customers are based on PG&E Climate Zone X,
which includes most surrounding comparison communities.
Table 6 presents sample median residential bills for Palo Alto, PG&E, and the City of Santa Clara
(Silicon Valley Power) for several usage levels. Rates used to calculate the monthly bills shown
below were in effect as of March 1, 2018.
141 Page
Over the next several years low usage customers in PG&E territory are expected to continue to
see higher percentage rate increases than high usage customers as PG&E compresses its tiers
from the highly exaggerated levels that have been in place since the energy crisis. This is likely
to make the bill for the median Palo Alto consumer look even more favorable compared to
most PG&E customers. Even with the compressed tiers, bills for high usage Palo Alto consumers
are likely to remain substantially lower than the bills for high usage PG&E customers.
The bill calculations show bills under the existing rates, not the proposed July 1, 2018 rates.
However, even with the proposed rate increases, Palo Alto's residential bills will remain
substantially below PG&E's current rates, but slightly above Santa Clara's.
Table 6: Residential Monthly Electric Bill Comparison (Effective 3/1/18, $/mo)
Season
Usage (kwh)
Palo Alto
PG&E
Santa Clara
Winter
(March)
300
36.48
63.51
35.18
453 (Median)
63.50
104.49
53.78
650
100.93
159.64
77.73
1200
205.45
313.60
144.59
Summer
(July)
300
36.48
63.51
35.18
(Median) 330
40.12
71.70
38.83
650
100.93
161.28
77.73
1200
205.45
315.24
144.59
Table 7 shows the average monthly electric bill for commercial customers for various usage
levels. Even with the proposed rate increases, Palo Alto's commercial bills will remain
substantially below PG&E's, and below Santa Clara's for some commercial customers.
Table 7: Commercial Monthly Electric Bill Comparison (3/1/18, $/mo)
Usage (kwh/mo)
Palo Alto
PG&E
Santa Clara
1,000
161
245
181
160,000
23,732
30,413
20,850
500,000
62,190
83,820
62,956
2,000,000
268,475
361,753
256,247
SECTION 5: UTILITY FINANCIAL PROJECTIONS
SECTION 5A: LOAD FORECAST
Figure 5 shows a 33 -year history of Palo Alto electricity consumption. Average electricity
consumption grew from 1986 to 1998, then returned to 1986 levels by 2002. Since then
electricity consumption has declined slowly as a result of a continuing focus on energy
efficiency, as well as the adoption of more stringent appliance efficiency standards and energy
standards in building codes.
15
Figure 5: Historical Electricity Consumption
1,150
1,100
1,050
1,000
950
900
850
800
L/1 l0 N. 03 O1 O eti N m u1 ID N 03 01 0 '-1 N m • Ln N 00 0 0 eti N m tt v1 lO N
01 01 01 O1 01 01 O1 O1 O1 O1 01 al O1 01 01 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - 0 0 0
.--1 n --I e-4 i-1 a -1 e--1 e--1 e--1 .1-4 t-1 e--1 e-1 e —I N N N N N N N N N N N N N N N N N N
Figure 6 shows the forecast of electricity consumption through FY 2028. Sales after the July
2016 rate change decreased by 6% from projections. To be conservative, the forecast assumes
that current trends continue and sales through the forecast period decline slightly.
161 Page
Figure 6: Forecasted Electricity Consumption
1,100
1,050
1,000
s
3 950
900
850
800
Actual
> Projection
CQ~CP� cP`'e e co) 0,10,�0,�0,�O,hO,=O,‘ O,�O,�O�001�0��00" 0 01h01OO��
ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti '1 ti ti ti ti ti ti ti ti ti 1,
SECTION 5B: FY 2013 TO FY 2017 COST AND REVENUE TRENDS
The annual expenses for the Electric Utility remained fairly stable between FY 2013 and FY
2017, as shown in Figure 7 and the tables in Appendix A: Electric Utility Financial Forecast Detail
Section 6A: Electricity Purchases discusses the factors influencing Electric Utility expenses. Since
FY 2012, total expenses for the utility have included the costs of renewable resources coming
online. In FY 2014 through FY 2015 commodity costs were higher due to lower than average
output from hydroelectric resources.
Commodity costs and capital investments are responsible for most of the changes in the
utility's expenses over the last six years. Operational costs decreased during that time but will
increase once staffing levels return to normal levels.
17 1 P
Figure 7: Electric Utility Expenses, Revenues, and Rate Changes:
Actual Costs through FY 2017 and Projections through FY 2028
$200 — RATE GHANGEs
0% 0% 0% 0% 11% 14% 6%
$180
0
_ $160
2
$140
$120
$100
$80
$60
$40
$20
$0
3%
2% 0% 1% 1% 1%
I 1
n
Lf1 lD N 00 01 0 N
e --I N N N
0 0 0 0 0 0 0 0
N N N N N N N N
>- >- >- >- >- >- >- >-
LL LL LL Li_ LL U LL LL
SECTION 5C: FY 2017 RESULTS
1%
1%
1%
Lf1 lD N 00
N N N N
0 0 0 0
N N N N
>- >- >- >-
u_ LL L.L LL
Electric
Commodity
=Capital
Investment
Transfers
Operations
=Debt Service
Revenue
Total cost of purchasing electricity was lower than the forecast by approximately $3.9 million.
Capital improvement costs were lower than the forecasted level by $9.9 million. Sales revenues
were higher than the forecast by $2.9 million, but there was also $4.8 million in surplus sales
revenue beyond what was budgeted. While net revenues were still lower than cost by $3
million, the net reserve withdrawal was lower than originally anticipated ($25 million). The
lower withdrawal in FY 2017 will allow for reserves to be used in future years.
18
Table 8 FY 2017, Actual Results vs. Financial Plan Forecast ($000)
Net Cost/(Benefit)
Type of change
Sales revenues higher than forecast
$(2,881)
Revenue increase
Wholesale and other revenues higher than
forecast
(5,978)
Revenue increase
Lower capital improvement costs
(9,932)
Cost decrease
Lower purchased electricity costs
(3,904)
Cost decrease
Higher operations costs
344
Cost increase
Net Cost / (Benefit) of Variances
$(22,352)
SECTION 5D: FY 2018 PROJECTIONS
Last year, staff recommended (and Council approved) a 14% rate change for July 1, 2017, the
start of FY 2018. Current sales revenue projections for 2018 are roughly $1.5 million higher than
expected in last year's financial plan. Based on current hydro conditions, wholesale costs are
again expected to contribute to other revenues being higher by $5.5 million. Purchased
electricity cost projections for 2018 are anticipated to be $4.5 million lower than in last year's
financial plan. However, capital cost estimates and operations cost estimates (which includes
other than purchased electricity costs) increased by $5.3 million and $3.8 million, respectively.
Table 9 FY 2018, Change in Projected Results, 2018 Forecast vs. 2019 Forecast ($000)
Net Cost/(Benefit)
Type of change
Sales revenues
(1,454)
Revenue increase
Wholesale and other revenues higher than
forecast
(5,476)
Revenue increase
Capital improvement costs
5,388
cost increase
Purchased electricity costs
(4,481)
cost decrease
Operations costs
3,848
cost increase
Net Cost / (Benefit) of Variances
$2,175
SECTION 5E: FY 2019 — FY 2028 PROJECTIONS
As shown in Figure 7 above, staff projects costs for the Electric Utility to increase at a fairly
steady rate through the forecast period. Revenue increases of 6% in FY 2019 and another 3% in
FY 2020 are projected to bring revenues in line with expenses. Rising electricity purchase costs
are the primary contributor to the increases. Electricity purchase costs have increased
substantially since FY 2013 as new renewable projects have come online to fulfill the City's
environmental goals, and as transmission costs have increased due to improvements being
made to the California grid. Operations costs are expected to increase at or near the inflation
rate (2-4 %/year) through the forecast period. Projected capital expenses for FY 2018 through
FY 2023 are higher in FY 2018 through FY 2021 due to work on the Upgrade Downtown project,
as well as anticipated AMI and smart grid implementation. Once these larger, one-time project
191 Page
cost increases are completed, annual CIPs are anticipated to decline back to levels seen in
recent years. This forecast also assumes that smart grid costs are funded from the Electric
Special Projects Reserves.
Reserves trends based on these revenue projections are shown in Figure 8 (for Supply Fund
Reserves) and Figure 9 (for Distribution Fund Reserves), below. The Supply Rate Stabilization
Reserve will be empty by the end of FY 2018.
Figure 8: Electric Utility Reserves (Supply Fund):
Actual Reserve Levels through FY 2017 and Projections through FY 2028
$140
0
2
$120
$100
$80
$60
$40
$20
$0
INNEN A
Now
• Unassigned (Supply)
Supply Rate
Stabilization Reserve
® Hydro Stabilization
Reserve
IN Supply Operations
Reserve
• Electric Special
Projects Reserve
• Central Valley
Project Reserve
• Emergency Plant
Replacement
• Reserve for
M t Ln lD N CO 0 0 r-1 N CO t Ln to N oo Commitments
.--
—1
1 .--I a--1 .--1 .--1 r-1 N N N N N NN N N
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
CA N N N N N N N N N N N NN N N
} ›- } } >- } ›- } } ›- } } ›- } } >- ■Reserve for
LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL
Reappropriations
201 Page
Figure 9: Electric Utility Reserves (Distribution Fund):
Actual Reserve Levels through FY 2017 and Projections through FY 2028
30
N
0
25
20
15
10
5
0
1
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
SECTION 5F: RISK ASSESSMENT AND RESERVES ADEQUACY
Unassigned (Distribution)
❑ Public Benefits Reserve
❑ Distribution Rate
Stabilization Reserve
❑ Distribution Operations
Reserve
®Underground Loan Reserve
❑ Emergency Plant
Replacement
Restricted for Debt Service
❑ Capital Reserve
❑ Reserve for Commitments
❑ Reserve for
Reappropriations
The Electric Utility currently has two contingency reserves, the Supply Operations Reserve and
the Distribution Operations Reserve. This Financial Plan maintains reserves above the reserve
minimum for the Distribution Operations Reserve throughout the forecast period. Reserve
levels also exceed the short-term risk assessment level for the Distribution Fund. The Supply
Operations Reserve, however, may end up below minimum levels and below the short-term risk
assessment level.
There are a variety of risks associated with the Supply Fund as are shown in Table 10. Because
of the high range of uncertainty in energy price predictions more than three years in the future,
this risk assessment is only performed for the first two fiscal years of the forecast period. It is
important to note that the likelihood of all of these adverse scenarios occurring simultaneously
and to the degree described in Table 10 is very low.
21 1
Table 10: Electric Supply Fund Risk Assessment
Categories of Electric Supply Cost
Uncertainties
Estimates of Adverse
Outcomes (M$)
Notes
FY 2019
FY 2020
1. Production from Hydroelectric
Resources: Western
6.8
6.2
Lower than forecasted hydro
2. Production from Hydroelectric
Resources: Calaveras
3.3
2.6
Lower than forecasted hydro
3. Market Price (Energy)
2.2
0.8
Higher than forecasted market prices for
energy
4. Transmission/CAISO
3.3
3.3
High -end transmission forecast scenario
5. Plant Outage
1.0
1.0
Uninsured losses from Calaveras plant outage
6. Western Cost
3.5
3.5
Risk of rate adjustments from Western
7. Regulatory and Legal
0.0
0.0
Risks associated with legislative uncertainties
Electric Supply Fund Risks
$19.9
million
$17.4
million
Projected Supply Operations +
Hydro Stabilization Reserve
Levels
$65.6
million
$65.8
million
Of the risks faced by the Electric Utility's Supply Fund in FY 2019, the risk of a dry year with very
low hydroelectric output is normally the largest, accounting for nearly half the total cost of all
adverse outcomes. Since the utility's costs for its hydroelectric resources are almost entirely
fixed, costs do not decline when the output of those resources are low, but the utility needs to
buy power to replace the lost output. The converse happens when hydroelectric output is
higher than average.
Of the remaining risks for FY 2019, $3.3 million is related to the projected costs if transmission
cost increases are higher than staff's current forecast. $3.5 million is related to the uncertainty
to Western's rates for Restoration costs.
As shown in Figure 10, the Supply Operations Reserve was below the minimum reserve
guidelines at the end of FY 2017. However, through reserve transfers and rate increases, staff
projects the Supply Operations Reserve to stay within the reserve guideline levels throughout
the forecast period. Figure 11 shows that the combined Hydro Stabilization and Supply
Operations Reserves are projected to be above what is needed for the risk assessment level.
221 Page
Figure 10: Electric Supply Operations Reserve Adequacy
N 45
c
0
40
35
30
25
20
15
10
5
0
— Reserve Maximum
Reserve Target
— Reserve Minimum
— Reserve (Year -End)
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
23 1 Page
Figure 11: Adequacy of Supply Operations and Hydro Stabilization Reserves, Combined
N $60
0
$50 —
$40
$30
$20
$10
$0 —
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
1Hydro Stabilization Reserve (Year -End)
=Operations Reserve (Year -End)
Risk Assessment
Table 11 summarizes the risk assessment calculation for the Distribution Operations Reserve
through FY 2023. As shown in Figure 12, the Distribution Operations Reserve will stay within the
reserve guidelines over the course of the forecast period, although it was recorded below the
minimum reserve guidelines at the end of FY 2017. The risk assessment includes the revenue
shortfall that could accrue due to:
1. Lower than forecasted sales revenue; and
2. An increase of 10% of planned system improvement CIP expenditures for the budget year.
Table 11: Electric Distribution Fund Risk Assessment ($000)
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
Total non -commodity revenue
$49,608
$49,928
$49,744
$50,068
$50,895
Max. revenue variance, previous ten years
8%
8%
8%
8%
8%
Risk of revenue loss
$3,915
$3,941
$3,926
$3,952
$4,017
CIP Budget
$22,684
$18,287
$20,097
$13,632
$14,011
CIP Contingency @10%
$2,268
$1,829
$2,010
$1,363
$1,401
Total Risk Assessment value
$6,184
$5,769
$5,936
$5,315
$5,418
24
Figure 12: Electric Distribution Operations Reserve Adequacy
in $20 —
c
0
2 $18
$10
$8
$6
$4 —
$2 -
so
— Reserve Maximum
— — Reserve Target --
Reserve Minimum
— Reserve (Year -End)
— • Risk Assessment
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
As shown in Figure 13, staff projects the CIP Reserve to be above the proposed revised
minimum and maximum guidelines over the forecast period. While the Reserve is above
maximum levels, CIP Commitments are nearly impossible to project that far out, and
adjustments to the reserve can be made in future years.
251 Page
Figure 13: Electric CIP Reserve Adequacy
$9
$8
cm
c
0
$7
$6
$5
$4
$3
$2
FY FY FY FY FY FY FY FY FY FY FY FY
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
SECTION 5G: LONG-TERM OUTLOOK
®CIP Reappropriations (Year -End)
®CIP Reserve (Year -End)
I CIP Commitments (Year -End)
— Reserve Minimum
Reserve Target
— Reserve Maximum
This forecast covers the period from FY 2019 through FY 2028, but various long-term
developments may create new costs for the utility over the next 5 to 35 years. While it is
challenging to accurately forecast the impact these events will have on the utility's costs, it is
worth noting them as future milestones and keeping them in mind for long-term planning
purposes.
For the supply portfolio, the 2020s will see a number of notable events. The contract with
Western for power from the CVP will expire in 2024. Determining the future relationship with
Western after 2024 will be important in the years leading up to the contract expiration,
especially because this resource represents nearly 40% of the electric portfolio, and is the
utility's largest source of carbon -free electricity. The utility's three earliest and lowest cost
renewable contracts will also begin expiring around that time, with the first contract expiring in
26 1
2021 and the last in 2028. These three contracts, plus one more expiring in 2030, currently
provide 17% to 18% of the energy for the utility's supply portfolio at prices under $65 per
megawatt -hour (MWh). It is difficult to know what renewable energy prices will be when those
contracts expire. Although recent prices have been in that range (or even lower), and costs
may decrease in the future, current renewable projects also benefit from a wide range of tax
and other incentives that may or may not be available in the 2020s and beyond. However, staff
is in the process of procuring a replacement for the contract expiring in 2021 at a lower price
than any of the City's current renewable contracts.
The costs of the Calaveras hydro project will also change in the 2020s, with debt service costs
dropping by half in 2025 as some of the debt is paid off, and all debt retired by the end of 2032
(assuming the Utility does not issue any new debt). The project will only be 40 years old at that
time. Calaveras debt service represents roughly 70% of the annual costs of that project (and
nearly 7% of the utility's total costs), so when the debt is retired, the project could be a low-
cost asset for the utility, providing carbon -free energy equal to around 13% of the Electric
Utility's supply needs in an average year.
Another factor that may affect the utility's supply costs in the long run is carbon allowance
revenue. Currently the Electric Utility receives $3 to 5 million per year in revenue from
allocated carbon allowances under the State's cap -and -trade program. It uses that revenue to
pay for energy efficiency programs and to purchase renewable energy to support the utility's
Carbon Neutral Plan. Staff expects that revenue source to continue through 2020. However,
discussions at the state level are ongoing and will determine whether or not these allocations
continue past 2020, as well as any restrictions CARB may wish to enact on usage of allocation
sales revenues. If the Electric Utility no longer received these allowances or was limited in how
it could spend revenues, it would have to fund these programs from sales revenues.
Transmission costs are also continuing to rise. If the State continues to increase mandates or
incentives for renewable energy development, integrating these new projects into the
transmission grid will be an ever increasing challenge, some costs of which will be borne by Palo
Alto. The planned expansion of the CAISO to a larger regional grid control area may result in
additional transmission costs that could further increase CPAU's transmission costs. In addition
to the costs of new transmission lines that will need to be built, flexible resources will be
required to balance rapid changes in wind or solar output throughout the day. Palo Alto will
likely bear some of the costs of these new lines and resources. CPAU is also currently
investigating installing a second transmission interconnection for Palo Alto, which could be
funded by the Electric Special Projects Reserve.
Over the next several years the Electric Utility will continue to execute its usual monitoring,
repair, and replacement routine for the distribution system, but will also begin the rollout of
various smart grid technologies. The utility continues to monitor the growth of electric vehicle
ownership and gas -to -electric fuel switching in Palo Alto. In the next 10 to 20 years, these
factors may begin to create notable increases in electric consumption and have a variety of
impacts on the distribution system. As housing stock is turned over, however, stricter building
271 Page
codes may help to counteract load growth, as may increasing numbers of rooftop solar
installations. The utility has already started to take some of these factors into account in its
long-term planning processes, but will need to continue to incorporate them into its planning
methodologies.
Over the long term, it is conceivable that electricity could replace natural gas and petroleum
almost entirely. Many, if not most, vehicles would use electricity, though hydrogen is another
potential fuel source under development and other technologies might be developed. Staff are
undertaking initial analysis of these types of scenarios in the context of the Sustainability and
Climate Action Plan (S/CAP) development process. These types of scenarios require careful
planning for the associated load growth to make sure the distribution system does not end up
overloaded, or conversely, to avoid over investment, and the evaluation of changes to utility
distribution system management to accommodate integration of the various technologies
involved in electrification.
28 1 P
SECTION 6: DETAILS AND ASSUMPTIONS
SECTION 6A: ELECTRICITY PURCHASES
As shown in Figure 14 the utility gets roughly 50% of its energy from hydroelectric projects in a
normal year (FY 2014 and FY2015 were dry). Contracts with renewable sources made up just
over 30% of the portfolio in FY 2016, and 50% in FY 2017. Staff expects contracts with
renewable sources to continue at approximately 50% of the portfolio for the forecast period.
The remainder comes from unspecified market sources. Under the City's Carbon Neutral Plan,
CPAU purchases RECs corresponding to the amount of market energy it purchases.
Figure 12: Electricity Supply by Source
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
— T T —I—
CO 01 0 a --I
ati N N N
O O 0 0
N N N N
LL LL LL LL
4
7
4
— T —I— T
N N N N N N N
O O O O O O 0
(j(:)
N }N }N N N N
LL LL LL LrL LPL
7
❑ Market Purchases+ RECs
Market Purchases
❑ Renewable
0 Hydroelectric
291 Page
Figure 15 shows the historical and projected costs for the electric supply portfolio,5 as well as
average and actual hydroelectric generation.6 Electric supply costs increased in FY 2013, FY
2014, and FY 2015 due to the drought, which reduced the amount of generation from
hydroelectric resources. Costs decreased slightly in FY 2016 due to better than expected market
purchase costs, and FY 2017 and FY 2018 had lower hydroelectric costs. Increases in renewable
energy costs are expected as various renewable projects come online to fulfill the City's carbon
neutral and RPS goals. Transmission charges are also projected to increase as new transmission
lines are built throughout California to accommodate new renewable projects. In total, electric
supply costs are projected to increase to $85 million by FY 2020, at which point all currently
contracted renewable projects will be online. Supply costs are only projected to change slightly
in subsequent years.
Figure 13: Electric Supply Portfolio Costs, Historical and Projected
$120 -
$100 -
$80 -
$60 -
$40
$20
so
•
7
7
K
mil%/,
5Fi
7
4
4
7 7 ''l/,
4
f-
in
No O N O N ▪ O 0
>- N N
u >- >- >- >- >-
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7
ffffff4f4ffffff4f4 gff4fff4f4ft�\\\\\\\\\\\�
600,000
- 500,000
N N
0 0
N N
400,000
2
O
w
300,000
C7
(11
V
01
2
200,000 •
100,000
® Renewables
D Market
Purchases
® Hydroelectric
Cost
Transmission
Other Costs
— • Average Hydro
Generation
• Actual Hydro
Generation
5 Costs are shown net of wholesale revenues, and cannot be directly compared with the electric supply purchase
figures shown in Appendix A: Electric Utility Financial Forecast Detail
6 Average hydroelectric generation increased in January of 2015 due to an increase in the utility's contractual share
of the output of the CVP Federal hydropower project.
30 1 P a
SECTION 6B: OPERATIONS
CPAU's Electric Utility operations include the following activities:
• Administration, including financial management of charges allocated to the Electric
Utility for administrative services provided by the General Fund and for Utilities
Department administration, as well as debt service and other transfers. Additional detail
on Electric Utility debt service is provided in Section 6D (Debt Service)
• Customer Service
• Engineering work for maintenance activities (as opposed to capital activities)
• Operations and Maintenance of the distribution system; and
• Resource Management
Appendix C: Description of Electric utility Operational Activities includes detailed descriptions of
the work associated with each of these activities.
From FY 2013 to FY 2017, Operations costs stayed relatively flat. In 2013 there was a one-time
increase in expenses associated with an adjustment to the value of the City's investment
portfolio. Debt service and transfers costs increase (reflecting transfers in from the ESP
reserve). However, over the forecast horizon, excluding debt service and transfers, staff project
costs to increase by roughly 2-3% per year.
Figure 14: Historical and Projected Electric Utility Operational Costs
N $70
c
0
2
$60
S50
$40
$30
$20 -
$10
$0
1
1
1
1
1
1
1
1
r
1
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
❑ Debt service and transfers
0 Demand Side
Management
• Resource Management
❑ Operations &
Maintenance (including
Engineering)
❑ Customer Service
• Administration (excluding
debt service and
transfers)
311 Page
SECTION 6C: CAPITAL IMPROVEMENT PROGRAM (CIP)
Staff projects CIP spending for FY 2019 through FY 2024 to be consistent with last year's
forecast, though there is a slight shift in the funding by project category. There will be a
reduction in capital cost and revenue related to the VA Hospital project as the VA will be
responsible for the installation, and associated costs, of electric facilities; there will be a
reduction in funding for Undergrounding as current projects are completed; there will be an
increase in funding for Underground Rebuilding and 4/12kV Conversion as improvements are
made to the system in portions of the Crescent Park/Duveneck/St. Francis/Community
Center/Leland Manor/Garland neighborhoods to facilitate rebuild of the Hopkins Substation;
and increase in funding for replacement of distribution system and substation facilities that are
at the end of their useful life. Other significant projects still slated to continue are deteriorated
wood pole replacements, pole relocations to facilitate the Caltrain Railway Electrification
project, Smart Grid upgrades, and ongoing capital investment in the electric distribution system
to maintain/improve reliability. This forecast assumes that the utility finances smart grid
projects from the Electric Special Projects Reserve and with additional funding from the water
and gas funds, but it would also be possible to use bond financing.
Excluding the one-time projects listed above, the CIP plan for FY 2019 to FY 2023 is primarily
funded by utility rates, but other sources of funds include connection fees (for Customer
Connections), phone and cable companies (primarily for undergrounding), and other funds (for
smart grid). The details of the CIP budget will be available in the Proposed FY 2019 Utilities
Capital Budget. Figure 17 shows the FY 2018 projected budget and the five year CIP spending
plan, although these figures are preliminary pending budget discussions starting in May. The
'committed' column represents funds committed to contracts for which work has not yet been
completed or invoices paid.
Figure 15: Electric Utility CIP Spending ($000)
Project Category
Current
Budget*
Spending,
Curr. Yr
Remain.
Budget**
Committed
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
One -Time Projects
5,021
(128)
4,893
123
1,400
1,300
10,750
5,000
5,000
System Expansion
3,507
(27)
3,481
-
-
-
-
-
-
Reliability
3,711
(129)
3,582
153
1,067
317
150
-
-
Undergrounding
4,395
(40)
4,355
353
900
-
2,000
2,250
500
4/12 Kv Conversion
270
(1)
269
-
-
1,750
800
-
-
Underground Rebuilding
3,385
(3)
3,382
3
-
2,656
1,500
350
350
Ongoing Projects
6,714
(882)
5,832
3,255
3,145
3,625
3,280
3,280
3,230
Customer Connections
(Fee Funded)
4,087
(1,149)
2,938
589
3,220
3,336
3,456
3,580
3,600
TOTAL
31,091
(2,359)
28,732
4,476
9,732
12,984
21,936
14,460
12,680
*Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year.
**Equal to CIP Reserves (Reserve for Reappropriations + Reserve for Commitments).
32 1 P
SECTION 6D: DEBT SERVICE
The Electric Utility's annual debt service is $100,000 per year. The Electric Utility currently
makes payment on one bond issuance, the 2007 Electric Utility Clean Renewable Energy Tax
Credit Bonds, Series A. This $1.5 million bond issuance was to fund a portion of the construction
costs of solar demonstration projects at the Municipal Services Center, Baylands Interpretive
Center, and Cubberley Community Center. The capacity of these projects totaled 250 kW. In
exchange for funding part of the construction costs, the Electric Utility receives the RECs from
these projects. The bonds were Clean Renewable Energy Bonds (CREBs), meaning they are
interest free (the investors receive a tax credit from the federal government). This bond
issuance is secured by the net revenues of the Electric Utility. Debt service for this bond
continues through 2021, and for the financial forecast period is as follows:
Table 11: Electric Utility Debt Service ($000)
FY 2018
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
2007 Clean Renewable
Energy Bonds
100
100
100
100
The 2007 bonds include a covenant stating that the Electric Utility will maintain a debt coverage
ratio of 125% of debt service. The current Financial Plan maintains compliance with these
covenants throughout the forecast period, as shown in Appendix C.
The Electric Utility also pledges reserves and net revenue as security for the bond issuances
listed in Table 13, even though the Electric Utility is not responsible for the debt service
payments. The Electric Utility's reserves or net revenues would only be called upon if the
responsible utilities are unable to make their debt service payments. Staff does not currently
foresee this occurring.
Table 12: Other Issuances Secured by Electric Utility's Revenues or Reserves
Bond Issuance
Responsible Utilities
Annual Debt
Service ($000)
Secured by Electric Utility's:
Net Revenues
Reserves
1995 Utility Revenue Bonds, Series A
Storm Drain
$680
Yes
No
1999 Utility Revenue Bonds, Series A
Storm Drain
Wastewater Collection
Wastewater Treatment
$1,207
No
Yes
2009 Water Revenue Bonds (Build
America Bonds)
Water
$1,977*
No
Yes
2011 Utility Revenue Refunding
Bonds, Series A
Gas
Water
$1,457
No
Yes
*Net of Federal interest subsidy
33 I Page
SECTION 6E: EQUITY TRANSFER
The City calculates the equity transfer from its Electric Utility based on a methodology adopted
by Council in 2009, which has remained unchanged since then.' Each year it is calculated
according to the 2009 Council -adopted methodology, and does not require additional Council
action.
SECTION 6F: WHOLESALE REVENUES AND OTHER REVENUES
The Electric Utility receives most of its revenues from sales of electricity, but about 19% comes
from other sources. Of these other sources, about 50 to 60% represents wholesale revenues of
surplus energy sales included solely for accounting purposes. These revenues have offsetting
electric supply purchase costs, and do not normally affect the utility's net position. Of the
remaining revenues, the largest revenue sources are interest on reserves, connection fees for
new or replacement electric services, and carbon allowance revenues associated with the
State's cap -and -trade program. In FY 2017 these sources represented roughly 28% of revenue
from sources other than electricity sales. The remaining FY 2017 revenues consisted of a variety
of one-time transfers.
Revenues from connection fees have increased since FY 2009 varying from year to year.
Revenue from connection fees decreased slightly during the recession, but has increased
substantially since then, peaking in FY 2016 and declining somewhat in FY 2017. Staff forecasts
slightly higher revenue from this source in 2018 through 2021 with revenue leveling out in
subsequent years.
Staff projects carbon allowance and interest income revenues to stay relatively stable through
the forecast period. However, both of these revenue sources are subject to some uncertainty.
The State's cap -and -trade program regulations only describe the program through 2020. This
forecast assumes the program will remain in place with similar program design following 2020,
but that may not be the case. CARB is in the process of establishing post -2020 rules.
The forecast for interest income assumes current interest rates continue and there are no
major reserve reductions aside from what is anticipated in this Financial Plan. If interest rates
rise, interest income could increase, and if reserves decrease (due to drought or a withdrawal
from the ESP reserve for a major project), interest income would decrease.
For more detail on the ordinance adopting the 2009 transfer methodology, see CMR 280:09, Budget Adoption
Ordinance for Fiscal Years 2009 and 2010; and CMR 260:09, Finance Committee Report explaining proposed
changes to equity transfer methodology.
34IPage
SECTION 6G: SALES REVENUES
The load forecast in Section SA: Load Forecast and the projected rate changes shown in Figure 7
provide the basis for sales revenue projections. As discussed in Section 5A, sales revenues for
this utility stay relatively stable due to the mild climate in Palo Alto. In addition, Palo Alto is a
built out City, with incremental growth in population and relatively stable commercial customer
loads.
35IPage
SECTION 7: COMMUNICATIONS PLAN
The FY 2019 Electric Utility communications strategy covers these primary areas: rates,
efficiency, renewables, operations, infrastructure, safety, and changes to utility economic
conditions in the wake of the drought. CPAU communication methods include use of the
Utilities website, utility bill inserts, messaging on bills and envelopes, email newsletters, print
ads in local publications, videos and participation in community outreach events.
In FY 2019, CPAU is proposing a nine percent increase in electric utility rates. Prior to FY 2017,
electric utility rates had not increased since 2009, as the City has been drawing down reserves
from the Electric Fund. The rate increase will be necessary in FY 2018 and again in FY 2019, as
these reserves drop below the reserve target level. Communications will focus on the reasons
why a rate increase is necessary, due to an increase in transmission fees and new renewable
projects coming online, rising operating and capital costs, and how drought affected the City's
reserves. Palo Alto purchases a significant portion of its electricity from hydroelectric resources.
Several -year drought conditions reduced available hydroelectric supplies, requiring the City to
purchase more costly replacement electric supplies. Since the State may not received a great
deal of precipitation in the latter part of FY 2018, communications staff will now focus
messaging on how increased hydroelectric supplies could still impact and potentially change the
forecast for electric rates moving forward, at least in the short-term.
Despite these costs and increasing rates, CPAU's electric utility rates remain lower than the
neighboring community average, including for municipal and investor -owned utilities (PG&E).
Keeping costs low is one of the benefits CPAU offers its customers as a public utility provider.
CPAU will continue to communicate about the environmental benefits of the City's carbon
neutral electric supply portfolio. Outreach includes apprising the public of major renewable
energy purchase agreements, which contribute toward Palo Alto's long-term energy security
and commitment to sustainability. Recent power purchase agreements have allowed CPAU to
procure long-term renewable electric supplies at low costs. While upfront capital costs to bring
these renewable projects online may initially contribute towards some increase in CPAU's
electric rates, staff expect these higher costs to taper off once the projects begin commercial
operations. CPAU will highlight these environmental attributes and value in our
communications.
Throughout the year, communications staff promote CPAU's electric efficiency services, rebates
and local renewable energy programs. Within the past few years, CPAU has launched new
programs that allow customers to better understand and manage their energy use. Programs
such as the Home Efficiency Genie and commercial energy efficiency programs help residents
and businesses better understand energy usage, activities and/or upgrades they can implement
to improve efficiency and reduce utility costs. CPAU will be launching an upgraded version of its
online utility account services portal (www.cityofpaloalto.org/myutilitiesaccount) this year,
which can provide customers with direct access and more information about utility account and
consumption data.
361 Page
APPENDICES
Appendix A: Electric Utility Financial Forecast Detail
Appendix B: Electric Utility Reserves Management Practices
Appendix C: Description of Electric utility Operational Activities
Appendix D: Samples of Recent Electric Utility Outreach Communications
37 'age
APPENDIX A: ELECTRIC UTILITY FINANCIAL FORECAST DETAIL
6053706
(page intentionally left blank)
6053706
1
2
3
FISCAL YEAR
FY 2013
ELECTRIC LOAD
FY 2027
r
4 Purchases (MWh)
5 Sales (MWh)
6
7
8
9
10
11
12 I START! NG RESERVES
976,319
946,841
980,894
950,784
979,005
936,773
977,292 945,703 939,991 943,995 940,694
937,157
917,687
909,595 910,883 907,697
937,221
904,346
933,569 931,545 930,263
900,823 898,869 897,632
System Average Rate ($/kWh)
Change in System Average Rate
Change in Average Residential Bill
$ 0.1154 $
0%
-40/0
0.1164 $
1%
- 1%
0.1158 $
0%
_5%
0.1156 $
0%
3%
0.1249 $
10%
11%
0.1421 $
14%
11%
0.1513 $
6%
6%
0.1557 $
3%
2%
0.1593 $
2%
2%
0.1598 $
0%
0%
930,117
897,492
929,943 930,376 930,646
897,324
897,742
898,002
0.1609 $
1%
0%
0.1625 $
1%
1%
0.1634 $
1%
0%
0.1650 $
1%
1%
0.1666 $
1%
1%
0.1683
13 Reappropriations (Non-CIP)
14 Commitments (Non-CIP)
15 Restricted for Debt Service
16 Emergency Plant Replacement
17 Central Valley Project Reserve
18 Underground Loan Reserve
19 Public Benefits Reserves
20 Electric Special Projects Reserve
21 Hydro Stabilization Reserve
22 Capital Reserves
23 Rate Stabilization Reserves
24 Operations Reserves
25 Unassigned
26 TOTAL STARTING RESERVES
27
28 REVENUES
1,886,000
2,737,000
1,000,000
314,000
742,000
1,149,000
50,320,000
305,000
3,528,000 3,164,000
1,000,000 1,000,000
313,000 329,000
738,000 734,000
2,197,000 2,064,000
51,838,000 51,838,000
3,102,055 3,777,205
2,970,955 2,970,955 2,970,955 2,970,955
2,970,955 2,970,955 2,970,955
730,000
2,574,000
51,837,855
17,000,000
729,000
1,839,000
51,837,855
11,400,000
730,147
681,330
51,837,855
11,400,000
879,964
730,147 730,147
45,837,855 45,066,855
10,400,000 10,400,000
879,964 879,964
730,147
44,756,855
10,400,000
- 879,964
74,609,000 69,029,000 70,049,000 14,410,840 9,010,840 9,010,840 - -
- 22,497,607 21,850,187 29,912,981 37,884,461 32,053,564 33,249,194
132,757,000 128,948,000 129,178,000 112,152,357 100,444,086 107,424,072 98,703,382 92,101,485 92,987,115
730,147 730,147 730,147
43,246,855 42,846,855 42,846,855
10,400,000 13,900,000 13,900,000
2,970,955
730,147
2,970,955 2,970,955
2,970,955
730,147 730,147 730,147
42,846,855 42,846,855 42,846,855 42,846,855
13,900,000 13,900,000 13,900,000 13,900,000
879,964 879,964 879,964 879,964 879,964 879,964 879,964
39,138,3- 46 38,836,530 39,719,824 41,254,722 44,072,659 46,167,305 49,327,6- 72
97,366,267 100,164,451 101,047,745 102,582,643 105,400,580 107,495,226 110,655,593
29 Net Sales
30 Wholesale Revenues
31 Other Revenues and Transfers In
32 TOTAL REVENUES
33
34 EXPENSES
35 Electric Supply Purchases
109,974,3 37 110,246,264 108,873,377 108,312,917 114,6 24,7 26 129,2 58,43 5 13 7,8 36,311 141,304,121 144,032,395 143,988,875 144,612,409 145,8 3 3,873 146,687,201 148,083,859 149, 581,682 151,104, 314
6,635,790 6,010,409 6,267,000 4,301,366 16,188,920 18,115,996 13,718,260 14,366,366 16,106,798 17,749,617 17,407,062 17,763,941 17,932,747 18,052,704 18,231,927 18,351,535
9,624,213 13,669,185 9,688,480 11,714,494 11,225,911 13,776,378 12,781,199 15,649,312 18,168,427 12,895,834 12,896,707 13,341,185 13,815,444 14,273,124 14,759,484 15,001,446
126,234,340 129,925,858 124,828,858 124,328,776 142,039,557 161,150,809 164,335,770 171,319,799 178,307,620 174,634,326 174,916,179 176,938,999 178,435,392 180,409,687 182,573,093 184,457,295
36 Operating Expenses
37 Administration
38 Allocated Charges
39 Rent
40 Debt Service
41 Transfers and Other Adjustments
42 Subtotal, Administration
43 Resource Management
44 Demand Side Management
45 Operations and Mtc
46 Engineering (Operating)
47 Customer Service
48 Allowance for Unspent Budget
49 Subtotal, Operating Expenses
50 Capital Program Contribution
51 TOTAL EXPENSES
52
53
61,313,637
4,399,674
3,875,836
9,265,736
16,797,054
34,338,299
3,024,268
3,529,529
9,601,481
1,114,945
2,007,322 2,032,231 1,548,851
68,785,977 80,022,010
4,139,837
4,051 ,044
9,020,651 9,037,000
4,511,222
4,147,742
11 ,329,973 11 ,004,636
28,541,506
3,541,524
3,187,875
9,488,627
1,102,008
28,700,600
2,138,615
3,491,470
10,716,881
1,230,160
75,705,000 80,467,136 83,505,886 91,924,961 94,232,563
4,934,195
4,997,101
8,885,994
3,990,822
5,121,102
8,953,893 8,955,166 8,808,619 8,818,349 8,783,507 8,792,388
4,304,278
5,284,977
4,412,096
5,443,527
4,522,617
5,606,832
95,111,327
4,635,777
5,775,037
98,655,001 98,667,977 99,059,024
4,751,692
5,948,288
4,870,511
6,126,737
9,624,493 9,259,612 4,898,677 4,896,047 4,894,784 4,893,296
14,21 1 ,853 14,216,448 14,221 ,158 14,225,986
31,052,439 31,387,888
4,330,770 4,444,262
4,174,870 4,238,976
16,650,041 17,081,577
2,405,890 2,466,557
2,633,909 2,703,550 2,775,032 2,848,403 2,923,715
(1,753,753) (1,798,955) (1,845,322) (1,892,885) (1,941,675)
61,354,076 61,945,295 58,565,440 59,569,529 60,601,301 61,659,859
4,992,301
6,310,539
11,798,865 12,702,945 13,041 ,626 13.305,787 14,1 90,505
30,616,155 30,768,762 31,586,048 31,970,028 33,138,304
2,083,812 1,985,620 3,446,889 3,569,550 3,697,054
3,643,924 4,271,786 4,327,895 4,214,985 3,955,387
11,523,881 11,811,016 13,349,204 13,790,502 14,247,795
1,592,024 1,656,522 1,963,752 2,016,569 2,070,856
1,540,884 2,540,424
14,194,567
33,388,889
3,806,324
3,913,776
14,653,401
2,124,317
102,252,401
5,117,136
6,499,855
103,534,874 103,178,257 106,193,402
5,245,093 5,376,249 5,510,686
6,694,851 6,895,697 7,102,568
14,198,730 14,202,997 14,207,370
33,691,098
3,905,053
3,888,167
15,030,198
2,177,782
34,824,738
4,007,389
3,989,346
15,419,751
2,232,696
34,769,822
4,112,406
4,050,076
15,819,400
2,288,996
2,253,647 2,338,475 2,426,869 2,500,743 2,566,062
(1,523,291) (1,571,660) (1,621,727) (1,667,008) (1,709,687)
53,615,844 47,893,770 47,826,576 51,000,680 53,034,130 55,404,145 56,328,449 57,914,537 58,720,442 59,548,674
30,727,521
4,220,176
4,111,910
16,229,407
2,346,715
31,732,535
4,560,728
4,304,249
17,524,297
2,528,754
3,001,018
(1,991,722)
15,113,859 13,016,111 14,005,915 9,331,367 11,558,306 20,961,467 22,684,258 18,287,069 20,096,699 13,632,467 14,010,831 14,399,781 14,799,614 15,210,638 15,633,168 16,067,528
130,043,340 129,695,858 141,854,501 136,037,047 145,059,572 159,871,498 170,937,668 170,434,169 173,928,468 171,836,142 174,032,885 175,404,101 175,617,456 178,315,041 179,412,726 183,920,790
ENDI NG RESERVES
54 Reappropriations (Non-CIP)
55 Commitments (Non-CIP)
56 Restricted for Debt Service
57 Emergency Plant Replacement
58 Central Valley Project Reserve
59 Underground Loan Reserve
60 Public Benefits Reserves
61 Electric Special Projects Reserve
62 Hydro Stabilization Reserve
58 Capital Reserve
59 Rate Stabilization Reserve
60 Operations Reserve
61 Unassigned
62 TOTAL ENDING RESERVES
63
64 OPERATIONS RESERVE
305,000
3,528,000 3,164,000 3,102,055
1,000,000
313,000
738,000
2,197,000
51,838,000
1,000,000
329,000
734,000
2,064,000
51,838,000
730,000
2,574,000
51,837,855
17,000,000 11,400,000 11,400,000 10,400,000 10,400,000
3,777,205 2,970,955
2,970,955 2,970,955 2,970,955 2,970,955 2,970,955 2,970,955
729,000
1,839,000
51,837,855
730,147
681,330
51,837,855
730,147 730,147 730,147
45,837,855 45,066,855 44,756,855
69,029,000 70,049,000 14,410,840 9,010,840
- 22,497,607 21,850,187
128,948,000 129,178,000 112,152,357 100,444,086
879,964 879,964 879,964
9,010,840
29,912,981 37,884,461 32,053,564
10,400,000
879,964
33,249,1- 94
730,147
43,246,855
10,400,000 13,900,000
879,964 879,964
39,138,346 38,836,530
2,970,955
730,147 730,147 730,147
42,846,855 42,846,855 42,846,855
2,970,955 2,970,955 2,970,955
730,147
42,846,855
730,147
730,147
2,970,955
730,147
42,846,855 42,846,855 42,846,855
13,900,000 13,900,000 13,900,000 13,900,000 13,900,000 13,900,000
879,964 879,964 879,964 879,964 879,964 879,964
39,719,824 41,254,722 44,072,659 46,167,305 49,327,672 49,864,1- 78
107,424,072 98,703,382 92,101,485 92,987,115 97,366,267 100,164,451 101,047,745 102,582,643 105,400,580 107,495,226 110,655,593 111,192,099
65 Min (60 days of non -capital expenses)
66 Target (90 days of non -capital expenses)
67 Max (120 days of non -capital expenses)
68 Risk Assessment Value
23,548,140
33,151,752
42,755,364
4,645,297
23,011,890
32,456,285
41,900,681
25,284,688
35,213,317
45,141,947
26,254,697
36,600,046
46,945,394
27,887,150
38,978,736
50,070,321
28,525,288
39,864,186
51,203,084
4,193,350
28,948,137
40,425,168
51,902,198
29,816,058
41,652,081
53,488,104
30,267,979
42,253,107
54,238,235
30,586,285
42,651,788
54,717,290
4,338,548 5,838,255 6,183,701 5,769,290 5,935,703 5,314,839
30,716,392
42,766,200
54,816,007
31,257,049
43,494,415
55,731,781
5,417,963 5,563,442 5,671,929 5,824,643
31,536,939
43,829,410
56,121,881
5,981,673
32,379,720
45,006,620
57,633,519
6,143,144
6053706
1
2
3
REVENUES
FY 2013
FY 2014 FY 2015
FY 20
L FY 2019 FY 2020
FY 2021
FY 2022
FY 2023
FY 2024
FY 20.
5 FY 2026
FY 2027
FY 2028
4
Net Sales
5 Other Revenues and Transfers In
6 TOTAL REVENUES
7
8 (EXPENSES
87%
13%
85%
15%
87%
13%
100% 100% 100%
87%
13%
100%
81%
19%
100%
80%
20%
100%
84%
16%
100%
82%
81%
18%
100%
19%
100%
82%
18%
100%
83%
17%
100%
82%
18%
100%
82%
18%
100%
82%
18%
100%
82%
18%
100%
82%
18%
100%
9
10
11 Administration
12 Allocated Charges 3% 3% 3% 4% 3% 3% 3% 3% 3% 3% 3% 3%
13 Rent 3% 3% 3% 4% 4% 3% 3% 3% 3% 3% 4% 4% 4%
14 Debt Service 7% 7% 6% 7% 6% 6% 5% 5% 5% 5% 6% 5%
15 Transfers and Other Adjustments 13%, 9% 8% 9% 9% 8% 8% 8% 8% 8% 8% 8%
16 Subtotal, Administration 26% 22% 20% 23% 21% 20% 19% 19% 19% 20% 20% 20% 17%
17 Resource Management 2% 3% 2% 2% 1% 2% 2% 2% 2% 2% 2% 2% 2%
18 Operations and Mtc 7% 7% 8% 8% 8% 8% 8% 8% 8% 9% 9% 9% 9%
19 Engineering (Operating) 1% 1% 1% 1% 1% l% 1% 1% 1% 1% 1% 1% 1%
20 Customer Service 2% 2% 1% 1% 2% 1% 1% 1% 1% 1% 2% 2% 2%
21 Allowance for Unspent Budget 0% 0% 0% 0% 0% -1% -1% -1% -1% -1% -1% -1% -1%
22 Subtotal, Operating Expenses 39%
Commodity Purchases
Operating Expenses
46% 52% 55% 54% 42% 41% 49% 50% 48% 49% 49% 49% 51%
3%
3%
8%
23 Capital Program Contribution
24 TOTAL EXPENSES
25
26
27
28
29
30
31 4. Carbon Neutral Cost
32
33
34 7. Transmission/CAISO
35
36
37 10. Regulatory & Legal
38 11. Supplier Default
39 TOTAL
12%
96%
51%
3%
50%
3%
51%
3%
4% 4% 4%
3%
8%
17% 17% 17%
2% 2% 2%
9% 10% 10%
1% 1% 1%
2% 2%
-1% -1%
3%
8%
3%
8%
RI SK ASSESSMENT DETAI L
SUPPLY FUND
34% 31% 35% 34% 32% 30% 32% 32% 32% 33% 33% 31%
10% 10%
97%
96%
7%
96%
8%
83%
13%
86%
13%
93%
11% 12%
92%
91%
8%
90%
8%
90%
8%
90%
8%
90%
3 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 F 7t FY2021
FY 2022 FY 2023
FY 2024 FY 20.
1. Load Net Revenue
2. Hydro Production: Western & Calaveras
3. Renewable Production: Landfill & Wind & Solar
5. Market Price
6. Local Capacity
8. Plant Outage
9. Western Cost
40
41
42 RISK ASSESSMENT DETAIL DISTRIBUTION FUND
43
44
45
46 Total Risk Asssessment Value
47 Projected Operations Reserve
48 Operations Reserve, % of Risk Value
49
Supply Operations + Hydro Stabilization
Reserves, % of Risk Assessment
FISCAL YEAR
44
Distribution Revenue Variance
10% CIP Program Contingency
FY 2013
77,428
9,314,822
375,755
331,630
909,196
475,962
652,853
9,050,313
743,945
1,208,477
3,397,119
539,073
303,022 114,983
775,584
408,388
1,138,589
446,695
4,555,915 3,741,647 2,806,120
1,000,000
3,130,000
1,000,000
2,704,738
1,000,000
2,973,619
20,170,708 19,380,490 13,624,674
196%
172%
FY 2014 FY 2Q
3,244,706
1,400,592
lErFY 2016
3,260,213
933,137
303%
FY 2017
3,182,718
1,155,831
FY 2018 FY 2019
3,742,109
2,096,147
3,915,276
2,268,426
FY 2020 FY 2021
3,940,583
1,828,707
3,926,033
2,009,670
FY 2022 FY 2023
3,951,592
1,363,247
4,016,880
1,401,083
31%
9%
90%
2%
-1%
31% 31%
9%
90%
9%
91%
5 FY 2026 FY 2027 FY 2028
4,123,464
1,439,978
4,191,
1,479,
4,645,297 4,193,350 4,338,548 5,838,255 6,183,701 5,769,290 5,935,703 5,314,839 5,417,963 5,563,442 5,671,
22,497,607 21,850,187 29,912,981 37,884,461 32,053,564 33,249,194 39,138,346 38,836,530 39,719,824 41,254,722 44,072,
484% 521% 689% 649% 518% 576% 659% 731% 733% 742% 777%
SUPPLY OPERATIONS RESERVE
45 Min (60 days of non -capital expenses)
46 Target (90 days of non -capital expenses)
47 Max (120 days of non -capital expenses)
48
49
15,208,5 52 14,498,215 15,472,236 16,163,913 17,553,876 17,965,924 18,133,345 18,744,756 18,928,400 18,961,720 18,799
22,812,829 21,747,322 23,208,354 24,245,869 26,330,813 26,948,886 27,200,017 28,117,133 28,392,600 28,442,580 28,199
30,417,105 28,996,429 30,944,472 32,327,825 35,107,751 35,931,847 36,266,689 37,489,511 37,856,800 37,923,439 37,599
DISTRIBUTION OPERATIONS RESERVE
50 Min (60 days of non -capital expenses)
51 Target (90 days of non -capital expenses)
52 Max (120 days of non -capital expenses)
53
54
55
56
57 Available Reserves (5x Debt Service)*
58
Risk Assessment Value
8,339,587 8,513,675 9,812,452 10,090,785 10,333,275 10,559,364 10,814,793 11,071,303 11,339,579 11,624,565 11,916
10,338,923 10,708,963 12,004,964 12,354,177 12,647,923 12,915,301 13,225,151 13,534,948 13,860,507 14,209,208 14,566
12,338,259 12,904,252 14,197,475 14,617,569 14,962,570 15,271,237 15,635,509 15,998,593 16,381,435 16,793,851 17,216
4,645,297
4,193,350
4,338,548
5,838,255
6,183,701
5,769,290
5,935,703 5,314,839
5,417,963
5,563,442
5,671
DEBT SERVI CE COVERAGE RATI 0
Net Revenues (125% of Debt Service)
1140%
13.5
1193%
14.0
1315%
12.1
1326%
10.9
1391%
11.7
1451%
10.7
1583%
10.1
1625%
10.2
1651%
10.7
1699%
11.1
1563%
10.2
1639%
10.8
31
*For the purposes of debt covenants, the unrestricted reserves of other utilities may be counted toward the available reserves for meeting this measure. A ratio below 5x means that this utility is relying on the reserves of other utilities to meet its debt cove
967
961
929 5,824,643 5,981,673 6,143,144
659 46,167,305 49,327,672
793% 825%
4,303,579
1,521,064
4,418,356
1,563,317
Y 2028
4,536,391
1,606,753
49,864,178
812%
559 19,040,477 19,012,969 19,540,493
338 28,560,716 28,519,453 29,310,739
117 38,080,955 38,025,937 39,080,986
834 12,216,571 12,523,970 12,839,228
862 14,933,699 15,309,957 15,695,881
890 17,650,826 18,095,944 18,552,534
929
5,824,643
5,981,673
6,143,144
83% 3231% 3246% 3330%
20.9 21.3 22.0 22.1
ants.
6053706
ELECTRIC UTILITY FINANCIAL PLAN
APPENDIX B: ELECTRIC UTILITY RESERVES MANAGEMENT PRACTICES
The following reserves management practices are used when developing the Electric Utility
Financial Plan:
Section 1. Definitions
a) "Financial Planning Period" — The Financial Planning Period is the range of future fiscal
years covered by the Financial Plan. For example, if the Financial Plan delivered in
conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019,
FY 2015 to FY 2019 would be the Financial Planning Period.
b) "Fund Balance" — As used in these Reserves Management Practices, Fund Balance refers
to the Utility's Unrestricted Net Assets.
c) "Net Assets" - The Government Accounting Standards Board defines a Utility's Net
Assets as the difference between its assets and liabilities.
d) "Unrestricted Net Assets" - The portion of the Utility's Net Assets not invested in capital
assets (net of related debt) or restricted for debt service or other restricted purposes.
Section 2. Supply Fund Reserves
The Electric Supply Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 4 (Reserve for Commitments)
b) For operating budgets reappropriated from previous years, as described in Section 5
(Reserve for Reappropriations)
c) For special projects for the benefit of the Electric Utility ratepayers, as described in
Section 6 (Electric Special Projects Reserve)
d) For year to year balancing of costs associated with the Electric Utility's hydroelectric
resources, as described in Section 7 (Hydroelectric Stabilization Reserve)
e) For rate stabilization, as described in Section 1.d) (Rate Stabilization Reserves)
f) For operating contingencies, as described in Section 12 (Operations Reserves)
g) Any funds not included in the other reserves will be considered Unassigned Reserves
and shall be returned to ratepayers or assigned a specific purpose as described in
Section 13 (Unassigned Reserves).
Section 3. Distribution Fund Reserves
The Electric Distribution Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 4 (Reserves for Commitments)
b) For operating and capital budgets reappropriated from previous years, as described in
Section 5 (Reserves for Reappropriations)
c) As an offset to underground loan receivables, as described in Section 8 (Underground
Loan Reserve)
d) To hold Public Benefit Program funds collected but not yet spent, as described in Section
9 (Public Benefits Reserve)
e) For cash flow management and contingencies related to the Electric Utility's Capital
Improvement Program (CIP), as described in Section 10 (CIP Reserve)
f) For rate stabilization, as described in Section 11.d) (Rate Stabilization Reserves)
g) For operating contingencies, as described in Section 12 (Operations Reserves)
June 2018 42 I Pa g
ELECTRIC UTILITY FINANCIAL PLAN
h) Any funds not included in the other reserves will be considered Unassigned Reserves
and shall be returned to ratepayers or assigned a specific purpose as described in
Section 14 (Unassigned Reserves).
Section 4. Reserves for Commitments
At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund
Reserves for Commitments will be set to an amount equal to the total remaining spending
authority for all contracts in force for the Electric Supply Fund and Electric Distribution
Fund, respectively, at that time.
Section 5. Reserves for Reappropriations
At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund
Reserves for Reappropriations will be set to an amount equal to the amount of all remaining
capital and non -capital budgets that will be reappropriated to the following fiscal year for
each Fund in accordance with Palo Alto Municipal Code Section 2.28.090.
Section 6. Electric Special Projects Reserve
The Electric Special Projects Reserve (ESP Reserve) will be managed in accordance with the
policies and timelines set forth in Resolution 9206 (Resolution of the Council of the City of
Palo Alto Approving Renaming the Calaveras Reserve to the Electric Special Project Reserve
and Adoption of Electric Special Project Reserve Guidelines). These policies and timelines
are included from Resolution 9206 as amended to refer to the reserves structure set forth
in these Reserves Management Practices:
a) The purpose of the ESP Reserve is to fund projects that benefit electric ratepayers;
b) The ESP Reserve funds must be used for projects of significant impact;
c) Projects proposed for funding must demonstrate a need and value to electric
ratepayers. The projects must have verifiable value and must not be speculative, or
high -risk in nature;
d) Projects proposed for funding must be substantial in size, requiring funding of at least
$1 million;
e) Set a goal to commit funds by the end of FY 2017;
f) Any uncommitted funds remaining at the end of FY 2022 will be transferred to the
Electric Supply Operations Reserve and the ESP Reserve will be closed;
Section 7. Hydroelectric Stabilization Reserve
The Hydroelectric Stabilization Reserve is used to manage the supply cost impacts
associated with variations in generation from hydroelectric resources. Staff will manage the
Hydroelectric Stabilization Reserve as follows:
a) Projected Hydro Output: Near the end of each fiscal year, staff will determine the
actual and expected hydro output for that fiscal year, compare that to the long-term
average annual output level (495,957 MWh as of March 2018), and multiply the
difference by the average of the monthly round-the-clock forward market prices for
each month of the current fiscal year.
June 2018 43 I Pa
ELECTRIC UTILITY FINANCIAL PLAN
b) Changes in Reserves. Staff is authorized to transfer the amount described in Sec.
7(a) from the Operations Reserve to the Hydroelectric Stabilization Reserve for
hydro output deviations above long-term average levels, or transfer this amount
from the Hydroelectric Stabilization Reserve to the Operations Reserve for hydro
output deviations below long-term average levels.
c) Implementation of HRA. The level of the Hydroelectric Stabilization Reserve after
the transfers described above shall be the basis for staff's determination, with
Council approval, of whether to implement the Hydro Rate Adjuster (Electric Rate E-
HRA) for the following fiscal year.
d) Reserve Guidelines. Staff will manage the Hydroelectric Stabilization Reserve
according to the following guideline levels:
Minimum Level
$3 million
Target Level
$19 million
Maximum Level
$35 million
Section 8. Underground Loan Reserve
At the end of each fiscal year, the Underground Loan Reserve will be adjusted by the
principal payments made against outstanding underground loans.
Section 9. Public Benefits Reserve
The Public Benefits Reserve will be increased by the amount of unspent Public Benefits
Revenues remaining at the end of each fiscal year. Expenditure of these funds requires
action by the City Council.
Section 10. CIP Reserve
The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for
capital contingencies. Staff will manage the CIP Reserve according to the following
practices:
a) The following guideline levels are set forth for the CIP Reserve. These guideline levels
are calculated for each fiscal year of the Financial Planning Period based on the levels of
CIP expense budgeted for that year.
Minimum Level 60 days of budgeted CIP expense
Maximum Level
120 days of budgeted CIP expense
b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and
the Reserve for Commitments when funds are added to or removed from the Reserve
for Commitments as a result of a change in contractual commitments related to CIP
projects. Any other additions to or withdrawals from the CIP reserve require Council
action.
c) Minimum Level:
i) Funds held in the Reserve for Commitments may be counted as part of the CIP
Reserve for the purpose of determining compliance with the CIP Reserve minimum
guideline level.
June 2018
44
ELECTRIC UTILITY FINANCIAL PLAN
ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present
a plan to the City Council to replenish the reserve. The plan shall be delivered by the
end of the following fiscal year, and shall, at a minimum, result in the reserve
reaching its minimum level by the end of the next fiscal year. For example, if the CIP
Reserve is below its minimum level at the end of FY 2017, staff must present a plan
by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In
addition, staff may present, and the Council may adopt, an alternative plan that
takes longer than one year to replenish the reserve, or that does so in a shorter
period of time.
d) Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds
may be added to this reserve. If there are funds in this reserve in excess of the
maximum level staff must propose to transfer these funds to another reserve or return
them to ratepayers in the next Financial Plan. Staff may also seek City Council to
approve holding funds in this reserve in excess of the maximum level if they are held for
a specific future purpose related to the CIP.
Section 11. Rate Stabilization Reserves
Funds may be added to the Electric Supply or Distribution Fund's Rate Stabilization Reserves
by action of the City Council and held to manage the trajectory of future year rate increases.
Withdrawal of funds from either Rate Stabilization Reserve requires action by the City
Council. If there are funds in either Rate Stabilization Reserve at the end of any fiscal year,
any subsequent Electric Utility Financial Plan must result in the withdrawal of all funds from
this Reserve by the end of the Financial Planning Period.
Section 12. Operations Reserves
The Electric Supply Fund and Electric Distribution Fund Operations Reserves are used to
manage normal variations in the costs of providing electric service and as a reserve for
contingencies. Any portion of the Electric Utility's Fund Balance not included in the reserves
described in Section 4 to d) above will be included in the appropriate Operations Reserve
unless the reserve has reached its maximum level as set forth in Section 12 (e) below. Staff
will manage the Operations Reserves according to the following practices:
a) The following guideline levels are set forth for the Electric Supply Fund Operations
Reserve. These guideline levels are calculated for each fiscal year of the Financial
Planning Period based on the levels of Operations and Maintenance (O&M) and
commodity expense forecasted for that year in the Financial Plan.
Minimum Level
60 days of Supply Fund O&M and commodity expense
Target Level
90 days of Supply Fund O&M and commodity expense
Maximum Level
120 days of Supply Fund O&M and commodity expense
June 2018
45IPage
ELECTRIC UTILITY FINANCIAL PLAN
b) The following guideline levels are set forth for the Electric Distribution Fund Operations
Reserve. These guideline levels are calculated for each fiscal year of the Financial
Planning Period based on the levels of O&M expense forecasted for that year in the
Financial Plan.
Minimum Level
60 days of Distribution Fund O&M expense
Target Level
90 days of Distribution Fund O&M expense
Maximum Level
120 days of Distribution Fund O&M expense
c) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Supply Fund
or Distribution Fund's Operations Reserve are lower than the minimum level set forth
above, staff shall present a plan to the City Council to replenish the reserve. The plan
shall be delivered within six months of the end of the fiscal year, and shall, at a
minimum, result in the reserve reaching its minimum level by the end of the following
fiscal year. For example, if the Operations Reserve is below its minimum level at the end
of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its
minimum level by June 30, 2015. In addition, staff may present an alternative plan that
takes longer than one year to replenish the reserve.
d) Target Level: If, at the end of any fiscal year, either Operations Reserve is higher or
lower than the target level, any Financial Plan created for the Electric Utility shall be
designed to return both Operations Reserves to their target levels by the end of the
forecast period.
e) Maximum Level: If, at any time, either Operations Reserve reaches its maximum level,
no funds may be added to this Reserve. Any further increase in that fund's Fund
Balance shall be automatically included in the Unassigned Reserve described in Section
13, below.
Section 13. Unassigned Reserves
If the Operations Reserve in either the Electric Supply Fund or the Electric Distribution Fund
reaches its maximum level, any further additions to that fund's Fund Balance will be held in
the Unassigned Reserve. If there are any funds in either Unassigned Reserve at the end of
any fiscal year, the next Financial Plan presented to the City Council must include a plan to
assign them to a specific purpose or return them to the Electric Utility ratepayers by the end
of the first fiscal year of the next Financial Planning Period. For example, if there were
funds in the Unassigned Reserves at the end of FY 2016, and the next Financial Planning
Period is FY 2017 through FY 2021, the Financial Plan shall include a plan to return or assign
the funds in the Unassigned Reserve by the end of FY 2017. Staff may present an
alternative plan that retains these funds or returns them over a longer period of time.
Section 14. Intra-Utility Transfers between Supply and Distribution Funds
Transfers between Electric Distribution Fund Reserves and Electric Supply Fund Reserves are
permitted if consistent with the purposes of the two reserves involved in the transfer. Such
transfers require action by the City Council.
June 2018 46 I Page
ELECTRIC UTILITY FINANCIAL PLAN
APPENDIX C: DESCRIPTION OF ELECTRIC UTILITY OPERATIONAL ACTIVITIES
This appendix describes the activities associated with the various cost categories referred to in
this Financial Plan.
Customer Service: This category includes the Electric Utility's share of the call center, meter
reading, collections, and billing support functions. Billing support encompasses staff time
associated with bill investigations and quality control on certain aspects of the billing process.
It does not include maintenance of the billing system itself, which is included in Administration.
This category also includes CPAU's key account representatives, who work with large
commercial customers who have more complex requirements for their electric services.
Resource Management: This category includes supply portfolio management, energy
procurement, rate setting, and tracking of legislation and regulation related to the electric
industry.
Operations and Maintenance: This category includes the costs of a variety of distribution
system maintenance activities, including:
• monitoring the substations and performing routine maintenance;
• performing preventative maintenance on the system;
• monitoring the system's status from the UCC using SCADA;
• maintaining the SCADA system;
• investigating outages and other customer complaints and performing emergency
repairs;
• clearing vegetation near overhead power lines; and
• testing and replacing meters to ensure accurate sales metering.
Administration: Accounting, purchasing, legal, and other administrative functions provided by
the City's General Fund staff, as well as shared communications services, Utilities Department
administrative overhead and billing system maintenance costs.
Demand Side Management: Includes the cost of administering energy efficiency programs and
the direct cost of rebates paid. Includes solar rebates.
Engineering (Operating): The Electric Utility's engineers focus primarily on the CIP, but a small
portion of their time is spent assisting with distribution system maintenance.
June 2018 47 I Pa
APPENDIX D: SAMPLES OF RECENT ELECTRIC UTILITY OUTREACH COMMUNICATIONS
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ATTACHMENT C
ELECTRIC UTILITY FINANCIAL PLAN
APPENDIX A: ELECTRIC UTILITY RESERVES MANAGEMENT PRACTICES
The following reserves management practices are used when developing the Electric Utility
Financial Plan:
Section 1. Definitions
a) "Financial Planning Period" —The Financial Planning Period is the range of future fiscal
years covered by the Financial Plan. For example, if the Financial Plan delivered in
conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019,
FY 2015 to FY 2019 would be the Financial Planning Period.
b) "Fund Balance" — As used in these Reserves Management Practices, Fund Balance refers
to the Utility's Unrestricted Net Assets.
c) "Net Assets" - The Government Accounting Standards Board defines a Utility's Net
Assets as the difference between its assets and liabilities.
d) "Unrestricted Net Assets" - The portion of the Utility's Net Assets not invested in capital
assets (net of related debt) or restricted for debt service or other restricted purposes.
Section 2. Supply Fund Reserves
The Electric Supply Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 4 (Reserve for Commitments)
b) For operating budgets reappropriated from previous years, as described in Section 5
(Reserve for Reappropriations)
c) For special projects for the benefit of the Electric Utility ratepayers, as described in
Section 6 (Electric Special Projects Reserve)
d) For year to year balancing of costs associated with the Electric Utility's hydroelectric
resources, as described in Section 7 (Hydroelectric Stabilization Reserve)
e) For rate stabilization, as described in Section 1.d) (Rate Stabilization Reserves)
f) For operating contingencies, as described in Section 12 (Operations Reserves)
g) Any funds not included in the other reserves will be considered Unassigned Reserves
and shall be returned to ratepayers or assigned a specific purpose as described in
Section 13 (Unassigned Reserves).
Section 3. Distribution Fund Reserves
The Electric Distribution Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 4 (Reserves for Commitments)
b) For operating and capital budgets reappropriated from previous years, as described in
Section 5 (Reserves for Reappropriations)
c) As an offset to underground loan receivables, as described in Section 8 (Underground
Loan Reserve)
d) To hold Public Benefit Program funds collected but not yet spent, as described in Section
9 (Public Benefits Reserve)
e) For cash flow management and contingencies related to the Electric Utility's Capital
Improvement Program (CIP), as described in Section 10 (CIP Reserve)
f) For rate stabilization, as described in Section 11) (Rate Stabilization Reserves)
June 2018 1IPa
ELECTRIC UTILITY FINANCIAL PLAN
g) For operating contingencies, as described in Section 12 (Operations Reserves)
h) Any funds not included in the other reserves will be considered Unassigned Reserves
and shall be returned to ratepayers or assigned a specific purpose as described in
Section 14 (Unassigned Reserves).
Section 4. Reserves for Commitments
At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund
Reserves for Commitments will be set to an amount equal to the total remaining spending
authority for all contracts in force for the Electric Supply Fund and Electric Distribution
Fund, respectively, at that time.
Section 5. Reserves for Reappropriations
At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund
Reserves for Reappropriations will be set to an amount equal to the amount of all remaining
capital and non -capital budgets that will be reappropriated to the following fiscal year for
each Fund in accordance with Palo Alto Municipal Code Section 2.28.090.
Section 6. Electric Special Projects Reserve
The Electric Special Projects Reserve (ESP Reserve) will be managed in accordance with the
policies and timelines set forth in Resolution 9206 (Resolution of the Council of the City of
Palo Alto Approving Renaming the Calaveras Reserve to the Electric Special Project Reserve
and Adoption of Electric Special Project Reserve Guidelines). These policies and timelines
are included from Resolution 9206 as amended to refer to the reserves structure set forth
in these Reserves Management Practices:
a) The purpose of the ESP Reserve is to fund projects that benefit electric ratepayers;
b) The ESP Reserve funds must be used for projects of significant impact;
c) Projects proposed for funding must demonstrate a need and value to electric
ratepayers. The projects must have verifiable value and must not be speculative, or
high -risk in nature;
d) Projects proposed for funding must be substantial in size, requiring funding of at least
$1 million;
e) Set a goal to commit funds by the end of FY 2017;
f) Any uncommitted funds remaining at the end of FY 2022 will be transferred to the
Electric Supply Operations Reserve and the ESP Reserve will be closed;
Section 7. Hydroelectric Stabilization Reserve
The Hydroelectric Stabilization Reserve is used to manage the supply cost impacts
associated with variations in generation from hydroelectric resources. Staff will manage the
Hydroelectric Stabilization Reserve as follows:
a) Projected Hydro Output: Near the end of each fiscal year, staff will calculate the
actual/expected hydro output for that fiscal year, compare that to the long-term
average annual output level (495,957 MWh as of March 2018), and multiply the
difference by the average of the monthly round-the-clock forward market prices for
each month of the fiscal year.
June 2018 Wage
ELECTRIC UTILITY FINANCIAL PLAN
b) Changes in Reserves: Staff is authorized to transfer the amount described in Sec. 7(a)
from the Operations Reserve to the Hydroelectric Stabilization Reserve for hydro
output deviations above long-term average levels, or transfer this amount from the
Hydroelectric Stabilization Reserve to the Operations Reserve for hydro output
deviations below long-term average levels.
c) Implementation of HRA. The level of the Hydroelectric Stabilization Reserve after
the transfers described above shall be the basis for staff's determination, with
Council approval, of whether to implement the Hydro Rate Adjuster (Electric Rate E-
HRA) for the following fiscal year.
Reserve Guidelines. Staff will manage the Hydroelectric Stabilization Reserve
according to the following guideline levels:
Minimum Level
$3 million
Target Level
$19 million
Maximum Level
$35 million
Section 8. Underground Loan Reserve
At the end of each fiscal year, the Underground Loan Reserve will be adjusted by the
principal payments made against outstanding underground loans.
Section 9. Public Benefits Reserve
The Public Benefits Reserve will be increased by the amount of unspent Public Benefits
Revenues remaining at the end of each fiscal year. Expenditure of these funds requires
action by the City Council.
Section 10. CIP Reserve
The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for
capital contingencies. Staff will manage the CIP Reserve according to the following
practices:
a) The following guideline levels are set forth for the CIP Reserve. These guideline levels
are calculated for each fiscal year of the Financial Planning Period based on the levels of
CIP expense budgeted for that year.
Minimum Level
60 days of budgeted CIP expense
Maximum Level
120 days of budgeted CIP expense
b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and
the Reserve for Commitments when funds are added to or removed from the Reserve
for Commitments as a result of a change in contractual commitments related to CIP
projects. Any other additions to or withdrawals from the CIP reserve require Council
action.
c) Minimum Level:
i) Funds held in the Reserve for Commitments may be counted as part of the CIP
Reserve for the purpose of determining compliance with the CIP Reserve minimum
guideline level.
June 2018
31
ELECTRIC UTILITY FINANCIAL PLAN
ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present
a plan to the City Council to replenish the reserve. The plan shall be delivered by the
end of the following fiscal year, and shall, at a minimum, result in the reserve
reaching its minimum level by the end of the next fiscal year. For example, if the CIP
Reserve is below its minimum level at the end of FY 2017, staff must present a plan
by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In
addition, staff may present, and the Council may adopt, an alternative plan that
takes longer than one year to replenish the reserve, or that does so in a shorter
period of time.
d) Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds
may be added to this reserve. If there are funds in this reserve in excess of the
maximum level staff must propose to transfer these funds to another reserve or return
them to ratepayers in the next Financial Plan. Staff may also seek City Council to
approve holding funds in this reserve in excess of the maximum level if they are held for
a specific future purpose related to the CIP.
Section 11. Rate Stabilization Reserves
Funds may be added to the Electric Supply or Distribution Fund's Rate Stabilization Reserves
by action of the City Council and held to manage the trajectory of future year rate increases.
Withdrawal of funds from either Rate Stabilization Reserve requires action by the City
Council. If there are funds in either Rate Stabilization Reserve at the end of any fiscal year,
any subsequent Electric Utility Financial Plan must result in the withdrawal of all funds from
this Reserve by the end of the Financial Planning Period.
Section 12. Operations Reserves
The Electric Supply Fund and Electric Distribution Fund Operations Reserves are used to
manage normal variations in the costs of providing electric service and as a reserve for
contingencies. Any portion of the Electric Utility's Fund Balance not included in the reserves
described in Section 4 to d) above will be included in the appropriate Operations Reserve
unless the reserve has reached its maximum level as set forth in Section 12 (e) below. Staff
will manage the Operations Reserves according to the following practices:
a) The following guideline levels are set forth for the Electric Supply Fund Operations
Reserve. These guideline levels are calculated for each fiscal year of the Financial
Planning Period based on the levels of Operations and Maintenance (O&M) and
commodity expense forecasted for that year in the Financial Plan.
Minimum Level
60 days of Supply Fund O&M and commodity expense
Target Level
90 days of Supply Fund O&M and commodity expense
Maximum Level
120 days of Supply Fund O&M and commodity expense
June 2018
41 Page
ELECTRIC UTILITY FINANCIAL PLAN
b) The following guideline levels are set forth for the Electric Distribution Fund Operations
Reserve. These guideline levels are calculated for each fiscal year of the Financial
Planning Period based on the levels of O&M expense forecasted for that year in the
Financial Plan.
Minimum Level
60 days of Distribution Fund O&M expense
Target Level
90 days of Distribution Fund O&M expense
Maximum Level
120 days of Distribution Fund O&M expense
c) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Supply Fund
or Distribution Fund's Operations Reserve are lower than the minimum level set forth
above, staff shall present a plan to the City Council to replenish the reserve. The plan
shall be delivered within six months of the end of the fiscal year, and shall, at a
minimum, result in the reserve reaching its minimum level by the end of the following
fiscal year. For example, if the Operations Reserve is below its minimum level at the end
of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its
minimum level by June 30, 2015. In addition, staff may present an alternative plan that
takes longer than one year to replenish the reserve.
d) Target Level: If, at the end of any fiscal year, either Operations Reserve is higher or
lower than the target level, any Financial Plan created for the Electric Utility shall be
designed to return both Operations Reserves to their target levels by the end of the
forecast period.
e) Maximum Level: If, at any time, either Operations Reserve reaches its maximum level,
no funds may be added to this Reserve. Any further increase in that fund's Fund
Balance shall be automatically included in the Unassigned Reserve described in Section
13, below.
Section 13. Unassigned Reserves
If the Operations Reserve in either the Electric Supply Fund or the Electric Distribution Fund
reaches its maximum level, any further additions to that fund's Fund Balance will be held in
the Unassigned Reserve. If there are any funds in either Unassigned Reserve at the end of
any fiscal year, the next Financial Plan presented to the City Council must include a plan to
assign them to a specific purpose or return them to the Electric Utility ratepayers by the end
of the first fiscal year of the next Financial Planning Period. For example, if there were
funds in the Unassigned Reserves at the end of FY 2016, and the next Financial Planning
Period is FY 2017 through FY 2021, the Financial Plan shall include a plan to return or assign
the funds in the Unassigned Reserve by the end of FY 2017. Staff may present an
alternative plan that retains these funds or returns them over a longer period of time.
Section 14. Intra-Utility Transfers between Supply and Distribution Funds
Transfers between Electric Distribution Fund Reserves and Electric Supply Fund Reserves are
permitted if consistent with the purposes of the two reserves involved in the transfer. Such
transfers require action by the City Council.
June 2018
5 I Page
Attachment D
* NOT YET APPROVED *
Resolution No.
Resolution of the Council of the City of Palo Alto Adopting an Electric
Rate Increase and Amending Rate Schedules E-1 (Residential Electric
Service), E-2 (Residential Master -Metered and Small Non -Residential
Electric Service), E -2-G (Residential Master -Metered and Small Non -
Residential Green Power Electric Service), E-4 (Medium Non -
Residential Electric Service), E -4-G (Medium Non -Residential Green
Power Electric Service), E-4 TOU (Medium Non -Residential Time of
Use Electric Service), E 7 (Large Non -Residential Electric Service), E -7-
G (Large Non -Residential Green Power Electric Service), E-7 TOU
(Large Non -Residential Time of Use Electric Service), and E-14 (Street
Lights).
RECITALS
A. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of
the City of Palo Alto may by resolution adopt rules and regulations governing utility services,
fees and charges.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E-1 (Residential Electric Service) is hereby amended to read as attached and
incorporated. Utility Rate Schedule E-1, as amended, shall become effective July 1, 2018.
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E-2 (Residential Master -Metered and Small Non -Residential Electric Service) is
hereby amended to read as attached and incorporated. Utility Rate Schedule E-2, as amended,
shall become effective July 1, 2018.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E -2-G (Residential Master -Metered and Small Non -Residential Green Power
Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule
E -2-G, as amended, shall become effective July 1, 2018.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E-4 (Medium Non -Residential Electric Service) is hereby amended to read as
attached and incorporated. Utility Rate Schedule E-4, as amended, shall become effective July
1, 2018.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E -4-G (Medium Non -Residential Green Power Electric Service) is hereby
amended to read as attached and incorporated. Utility Rate Schedule E -4-G, as amended, shall
become effective July 1, 2018.
6055014 1
Attachment D
* NOT YET APPROVED *
SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E-4 TOU (Medium Non -Residential Time of Use Electric Service) is hereby
amended to read as attached and incorporated. Utility Rate Schedule E-4 TOU, as amended,
shall become effective July 1, 2018.
SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E-7 (Large Non -Residential Electric Service) is hereby amended to read as
attached and incorporated. Utility Rate Schedule E-7, as amended, shall become effective
July 1, 2018.
SECTION 8. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E -7-G (Large Non -Residential Green Power Electric Service) is hereby amended to
read as attached and incorporated. Utility Rate Schedule E -7-G, as amended, shall become
effective July 1, 2018.
SECTION 9. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E-7 TOU (Large Non -Residential Time of Use Electric Service) is hereby amended
to read as attached and incorporated. Utility Rate Schedule E-7 TOU, as amended, shall become
effective July 1, 2018.
SECTION 10. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule E-14 (Street Lights) is hereby amended to read as attached and incorporated.
Utility Rate Schedule E-14, as amended, shall become effective July 1, 2018.
SECTION 11. The Council makes the following findings:
a. The revenue derived from the adoption of this resolution shall be used only for the
purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
b. The fees and charges adopted by this resolution are charges imposed for a specific
government service or product provided directly to the payor that are not provided
to those not charged, and do not exceed the reasonable costs to the City of
providing the service or product.
c. The adoption of this resolution changing electric rates to meet operating expenses,
purchase supplies and materials, meet financial reserve needs and obtain funds for
capital improvements necessary to maintain service is not subject to the California
Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec.
21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After
reviewing the staff report and all attachments presented to Council, the Council
incorporates these documents herein and finds that sufficient evidence has been
presented setting forth with specificity the basis for this claim of CEQA exemption.
6055014 2
Attachment D
* NOT YET APPROVED *
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
6055014 3
ATTACHMENT E
RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-1
A. APPLICABILITY:
This schedule applies to separately metered single-family residential dwellings receiving Electric
retail energy sServices from the City of Palo Alto Utilities.
B. TERRITORY:
This rate schedule applies everywhere the City of Palo Alto provides Eelectric Sservice.
C. UNBUNDLED RATES:
Per kilowatt-hour (kWh) Commodity Distribution Public Benefits
Tier 1 usage
Tier 2 usage
Any usage over Tier 1
Total
$0.0721466 $0.052401611 $0.004173-94- $0.128712159
05
0.11347253 0.0751573-5-8 0.00417391 0.1927919002
Minimum Bill ($/day) 0.30402938•
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Ceustomer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Calculation of Usage Tiers
Tier 1 Eelectricity usage shall be calculated and billed based upon a level of 11 kWh per
day, prorated by Mmeter reading days of Sservice. As an example, for a 30 -day bill, the
Tier 1 level would be 330 kWh. For further discussion of bill calculation and proration,
refer to Rule and Regulation 11.
[End)
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-1-1 dated 7-1-2017&
Effective 7-1-20187
Sheet No E-1-1
CITY OF PALO ALTO
UTILITIES
RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL ELECTRIC
SERVICE
UTILITY RATE SCHEDULE E-2
A. APPLICABILITY:
This schedule applies to the following Customers receiving Electric Service from the City of
Palo Alto Utilities:
1. Small non-residential Customers receiving Nnon-Ddemand Mmetered Eelectric Sservicei
and
4-2. for small non residential Ceustomers with Accounts at Master -Metered and master
metered mmulti-family facilities.
B. TERRITORY:
This rate schedule applies everywhere the City of Palo Alto provides Eelectric Seervice.
C. UNBUNDLED RATES:
Per kilowatt-hour (kWh) Commodity Distribution Public Benefits
$0.112051059
Summer Period
Winter Period
Minimum Bill ($/day)
D. SPECIAL NOTES:
1-
0.0767807520
Total
$0.0790-308468 $0.9039100417 $0.1888520090
0.0535605766 0.0039100417 0.1386113267
0.732 7740
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a eCustomer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Seasonal Rate Changes
The Summer Period is effective May 1 to October 31 and the Winter Period is effective
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-2-1 dated 7-1-20167
‘`t'14
Effective 7-1-20178
Sheet No E-2-1
CITY OF PALO ALTO
UTILITIES
RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL ELECTRIC
SERVICE
UTILITY RATE SCHEDULE E-2
from November 1 to April 30. When the billing period includes use in both the Summer
and the Winter Periods, the usage will be prorated based on the number of days in each
seasonal period, and the charges based on the applicable rates therein. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
3. Maximum Demand Meter
Whenever the monthly use of energy has exceeded 8,000 kWh for three consecutive
months, a maximum Ddemand Mmeter will be installed as promptly as is practicable and
thereafter continued in service until the monthly use of energy has fallen below 6,000
kWh for twelve consecutive months, whereupon, at the option of the City, it may be
removed.
The maximum Ddemand in any month will be the maximum average power in kilowatts
taken during any 15 -minute interval in the month provided that if the Customer's load is
intermittent or subject to fluctuations, the City may use a 5 -minute interval. A
thermal -type Ddemand Mmeter which does not reset after a definite time interval may be
used at the City's option.
The billing Ddemand to be used in computing charges under this schedule will be the
actual maximum Ddemand in kilowatts for the current month. An exception is that the
billing Ddemand for Ceustomers with Thermal Energy Storage (TES) will be based upon
the actual maximum Ddemand of such Ceustomers between the hours of noon and 6 pm
on weekdays.
{End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-2-2 dated 7-1-20167
‘`t'14
Effective 7-1-20178
Sheet No E-2-2
CITY OF PALO ALTO
UTILITIES
RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL GREEN POWER
ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -2-G
A. APPLICABILITY:
This schedule applies to the following Customers receiving Electric Service from the City of
Palo Alto Utilities under the Palo Alto Green Program:
1. Small non-residential Customers receiving Non -Demand Metered Eelectric Sservice; and
2. Customers with Aaccounts at Master-Mmetered multi -family facilities.
B. TERRITORY:
This rate schedule applies everywhere the City of Palo Alto provides Electric Service.
C. UNBUNDLED RATES:
1. 100% Renewable Option:
Per kilowatt-hour (kWh) Commodity
Summer Period
Winter Period
Minimum Bill ($/day)
2. 1000 kWh Block Purchase Option:
Per kilowatt-hour (kWh) Commodity Distribution
$0.10591112
Summer Period 05
Winter Period
Minimum Bill ($/day)
0.075200767
8
$0.07903084
68
0.053560576
6
Public
Distribution Benefits
$0.11205105 $0.07903084 $0.004173-
94- 68 94
0.0 90767 0.053-560576 0.004173-9
8 6 -1-
Palo Alto
Green
Charge Total
$0.190852
$0.0020 0290
$0.131671
0.0020 4061
0.73287740
Public
Benefits Total
$0.004173- $0.188852
94- 0090
0.0041739 0.134 6713
4 861
0.73287740
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -2-G-1 dated 7-1-2016
Effective 7-1-20187
Sheet No E -2-G-1
CITY OF PALO ALTO
UTILITIES
RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL GREEN POWER
ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -2-G
Palo Alto Green Charge (per 1000 kWh block) $2.00
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Seasonal Rate Changes
The Summer Period is effective May 1 to October 31 and the Winter Period is effective
from November 1 to April 30. When the billing period includes use in both the Summer
and Winter Periods, usage will be prorated based upon the number of days in each
seasonal period, and the charges based on the applicable rates therein. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
3. Palo Alto Green Program Description and Participation
Palo Alto Green provides for either the purchase of enough renewable energy credits
(RECs) to match 100% of the energy usage at the facility every month, or for the
purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the
production of renewable energy, increase the financial value of power from renewable
sources, and create a transparent and sustainable market that encourages new
development of wind and solar power.
Customers choosing to participate shall fill out a Palo Alto Green Power Program
application provided by the Customer Service Center. Customers may request at any
time, in writing, a change to the number of blocks they wish to purchase under the Palo
Alto Green Program.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -2-G-2 dated 7-1-2016
‘`t'14
Effective 7-1-20187
Sheet No E -2-G-2
CITY OF PALO ALTO
UTILITIES
RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL GREEN POWER
ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -2-G
4. Maximum Demand Meter
Whenever the monthly use of energy has exceeded 8,000 kWh for three consecutive
months, a maximum Demand Meter will be installed as promptly as is practicable and
thereafter continued in service until the monthly use of energy has fallen below 6,000
kWh for twelve consecutive months, whereupon, at the option of the City, it may be
removed.
The maximum Demand in any month will be the maximum average power in kilowatts
taken during any 15 -minute interval in the month, provided that if the Customer -s load is
intermittent or subject to fluctuations, the City may use a 5 -minute interval. A
thermal -type Demand Meter which does not reset after a definite time interval may be
used at the City's option.
The billing Demand to be used in computing charges under this schedule will be the
actual maximum Demand in kilowatts for the current month. An exception is that the
billing Demand for Customers with Thermal Energy Storage (TES) will be based upon
the actual maximum Demand of such Customers between the hours of noon and 6 pm on
weekdays.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -2-G-3 dated 7-1-2016
‘`t'14
Effective 7-1-20188
Sheet No E -2-G-3
CITY OF PALO ALTO
UTILITIES
MEDIUM NON-RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-4
A. APPLICABILITY:
This schedule applies to Demand metered Ssecondary Electric Service for Ceustomers with a
mMaximum Demand below 1,000 kilowatts. This schedule applies to three-phase Electric
Service and may include Service to master -metered multi -family facilities or other facilities
requiring Demand -metered sServices, as determined by the City.
B. TERRITORY:
This rate schedule applies anywhere the City of Palo Alto provides Electric Service.
C. UNBUNDLED RATES:
Rates per kilowatt (kW) and kilowatt-hour (kWh):
Public
Commodity Distribution Benefits
Summer Period
Demand Charge (per kW)
Energy Charge (per kWh)
Winter Period
Demand Charge (per kW)
0.06743071
Energy Charge (per kWh) 09
Minimum Bill ($/day)
D. SPECIAL NOTES:
Total
$3,3-g2.98 $17.6721.13 $21.0524.11
0.09526098
93 0.04-7601771 0.004173 0.1167312081
$1,931.87 $13.4316.65 $15.3618.52
0.01-75-601771 0.004173-94- 0.0889009297
14.8/11/115.9946
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a customer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-4-1 dated 7-1-20157
Effective 7-1-20178
Sheet No E-4-1
CITY OF PALO ALTO
UTILITIES
MEDIUM NON-RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-4
2. Seasonal Rate Changes
The Summer Period is effective May 1 to October 31 and the Winter Period is effective
from November 1 to April 30. When the billing period includes use both in the Summer
and the Winter Periods, the usage will be prorated based on the number of days in each
seasonal period, and the charges based on the applicable rates therein. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
3. Maximum Demand Meter
Whenever the monthly use of energy has exceeded 8,000 kWh for three consecutive
months, a Maximum Demand Mmeter will be installed as promptly as is practicable and
thereafter continued in Service until the monthly use of energy has fallen below 6,000
kWh for twelve consecutive months, whereupon, at the option of the City, it may be
removed.
The Maximum Demand in any month will be the maximum average power in kilowatts
taken during any 15 -minute interval in the month, provided that if the Customer -'s load is
intermittent or subject to fluctuations, the City may use a 5 -minute interval. A
thermal -type Demand Mmeter which does not reset after a definite time interval may be
used at the City's option.
The Billing Demand to be used in computing charges under this schedule will be the
actual Maximum Demand in kilowatts for the current month. An exception is that the
Billing Demand for Ceustomers with Thermal Energy Storage (TES) will be based upon
the actual Maximum Demand of such Ceustomers between the hours of noon and 6 pm
on weekdays.
4. Power Factor
For new or existing Ceustomers whose Demand is expected to exceed or has exceeded
300 kilowatts for three consecutive months, the City has the option of installing
applicable Mmetering to calculate a Power Factor. The City may remove such
Mmetering from the Service of a Ceustomer whose Demand has been below 200
kilowatts for four consecutive months.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-4-2 dated 7-1-20157
Effective 7-1-20178
Sheet No E-4-2
CITY OF PALO ALTO
UTILITIES
MEDIUM NON-RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-4
When such metering is installed, the monthly Electric bill will include a "Power Factor
Adjustment", if applicable. The adjustment will be applied to a Ceustomer's bill prior to
the computation of any primary voltage discount. The Power Factor Adjustment is
applied by increasing the total energy and Demand charges for any month by 0.25
percent (0.25%) for each one percent (1%) that the monthly Power Factor of the
Ceustomer's load was less than 95%.
The monthly Power Factor is the average Power Factor based on the ratio of kilowatt
hours to kilovolt -ampere hours consumed during the month. Where time -of -day
Mmetering is installed, the monthly Power Factor shall be the Power Factor coincident
with the Ceustomer's Maximum Demand.
5. Changing Rate Schedules
Customers may request a rate schedule change at any time to any City of Palo Alto full -
service rate schedule as is applicable to their kilowatt -Demand and kilowatt-hour usage
profile.
6. Primary Voltage Discount
Where delivery is made at the same voltage as that of the line from which the Service is
supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be
offered, but the City is not required to supply Service at a particular line voltage where it
has, or will install, ample facilities for supplying at another voltage equally or better
suited to the Ceustomer's electrical requirements, as determined in the City's sole
discretion. The City retains the right to change its line voltage at any time after providing
reasonable advance notice to any Ceustomer receiving the discount in this section. The
Ceustomer then has the option to change his system so as to receive Service at the new
line voltage or to accept Service (without voltage discount) through transformers to be
supplied by the City subject to a maximum kilovolt -ampere size limitation.
7. Standby Charge
a. Applicability: The standby charge, subject to the exemptions in subsection
D(7)(e), applies to Customers that have a non -utility generation source
interconnected on the Customer's side of the City's revenue meter and that
occasionally require backup power from the City due to non -operation of the non -
utility generation source.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-4-3 dated 7-1-20157
Effective 7-1-20178
Sheet No E-4-3
CITY OF PALO ALTO
UTILITIES
MEDIUM NON-RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-4
b. Standby Charges:
Commodity Distribution Total
Standby Charge (per kW of
Reserved Capacity)
Summer Period $0.69
$15.23 $15.92
Winter Period $0.63 $9.04 $9.67
c. Meters. A separate Mmeter is required for each non -utility generation source.
d. Calculation of Maximum Demand Credit.
(1) In the event the Customer's Maximum Demand (as defined in Section
D.3) occurs when one or more of the non -utility generators on the Customer's
side of the City's revenue meter are not operating, the Maximum Demand will be
reduced by the sum of the Maximum Generation of those non -utility generators,
but in no event shall the Customer's Maximum Demand be reduced below zero.
(2) If the non -utility generation source does not operate for an entire billing
cycle, the standby charge does not apply and the Customer shall not receive the
Maximum Demand credit described in this Section.
e. Exemptions.
(1) The standby charge shall not apply to backup generators designed to operate
only in the event of an interruption in utility Service and which are not used to
offset Customer electricity purchases.
(2) The standby charge shall not apply if the Customer meets the definition of an
"Eligible Customer -generator" as defined in California Public Utilities Code
Section 2827(b)(4), as amended.
(3) The applicability of these exemptions shall be determined at the discretion of
the Utilities Director.
{End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-4-4 dated 7-1-20157
Effective 7-1-20178
Sheet No E-4-4
CITY OF PALO ALTO
UTILITIES
MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -4-G
A. APPLICABILITY:
This schedule applies to Demand mMetered Secondary Electric Service for Customers with a
mMaximum Demand below 1,000 kilowatts (kW) who receive power under the Palo Alto Green
Program. This schedule applies to three-phase Electric Service and may include Service to
Master -metered multi -family facilities or other facilities requiring Demand_-mMetered Services,
as determined by the City.
B. TERRITORY:
The rate schedule applies everywhere the City of Palo Alto provides Electric Service.
C. UNBUNDLED RATES:
1. 100% Renewable Option:
Summer Period
Demand Charge (per kW)
Energy Charge (per kWh)
Winter Period
Demand Charge (per kW)
Energy Charge (per kWh)
Minimum Bill ($/day)
Commodity
$2.983-35
0.095260989
3
$1.931.87
0.067430710
9
Palo Alto
Public Green
Distribution Benefits Charge Total
$17.6721.13
0.017560177
1
$13.4316.65
0.017560177
1
$21.0524.
11
0.0039100 0.1228144
417 0.0020 8-7-3-
$15.3618.
52
0.0039100 0.0909009
417 0.0020 497
V1.811/115.9946
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -4-G-1 dated 7-1-201&7
‘`t'14
CITY OF PALO ALTO
UTILITIES
Effective 7-1-20178
Sheet No E -4-G-1
MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -4-G
2. 1000 kWh Block Purchase Option:
Public
Commodity Distribution Benefits
Summer Period
Demand Charge (per kW) $ 2.98 $21.1317.67
Energy Charge (per kWh)
0.095260989
3
0.017560177 0.0039100
1 417
Palo Alto Green Charge (per 1000 kWh block)
Winter Period
Demand Charge (per kW)
Energy Charge (per kWh)
$1.931.87 $13.4316.65
0.06743071
09 0.0175601771
Palo Alto Green Charge (per 1000 kWh block)
Minimum Bill ($/day)
D. SPECIAL NOTES:
0.0039100
417
Total
$24.11
05
0.
11673120
81
$2.00
$15.3618.
52
0.0889009
497
$2.00
14.811 d 15.9946
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges, and/or taxes. On a Customer's bill statement,
the bill amount may be broken down into appropriate components as calculated under Section C.
2. Seasonal Rate Changes
The Summer Period is effective May 1 to October 31 and the Winter Period is effective
from November 1 to April 30. When the billing period includes use both in the Summer
and the Winter Periods, the usage will be prorated based on the number of days in each
seasonal period, and the charges based on the applicable rates therein. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
3. Maximum Demand Meter
Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three
consecutive months, a Maximum Demand Meter will be installed as promptly as is
practicable and thereafter continued in Service until the monthly use of energy has
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -4-G-2 dated 7-1-201&7
CITY OF PALO ALTO
UTILITIES
Effective 7-1-20178
Sheet No E -4-G-2
MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -4-G
dropped below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the
option of the City, it may be removed.
The Maximum Demand in any month will be the maximum average power in kilowatts
taken during any 15 -minute interval in the month, provided that if the Customer's load is
intermittent or subject to fluctuations, the City may use a 5 -minute interval. A
thermal -type Demand Meter, which does not reset after a definite time interval, may be
used at the City's option.
The Billing Demand to be used in computing charges under this schedule will be the
actual Maximum Demand in kilowatts for the current month. An exception is that the
Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon
the actual Maximum Demand of such Customers between the hours of noon and 6 PM on
weekdays.
4. Power Factor
For new or existing Customers whose Demand is expected to exceed or has exceeded 300
kilowatts for three consecutive months, the City has the option of installing applicable
Metering to calculate a Power Factor. The City may remove such Metering from the
Service of a Customer whose Demand has dropped below 200 kilowatts for four
consecutive months.
When such Metering is installed, the monthly Electric bill will include a "Power Factor
Adjustment", if applicable. The adjustment will be applied to a Customer's bill prior to
the computation of any primary voltage discount. The Power Factor Adjustment is
applied by increasing the total energy and Demand charges for any month by 0.25
percent or (1/4) for each one percent (1%) that the monthly Power Factor of the
Customer's load was less than 95%.
The monthly Power Factor is the average Power Factor based on the ratio of kilowatt-
hours to kilovolt -ampere hours consumed during the month. Where time -of -day
Metering is installed, the monthly Power Factor shall be the Power Factor coincident with
the Customer's Maximum Demand.
5. Changing Rate Schedules
Customers may request a rate schedule change at any time to any applicable full -service
rate schedule as is applicable to their kilowatt -Demand and kilowatt-hour usage profile.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -4-G-3 dated 7-1-201&7
CITY OF PALO ALTO
UTILITIES
Effective 7-1-20178
Sheet No E -4-G-3
MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -4-G
6. Palo Alto Green Program Description and Participation
Palo Alto Green provides for either the purchase of enough renewable energy credits
(RECs) to match 100% of the energy usage at the facility every month, or for the
purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the
production of renewable energy, increase the financial value of power from renewal
sources, and creates a transparent and sustainable market that encourages new
development of wind and solar.
Customers choosing to participate shall fill out a Palo Alto Green Power Program
application provided by the Customer Service Center. Customers may request at any
time, in writing, a change to the number of blocks they wish to purchase under the Palo
Alto Green Program.
7. Primary Voltage Discount
Where delivery is made at the same voltage as that of the line from which the Service is
supplied, a discount of 2.5 percent for available line voltages above 2 kilovolts will be
offered, but the City is not required to supply Service at a particular line voltage where it
has, or will install, ample facilities for supplying at another voltage equally or better
suited to the Customer's electrical requirements, as determined in the City's sole
discretion. The City retains the right to change its line voltage at any time after providing
reasonable advance notice to any Customer receiving the discount in this section. The
Customer then has the option to change the system so as to receive Service at the new
line voltage or to accept Service (without voltage discount) through transformers to be
supplied by the City subject to a maximum kilovolt -ampere size limitation.
8. Standby Charge
a. Applicability: The standby charge, subject to the exemptions in subsection
D(8)(e), applies to Customers that have a non -utility generation source
interconnected on the Customer's side of the City's revenue Meter and that
occasionally require backup power from the City due to non -operation of the non -
utility generation source.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -4-G-4 dated 7-1-201&7
CITY OF PALO ALTO
UTILITIES
Effective 7-1-20178
Sheet No E -4-G-4
MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -4-G
b. Standby Charges:
Commodity Distribution Total
Standby Charge (per kW of
Reserved Capacity)
Summer Period $0.69
$15.23 $15.92
Winter Period $0.63 $9.04 $9.67
c. Meters: A separate Meter is required for each non -utility generation source.
d. Calculation of Maximum Demand Credit:
(1) In the event the Customer's Maximum Demand (as defined in Section
D.3) occurs when one or more of the non -utility generators on the Customer's
side of the City's revenue Meter are not operating, the Maximum Demand will be
reduced by the sum of the Maximum Generation of those non -utility generators,
but in no event shall the Customer's Maximum Demand be reduced below zero.
(2) If the non -utility generation source does not operate for an entire billing
cycle, the standby charge does not apply and the Customer shall not receive the
Maximum Demand credit described in this Section.
e. Exemptions:
(1) The standby charge shall not apply to backup generators designed to operate
only in the event of an interruption in utility Service and which are not used to
offset Customer electricity purchases.
(2) The standby charge shall not apply if the Customer meets the definition of an
"Eligible Customer -generator" as defined in California Public Utilities Code
Section 2827(b)(4), as amended.
(3) The applicability of these exemptions shall be determined at the discretion of
the Utilities Director.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -4-G-5 dated 7-1-201&7
‘`t'14
CITY OF PALO ALTO
UTILITIES
Effective 7-1-20178
Sheet No E -4-G-5
MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-4 TOU
A. APPLICABILITY:
This voluntary rate schedule applies to Demand metered Ssecondary Electric Service for
Ceustomers with Demand between 500 and 1,000 kilowatts per month and who have sustained
this level of usage for at least three consecutive months during the most recent 12 month period.
This schedule applies to three-phase Electric Service and may include Service to Mmaster-
Mmetered multi -family facilities or other facilities requiring Demand -metered Sservices, as
determined by the City. In addition, this rate schedule is applicable for Ceustomers who did not
pay Ppower Ffactor Aadjustments during the last 12 months.
B. TERRITORY:
This rate schedule applies everywhereanywhere the City of Palo Alto provides Electric Service.
C. UNBUNDLED RATES:
Rates per kilowatt (kW) and kilowatt-hour (kWh):
Commodity Distribution Public Benefits
Total
Summer Period
Demand Charge (per kW)
Peak $2.121.76 $6417.28 $8 9.04
Mid -Peak 0.6466 6417.28 6 67.92
Off -Peak 0.6466 6497.28 6-767.92
Energy Charge (per kWh)
$0.1011409
Peak 248 $0.0175601771 $0.003-94-417 $0.1229111436
0.09835116
Mid -Peak 45 0.045601771 0.00 417 0.1198213833
0.0871 8071
Off -Peak 46 0.045601771 0.00 417 0.1089509334
Winter Period
Demand Charge (per kW)
Peak $1.047 $7,499.28 $83610.32
Off -Peak 1.047 7,499.28 83610.32
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-4-TOU-1 dated 7-1-20176
Effective 7-1-20187
Sheet No E-4-TOU-1
CITY OF PALO ALTO
UTILITIES
MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-4 TOU
Commodity Distribution Public Benefits Total
Energy Charge (per kWh)
$0.0816'108
Peak 187 $0.0 61771 $0.00 -417 $0.1031110375
0.05738070
Off -Peak 28 0.04-75-61771 $0.0039-1-417 0.0788509216
Minimum Bill ($/day) H.8/11/115.9946
.811115.9946
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill statement,
the bill amount may be broken down into appropriate components as calculated under Section C.
2. Definition of Time Periods
SUMMER PERIOD (Service from May 1 to October 31):
Peak:
12:00 noon to 6:00 p.m. Monday through Friday (except holidays)
Mid Peak: 8:00 a.m. to 12:00 noon Monday through Friday (except holidays)
6:00 p.m. to 9:00 p.m.
Off -Peak: 9:00 p.m. to 8:00 a.m. Monday through Friday (except holidays)
All day Saturday, Sunday, and holidays
WINTER PERIOD (Service from November 1 to April 30):
Peak:
8:00 a.m. to 9:00 p.m. Monday through Friday (except holidays)
Off -Peak: 9:00 p.m. to 8:00 a.m. Monday through Friday (except holidays)
All day Saturday, Sunday, and holidays
HOLIDAYS: "Holidays" for the purposes of this rate schedule are New Year's Day,
President's Day, Memorial Day, Independence Day, Labor Day, Veterans Day,
Thanksgiving Day, and Christmas Day. The dates will be those on which the holidays
are legally observed.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-4-TOU-2 dated 7-1-20176
Effective 7-1-20187
Sheet No E-4-TOU-2
CITY OF PALO ALTO
UTILITIES
MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-4 TOU
SEASONAL RATE CHANGES: When the billing period includes use in both the
Summer and the Winter periods, the usage will be prorated based on the number of days
in each seasonal period, and the charges based on the applicable rates therein.: For
further discussion of bill calculation and proration, refer to Rule and Regulation 11.
3. Demand Meter
Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three
consecutive months, a Demand Mmeter will be installed as promptly as is practicable and
thereafter continued in Service until the monthly use of energy has fallen below 6,000
kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it
may be removed.
The Billing Demand to be used in computing charges under this schedule will be the
actual Maximum Demand in kilowatts taken during any 15 -minute interval in each of the
designated tTime periods as defined under Section D.2.
4. Power Factor Adjustment
Time of Use Ceustomers must not have had a Ppower Ffactor Aadjustment assessed on
their Service for at least 12 months. Power factor is calculated based on the ratio of
kilowatt hours to kilovolt -ampere hours consumed during the month, and must not have
fallen below 95% to avoid the pPower Ffactor Aadjustment.
Should the City of Palo Alto Utilities Department find that the Customer's Service should
be subject to Ppower Ffactor Aadjustments, the Customer will be removed from the E-4-
TOU rate schedule and placed on another applicable rate schedule as is suitable to their
kilowatt Demand and kilowatt-hour usage.
5. Changing Rate Schedules
Customers electing to be served under E-4 TOU must remain on said schedule for a
minimum of 12 months. Should the Customer so wish, at the end of 12 months, the
Customer may request a rate schedule change to any applicable City of Palo Alto full -
service rate schedule as is suitable to their kilowatt Demand and kilowatt-hour usage.
6. Primary Voltage Discount
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-4-TOU-3 dated 7-1-20176
Effective 7-1-20187
Sheet No E-4-TOU-3
CITY OF PALO ALTO
UTILITIES
MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-4 TOU
Where delivery is made at the same voltage as that of the line from which the Service is
supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be
offered, but the City is not required to supply Service at a particular line voltage where it
has, or will install, ample facilities for supplying at another voltage equally or better
suited to the Customer's electrical requirements, as determined in the City's sole
discretion. The City retains the right to change its line voltage at any time after providing
reasonable advance notice to any Customer receiving the discount in this section. The
Customer then has the option to change his system so as to receive Service at the new
line voltage or to accept Service (without voltage discount) through transformers to be
supplied by the City subject to a maximum kilovolt -ampere size limitation.
7. Standby Charge
a. Applicability: The standby charge, subject to the exemptions in subsection
D(7)(e), applies to Customers that have a non -utility generation source
interconnected on the Customer's side of the City's revenue Mmeter and that
occasionally require backup power from the City due to non -operation of the non -
utility generation source.
b. Standby Charges:
Commodity Distribution Total
Standby Charge (per kW of
Reserved Capacity)
Summer Period
Winter Period
$0.69 $15.23 $15.92
$0.63 $9.04 $9.67
c. Meters. A separate Mmeter is required for each non -utility generation source.
d. Calculation of Maximum Demand Credit.
(1) In the event the Customer's Maximum Demand occurs when one or more
of the non -utility generators on the Customer's side of the City's revenue Mmeter
are not operating, the Maximum Demand will be reduced by the sum of the
Maximum Generation of those non -utility generators, but in no event shall the
Customer's Maximum Demand be reduced below zero.
(2) If the non -utility generation source does not operate for an entire billing
cycle, the standby charge does not apply and the Customer shall not receive the
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-4-TOU-4 dated 7-1-20176
Effective 7-1-20187
Sheet No E-4-TOU-4
CITY OF PALO ALTO
UTILITIES
MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-4 TOU
Maximum Demand credit described in this Section.
e. Exemptions.
(1) The standby charge shall not apply to backup generators designed to operate
only in the event of an interruption in utility Service and which are not used to
offset Customer electricity purchases.
(2) The standby charge shall not apply if the Customer meets the definition of an
"Eligible Customer -generator" as defined in California Public Utilities Code
Section 2827(b)(4), as amended.
(3) The applicability of these exemptions shall be determined at the discretion of
the Utilities Director.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-4-TOU-5 dated 7-1-20176
Effective 7-1-20187
Sheet No E-4-TOU-5
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-7
A. APPLICABILITY:
This schedule applies to Demand Mmetered secondary Service for large non-residential
Customers with a Maximum Demand of at least 1,000KW per month per site, who have
sustained this Demand level at least 3 consecutive months during the last twelve months.
B. TERRITORY:
This rate schedule applies everya ywhere the City of Palo Alto provides Electric Service.
C. RATES:
Rates per kilowatt (kW) and kilowatt-hour (kWh):
Public
Commodity Distribution Benefits Total
Summer Period
Demand Charge (kW) $3.143:49 $23.6320.35 $26.7723.81
0.10037093
Energy Charge (kWh) 53 0.0005300058 0.0041700391 0.1050709802
Winter Period
Demand Charge (kW) $1.841.90 $15.171 9 $17.0115.59
0.06979067
Energy Charge (kWh) 39 0.0005300058 0.0041700391 0.0744907188
Minimum Bill ($/day) 45.475812.3648
D. SPECIAL NOTES:
1. Calculation of Charges
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-1 dated 7-1-2017&
Effective 7-1-20178
Sheet No E-7-1
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-7
2. Seasonal Rate Changes
The Summer Period is effective May 1 to October 31 and the Winter Period is effective
from November 1 to April 30. When the billing period includes use both in the summer
and in the winter periods, the usage will be prorated based on the number of days in each
seasonal period, and the charges based on the applicable rates therein. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
3. Request for Service
Qualifying Customers may request Service under this schedule for more than one
Aaccount or one Mmeter if the Aaccounts are on one site. A site shall be defined as one
or more utility Aaccounts serving contiguous parcels of land with no intervening public
right-of-ways (e.g. streets) and have a common billing address.
4. Maximum Demand Meter
Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three
consecutive months, a Maximum Demand Mmeter will be installed as promptly as is
practicable and thereafter continued in Service until the monthly use of energy has fallen
below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of
the City, it may be removed.
The Maximum Demand in any month will be the maximum average power in kilowatts
taken during any 15 -minute interval in the month provided that if the Customer's load is
intermittent or subject to fluctuations, the City may use a 5 -minute interval. A thermal -
type Demand Mmeter which does not reset after a definite time interval may be used at
the City's option.
The Billing Demand to be used in computing charges under this schedule will be the
actual Maximum Demand in kilowatts for the current month. An exception is that the
Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon
the actual Maximum Demand of such Customers between the hours of noon and 6 pm on
weekdays.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-2 dated 7-1-2017&
Effective 7-1-20178
Sheet No E-7-2
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-7
5. Power Factor
For new or existing Customers whose Demand is expected to exceed or has exceeded 300
kilowatts for three consecutive months, the City has the option to install applicable
Mmetering to calculate a Power Factor. The City may remove such Mmetering from the
Service of a Customer whose Demand has been below 200 kilowatts for four consecutive
months.
When such metering is installed, the monthly Electric bill shall include a "Power Factor
Adjustment", if applicable. The adjustment shall be applied to a Customer's bill prior to
the computation of any primary voltage discount. The power factor Aadjustment is
applied by increasing the total energy and Demand charges for any month by 0.25
percent (0.25%) for each one percent (1%) that the monthly Power Factor of the
Customer's load was less than 95%.
The monthly Power Factor is the average Power Factor based on the ratio of kilowatt
hours to kilovolt -ampere hours consumed during the month. Where time -of -day
Mmetering is installed, the monthly Power Factor shall be the Power Factor coincident
with the Customer's Maximum Demand.
6. Changing Rate Schedules
Customers may request a rate schedule change at any time to any applicable full service
rate schedule as is applicable to their kilowatt -Demand and kilowatt-hour usage profile.
7. Primary Voltage Discount
Where delivery is made at the same voltage as that of the line from which the Service is
supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be
offered, but the City is not required to supply Service at a particular line voltage where it
has, or will install, ample facilities for supplying at another voltage equally or better
suited to the Customer's electrical requirements—, as determined in the City's sole
discretion. The City retains the right to change its line voltage at any time after providing
reasonable advance notice to any Customer receiving the discount in this section. The
Customer then has the option to change his system so as to receive Service at the new
line voltage or to accept Service (without voltage discount) through transformers to be
supplied by the City subject to a maximum kVA size limitation.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-3 dated 7-1-2017&
Effective 7-1-20178
Sheet No E-7-3
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-7
8. Standby Charge
a. Applicability: The standby charge, subject to the exemptions in subsection
D(8)(e), applies to Customers that have a non -utility generation source
interconnected on the Customer's side of the City's revenue Mmeter and that
occasionally require backup power from the City due to non -operation of the non -
utility generation source.
b. Standby Charges:
Commodity Distribution Total
Standby Charge (per kW of
Reserved Capacity)
Summer Period
Winter Period
$0.84
$0.72
$12.55 $13.39
$6.04 $6.76
c. Meters. A separate Mmeter is required for each non -utility generation source.
d. Calculation of Maximum Demand Credit.
(1) In the event the Customer's Maximum Demand (as defined in Section
D.4) occurs when one or more of the non -utility generators on the Customer's
side of the City's revenue Mmeter are not operating, the Maximum Demand will
be reduced by the sum of the Maximum Generation of those non -utility
generators, but in no event shall the Customer's Maximum Demand be reduced
below zero.
(2) If the non -utility generation source does not operate for an entire billing
cycle, the standby charge does not apply and the Customer shall not receive the
Maximum Demand credit described in this Section.
e. Exemptions.
(1) The standby charge shall not apply to backup generators designed to operate
only in the event of an interruption in utility Service and which are not used to
offset Customer electricity purchases.
(2) The standby charge shall not apply if the Customer meets the definition of an
"Eligible Customer -generator" as defined in California Public Utilities Code
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-4 dated 7-1-2017&
Effective 7-1-20178
Sheet No E-7-4
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC SERVICE
UTILITY RATE SCHEDULE E-7
Section 2827(b)(4) , as amended.
(3) The applicability of these exemptions shall be determined at the discretion of
the Utilities Director.
{End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-5 dated 7-1-2017&
Effective 7-1-20178
Sheet No E-7-5
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -7-G
A. APPLICABILITY:
This schedule applies to Demand mMetered Service for large non-residential Customers who
choose Service under the Palo Alto Green Program. A Customer may qualify for this rate
schedule if the Customer's Maximum Demand is at least 1,000KW per month per site, who have
sustained this Demand level at least 3 consecutive months during the last twelve months.
B. TERRITORY:
The rate schedule applies everywhere the City of Palo Alto provides Electric Service.
C. UNBUNDLED RATES:
1. 100% Renewable Option:
Summer Period
Demand Charge ( per kW)
Energy Charge (per kWh)
Winter Period
Demand Charge (per kW)
Energy Charge (per kWh)
Minimum Bill ($/day)
Commodity
$3.143 9
0.10037093-
53
$1.84-1,90
0.06979067
39
Distribution
$23.6320.35
0.000530005
8
$15.1713.69
0.000530005
8
Public
Benefits
0.0041700
3-94-
0.0041700
394
Palo Alto
Green
Charge
Total
$26.772
3.811
0.10707
0.0020 10002
$17.014-
5,5-9
0.07649
0.0020 07388
45.4758/12.3648
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -7-G-1 dated 7-1-20167
Effective 7-1-20187
Sheet No E -7-G-1
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -7-G
2. 1000 kWh Block Purchase Option:
Commodity Distribution Public Benefits Total
Summer Period
$26.772
Demand Charge (per kW) $3.143-4-9 $23.6320.35 3.81
0.10037093 0.000530005 0.10507
Energy Charge (per kWh) 53 S 0.0041700391 0940-2
Palo Alto Green Charge (per 1000 kWh block) $2.00
Winter Period
$17.01 -1 -
Demand Charge (per kW) $1,901.84 $15.17 669
0.06979067 0.000530005 0.07449
Energy Charge (per kWh) 3-9 S 0.00417003 07188
Palo Alto Green Charge (per 1000 kWh block) $2.00
Minimum Bill ($/day) 45.475812.3618
D. SPECIAL NOTES:
1. Calculation of Charges
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Seasonal Rate Changes
The Summer Period is effective May 1 to October 31 and the Winter Period is effective
from November 1 to April 30. When the billing period includes use both in the Summer
and the Winter Periods, the usage will be prorated based on the number of days in each
seasonal period, and the charges based on the applicable rates therein. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
3. Maximum Demand Meter
Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three
consecutive months, a Maximum Demand Meter will be installed as promptly as is
practicable and thereafter continued in Service until the monthly use of energy has
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -7-G-2 dated 7-1-20167
Effective 7-1-20187
Sheet No E -7-G-2
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -7-G
dropped below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the
option of the City, it may be removed.
The Maximum Demand in any month will be the maximum average power in kilowatts
taken during any 15 -minute interval in the month, provided that if the Customer's load is
intermittent or subject to fluctuations, the City may use a 5 -minute interval. A
thermal -type Demand Meter which does not reset after a definite time interval may be
used at the City's option.
The Billing Demand to be used in computing charges under this schedule will be the
actual Maximum Demand in kilowatts for the current month. An exception is that the
Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon
the actual Maximum Demand of such Customers between the hours of noon and 6 PM on
weekdays.
4. Request for Service
Qualifying Customers may request Service under this schedule for more than one
Account or one Meter if the Accounts are at one site. A site shall be defined as one or
more utility Accounts serving contiguous parcels of land with no intervening public right-
of-ways (e.g. streets) and have a common billing address.
5. Power Factor
For new or existing Customers whose Demand is expected to exceed or has exceeded 300
kilowatts for three consecutive months, the City has the option of installing applicable
Metering to calculate a Power Factor. The City may remove such Metering from the
Service of a Customer whose Demand has dropped below 200 kilowatts for four
consecutive months.
When such Metering is installed, the monthly Electric bill shall include a "Power Factor
Adjustment", if applicable. The adjustment shall be applied to a Customer's bill prior to
the computation of any primary voltage discount. The Ppower fFactor Aadjustment is
applied by increasing the total energy and Demand charges for any month by 0.25
percent or (1/4) for each one percent (1%) that the monthly Power Factor of the
Customer's load was less than 95%.
The monthly Power Factor is the average Power Factor based on the ratio of kilowatt-
hours to kilovolt -ampere hours consumed during the month. Where time -of -day
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -7-G-3 dated 7-1-20167
Effective 7-1-20187
Sheet No E -7-G-3
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -7-G
Metering is installed, the monthly Power Factor shall be the Power Factor coincident with
the Customer's Maximum Demand.
6. Changing Rate Schedules
Customers may request a rate schedule change at any time to any applicable full service
rate schedule as is applicable to their kilowatt -Demand and kilowatt-hour usage profile
7. Palo Alto Green Program Description and Participation
Palo Alto Green provides for either the purchase of enough renewable energy credits
(RECs) to match 100% of the energy usage at the facility every month, or for the
purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the
production of renewable energy, increase the financial value of power from renewal
sources, and creates a transparent and sustainable market that encourages new
development of wind and solar.
Customers choosing to participate shall fill out a Palo Alto Green Power Program
application provided by the Customer Service Center. Customers may request at any
time, in writing, a change to the number of blocks they wish to purchase under the Palo
Alto Green Program.
8. Primary Voltage Discount
Where delivery is made at the same voltage as that of the line from which the Service is
supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be
offered, but the City is not required to supply Service at a qualified line voltage where it
has, or will install, ample facilities for supplying at another voltage equally or better
suited to the Customer's Electrical requirements—, as determined in the City's sole
discretion. The City retains the right to change its line voltage at any time after providing
reasonable advance notice to any Customer receiving the discount in this section. The
Customer then has the option to change the system so as to receive Service at the new
line voltage or to accept Service (without voltage discount) through transformers to be
supplied by the City subject to a maximum kilovolt -ampere size limitation.
9. Standby Charge
a. Applicability: The standby charge, subject to the exemptions in subsection
D(9)(e), applies to Customers that have a non -utility generation source
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -7-G-4 dated 7-1-20167
Effective 7-1-20187
Sheet No E -7-G-4
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE
UTILITY RATE SCHEDULE E -7-G
interconnected on the Customer's side of the City's revenue Meter and that
occasionally require backup power from the City due to non -operation of the non -
utility generation source.
b. Standby Charges:
Commodity Distribution Total
Standby Charge (per kW of
Reserved Capacity)
Summer Period
Winter Period
$0.84
$0.72
$12.55 $13.39
$6.04 $6.76
c. Meters: A separate Meter is required for each non -utility generation source.
d. Calculation of Maximum Demand Credit:
(1) In the event the Customer's Maximum Demand (as defined in Section
D.3) occurs when one or more of the non -utility generators on the Customer's
side of the City's revenue Meter are not operating, the Maximum Demand will be
reduced by the sum of the Maximum Generation of those non -utility generators,
but in no event shall the Customer's Maximum Demand be reduced below zero.
(2) If the non -utility generation source does not operate for an entire billing
cycle, the standby charge does not apply and the Customer shall not receive the
Maximum Demand credit described in this Section.
e. Exemptions:
(1) The standby charge shall not apply to backup generators designed to operate
only in the event of an interruption in utility Service and which are not used to
offset Customer electricity purchases.
(2) The standby charge shall not apply if the Customer meets the definition of an
"Eligible Customer -generator" as defined in California Public Utilities Code
Section 2827(b)(4), as amended.
(3) The applicability of these exemptions shall be determined at the discretion of
the Utilities Director.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E -7-G-5 dated 7-1-20157
Effective 7-1-20187
Sheet No E -7-G-5
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-7 TOU
A. APPLICABILITY:
This voluntary rate schedule applies to Demand mMetered secondary Service for non-
residential Ceustomers with a Maximum Demand of at least 1,000KW per month per site, who
have sustained this Demand level at least 3 consecutive months during the last twelve months.
In addition, this rate schedule is applicable for customers Customers who did not pay Power
Ffactor Aadjustments during the last 12 months.
B. TERRITORY:
This rate schedule applies everywhere the City of Palo Alto provides Electric Service.
C. UNBUNDLED RATES:
Rates per kilowatt (kW) and kilowatt-hour (kWh):
Commodity Distribution Public Benefits Total
Summer Period
Demand Charge (per kW)
Peak $1.922.22 $7.946.81 $9.869.06
Mid -Peak 0.6264 7.946.81 7.458.56
Off -Peak 0.6264 7.946.81 7.458.56
Energy Charge (per kWh)
$0.10149101
Peak 77 $0.0005300058 $0.0041700391 $0.1061910626
0.127790986
Mid -Peak g 0.0005300055 0.0041700391 0.1324910316
0.078420877
Off -Peak 7 0.0005300058 0.0041700391 0.0831209226
Winter Period
Demand Charge (per kW)
Peak $0.9396 $7.686-93 $8.617.89
Off -Peak 0.9396 7.6863 8.617.89
Energy Charge (per kWh)
Peak
$0.07150080
36 $0.0005300058 $0.0041700391 $0.0762008181
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-TOU-1 dated 7-1-20167
Effective 7-1-20187
Sheet No E-7-TOU-1
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-7 TOU
0.061389564
Off -Peak 7 0.000530005g 0.0041790391 0.0660806096
Minimum Bill ($/day) 42.364845.4758
D. SPECIAL NOTES:
1. Calculation of Charges
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill statement,
the bill amount may be broken down into appropriate components as calculated under Section C.
2. Definition of Time Periods
SUMMER PERIOD (Service from May 1 to October 31):
Peak:
12:00 noon to 6:00 p.m. Monday through Friday (except holidays)
Mid Peak: 8:00 a.m. to 12:00 noon Monday through Friday (except holidays)
6:00 p.m. to 9:00 p.m.
Off -Peak: 9:00 p.m. to 8:00 a.m. Monday through Friday
All day Saturday, Sunday, and holidays
WINTER PERIOD (Service from November 1 to April 30):
Peak: 8:00 a.m. to 9:00 p.m. Monday through Friday (except holidays)
Off -Peak: 9:00 p.m. to 8:00 a.m. Monday through Friday (except holidays)
All day Saturday, Sunday, and holidays
HOLIDAYS: "Holidays" for the purposes of this rate schedule are New Year's Day,
President's Day, Memorial Day, Independence Day, Labor Day, Veterans Day, Thanksgiving
Day, and Christmas Day. The dates will be those on which the holidays are legally observed.
SEASONAL RATE CHANGES: When the billing period includes use in both the Summer and
the Winter periods, the usage will be prorated based on the number of days in each seasonal
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-TOU-2 dated 7-1-20167
Effective 7-1-20187
Sheet No E-7-TOU-2
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-7 TOU
period, and the charges based on the applicable rates therein. For further discussion of bill
calculation and proration, refer to Rule and Regulation 11.
3. Request for Service
Qualifying Ceustomers may request Service under this schedule for more than one account or
one Mmeter if the Aaccounts are on one site. A site shall be defined as one or more utility
Aaccounts serving contiguous parcels of land with no intervening public right-of-ways (e.g.
streets) and have a common billing address.
4. Demand Meter
Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three consecutive
months, a Demand Mmeter will be installed as promptly as is practicable and thereafter
continued in Service until the monthly use of energy has fallen below 6,000 kilowatt-hours for
twelve consecutive months, whereupon, at the option of the City, it may be removed.
The Billing Demand to be used in computing charges under this schedule will be the actual
Maximum Demand in kilowatts taken during any 15 -minute interval in each of the designated
tTime periods as defined under Section D.2.
5. Power Factor Adjustment
Time of Use Ceustomers must not have had a pPower factor aAdjustment assessed on their
Service for at least 12 months. Power factor is calculated based on the ratio of kilowatt hours to
kilovolt -ampere hours consumed during the month, and must not have fallen below 95% to avoid
the Ppower Ffactor Aadjustment.
Should the City of Palo Alto Utilities Department find that the Customer's Service should be
subject to Ppower Ffactor Aadjustments, the Customer will be removed from the E-7-TOU rate
schedule and placed on another applicable rate schedule as is suitable to their kilowatt Demand
and kilowatt-hour usage.
6. Changing Rate Schedules
Customers electing to be served under E-7 TOU must remain on said schedule for a minimum of
12 months. Should the Customer so wish, at the end of 12 months, the Customer may request a
rate schedule change to any applicable City of Palo Alto full -service rate schedule as is suitable
to their kilowatt Demand and kilowatt-hour usage.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-TOU-3 dated 7-1-20167
Effective 7-1-20187
Sheet No E-7-TOU-3
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-7 TOU
7. Primary Voltage Discount
Where delivery is made at the same voltage as that of the line from which the Service is
supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be offered,
but the City is not required to supply Service at a particular line voltage where it has, or will
install, ample facilities for supplying at another voltage equally or better suited to the Customer's
electrical requirements-, as determined in the City's sole discretion. The City retains the right to
change its line voltage at any time after providing reasonable advance notice to any Customer
receiving the discount in this section. The Customer then has the option to change his system so
as to receive Service at the new line voltage or to accept Service (without voltage discount)
through transformers to be supplied by the City subject to a maximum kilovolt -ampere size
limitation.
8. Standby Charge
a. Applicability: The standby charge, subject to the exemptions in subsection D(8)(e),
applies to Customers that have a non -utility generation source interconnected on the
Customer's side of the City's revenue Mmeter and that occasionally require backup
power from the City due to non -operation of the non -utility generation source.
b. Standby Charges:
Commodity Distribution Total
Standby Charge (per kW of
Reserved Capacity)
Summer Period $0.84
Winter Period $0.72
$12.55 $13.39
$6.04 $6.76
c. Meters. A separate mMeter is required for each non -utility generation source.
d. Calculation of Maximum Demand Credit.
(1) In the event the Customer's Maximum Demand occurs when one or more of the
non -utility generators on the Customer's side of the City's revenue mMeter are not
operating, the Maximum Demand will be reduced by the sum of the Maximum
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-TOU-4 dated 7-1-20167
Effective 7-1-20187
Sheet No E-7-TOU-4
CITY OF PALO ALTO
UTILITIES
LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE
UTILITY RATE SCHEDULE E-7 TOU
Generation of those non -utility generators, but in no event shall the Customer's
Maximum Demand be reduced below zero.
(2) If the non -utility generation source does not operate for an entire billing cycle, the
standby charge does not apply and the Customer shall not receive the Maximum Demand
credit described in this Section.
e. Exemptions.
(1) The standby charge shall not apply to backup generators designed to operate only in
the event of an interruption in utility Service and which are not used to offset Customer
electricity purchases.
(2) The standby charge shall not apply if the Customer meets the definition of an
"Eligible Customer -generator" as defined in California Public Utilities Code Section
2827(b)(4) , as amended.
(3) The applicability of these exemptions shall be determined at the discretion of the
Utilities Director.
{End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No E-7-TOU-5 dated 7-1-20167
Effective 7-1-20187
Sheet No E-7-TOU-5
CITY OF PALO ALTO
UTILITIES
A. APPLICABILITY:
This schedule applies to all street and highway lighting installations.
B. TERRITORY:
Within the incorporated limits of the City of Palo Alto and on land owned or leased by the City.
C. RATES:
Per Lamp Per Month
Class A: Utility supplies energy
and switching service only.
Lamp Rating:
High Pressure Sodium Vapor Lamps
100 watts
200 watts
250 watts
310 watts
400 watts
9.668.28
17.8315.29
21.9218.79
27.1223.25
34.9229.94
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No. E-14-1 dated 7-1-20176
Effective 7-1-20178
Sheet No. E-14-1
CITY OF PALO ALTO
UTILITIES
Per Lamp Per Month —
Class C: Utility supplies energy
and switching service and
maintains entire system,
including lamps and glassware.
Lamp Rating:
Mercury -Vapor Lamps
400 watts
High Pressure Sodium Vapor Lamps
70 watts
100 watts
150 watts
250 watts
Light Emitting Diode (LED) Lamps
70 watts -equivalent
100 watts -equivalent
150 watts -equivalent
250 watts
D. SPECIAL CONDITIONS:
3/1.9132.58
30.1825.72
32.9327.82
37.0233.32
454938.33
25,0621.07
26.9122.66
28.6224.13
33.3028.14
1. Type of Service: This schedule is applicable to series circuit and multiple street lighting
systems to which the Utility will deliver current at secondary voltage. Unless otherwise
agreed, multiple current will be delivered at 120/240 volts, three -wire, single-phase. In
certain localities the Utility may supply service from 120/208 volt star -connected poly -phase
lines in place of 240 -volt service. Single phase service from 480 -volt sources will be
available in certain areas at the option of the Utility when this type of service is practical
from the Utility's engineering standpoint. All currents and voltages stated herein are
nominal, reasonable variations being permitted. New lights will normally be supplied as
multiple systems.
2. Point of Delivery: Delivery will be made to the customer's system at a point or at points
mutually agreed upon. The Utility will furnish the service connection to one point for each
group of lamps, provided the customer has arranged his system for the least practicable
number of points of delivery. All underground connections will be made by the customer or
at the customer's expense.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No. E-14-2 dated 7-1-20176
Effective 7-1-20178
Sheet No. E-14-2
CITY OF PALO ALTO
UTILITIES
3. Switching: Switching will be performed by the Utility (on the Utility's side of points of
delivery) and no charge will be made for switching provided there are at least 10 kilowatts of
lamp load on each circuit separately switched, including all lamps on the circuit whether
served under this schedule or not; otherwise, an extra charge of $2.50 per month will be
made for each circuit separately switched unless such switching installation is made for the
Utility's convenience or the customer furnishes the switching facilities and, if installed on the
Utility's equipment, reimburses the Utility for installing and maintaining them.
4. Annual Burning Schedule: The above rates apply to lamps which will be turned on and off
once each night in accordance with a regular burning schedule agreeable to the customer but
not exceeding 4,100 hours per year.
5. Maintenance: The rates under Class C include all labor necessary for replacement of
glassware and for inspection and cleaning of the same. Maintenance of glassware by the
Utility is limited to standard glassware such as is commonly used and manufactured in
reasonably large quantities. A suitable charge will be made for maintenance of glassware of a
type entailing unusual expense. Under Class C, the rates include maintenance of circuits
between lamp posts and of circuits and equipment in and on the posts, provided these are all
of good standard construction; otherwise, the Utility may decline to grant Class C rates.
Class C rates applied to any agency other than the City of Palo Alto also include painting of
posts with one coat of good ordinary paint as required to maintain good appearance but do
not include replacement of posts broken by traffic accidents or otherwise.
10.. System Owned In -Part by Utility : Where, at customer's request, the Utility installs, owns,
and maintains any portion of the lighting fixtures, supports, and/or interconnecting circuits,
an extra monthly charge of one and one-fourth percent of the Utility's estimate of additional
investment shall be made.
11. Rates For Lamps Not on Schedule: In the event a customer installs a lamp which is not
presently represented on this schedule, the Utility will prepare an interim rate reflecting the
Utility's estimated costs associated with the specific lamp size. This interim rate will serve as
the effective rate for billing purposes until the new lamp rating is added to Schedule E-14.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No. E-14-3 dated 7-1-20176
‘"'11/
\,`"'
Effective 7-1-20178
Sheet No. E-14-3
CITY OF PALO ALTO
UTILITIES
ATTACHMENT F
* NOT YET APPROVED *
Resolution No.
Resolution of the Council of the City of Palo Alto Approving the
FY 2019 Gas Utility Financial Plan
RECITALS
A. Each year the City of Palo Alto ("City") regularly assesses the financial position of
its utilities with the goal of ensuring adequate revenue to fund operations. This includes
making long-term projections of market conditions, the physical condition of the system, and
other factors that could affect utility costs, and setting rates adequate to recover these costs. It
does this with the goal of providing safe, reliable, and sustainable utility services at competitive
rates. The City adopts Financial Plans to summarize these projections.
B. The City uses reserves to protect against contingencies and to manage other
aspects of its operations, and regularly assesses the adequacy of these reserves and the
management practices governing their operation. The status of utility reserves and their
management practices are included in Reserves Management Practices attached to and made
part of the Financial Plans.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby adopts the FY 2019 Gas Utility Financial Plan.
SECTION 2. The Council hereby approves the transfer of up to $129,000 in FY 2019
from the Rate Stabilization Reserve to the Operations Reserve, as described in the FY 2019 Gas
Utility Financial Plan approved via this resolution.
SECTION 3. The Council finds that the adoption of this resolution does not meet the
California Environmental Quality Act's (CEQA) definition of a project under Public Resources
Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative
governmental activity which will not cause a direct or indirect physical change in the
environment, and therefore, no environmental assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
6055005
Attachment F
* NOT YET APPROVED *
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
6055005
ATTACHMENT G
FY 2019 GAS
UTILITY
FINANCIAL PLAN
FY 2019 TO FY 2028
GAS UTILITY FINANCIAL PLAN
GAS UTILITY FINANCIAL PLAN
FY 2019 TO FY 2028
TABLE OF CONTENTS
Section 1: Definitions and Abbreviations 4
Section 2: Executive Summary and Recommendations 5
Section 2A: Overview of Financial Position 5
Section 28: Summary of Proposed Actions 6
Section 3: Detail of FY 2018 Rate and Reserve Proposals 6
Section 3A: Rate Design 6
Section 38: Current and Proposed Rates 6
Section 3C: Proposed Reserve Transfers 9
Section 4: Utility Overview 10
Section 4A: Gas Utility History 10
Section 48: Customer Base 11
Section 4C: Distribution System 12
Section 4D: Cost Structure and Revenue Sources 13
Section 4E: Reserves Structure 13
Section 4F: Competitiveness 14
Section 4G: Gas Supply Rates 15
Section 5: Utility Financial Projections 16
Section 5A: Load Forecast 16
Section 5A: FY 2013 to FY 2017 Cost and Revenue Trends 17
Section 58: FY2017 Results 18
Section 5C: FY 2018 Projections 19
Section 5D: FY 2019 -FY 2028 Projections 19
Section 5E: Risk Assessment and Reserves Adequacy 20
Section 5F: Long -Term Outlook 22
March 2018 2 I Page
GAS UTILITY FINANCIAL PLAN
Section 6: Details and Assumptions 23
Section 6A: Gas Purchase Costs 23
Section 68: Operations 24
Section 6C: Capital Improvement Program (CIP) 25
Section 6D: Debt Service 27
Section 6E: Equity Transfer 28
Section 6F: Revenues 28
Section 6G: Communications Plan 29
Appendices 31
Appendix A: Gas Financial Forecast Detail 32
Appendix 8: Gas Utility Capital Improvement Program (CIP) Detail 33
Appendix C: Gas Utility Reserves Management Practices 35
Appendix D: Description of Gas Utility Cost Categories 39
Appendix E: Gas Utility Communications Samples 40
March 2018 3 I Page
GAS UTILITY FINANCIAL PLAN
SECTION 1: DEFINITIONS AND ABBREVIATIONS
ABS: Acrylonitirile butydene styrene, a plastic gas main material
AMI: Advanced Metering Infrastructure
CARB: California Air Resources Board
CIP: Capital Improvement Program
CNG: Compressed Natural Gas
CPAU: City of Palo Alto Utilities Department
CPUC: California Public Utilities Commission
Cross -bore: A cross -bore exists when one utility line has been drilled or "bored" through a portion
of another line. Gas cross -bores can occur in sewer lines as a result of "horizontal boring"
construction practices.
Distribution: transportation of gas to customers.
GMR Program: Gas Main Replacement Program
Local Transportation: transportation of gas to Palo Alto across PG&E's distribution system from
PG&E City Gate.
Malin: a delivery hub referred to in gas purchase contracts and located in Malin, Oregon, where
the northern end of PG&E's Redwood Transmission Pipeline is located.
MMBtu: Millions of British thermal units, a unit of gas measurement equal to ten therms.
Commonly used for high volume gas measurement. Wholesale purchases of gas from suppliers
are typically measured in MMBtu.
O&M: Operations and Maintenance
PE or HDPE: Polyethylene, a gas main material (more specifically, High -Density Polyethylene)
PG&E: Pacific Gas and Electric
PG&E Citygate, or Citygate: a delivery hub referred to in gas purchase contracts. Any gas delivered
to PG&E's distribution system (such as gas delivered at the southern end of PG&E's Redwood
Transmission Pipeline) is said to have been delivered at PG&E Citygate.
PVC: Polyvinyl chloride, a plastic gas main material
Summer: April 1 to October 31
Therms: The standard unit of measurement for natural gas sales to customers, equal to 100,000
British thermal units. Therms measure the heating value of the gas, rather than its volume.
Transmission: transportation of gas between major gas delivery hubs via a gas transmission
pipeline, such as PG&E's Redwood pipeline.
UAC: Utilities Advisory Commission, an appointed body that advises the City Council on CPAU
issues.
Winter: November 1 to March 31
March 2018 4IPage
GAS UTILITY FINANCIAL PLAN
SECTION 2: EXECUTIVE SUMMARY AND RECOMMENDATIONS
This document presents a Financial Plan for the City's Gas Utility for the next ten years. This
Financial Plan provides revenues to cover the costs of operating the utility safely over that time
while adequately investing for the future. It also addresses the financial risks facing the utility
over the short term and long term, and includes measures to mitigate and manage those risks.
SECTION 2A: OVERVIEW OF FINANCIAL POSITION
This financial plan projects non -commodity costs to increase from FY 2019 through FY 2028 at
about 3.5% per year on average. In the short term, some of these cost increases are related to
the cross -bore inspection program, but capital improvement program (CIP) costs have also
increased as the economy has improved. The national and regional focus on infrastructure
improvement has created more demand, and the pool of skilled construction labor has not grown
at the same pace. While CPAU generally plans a new gas main replacement project every year,
recent larger than expected bids have required resizing and redesign of some existing planned
projects. Because of this (as well as the complexity of the project), CIP costs for FY 2018 increased
for the University Avenue Business District project, which is scheduled to begin construction in
mid -2018. Due to the amount of planning required for this project, no new CIP work was
budgeted for FY 2017, and because of the complexity of the University Avenue project, no CIP
work is budgeted for FY 2019, resulting in one-time cost savings. The next new main replacement
project after the University Avenue project will take place in FY 2020. Table 1 shows the Gas
Utility expenses over the period of this financial plan.
Table 1: Gas Utility Expenses for FY 2017 to FY 2028 (Thousand $'s)
Expenses
($000)
2FY
017
(act.)
FY
2018
(est.)
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
Commodity costs
12,563
14,137
13,022
12,851
13,040
13,233
13,499
13,855
14,188
14,576
14,731
14,932
Operations
21,050
20,302
20,509
21,133
20,579
21,874
22,508
23,270
24,048
24,879
24,303
24,649
Capital Projects
2,214
7,804
5,197
10,217
12,080
9,815
9,892
9,970
10,050
10,131
10,214
10,299
TOTAL
35,827
42,243
38,728
44,202
45,698
44,922
45,898
47,095
48,286
49,587
49,248
49,880
To ensure that revenues cover projected rising costs, the financial plan includes the rate
trajectory shown in Table 2.
Table 2: Projected Gas Rate Trajectory for FY 2019 to FY 2028
Projection
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
Current Financial Plan
4%
8%
7%
7%
4%
4%
1%
1%
0%
2%
FY 2018 Financial Plan
4%
6%
6%
5%
3%
3%
2%
1%
0%
N/A
FY 2017 Financial Plan
7%
4%
1%
1%
1%
1%
1%
1%
N/A
N/A
The Gas Utility has a Rate Stabilization Reserve, which can be used to smooth rate increases over
several years. This Financial Plan projects that these reserves will be exhausted by the end of FY
2020. The Gas Utility also has a CIP Reserve to help offset one-time and/or unanticipated, spikes
March 2018
51 Page
GAS UTILITY FINANCIAL PLAN
in CIP spending which do not merit separate bond financing. Table 3 shows the projected reserve
transfers over the forecast period.
Table 3: Transfers To/(From) Reserves for FY 2018 to FY 2028 ($000)
Reserve
FY 2018
FY 2019
FY 2020 to FY 2028
Rate Stabilization
(129)
(2,006)
(4,404)
CIP
-
-
(3,820)
Operations
129
2,006
8,224
SECTION 2B: SUMMARY OF PROPOSED ACTIONS
Staff proposes the following actions for the Gas Utility in FY 2018:
1. Amend the proposal of a $1.2 million transfer from the Rate Stabilization Reserve to the
Operations Reserve, as proposed in the FY 2018 Gas Financial Plan, to a transfer of
$129,000, based on projected ending Operations Reserve levels.
Staff proposes the following actions for the Gas Utility in FY 2019:
2. Increase distribution rates by 6% (a 4% overall increase) for FY 2019, primarily reflecting
increases to capital expenditures and also increased operations costs. See Section 38:
Current and Proposed Rates for more details.
3. Transfer $2 million from the Rate Stabilization Reserve to the Operations Reserve. See
Section 3D: Proposed Reserve Transfers for more details.
SECTION 3: DETAIL OF FY 2018 RATE AND RESERVE PROPOSALS
SECTION 3A: RATE DESIGN
The Gas Utility's rates are evaluated and implemented in compliance with cost of service
requirements. The Gas Utility's current rates are based on the methodology from the April 2012
Gas Utility Cost of Service Study completed by Utility Financial Solutions.' In preparation for an
update to the study, staff discussed a proposed scope with the Utilities Advisory Commission in
October 2016, and the Council in November 20162. The updated study is projected to be
completed by late FY 2018 or the early part of FY 2019, and will provide guidance for the next
proposed rate action.
SECTION 3B: CURRENT AND PROPOSED RATES
On July 1, 2012 CPAU restructured its rates so that the commodity component varied monthly to
match changes in gas market prices.3 In addition, CPAU increased monthly service charges to
recover the cost of providing gas service to customers. In January 2015, the Council adopted a
1 Staff Report 2812, 5/17/ 2012 http://archive.cityofpaloalto.org/civica/filebank/blobdload.asp?BIobID=31395
2 Staff Report 7416 11/14/2016 http://www.cityofpaloalto.org/civicax/filebank/documents/54576
'Staff Report 2812, 5/17/2012: http://archive.cityofpaloalto.org/civica/filebank/blobdload.asp?BIobID=31395
March 2018 61
GAS UTILITY FINANCIAL PLAN
new rate component to collect the costs of purchasing allowances for the purpose of compliance
with the State's cap -and -trade program.4 This component changes depending on the cost of
allowances and gas demand. In October 2016, the Council adopted a resolution changing the
Local Transportation rate (which had been collapsed into the Distribution rate in 2015 to
streamline bill presentation), to be a pass -through of PG&E's Gas Transportation Rate to
Wholesale/Resale Customers (G-WSL) charge to Palo Alto.5 This went into effect November 1,
2016. In December 2016, Council approved a carbon neutral gas plan, with a goal of achieving a
carbon neutral gas portfolio by FY 2018.6 The plan is for costs associated with the plan to be a
passed through directly to customers as well, although the rate impact is not to exceed $0.10 per
therm. Three years' worth of volumetric rate history can be found on Palo Alto's website.7
CPAU has four rate schedules: one for separately metered residential customers (G-1), one for
small commercial and master -metered multi -family residential customers (G-2), one for
customers using over 250,000 therms per year (G-3) and a specific schedule for the Compressed
Natural Gas station (G-10). All customers pay a monthly service charge, which represents meter
reading, billing, and other customer service costs, as well as a portion of operations and
maintenance cost. All customers are also charged for each therm of gas used. Separately metered
residential customers are charged on a tiered basis, differentiated by season. During the winter
months, the first 2 therms per day (60 therms for a 30 day billing period) are charged a base price
per CCF, and all additional units charged a higher price per therm. During the summer months,
the first tier level is 0.667 therms per day, or 20 therms for a 30 day billing period. Commercial
customers pay a uniform price for each therm used.
Table 4 shows the current monthly service charges for all rate schedules. Table 95 shows the
consumption charges related to distribution charges. As mentioned earlier, commodity charges
change monthly, and transportation charges are tied to the PG&E G-WSL rate schedule. Some
recent commodity price history is discussed in Section 6A: Gas Purchase Costs.
4 Staff Report 5397, 1/26/2015: https://www.cityofpaloalto.org/civicax/filebank/documents/45537
5 Staff Report 7260 10/17/2016 http://www.cityofpaloalto.org/civicax/filebank/documents/54165
6 Staff Report 7533 12/05/2016 http://www.cityofpaloalto.org/civicax/filebank/documents/54882
Monthly Gas Commodity & Volumetric Rates http://www.cityofpaloalto.org/civicax/filebank/documents/30399
March 2018 7 I Page
GAS UTILITY FINANCIAL PLAN
Table 4: Current and Proposed Monthly Service Charges
Rate Schedule
Monthly Service Charge
($/month)
Change
Current (as of
7/1/16)
Proposed for
FY 2019
($)
(%)
G-1 (Residential)
$10.32
$10.94
$0.62
6%
G-2 (Small Commercial)
78.23
82.94
4.69
6%
G-3 (Large Commercial)
377.43
400.08
22.65
6%
G-10 (CNG)
52.93
56.11
3.18
6%
Table 5: Current and Proposed Gas Distribution Charges
Change
Current (as of
11/1/16)
Proposed
for FY 2019
($)
(%)
G-1 (Residential)
Tier 1 Rates
$0.3933
$0.4239
$0.0306
7.8%
Tier 2 Rates
0.9319
0.9948
0.0629
6.7%
G-2 (Residential Master -Metered and Small Commercial)
Uniform Rate
0.5767
0.6183
0.0416
7.2%
G-3 (Large Commercial)
Uniform Rate
0.5687
0.6098
0.0411
7.2%
G-10 (Compressed Natural Gas)
Uniform Rate
0.0093
0.0100
0.0007
7.2%
SECTION 3C: BILL IMPACT OF PROPOSED RATE CHANGES
Table 6 shows the impact of the proposed July 1, 2018 rate changes on the median residential
bill. The average increase is roughly 4% based on prices in February 2018, but some customers
may see slightly higher or lower increases due to slight changes in the composition of the utility's
costs, as well as prevailing market prices.
March 2018 8IPage
GAS UTILITY FINANCIAL PLAN
Table 6: Impact of Proposed Gas Rate Changes on Residential Bills
Usage
(Therms/month)
Bill under
Current Rates
Bill under
Proposed Rates
Change
$/mo.
%
Winter (Using February 2018 commodity prices)
30
$36.93
$ 38.47
$ 1.54
4%
54 (median)
58.21
60.49
2.28
4%
80
94.20
98.04
3.84
4%
150
193.98
202.23
8.25
4%
Summer (Using July 2017 commodity prices)
10
18.73
$ 19.90
$ 1.17
6%
18 (median)
25.45
27.08
1.63
6%
30
40.57
43.16
2.59
6%
45
61.26
65.17
3.91
6%
Table 7 shows the impact of the proposed July 1, 2018 rate changes on various representative
commercial customer bills.
Table 7: Impact of Proposed Gas Rate Changes on Commercial Bills
(Using February 2018 commodity prices)
Usage
(Therms/month)
Bill under Current
Rates
Bill under
Proposed Rates
Change
%
500
613
639
4%
5,000
5,430
5,642
4%
10,000
10,781
11,202
4%
50,000
53,493
55,571
4%
SECTION 3D: PROPOSED RESERVE TRANSFERS
The FY 2018 Financial Plan proposed a $1.2 million transfer from the Rate Stabilization Reserve
into the Operations Reserve in FY 2018. Lower actual expenses in FY 2017 resulted in higher
ending reserve balances than initially projected, so staff recommends revising the transfer down
to $129,000 at this time. A tentative transfer of $2 million in FY 2019, followed by $4.4 million in
FY 2020, is included in the financial projections in this Financial Plan. In addition, $3.8 million in
the CIP Reserve may need to be utilized in FY 2021. This will help mitigate additional, one-time
costs related to the replacement of gas meters for AMI deployment. The transfers in general will
enable CPAU to maintain adequate Operations Reserve levels while moderating the pace of
increase in gas rates. The impact of these transfers on reserves levels can be seen in Appendix A:
Gas Utility Financial Forecast Detail.
March 2018
91 Page
GAS UTILITY FINANCIAL PLAN
SECTION 4: UTILITY OVERVIEW
This section provides an overview of the utility and its operations. It is intended as general
background information and to help readers better understand the forecasts in Section 5: Utility
Financial Projections and Section 6: Details and Assumptions.
SECTION 4A: GAS UTILITY HISTORY
On September 22, 1917, the City of Palo Alto issued a bond to purchase the property of Palo Alto
Gas Company and continue it as a municipal enterprise. At the time, the system was comprised
of 21 miles of mains, 1,900 meters, and was valued at $65,500. PG&E supplied the gas, which
was synthesized from coal at its Potrero gasification facility. Almost immediately the City faced
challenges. Losses were at nearly 25% according to PG&E's master meter, and PG&E had filed
with the Railroad Commission (the forerunner to today's CPUC) to increase rates by nearly 72.5%.
Despite these initial hurdles, Palo Alto's system grew tremendously, and by 1924 revenues had
exceeded those of the electric utility. Sales were such that the annual reports of the time noted
gas usage "appears to be greater than that of any other city in the state, showing that gas is a
very popular form of fuel in Palo Alto." Just prior to the acquisition of the neighboring town of
Mayfield's gas system (centered around today's California Avenue) in 1929, the miles of main in
service and customers connections had doubled.
Notable changes to the gas supply itself came in 1930, when PG&E ceased supplying purely
manufactured (or coal) gas from its Potrero Hill facility in San Francisco and instead switched to
natural gas. In 1935, a supplementary butane injection system (later retired) was purchased from
Standard Oil to mitigate large wintertime peaks. Gas sales were at 248,658 million cubic feet
(MCF) with 4,849 active services.
Early gas mains in Palo Alto were made of steel, but in the 1950s, like many other utilities, CPAU
switched to ABS plastic. CPAU switched to PVC plastic in the early 1970s, but around 100 miles
of ABS mains had already been installed. A 1990 evaluation of the system found a steadily
increasing rate of gas leaks associated with those mains, something that other gas utilities had
also been experiencing. To reduce leaks, CPAU accelerated its main replacement program from
7,000 feet (1.3 miles) of replacements per year to 20,000 feet (3.8 miles) per year. This would
enable the utility to replace all of its ABS and its most vulnerable steel and PVC mains with
polyethylene (PE) mains over the course of the following 36 years.8 As of 2015 the Gas Utility
had replaced approximately 99 miles of ABS, as well as some sections of steel where cathodic
protection was not effective. Current main replacement projects will target the last "800 feet of
remaining ABS main as well as tackling PVC replacement. A PVC risk analysis to determine the
appropriate footage of annual PVC replacement for future CIP projects is currently being
conducted. This is an example of how local control of its Gas Utility has provided Palo Alto
residents with substantial benefits. During the 1990s and 2000s, while CPAU was increasing its
'Staff Report CMR:183:90. Infrastructure Review and Update, March 1, 1990
March 2018 10 'Page
GAS UTILITY FINANCIAL PLAN
main replacement rate to ensure a robust gas distribution system, PG&E was underspending on
safety -related infrastructure, according to a past audit.9
In the 1990s, while grappling with the issues surrounding its distribution system, CPAU was also
participating in major changes to the structure of the gas industry in California. Until 1988 CPAU
had a formal policy of setting its rates equal to PG&E's rates and successfully did so with the
exception of one year in the mid -1970s. At times this led to inadequate revenue (1974 to 1981)
as PG&E, the City's only gas supplier, regularly filed requests with the CPUC to increase the
wholesale gas supply rates charged to the Gas Utility. In the 1990s, as the CPUC began
deregulating the natural gas industry in California, the Gas Utility began purchasing gas from
suppliers other than PG&E. In 1997 the CPUC adopted the "Gas Accord,"10 which enabled the Gas
Utility (along with other local transportation -only customers) to obtain transmission rights on
PG&E's Redwood transmission pipeline running from Malin, Oregon into California.
In 2000/2001 the California energy crisis occurred, causing major disruptions to the Gas Utility's
supply costs. Wholesale gas prices rose over 500% between January 2000 and January 2001. The
Council approved drawing down reserves to provide ratepayer relief and, for two years following
the crisis, CPAU rates were above PG&E's as reserves were replenished. In April 2001 the Council
approved a hedging practice of buying fixed price gas one to three years into the future. After
reaching a low point in October 2001, prices continued to rise, and as a result the CPAU hedging
strategy frequently resulted in a wholesale supply cost advantage compared to PG&E until prices
began to decline steeply in mid -2008. At that point the Gas Utility's wholesale supply costs
became higher than market gas prices due to fixed price contracts entered into prior to 2008. As
a result the Gas Utility's wholesale supply costs were higher than PG&E's for several years. In
2012 Council approved a plan to formally cease the hedging strategy and purchase all gas on the
short-term ("spot") markets. As of July 1, 2012, the commodity portion of the gas rates changes
every month based on the spot market gas price.
SECTION 46: CUSTOMER BASE
CPAU's Gas Utility provides natural gas service to the residents, businesses, and other gas
customers in Palo Alto. Close to 23,600 customers are connected to the natural gas system,
approximately 22,000 (93%) of which are residential and 1,600 (7%) of which are non-residential.
Residential customers consume about 11 to 13 million therms of gas per year, roughly 45% of the
gas sold, while non-residential customers consume 55% (about 14 to 16 million therms).
Residential customers use gas primarily for space heating (46% of gas consumed) and water
heating (42%), with the remainder consumed for other purposes such as cooking, clothes drying,
9 Focused Financial Audit of The Pacific Gas & Electric Company's Gas Distribution Operations, Overland Consulting,
made available through a CPUC Administrative Law Judge's ruling on Al2-11-009/113-03-007 on 5/31/2013
10 CPUC decision 97-08-055. Since then, the Gas Accord has been amended four times, with the most recent being
Gas Accord V, application A.09-09-013
March 2018 11 I Page
GAS UTILITY FINANCIAL PLAN
and heating pools and spas." Non-residential customers use gas for space and water heating
(73% of gas consumed), cooking (20%), and industrial processes (6%).12
The Gas Utility receives gas at the four receiving stations within Palo Alto where CPAU's
distribution system connects with Pacific Gas and Electric's (PG&E's) system. These receiving
stations are jointly operated by CPAU and PG&E. CPAU purchases gas from various natural gas
marketers, with PG&E providing only local transportation service (transportation from the PG&E
City Gate gas delivery hub to Palo Alto). CPAU also has transmission rights on PG&E's transmission
pipeline from Malin, Oregon to PG&E City Gate, allowing it to purchase lower priced gas at that
location. CPAU does not produce or store any natural gas, and purchases gas in the monthly and
daily spot markets. The cost of the purchased gas is passed through directly to customers through
a rate adjuster that varies monthly with market prices. In a similar fashion, the cost for local
transportation is now tied to PG&E's G-WSL rate schedule, and varies when and if PG&E changes
its rate schedule. The cost of purchased gas and PG&E local transportation service usually
account for roughly one third of the utility's expenditures.
SECTION 4C: DISTRIBUTION SYSTEM
To deliver gas from the receiving stations to its customers, the utility owns 210 miles of gas mains
(which transport the gas to various parts of the city) and close to 23,600 gas services (which
connect the gas mains to the customers' gas lines). These mains and services, along with their
associated valves, regulators, and meters, represent the vast majority of the infrastructure used
to deliver gas in Palo Alto. CPAU has an ongoing CIP to repair and replace its infrastructure over
time, the expense of which normally accounts for around 15 to 20% of the utility's expenditures.
Costs for main replacements have been going up in recent years.
In addition to the CIP, the Gas Utility performs a variety of maintenance activities related to the
system, such as monitoring the system for leaks, testing and replacing meters, monitoring the
condition of steel pipe, and building and replacing gas services for buildings being built or
redeveloped throughout the city. The utility also shares the costs of other system -wide
operational activities (such as customer service, billing, meter reading, supply planning, energy
efficiency, equipment maintenance, and street restoration) with the City's other utilities. These
maintenance and operations expenses, as well as associated administration, debt service, rent,
and other costs, make up roughly half of the utility's expenses. In addition to these ongoing
activities, CPAU has conducted a program to find and replace cross -bores over the last several
years. Currently, $1 million is budgeted per year for the cross -bore program through FY 2021.
However, the ongoing cross -bore investigation may require additional funding, or extend for
longer into the future, as the remaining sewer lines are more difficult to examine than the
majority of the wastewater collection system that has been examined to date.
11 http://energyalmanac.ca.gov/naturalgas/overview.html
'Source: Statewide Commercial End Use Study, California Energy Commission report, 2006. Statistics shown are for
end users in PG&E Climate Zone 4 (the Peninsula) where Palo Alto is located.
March 2018 12 I Page
GAS UTILITY FINANCIAL PLAN
SECTION 4D: COST STRUCTURE AND REVENUE SOURCES
As shown in Figure 1, the Gas
Utility receives 95% of its revenue
from sales of gas and the
remainder from capacity and
connection fees, interest on
reserves, and other sources.
Appendix A: Gas Utility Financial
Forecast Detail shows more detail
on the utility's cost and revenue
structures.
As shown in Figure 2, in FY 2017,
gas purchase costs accounted for
roughly 31% of the Gas Utility's
costs. This percentage can vary
widely from year to year, as this
cost is based upon market
purchases, and now also includes
costs related to cap and trade.
Operational costs in FY 2017
represented roughly 51%, of
expenses and capital investment
was responsible for the remaining
18%. CIP is normally about 20% of
expenses, but this may be lower in
times when new budgeting for
projects is deferred, as happened in FY 2017.
Figure 1: Revenue Structure (FY 2017)
Sales of Gas
Other Revenue
Figure 2: Cost Structure (FY 2017)
Operations
Gas Purchases
Capital
SECTION 4E: RESERVES STRUCTURE
CPAU maintains six reserves for its Gas Utility to manage various types of contingencies. The
summary below describes each of these briefly. See Appendix C: Gas Utility Reserves
Management Practices for more detailed definitions and guidelines for reserve management:
• Reserve for Commitments: A reserve equal to the utility's outstanding contract liabilities
for the current fiscal year. Most City funds, including the General Fund, have a
Commitments Reserve.
• Reserve for Reappropriations: A reserve for funds dedicated to projects reappropriated
by the City Council, nearly all of which are capital projects. Most City funds, including the
General Fund, have a Reappropriations Reserve.
• Capital Improvement Program (CIP) Reserve: The CIP reserve can be used to accumulate
funds for future expenditure on CIP projects and is anticipated to be empty unless a major
one-time CIP expenditure is expected in future years. This CIP can also act as a
March 2018 131 Page
GAS UTILITY FINANCIAL PLAN
contingency reserve for the CIP. This type of reserve is used in other utility funds (Electric,
Water, and Wastewater Collection) as well.
• Rate Stabilization Reserve: This reserve is intended to be empty unless one or more large
rate increases are anticipated in the forecast period. In that case, funds can be
accumulated to spread the impact of those future rate increases across multiple years.
This type of reserve is used in other utility funds (Electric, Water, and Wastewater
Collection) as well.
• Operations Reserve: This is the primary contingency reserve for the Gas Utility, and is
used to manage yearly variances from budget for operational gas costs. This type of
reserve is used in other utility funds (Electric, Water, and Wastewater Collection) as well.
• Unassigned Reserve: This reserve is for any funds not assigned to the other reserves and
is normally empty.
SECTION 4F: COMPETITIVENESS
Table 8 presents winter and summer residential bills for Palo Alto and PG&E at several usage
levels for commodity rates in effect as of July 2017 (to illustrate a summer month bill) and
February 2018 (to illustrate a winter month bill). The annual gas bill for the median residential
customer for calendar year 2017 was $469.05, about 14% lower than the annual bill for a PG&E
customer with the same consumption. PG&E's distribution rates for gas have increased
substantially to collect for needed system improvements for pipeline safety and maintenance.
The bill calculations for PG&E customers are based on PG&E Climate Zone X, an area which
includes the surrounding communities.
Table 8: Residential Monthly Natural Gas Bill Comparison ($/month)
Season
Usage
(therms)
Palo Alto
PG&E Zone X
%
Difference
Winter
(February 2018)
30
36.93
42.39
-12.9%
(Median) 54
58.21
76.31
-23.7%
80
94.20
126.58
-25.6%
150
193.98
264.07
-26.5%
Summer
(July 2017)
10
18.73
13.01
44.0%
(Median) 18
25.45
23.41
8.7%
30
40.57
45.24
-10.3%
45
61.26
72.72
-15.8%
Table 9 shows the monthly gas bills for commercial customers for various usage levels for rates in
effect as of February 2018. Bills for CPAU customers at the usage levels shown are around 2% to
27% higher for commercial customers than for PG&E customers. This is a substantial
improvement over the calendar year 2013 bill comparison, when commercial gas bills for CPAU
customers were 27% to 44% higher than for PG&E customers. This is primarily attributable to
PG&E's higher distribution rates as the commodity rates for CPAU and PG&E are very similar, both
being based on spot market gas prices.
March 2018
141 Page
GAS UTILITY FINANCIAL PLAN
Table 9: Commercial Monthly Average Gas Bill Comparison
(for Rates in Effect February 2018)
Usage (therms/mo)
Gas Bill ($/month)
Difference
Palo Alto
PG&E
500
613
600
2%
5,000
5,430
5,242
4%
10,000
10,781
9,211
17%
50,000
53,493
42,036
27%
SECTION 4G: GAS SUPPLY RATES
Starting in July 2012, CPAU replaced a "laddering" hedging strategy for purchasing gas supplies
with a strategy to buy gas on the short-term, or "spot" markets and pass the commodity cost to
customers on a monthly basis. Figure 3 shows the actual commodity prices charged. Commodity
prices have fluctuated by around $0.20 over the last two years, but have generally been lower
than prices seen in 2013 and 2014.
Figure 3: Gas Commodity Rates from July 2012 through February 2018
$o.60
$0.50
E
a)
$0.40
ea
ea
oc
>. $0.30
0
o $o.20
L7
$0.10
$0.00 T j 1
Jul -12 Jan -13 Jul -13 Jan -14 Jul -14 Jan -15 Jul -15 Jan -16 Jul -16 Jan -17 Jul -17 Jan -18
March 2018
151 Page
GAS UTILITY FINANCIAL PLAN
SECTION 5: UTILITY FINANCIAL PROJECTIONS
SECTION 5A: LOAD FORECAST
Gas usage in Palo Alto is volatile, varying with both economic and weather conditions. As shown
in Figure 4, in the early 1970's, gas purchases reached over 45 million therms per year. Usage
dropped dramatically in the 1976/1977 drought when customers saved significant amounts of
(hot) water by upgrading to efficient showerheads. During the 1980s and 90s average gas usage
was around 36 million therms per year. Usage dropped again in the early 2000's. In FY 2001, gas
prices escalated during the California energy crisis and Palo Alto's rates increased by nearly 200%.
From 2003 to 2011, usage decreased by 2.3% mainly as a result of continued customer
investments in energy efficiency.
In 2014 and 2015, unusually warm winters, as well as ongoing drought, caused gas usage to
tumble to historic lows. In FY 2017 and FY 2018, as the drought has eased, gas usage has started
to increase again.
Figure 4: Historic Gas Consumption
25
—FY basis — — CY basis
20
I I 1 1 1 I I 1 I —I
O N 'Jr0 00 O N l0 CO O N Cf' l0 00 O N 8 lD 0p O ,(11
lD
I- n r - t\ 00 00 00 00 00 0l Ol 00 00 03 O O O O .-1
O O O a, 0, of 0i O1 03 03 Q, rn 01 0 0 0 0 0 0 0 0 0
a --I .--I a --I .-1 a --I a -1 ai .--1 .--I a --I .-1 ai N N N N N N N N N
Gas consumption, as denoted by the dotted line in Figure 5, is projected to recover somewhat
and resume the long run trend of decreasing usage over the forecast period, although changes
such as replacement of gas appliances with electric appliances or customer behavior may result
March 2018
16 1 age
GAS UTILITY FINANCIAL PLAN
in lower long run usage. As with prior drought/gas usage declines in the past, it is likely that
consumption will not come back to pre -conservation levels. It is too early to tell, however, where
the new 'normal' level of consumption will be.
Figure 5: Forecast Gas Consumption
34
In
0
3 32
aa)
i4 30
u
u
.
n • 28
aa)
r
- 26
24
22
20
O N
O O
O O
N N
O
N
•
•
—Actual — • Forecast
CO 0 N ▪ lD 00 0 N ▪ lD 00
O O • c -I .--I N
O O 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N
SECTION 5A: FY 2013 TO FY 2017 COST AND REVENUE TRENDS
Figure 6 and Appendix A: Gas Utility Financial Forecast Detail show how costs have changed
during the last five years as well as how staff project costs to change over the next decade.
The annual expenses for the gas utility decreased substantially between 2013 and 2017. Lower
gas sales in conjunction with the drought, as well as lower gas market prices in FY 2015 and FY
2016 (as shown in Figure 3 above) resulted in lower overall commodity expenses. FY 2014, FY
2015 and FY 2017 were notable due to the fact that no new funding was added for main
replacement projects. In FY 2014 and FY 2015, this was due to the fact that staff was completing
a prior major gas main replacement project, the largest in utility history, which completed
replacement of ABS gas mains in Palo Alto. The FY 2016 project included replacements of gas
mains on University Avenue, a project that has evolved into the Upgrade Downtown project
involving a coordinated replacement of several different types of infrastructure to avoid multiple
disruptions to the business district. This has been a multi -year planning effort that did not allow
for design of other new projects. This allowed the Gas Utility to temporarily keep rates lower
than they will need to be to fund future operations and capital replacement.
March 2018 17IPage
GAS UTILITY FINANCIAL PLAN
Revenues have generally matched expenses in most years and were higher than expenses in FY
2017. As shown in Figure 6 below, revenues were below cost in FY 2013 and nearly at cost in FY
2016. The absence of new budget funding for main replacement projects for several years, as
well as the availability of relatively large reserves, forestalled the need for rate increases until
now.
As shown in Figure 6, the last adjustment to gas distribution rates was in July 2016 when CPAU
increased rates by 8%. In FY 2012, commodity rates were changed to a market -based, monthly
pass -through cost —and commodity rates (and usage) fell, so revenues (and gas supply costs)
actually declined in FY 2013 after the rate increase. Figure 6 assumes no change in gas supply
costs over the forecast period to illustrate the impact of proposed distribution rate changes on
the overall customer bill. In reality, gas supply costs are uncertain and are passed through to
customers as they change month to month.
Figure 6: Gas Utility Expenses, Revenues, and Rate Changes:
Actual Costs through FY 2017 and Projections through FY 2028
$60 -
$50 -
$40
S20 -
$10
$0
Rate changes -(assuming -no -changes o-commodity--costr
12% 0% 0% 0% 8% 0% 4% 8% 7% 8% 4% 4% 1% 1% 0% 2%
illlllli�,l
CO CY) ON N N CO N N N N N
0 0 0 0 0 0 0 0 N 0
N N N N N CV N CV N
co
N
O
N
— Revenue
❑ Capital
Investment
❑ Gas Supply
❑ Operations
■ Transfers
• Debt Service
SECTION 5B: FY 2017 RESULTS
Sources of funds for FY 2017 were lower than projections by $885,000, but operational expenses
came in well below the expected budget. Total FY 2017 expenses were $32.7 million compared
March 2018
181 Page
GAS UTILITY FINANCIAL PLAN
to projections of $36.9 million in the FY 2018 Financial Plan. Table 10 summarizes the variances
from forecast.
Table 10: FY 2017, Actual Results vs. Financial Plan Forecast ($000)
Net Cost/(Benefit)
Type of change
Purchase costs lower than forecast
(479)
Cost savings
Operations cost savings
(3,774)
Cost savings
Decreased interest income and other
non -sales revenues
1,753
Revenue decrease
Increased sales revenues
(867)
Revenue increase
Net Cost / (Benefit) of Variances
(3,368)
SECTION 5C: FY 2018 PROJECTIONS
Current projections indicate that sales revenues will be slightly higher than last year's forecast,
but other revenues have been revised downwards based on prior year actuals. While gas
purchase costs are not projected to increase appreciably during the forecast period, the current
financial plan anticipates CIP costs will be substantially higher in FY 2018 than projected in the
prior financial plan. Table 11 summarizes the current and projected variances from the FY 2018
Financial Plan.
Table 11: FY 2018 Projected Results vs. Current Financial Plan Forecast ($000)
Net Cost/ (Benefit)
Type of change
Sales revenues higher than forecast
(160)
Revenue increase
Other revenues and interest lower than forecast
1,272
Revenue decrease
Purchase cost decrease
(2,108)
Cost decrease
Operations & maintenance and customer service
cost decreases
(1,477)
Cost decrease
Capital Improvement Cost increases
5,730
Cost increase
Net Cost / (Benefit) of Variances
3,259
SECTION 5D: FY 2019 -FY 2028 PROJECTIONS
Figure 6 above shows that staff projects costs for the Gas Utility to rise substantially in FY 2018,
and then to increase at around 2.9% per year on average through FY 2028. In Operations, there
is a short run addition of $1 million, starting in FY 2019, for cross -bore inspections (this expense
is projected to continue for at least three years), as well as general inflationary increases of
around 2 to 3% per year. Salaries and benefits expenses are projected to rise at 3 to 4% per year,
per the City's Long Range Financial Plan. Construction costs continue to increase, which resulted
in increased costs in FY 2018 for the University Avenue Business District project, which is
scheduled to begin construction in mid -2018. Due to the amount of planning required for this
project, no new CIP work was budgeted for FY 2017, and because of its complexity, no CIP work
is budgeted for FY 2019, resulting in one-time cost savings. The next new main replacement
project after the University Avenue project will take place in FY 2020, and ongoing main
replacement is expected to be more expensive. In addition to these trends, additional costs
related to AMI deployment are projected in FY 2020 and 2021. Gas commodity costs are the most
March 2018 19 Wage
GAS UTILITY FINANCIAL PLAN
variable component but are currently projected to increase by less than 2% annually. Since this
is a pass -through cost to customers, the risk of these costs being higher or lower than expected
has a minimal impact on reserves.
As shown in Figure 7, this financial plan projects the Rate Stabilization Reserves to be depleted
by FY 2020.
Figure 7: Gas Utility Reserves
Actual Reserve Levels for FY 2017 and Projections through FY 2028
$30
77,
0
1525
$20
$15
$10
$5
$0
▪ - --[ --
I� 00 Ql O a -I N
rl r -I r -I Ni N N
O O O O O O
N N N Ni N N
>- LL >- >- >- L}L
m
N
O
N
>-
LL
rJ
N
N
>-
LL
N
N
O
>-
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00
N
0
N
>-
LL
Lf1 lD
N N
0 0
N N
LL }L LLL
Rate Stabilization
■ Operations Reserve
• CIP Reserve and
Commitments
SECTION 5E: RISK ASSESSMENT AND RESERVES ADEQUACY
This financial plan projects the Gas Utility's primary contingency reserve, the Operations Reserve,
to be within guideline levels throughout the forecast period, barring either short -run budget
savings and/or larger future increases. Figure 8 shows the Operations Reserve within the
guideline levels.
March 2018 201 Page
GAS UTILITY FINANCIAL PLAN
Figure 8: Operations Reserve Adequacy
516
514
0
512
510
58
56
$2
S0
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Reserve )Year -End)
-Reserve Maximum
- - - Reserve Target
-Reserve Minimum
-- Risk Assessment
Forecasted Operations Reserve levels also exceed the short-term risk assessment for the Utility.
Table 12 summarizes the risk assessment calculation for the Gas Utility through FY 2023. The
same methodology is used for FY 2024 through FY 2028 as well. The risk assessment includes the
revenue shortfall that could accrue due to:
1. Lower than forecasted distribution sales revenue; and
2. An increase of 10% of planned system improvement CIP expenditures for the budget year.
Table 12: Gas Risk Assessment ($000)
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
Total non -commodity revenue
$21,457
$23,226
$25,843
$28,443
$29,930
Max. revenue variance, previous ten years
16%
16%
16%
16%
16%
Risk of revenue loss
$3,441
$3,725
$4,144
$4,561
$4,799
CIP Budget
$3,894
$8,875
$10,697
$8,391
$8,425
CIP Contingency @10%
$389
$888
$1,070
$839
$842
Total Risk Assessment value
$3,830
$4,612
$5,214
$5,400
$5,642
Finally, the City created the CIP Reserve at the end of FY 2015 to act as a contingency reserve for
capital improvement projects. Current guidelines state that the balance of this reserve should fall
between 12 and 24 months of budgeted CIP expense, but staff will continue to review this reserve
and the appropriateness of the current minimum and maximum guideline levels.
At the end of FY 2017, the sum of the CIP Reserve and existing Commitments was $8 million, as
shown in Figure 7.
March 2018
21 1
GAS UTILITY FINANCIAL PLAN
SECTION 5F: LONG-TERM OUTLOOK
In the longer term (5 to 35 years out) it is very difficult to predict the Gas Utility's commodity
costs. A variety of long-term trends could affect commodity costs either positively or negatively.
Continuing improvement in gas extraction technology, such as fracking, could continue to create
generous supplies of gas, but these technologies are also under greater scrutiny with respect to
their environmental impacts. On the demand side, a continued shift from coal to natural gas for
electricity generation, an expansion of export capabilities, or an increase in manufacturing in the
U.S. might drive up natural gas prices, but other factors, such as generally more mild winters,
might drive gas demand lower. It is also difficult to predict the magnitude of the additional cost
impacts associated with the State's cap -and -trade program over the long term. In the face of this
uncertainty, CPAU is able to protect the financial position of the Gas Utility by continuing its
current strategy of passing these costs directly to its customers via month -varying rate
adjustment mechanisms. The City pursues a policy of purchasing offsets to make gas usage in
Palo Alto carbon neutral. The cost is not to exceed $0.10/therm.
Future CIP investment needs for the Gas Utility may be lower than in the past, although costs per
foot for main replacement have been increasing substantially. The Gas Utility has replaced nearly
all of its ABS gas mains and its most problematic steel and PVC mains as well. The PE pipe being
used now is expected to have at least a fifty-year lifetime, and there is growing evidence that it
may last much longer than that. This would result in lower CIP investment over the long term.
CPAU is considering performing a study in the near future to develop its future main
replacements priorities and strategy.
Long-term state or local climate goals could also have a major impact on the Gas Utility. The
Global Warming Solutions Act, Assembly Bill 32 (AB32), set a goal of reducing greenhouse gas
(GHG) emissions to 1990 levels by 2020. In its December 2007 Climate Protection Plan, the City
set a goal of lowering emissions to 15% below 2005 levels by 2020. As a community Palo Alto
achieved these goals in 2012 even with continued use of natural gas for heating, cooking, and
industrial processes. However, to achieve the recently adopted Sustainability and Climate Action
Plan (S/CAP) goal of an 80% reduction in carbon emissions by 2030, or the State's adopted goal
of an 80% reduction in emissions by 2050, extensive electrification of gas -using appliances is
necessary. If significant amounts of electrification occurred, stranded investment and higher
rates could be required as the costs of the distribution system are recovered over a lower sales
base. It is instructional that, in the recent discussion draft of its scoping plan update, CARB says,
to meet those goals, natural gas use would have to be "mostly phased out."13 Staff intends to
begin evaluating how to manage potential impacts of these trends over the next few years.
13 Climate Change Scoping Plan, First Update, Discussion Draft for Public Review and Comment, California Air
Resources Board, October 2013, pg 88.
March 2018 22 I Page
GAS UTILITY FINANCIAL PLAN
SECTION 6: DETAILS AND ASSUMPTIONS
SECTION 6A: GAS PURCHASE COSTS
The Gas Utility purchases much of its gas for delivery at Malin, Oregon which is almost always
cheaper than delivery at PG&E Citygate, even including the costs of transmission from Malin to
Citygate. The Gas Utility purchases gas on a month -ahead and day -ahead basis in the spot market.
The last few years have seen gas prices in a relatively narrow but low band. High levels of natural
gas in storage, along with warmer than normal weather on the West coast has kept prices low,
as shown in Figure 9.
Figure 9: Gas Market Prices at PG&E Citygate
$1.60
$1.40
E
au $1.20
cu $1.00
•L
a
Y $0.80
2
(11 $o.60
$0.40
$0.20
$0.00
0
61
O O O N
c U
°LL' ns o 0
9
z
M
9
0
O O
7 �
9 9
Q
>.
fD
2
O %-I N N M
a --I ci
i c U >
LL ns o z
r -I
0
IfI l0 N
t1 40
(n <
Gas commodity costs are expected to increase slowly but steadily over the next several years.
Figure 10 shows the projected gas prices used to generate this forecast. Projections for
transmission costs associated with transporting gas over PG&E's Redwood transmission pipeline
(from Malin, Oregon to the PG&E Citygate) are based on rates adopted in the most recent update
to the Gas Accord.
Local transportation costs decreased on January 1, 2015 due to the expiration of a temporary
adder to PG&E's local transportation rate,14 but in December 2014 PG&E applied to the CPUC to
14 California Public Utilities Commission Advice Letter 3430-G, effective January 1, 2014. Also see CPUC Decision
12-12-30 regarding the Pipeline Safety Enhancement Plan Adder.
March 2018
231 Page
GAS UTILITY FINANCIAL PLAN
more than double local transportation costs. The application was not settled until late 2016. As
these charges are dictated by PG&E and are outside of Palo Alto's control, staff proposed making
these costs pass -through charge, similar to the commodity charge, and this became effective in
November 2016.
Figure 10: Wholesale Gas Price Projections
.-, $0.40
E
$0.35
IA $0.30
w
...`4 $0.25
4 $0.20
g $0.15
to
t $0.10
$0.05
2
$0.00
- PG&E Citygate
Malin
SECTION 6B: OPERATIONS
Operations costs include the Customer Service, Demand Side Management, Operations and
Maintenance (including Engineering), Resource Management, and Administration categories in
Figure 11, below. Debt service, rent, and transfers are also included in Operations costs
(excluding the General Fund equity transfer). Appendix D: Description of Gas Utility Cost
Categories includes detailed descriptions of the activities associated with these cost categories.
Operations costs are projected to increase by 2 to 4% per year. Salary and benefits, inflation, and
other assumptions match those used in the City's long-range financial forecast.
Operations costs for FY 2019 to FY 2021 include funding for the cross -bore program. In the 1970s
CPAU, like many other utilities, adopted horizontal drilling as an alternative to trenching when
installing new gas services. This created the possibility of cross -bores, which can happen when a
gas service is bored through a sewer lateral. Though cross -bores are very rare, they can create a
dangerous situation when a contractor attempts to clear a blocked sewer line, because if the
cross -bored gas service is damaged during the line, clearing it can result in a gas leak. CPAU has
been inspecting new gas services since 2001, and in 2011 began video inspections of the sewer
laterals at the location of horizontally -drilled gas services installed before 2001. This inspection
program has cost roughly $1 million per year since FY 2012. While a majority of sewer laterals
have been inspected, staff has come across several services which are not able to be scoped,
either due to infiltration by roots or broken/collapsed pipe segments. Staff has included $3
March 2018 24 I Page
GAS UTILITY FINANCIAL PLAN
million in additional funding between FY 2019 and FY 2021 for this program, but the program will
likely require additional funding in future years to complete.
Figure 11: Historical and Projected Operational Costs
5
$8
$6
$4
$2
$0
muumuu
IIInhuIIuIuuII 11111 1111111
m
N
O
N
O
N
I
0
O
N
.--1
0
N
N
0
O
N
co
-1
O
N
O
N
O
N
O
N
N
0
N
N
0
N
m
N
0
N
N N
O 0
N N
0
N
0
N
0
N
CO
N
0
N
• Debt service and
transfers
• Resource Management
• Operations &
Maintenance
• Demand Side
Management
Customer Service
• Administration
(excluding debt service
and transfers)
SECTION 6C: CAPITAL IMPROVEMENT PROGRAM (CIP)
The Gas Utility's CIP program consists of the following programs and budgets:
• The Gas Main Replacement Program, under which the Gas Utility replaces aging gas
mains ranked to have the highest threat scores within the system.
• Customer Connections, which covers the cost when the Gas Utility installs new services
or upgrades existing services at a customer's request in response to development or
redevelopment. The Gas Utility charges a fee to these customers to cover the cost of
these projects.
• Ongoing Projects, which covers the cost of routine meter, regulator, and service
replacement, minor projects to improve reliability or increase capacity, and other general
improvements.
• Tools and Equipment, which covers the cost of capitalized equipment, such as directional
boring, gas pipeline maintenance and emergency equipment.
• One-time Projects, which represents occasional large projects that do not fall into any
other category.
March 2018 251 Page
GAS UTILITY FINANCIAL PLAN
Table 13 shows the current status of these project categories and future projected spending.
Table 13: Budgeted Gas CIP Spending ($000)
Project Category
One Time Projects
Current
Budget*
129
Spending,
Curr. Yr
(1)
Remain.
Budget**
128
Committed
42
FY 2019
1,680
FY 2020
530
FY 2021
2,320
FY 2022
-
FY 2023
-
Gas Main Replacement
10,913
(225)
10,688
311
600
7,150
7,150
7,150
7,150
Tools And Equipment
89
(5)
84
15
370
120
120
100
100
Ongoing Projects
1,455
(164)
1,291
134
1,044
1,075
1,107
1,141
1,175
Customer Connections
1,414
(418)
997
99
1,303
1,342
1,383
1,424
1,467
TOTAL
14,001
(812)
13,189
600
4,997
10,218
12,080
9,815
9,892
*Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year
**Equal to CIP Reserves (Reserve for Reappropriations + Reserve for Commitments).
The Gas Main Replacement (GMR) Program is in the final stages of completing a major milestone
with the replacement of gas mains made from Acrylonitrile-Butadiene-Styrene (ABS) plastic. The
program to replace ABS and other low -performing materials within the gas system started in the
1990s (see Section 4A: Gas Utility History for more detail). CPAU temporarily slowed down its FY
2014 and 2015 CIP appropriations in this category in order to finalize the last major ABS main
replacement project and to catch up on projects that had accumulated due to staffing issues.
With the replacement of all ABS mains with Polyethylene (PE) plastic near completion, the
material most at risk for failure is the remaining Polyvinyl chloride (PVC) plastic and steel
(wrapped, with cathodic protection). The next focus of the GMR program will be the replacement
of all PVC mains with PE mains. CPAU is considering updating the Gas System Master Plan to
determine which sections of pipeline to prioritize and assist in determining the pace of main
replacement (approximately three miles of main each year, or 1.5% of the system).
The current budget for the gas main replacement program takes into account the recent rise in
construction costs. Several factors are contributing to the increase in construction costs and
include economic recovery in the Bay Area, a greater focus on infrastructure improvement by
many municipal agencies, and the higher demand for utility contractors within these fields. CPAU
has seen the replacement cost per linear foot increase by 25% to 50% over the last couple of
years. The Gas Utility posted the most recent project for competitive bid (the Upgrade Downtown
Project) and this resulted in very few contractor bids and an eventual contract price that was
much higher than estimated (staff has requested $6.7 million additional funding in FY 2018
related to this project) . Staff is beginning to include the higher construction cost in future project
estimates in order to maximize the amount of pipe replaced, as well as insuring the overall
integrity of the gas system. Currently, CPAU plans to replace as many aging mains as possible
within its current budget. However, if this trend of higher construction cost continues, the Gas
Utility may require larger CIP budgets and as a result, an increase in rates.
Staff has also included projections for costs related to AMI deployment, primarily centered
around meter replacement costs in FY 2021.
Staff projects ongoing projects, tools and equipment, and customer connections to cost
approximately $2.7 million in FY 2019 and remain relatively flat through the end of the forecast
period. In practice, these projects can fluctuate dramatically depending on prices of material,
system conditions and the pace of development and redevelopment in the city. It is worth noting
March 2018 26 Page
GAS UTILITY FINANCIAL PLAN
that fee revenue pays for the Customer Connections program, so when costs go up fees will be
adjusted as well. .
Aside from customer connections and transfers from other funds, the CIP plan for FY 2019 to FY
2023 is funded by utility rates. Appendix B: Gas Utility Capital Improvement Program (CIP) Detail
shows the details of the plan.
SECTION 6D: DEBT SERVICE
The Gas Utility currently makes debt service payments on one bond issuance, the 2011 Series A
Utility Revenue Refunding Bonds. This bond issuance was to refinance the $18 million principal
remaining on the Utility Revenue Bonds, 2002 Series A issued for the Gas and Water Utilities to
finance various improvements to the distribution systems. $9.4 million of this issuance was
secured by the net revenues of the Gas Utility. Table 14 shows debt service for this bond for the
financial forecast period. Debt service on this bond will continue through 2026.
Table 14: Gas Utility Debt Service
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
2011 Utility Revenue
Refunding Bonds, Series A
802
801
801
803
804
805
803
800
803
1
The 2011 bonds include two covenants stating that 1) the Gas Utility will maintain a debt
coverage ratio of 125% of debt service, and 2) that the City will maintain "Available Reserves"1s
equal to five times the annual debt service. The current financial plan complies with these
covenants throughout the forecast period, as shown in Table 15 and
Table 16.
Table 15: Debt Service Coverage Ratio ($000)
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
Revenues
37,112
36,361
38,526
41,445
44,381
46,250
47,956
48,837
49,742
49,505
Expenses
(Excluding CIP and
Debt Service)
(26,079)
(25,309)
(25,572)
(25,192)
(25,765)
(26,408)
(27,104)
(27,763)
(28,489)
(28,865)
Net Revenues
11,033
11,052
12,954
16,253
18,616
19,842
20,852
21,074
21,253
20,639
Debt Service
802
801
801
803
804
805
803
800
803
1
Coverage Ratio
1375%
1381%
1618%
2023%
2315%
2464%
2596%
2633%
2648%
N/A
15 Available Reserves as defined in the 2011 bonds include the reserves for the Water, Electric, and Gas Utilities
March 2018
271 Page
GAS UTILITY FINANCIAL PLAN
Table 16: Debt Service Minimum Reserves ($000)
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
Gas Utilitya
22,986
20,619
14,943
10,690
10,149
10,501
11,362
11,913
12,882
13,140
Debt Serviceb
802
801
801
803
804
805
803
800
803
1
Reserves Ratio`
29x
26x
19x
13x
13x
13x
14x
15x
16x
N/A
a) CIP, Rate Stabilization, Operations, and Unassigned Reserves
b) Gas Utility's share of the debt service on the 2011 bonds.
c) Calculated using only Gas Utility reserves. The actual reserves ratio for the 2011 bonds is calculated based on the
combined Electric, Gas, and Water Utility reserves and total debt service and is higher than shown here.
The Gas Utility's reserves and net revenue are also pledged as security for the bond issuances
listed in Table 17, even though the Gas Utility is not responsible for the debt service payments.
The Gas Utility's reserves or net revenues would only be called upon if the responsible utilities
are unable to make their debt service payments. Staff does not currently foresee this occurring.
Table 17: Other Issuances Secured by Gas Utility's Revenues or Reserves
Bond Issuance
Responsible Utilities
Annual Debt
Service ($000)
Secured by Gas Utility's:
Net Revenues
Reserves
1995 Series A Utility
Revenue Bonds
Storm Drain
$680
Yes
No
1999 Utility Revenue
Bonds, Series A
Wastewater Collection
Wastewater Treatment
Storm Drain
$1,207
No
Yes
2009 Water Revenue
Bonds (Build America
Bonds)
Water
$1,977*
No
Yes
*Net of Federal interest subsidy
SECTION 6E: EQUITY TRANSFER
The City calculates the equity transfer from its Gas Utility based on a methodology adopted by
Council in 2009 that has remained unchanged since.16 Each year it is calculated according to the
2009 Council -adopted methodology, and does not require additional Council action.
SECTION 6F: REVENUES
The Gas Fund receives most of its revenues from sales of gas, but about 5% comes from other
sources. The largest of these comes from service connection and capacity fees, followed closely
by sales of allowances related to California's cap -and -trade program. Another revenue item
related to the cap -and -trade program is collected in customers' bills. While the State provides
CPAU with a certain number of free allowances each year, the Gas Utility is required to sell a
portion of those in accordance with the regulations. In order to have enough allowances to cover
16 For more detail on the ordinance adopting the 2009 transfer methodology, see CMR 280:09, Budget Adoption
Ordinance for Fiscal Years 2009 and 2010; and CMR 260:09, Finance Committee Report explaining proposed changes
to equity transfer methodology.
March 2018 28 I Page
GAS UTILITY FINANCIAL PLAN
customers' natural gas emissions, CPAU must buy allowances at market, and subsequently passes
through the cost of those allowances to customers. The regulations do not allow the revenue
derived from the sale of the free allowances to offset allowance purchases, thus the pass -through
rate component.
This financial plan bases sales revenue projections on the load forecast in Section 5A: Load
Forecast. Except where stated otherwise, these load forecasts are based on normal weather.
Weather can vary substantially, however, and this can affect revenues substantially. Also,
changes in customer behavior, as well as changes to more efficient gas appliances, or switching
to electric appliances, will modify these forecasts. Staff continually evaluate forecasts to see
when new trends emerge.
SECTION 6G: COMMUNICATIONS PLAN
The FY 2019 communications strategy covers four primary areas: operations, infrastructure,
safety, efficiency, renewables and rates. Since moving to market pricing for commodity rates, the
City's website posts changes to the commodity rates monthly. The City promotes gas use
efficiency incentives year-round, but most heavily during winter months to impact heating
activities. Promotional methods include community outreach events, print ads in local
publications, utility bill inserts, messaging on the bills and envelopes, website pages, email blasts,
videos for the web and use of social media.
To keep customers apprised of the status and accomplishments of capital improvement projects,
the City maintains a network of project web pages. Print and digital ads, social media and email
blasts drive traffic to the website. CPAU emphasizes safety topics year-round. CPAU is engaging
in several campaigns and programs in FY 2019 to promote gas utility efficiency and awareness of
the City's carbon neutral natural gas utility. Programs such as the Home Efficiency Genie and
commercial energy efficiency programs help residents and businesses better understand energy
usage, activities and/or upgrades they can implement to improve efficiency and reduce utility
costs. CPAU will be launching an upgraded version of its online utility account services portal
(www.cityofpaloalto.org/myutilitiesaccount) this year, which can provide customers with direct
access and more information about utility account and consumption data.
Stepping up efforts to promote gas safety education, staff is focusing outreach among
stakeholders to increase awareness of the need to call USA (811) before digging for anyone who
may excavate in and around Palo Alto, such as plumbers and contractors. Staff is also focusing
outreach on the importance of contacting CPAU to check for potential sewer and gas line cross -
bores prior to clearing a sewer line. Additional outreach messaging includes keeping fats, oils and
greases out of drains, and ensuring clear access to meters. CPAU has developed a number of
safety outreach materials to distribute to customers at community outreach events, emergency
preparedness fairs, school and business meetings. The use of materials featuring photos of some
unusual ways people obstruct access to their meters, including using them as bike racks and
building storage sheds around them, highlights meter access awareness.
CPAU will continue to promote safety, infrastructure, operations, efficiency and rate adjustment
messages through a variety of marketing and media channels. Every year, CPAU publishes an
updated gas safety awareness brochure and mails it to all customers in Palo Alto, as well as to
March 2018 29 I rage
GAS UTILITY FINANCIAL PLAN
plumbers, contractors and excavators that may work in and around the area. Staff talk with
business customers at special facilities meetings, attend neighborhood safety and emergency
preparedness fairs and offer presentations to school and community groups. While print
materials and website pages still feature prominently, CPAU is increasing emphasis on outreach
through email newsletters, direct mail, newspaper inserts, social media and online videos. The
Gas Safety Public Awareness Plan contains saved copies of all outreach materials and logs of
activities; the Department of Transportation reviews this Plan at least once per year.
March 2018 30IPage
GAS UTILITY FINANCIAL PLAN
APPENDICES
Appendix A: Gas Financial Forecast Detail
Appendix B: Gas Utility Capital Improvement Program (CIP) Detail
Appendix C: Gas Utility Reserves Management Practices
Appendix D: Description of Gas Utility Cost Categories
Appendix E: Gas Utility Communications Samples
March 2018 31 I Page
GAS UTILITY FINANCIAL PLAN
APPENDIX A: GAS FINANCIAL FORECAST DETAIL
,�)I+�_
mTILI'i(9arrows
U
City of Palo Alto
Gas Utility
($'000)
($'000)
Fiscal Year 2013
2014
2015
2016
2017
2018
2019
2020
2021
2022 2023
2024
2025
2026
2027
2028
1
RATE CHANGE (%)* 12%'
0%
0%
0%
8%
0%
4%
8%
7%
8% 4%
4%
1%
1%
0%
1%
2
SALES IN THOUSAND THERMS 28,901
1 28,117
28,881
26,719
27,829
27,434
27,289
26,752
26,847
26,547 ; 26,245
25,939
25,726
25,507 1
25,095 1
25,071
O N.CO CO I- CO 0) 0 N M V W (0 (0 r
M V (0 (o r co m. . v- e- (0 (0 (0 (0 00 (0 0') 0) 00
Utilities Retail Sales 33,759
; 34,843
29,515
28,065
34,110
34,012
33,096
34,849
37,506
40,126
41,690
43,082
43,663
44,218
43,971
44,693
Service Connection&CapacityFees 731
1 654
748
961
940
1,048
1,079
1,111
1,145
1,179
1,179
1,179
1,179
1,179
1,179
1,179
Other Revenues&Transfersln 830
1 313
414
2,346
694
1,508
1,818
2,261
2,599
2,895
3,185
3,467
3,740
4,074
4,079
4,205
Interest plus Gain or Loss on Investment (239)!,
706
450
730
13
545
368
304
196
181
196
228
255
272
276
284
Total Sources of Funds
35,081
36,517
31,127
32,102
35,758
37,112
36,361
38,526
41,445
44,381
46,250
47,956
48,837
49,742
49,505
50,361
Purchases of Utilities:
Supply Commodity
12,461
i 12,992
9,537
6,648
9,720
9,998
8,587
8,226
8,205
8,200
8,268
8,429
8,569
8,708
8,855
9,001
Supply Transportation
994
, 1,333
982
(1,051)
2,843
3,331
3,507
3,473
3,482
3,490
3,497
3,504
3,510
3,515
3,520
3,524
Total Purchases
13,455
j 14,325
10,519
5,597
12,563
13,329
12,094
11,699
11,687
11,690
11,765
11,933
12,079
12,223
12,375
12,525
Administration (CIP+Operating)
4,273
3,988
4,007
3,337
2,450
2,519
2,577
2,640
2,707
2,775
2,845
2,906
2,968
3,051
3,106
3,178
Customer Service
1,358
1,338
1,195
1,097
1,581
1,643
1,700
1,781
1,858
1,925
1,992
2,051
2,107
2,155
2,184
2,237
Demand Side Management
630
438
632
566
855
879
900
922
945
969
993
1,015
1,036
1,065
1,084
1,110
Engineering (Operating)
340
352
369
426
355
367
377
390
404
416
428
439
450
461
469
480
Operations and Maintenance
4,940
4,119
4,403
4,153
4,321
5,482
5,651
5,871
5,087
5,261
5,433
5,586
5,732
5,868
5,953
6,094
Resource Management
506
516
556
3,002
566
1,393
1,530
1,777
1,999
2,210
2,420
2,626
2,830
3,093
3,107
3,176
Debt Service Payments
296
805
804
249
227
802
801
801
803
804
805
803
800
803
1
1
Rent
219
419
431
443
455
467
480
492
505
519
532
546
561
574
587
601
Transfers to General Fund
5,971
5,811
5,730
6,194
6,594
7,035
6,888
7,069
7,069
7,972
8,214
8,629
9,072
9,547
9,539
9,538
Other Transfers Out
207
606
151
303
510
523
533
543
554
566
579
590
601
617
628
642
CapitallmprovementPrograms
7,620
1,026
1,832
6,889
2,214
7,804
5,197
10,217
12,080
9,815
9,892
9,970
10,050
10,131
10,214
10,299
Total Uses of Funds
39,814
! 33,743
30,629
32,256
32,690
42,243
38,728
44,202
45,698
44,922
45,898
47,095
48,286
49,587
49,248
49,880
Into/ (Out of) Reserves
(4,733)!
2,773
498
(154)
3,067
(5,131)
(2,367)
(5,676)
(4,253)
(541)
352
861
551
155
257
481
29
30
Reappropriations+Commitments
19,363
, 11,305
6,491
6,255
4,209
4,209
4,209
4,209
4,209
4,209
4,209
4,209
4,209
4,209
4,209
4,209
31
Plant Replacement
1,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
32
CIP Reserve
0
0
1,591
3,820
3,820
3,820
3,820
3,820
0
0
0
0
0
0
0
0
33
Rate Stabilization
11,318
15,981
7,215
6,018
6,539
6,411
4,291
0
0
0
0
0
0
0
0
0
34
Operations Reserve
0
0
10,847
10,296
13,549
8,547
8,300
6,915
6,482
5,941
6,293
7,153
7,705
8,673
8,930
9,411
35
Unassigned
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
1
36
Total Reserves
31,681
27,286
26,144
26,389
28,117
22,986
20,619
14,943
10,690
10,149
10,501
11,362
11,913
12,882
13,140
13,621
37
38
Short Term Risk Assessment Value
1,226
3,753
3,516
3,928
3,830
4,612
5,214
5,400
5,642
5,843
5,919
5,991
5,935
6,034
39
40
Operations Reserve Guidelines
41
Min (60 Days Commodity+O&M)
5,620
5,000
5,690
5,698
5,533
5,576
5,488
5,706
5,828
5,986
6,142
6,308
6,242
6,328
42
Target (90 Days Commodity + O&M)
8,429
7,500
8,535
8,547
8,300
8,364
8,232
8,560
8,742
8,978
9,213
9,462
9,362
9,492
43
Max (120 Days Commodity + O&M)
11,239
10,000
11,380
11,396
11,067
11,152
10,976
11,413
11,656
11,971
12,284
12,616
12,483
12,656
44
March 2018
321 Page
GAS UTILITY FINANCIAL PLAN
APPENDIX B: GAS UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL
Reappropriated /
Carried Forward from
Project # Project Name Previous Years
Current Year
Funding
Budget
Amendments
Remaining in
Spending, CIP Reserve
Current Year Fund Commitments FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
ONE TIME PROJECTS
GS -15001 Security at Receiving Stations
Unk AMI Project
GS -18000 Gas ABS/Tenite Replacement
64,700
64,700
-
-
(1,101)
128,299
41,534
-
180,000
1,500,000
-
530,000
-
-
2,320,000
-
-
-
-
-
-
-
Subtotal, One-time Projects
64,700
64,700
-
(1,101) 128,299
41,534
1,680,000
530,000
2,320,000
-
-
GAS MAIN REPLACEMENT (GMR) PROGRAM
GS -11000 GMR - Project 21 100,000
GS -12001 GMR - Project 22 (150,372)
GS -13001 GMR - Project 23 337,000
GS -14003 GMR - Project 24 -
GS -15000 GMR - Project 25 -
GS -16000 GMR - Project 26 -
GS -20000 GMR - Project 27 -
GS -20001 GMR - Project 28 -
100,000
3,104,410
700,000
-
-
-
-
-
-
6,722,029
-
-
-
-
-
-
-
(224,576)
-
-
-
-
-
200,000
9,451,491
1,037,000
-
-
-
-
-
-
310,563
-
-
-
-
-
-
600,000
-
-
-
-
-
-
-
6,500,000
650,000
-
-
-
-
-
-
6,500,000
650,000
-
-
-
-
-
-
6,500,000
650,000
-
-
-
-
-
-
6,500,000
650,000
-
Subtotal, Gas Main Replacement Program 286,628
3,904,410
6,722,029
(224,576)
10,688,491
310,563
600,000
7,150,000
7,150,000
7,150,000
7,150,000
TOOLS AND EQUIPMENT
GS -13002 General Shop Equipment/Tools -
GS -14004 Gas Distribution System Model 19,574
50,000
19,574
-
-
-
(4,660)
50,000
34,488
-
14,914
350,000
20,000
100,000
20,000
100,000
20,000
100,000
100,000
Subtotal, Tools and Equipment 1 19,574
69,574
-
(4,660)
84,488
14,914
370,000
120,000
120,000
100,000
100,000
ONGOING PROJECTS
GS -11002 Gas System Improvements 75,624
GS -03009 System Ext. - Unreimbursed -
GS -80019 Gas Meters and Regulators 126,772
555,672
204,455
492,453
-
-
-
(114,215)
(19,127)
(30,676)
517,081
185,328
588,549
37,979
-
96,096
246,036
421,180
376,652
253,417
433,816
387,952
261,020
446,830
399,591
268,851
460,234
411,579
276,916
474,042
423,926
Subtotal, Ongoing Projects 202,396
1,252,580
-
(164,018)
1,290,958
134,075
1,043,868
1,075,185
1,107,441
1,140,664
1,174,884
CUSTOMER CONNECTIONS (FEE FUNDED)
GS -80017 Gas System Extensions 74,468
1,339,823
-
(417,703)
996,588
98,562
1,303,315
1,342,415
1,382,688
1,424,169
1,466,894
Subtotal, Customer Connections
74,468
1,339,823
-
(417,703)
996,588
98,562
1,303,315
1,342,415
1,382,688
1,424,169
1,466,894
GRAND TOTAL
647,766
6,631,087
6,722,029
(812,058)
13,188,824
599,648
4,997,183
10,217,600
12,080,129
9,814,833
9,891,778
Funding Sources
Connection Fees
Utility Rates
1,017,000
5,614,087
-
6,722,029
1,078,935
3,918,248
1,111,303
9,106,297
1,144,642
10,935,487
1,178,981
8,635,852
266,894
9,624,884
CIP-RELATED RESERVES DETAIL
6/30/2017
(Actual)
6/30/2018
(Unaudited)
Rea ppropriations
Commitments
298,178
349,588
12,589,176
599,648
March 2018
33 'Page
GAS UTILITY FINANCIAL PLAN
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March 2018 34 I Page
GAS UTILITY FINANCIAL PLAN
APPENDIX C: GAS UTILITY RESERVES MANAGEMENT PRACTICES
The following reserves management practices shall be used when developing the Gas Utility
Financial Plan:
Section 1. Definitions
a) "Financial Planning Period" — The Financial Planning Period is the range of future fiscal
years covered by the Financial Plan. For example, if the Financial Plan delivered in
conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015
to FY 2019 would be the Financial Planning Period.
b) "Fund Balance" — As used in these Reserves Management Practices, Fund Balance refers
to the Utility's Unrestricted Net Assets.
c) "Net Assets" - The Government Accounting Standards Board defines a Utility's Net Assets
as the difference between its assets and liabilities.
d) "Unrestricted Net Assets" - The portion of the Utility's Net Assets not invested in capital
assets (net of related debt) or restricted for debt service or other restricted purposes.
Section 2. Supply Fund Reserves
The Gas Utility's Supply Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 4 (Reserve for Commitments)
b) For operating and capital budgets re -appropriated from previous years, as described in
Section 5 (Reserve for Re -appropriations)
Section 3. Distribution Fund Reserves
a) For existing contracts, as described in Section 4 (Reserve for Commitments)
b) For operating and capital budgets re -appropriated from previous years, as described in
Section 5 (Reserve for Re -appropriations)
c) For cash flow management and contingencies related to the Gas Utility's Capital
Improvement Program (CIP), as described in Section 6 (CIP Reserve)
d) For rate stabilization, as described in Section 7 (Rate Stabilization Reserve)
e) For operating contingencies, as described in Section 8 (Operations Reserve)
f) Any funds not included in the other reserves will be considered Unassigned Reserves and
shall be returned to ratepayers or assigned a specific purpose as described in Section 9
(Unassigned Reserves)
Section 4. Reserve for Commitments
At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserve for
Commitments will be set to an amount equal to the total remaining spending authority for
all contracts in force for the Wastewater Collection Utility at that time.
Section 5. Reserve for Reappropriations
At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserve for
Reappropriations will be set to an amount equal to the amount of all remaining capital and
March 2018 35 I Page
GAS UTILITY FINANCIAL PLAN
non -capital budgets, if any, that will be re -appropriated to the following fiscal year for each
fund in accordance with Palo Alto Municipal Code Section 2.28.090.
Section 6. CIP Reserve
The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for
capital contingencies. Staff will manage the CIP Reserve according to the following practices:
a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are
calculated for each fiscal year of the Financial Planning Period based on the levels of CIP
expense budgeted for that year.
Minimum Level
12 months of budgeted CIP expense
Maximum Level
24 months of budgeted CIP expense
b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and
the Reserve for Commitments when funds are added to or removed from the Reserve for
Commitments as a result of a change in contractual commitments related to CIP projects.
Any other additions to or withdrawals from the CIP reserve require Council action.
c) Minimum Level:
i) Funds held in the Reserve for Commitments may be counted as part of the CIP Reserve
for the purpose of determining compliance with the CIP Reserve minimum guideline
level.
ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present
a plan to the City Council to replenish the reserve. The plan shall be delivered by the
end of the following fiscal year, and shall, at a minimum, result in the reserve reaching
its minimum level by the end of the next fiscal year. For example, if the CIP Reserve is
below its minimum level at the end of FY 2017, staff must present a plan by June 30,
2018 to return the reserve to its minimum level by June 30, 2019. In addition, staff
may present, and the Council may adopt, an alternative plan that takes longer than
one year to replenish the reserve, or that does so in a shorter period of time.
d) Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds may
be added to this reserve. If there are funds in this reserve in excess of the maximum level
staff must propose to transfer these funds to another reserve or return them to
ratepayers in the next Financial Plan. Staff may also seek Council approval to hold funds
in this reserve in excess of the maximum level, if they are held for a specific future purpose
related to the CIP.
Section 7. Rate Stabilization Reserve
Funds may be added to the Rate Stabilization Reserve by action of the City Council and held
to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate
Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization
Reserve at the end of any fiscal year, any subsequent Gas Utility Financial Plan must result in
the withdrawal of all funds from this Reserve by the end of the Financial Planning Period.
Section 8. Operations Reserve
March 2018 36 I Page
GAS UTILITY FINANCIAL PLAN
The Operations Reserve is used to manage normal variations in costs and as a reserve for
contingencies. Any portion of the Gas Utility's Fund Balance not included in the reserves
described in Section 4 -Section 7 above will be included in the Operations Reserve unless this
reserve has reached its maximum level as set forth in Section 8 d) below. Staff will manage
the Operations Reserve according to the following practices:
a) The following guideline levels are set forth for the Operations Reserve. These guideline
levels are calculated for each fiscal year of the Financial Planning Period based on the
levels of Operations and Maintenance (O&M) and commodity expense forecasted for that
year in the Financial Plan.
Minimum Level
60 days of O&M and commodity expense
Target Level
90 days of O&M and commodity expense
Maximum Level
120 days of O&M and commodity expense
b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations
Reserve are lower than the minimum level set forth above, staff shall present a plan to
the City Council to replenish the reserve. The plan shall be delivered within six months of
the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its
minimum level by the end of the following fiscal year. For example, if the Operations
Reserve is below its minimum level at the end of FY 2014, staff must present a plan by
December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In
addition, staff may present, and the Council may adopt, an alternative plan that takes
longer than one year to replenish the reserve.
c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower
than the target level, any Financial Plan created for the Gas Utility shall be designed to
return the Operations Reserve to its target level by the end of the forecast period.
d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no
funds may be added to this reserve. Any further increase in the Gas Utility's Fund Balance
shall be automatically included in the Unassigned Reserve described in Section 9, below.
Section 9. Unassigned Reserve
If the Operations Reserve reaches its maximum level, any further additions to the Gas Utility's
Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned
Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council
must include a plan to assign them to a specific purpose or return them to the Gas Utility
ratepayers by the end of the first fiscal year of the next Financial Planning Period. For
example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next
Financial Planning Period is FY 2016 through FY 2020, the Financial Plan shall include a plan
to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may
present an alternative plan that retains these funds or returns them over a longer period of
time.
Section 10. Intra-Utility Transfers Between Supply and Distribution Funds
March 2018
371,
n
GAS UTILITY FINANCIAL PLAN
The Gas Utility records costs in two separate funds: the Gas Supply Fund and the Gas
Distribution Fund. At the end of each fiscal year staff is authorized to transfer an amount
equal to the difference between Gas Supply Fund costs and Gas Supply Fund Revenues from
the Gas Distribution Fund Operations Reserve to the Gas Supply Fund, or vice versa. Such
transfers shall be included in the ordinance closing the budget for the fiscal year.
March 2018 38IPage
GAS UTILITY FINANCIAL PLAN
APPENDIX D: DESCRIPTION OF GAS UTILITY COST CATEGORIES
This appendix describes the activities associated with the various cost categories referred to in
this Financial Plan.
Customer Service: This category includes the Gas Utility's share of the call center, meter reading,
collections, and billing support functions. Billing support encompasses staff time associated with
bill investigations and quality control on certain aspects of the billing process. It does not include
maintenance of the billing system itself, which is included in Administration. This category also
includes CPAU's key account representatives, who work with large commercial customers who
have more complex requirements for their gas services.
Resource Management: This category includes gas procurement, contract management, rate
setting, and tracking of legislation and regulation related to the gas industry.
Operations and Maintenance: This category includes the costs of a variety of distribution system
maintenance activities, including:
• surveying the gas system (50% of the system each year) and repairing any leaks found;
• investigating reports of damaged mains or services and perform emergency repairs;
• building and replacing gas services for new or redeveloped buildings; and
• testing and replacing meters to ensure accurate sales metering.
This category also includes a variety of functions the utility shares with other City utilities,
including:
• the Field Services team (which does field research of various customer service issues);
• the Cathodic Protection team (which monitors and maintains the systems that prevent
corrosion in metal pipes and reservoirs); and
• the General Services team (which manages and maintains equipment, paves and restores
streets after gas, water, or sewer main replacements, and provides welding services,
including certified gas line welding services)
Administration: Accounting, purchasing, legal, and other administrative functions provided by
the City's General Fund staff, as well as shared communications services and Utilities Department
administrative overhead and billing system maintenance costs.
Demand Side Management: Includes the cost of administering gas efficiency programs and the
direct cost of rebates paid.
Engineering (Operating): The Gas Utility's engineers focus primarily on the CIP, but a small
portion of their time is spent assisting with distribution system maintenance.
March 2018
39 i i><ag
APPENDIX E: GAS UTILITY COMMUNICATIONS SAMPLES
CALL BEFORE YOU DIG
Make sure it is safe before you:
Plant a tree
Stake a sapling tree
• Dig a trench
• Build or repair a fence
or deck
• Pour a building
foundation
• Dig up sprinklers
• Replace a driveway or
walkway
If you can't easily spot your meters—„emrer can
we to ensure your safety, such as when meters
need to be shut off dung leaks or fires a<
well es to ensure accurate billing
WE CAN HELP YOU SAVE ENERGY AND MONEY
Customers facing challenging economic times can use our programs and
services to help cope with utilities costs. If you're overwhelmed by your
utility bills, the City of Palo Alto Utilities (CPAU) can help.
I'm port of a loam who ate in the trenches 1
every day Soaping your go. water and vwar I•,
operating safely and ofilcwndy You're on my tx.
too!, or example. when you put rags wipes,
diaper a grease in the trash, instead al down
drains anti toilets. Mat mein we all have fewer
serer backups to deal with
50 lot's work as a team to loop ow City's
underground utilities operating well
Get important gas and sewer safety tips.
www.dtyefpalealta.arp/saf.utitlty
tarn about what we're wnrting on
www.dtyofpaloafto aryhstaltypfol.cts
CLOGS PIPES!
ATTACHMENT H
* NOT YET APPROVED *
Resolution No.
Resolution of the Council of the City of Palo Alto Increasing Gas
Rates by Amending Rate Schedules G-1 (Residential Gas Service),
G-2 (Residential Master -Metered and Commercial Gas Service), G-3
(Large Commercial Gas Service), and G-10 (Compressed Natural Gas
Service Service)
RECITALS
A. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of
the City of Palo Alto may by resolution adopt rules and regulations governing utility services,
fees and charges.
B. On June 11, 2018, the City Council heard and approved the proposed rate increase
at a noticed public hearing.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-1 (Residential Gas Service) is hereby amended to read as attached and
incorporated. Utility Rate Schedule G-1, as amended, shall become effective July 1, 2018.
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-2 (Residential Master -Metered and Commercial Gas Service) is hereby
amended to read as attached and incorporated. Utility Rate Schedule G-2, as amended, shall
become effective July 1, 2018.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-3 (Large Commercial Gas Service) is hereby amended to read as attached and
incorporated. Utility Rate Schedule G-3, as amended, shall become effective July 1, 2018.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-10 (Compressed Natural Gas Service Service) is hereby amended to read as
attached and incorporated. Utility Rate Schedule G-10, as amended, shall become effective
July 1, 2018.
SECTION 5. The City Council finds as follows:
a. Revenues derived from the gas rates approved by this resolution do not exceed the
funds required to provide gas service.
b. Revenues derived from the gas rates approved by this resolution shall not be used
for any purpose other than providing gas service, and the purposes set forth in
Article VII, Section 2, of the Charter of the City of Palo Alto.
6055006
Attachment H
* NOT YET APPROVED *
SECTION 6. The Council finds that the fees and charges adopted by this resolution are
charges imposed for a specific government service or product provided directly to the payor
that are not provided to those not charged, and do not exceed the reasonable costs to the City
of providing the service or product.
SECTION 7. The Council finds that the adoption of this resolution changing gas rates
to meet operating expenses, purchase supplies and materials, meet financial reserve needs and
obtain funds for capital improvements necessary to maintain service is not subject to the
California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec.
21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing
the staff report and all attachments presented to Council, the Council incorporates these
documents herein and finds that sufficient evidence has been presented setting forth with
specificity the basis for this claim of CEQA exemption.
6055006
Attachment H
* NOT YET APPROVED *
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
6055006
ATTACHMENT I
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
A. APPLICABILITY:
This schedule applies to the following Customers receiving Gas Service from City of Palo Alto
Utilities:
1. Separately -metered single-family residential Customers.
2. Separately -metered multi -family residential Customers in multi -family residential facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides Gas Service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: $10.9432
Tier 1 Rates: Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) $0.10-$2.00
2. Cap and Trade Compliance Charge $0.00-$0.25
3. Transportation Charge $0.00-$0.15
4. Carbon Offset Charge $0.00-$0.10
Distribution Charge- $0.42393933
Tier 2 Rates: (All usage over 100% of Tier 1)
Supply Charges:
1. Commodity (Monthly Market Based) $0.10-2.00
2. Cap and Trade Compliance Charge $0.00-$0.25
3. Transportation Charge $0.00-$0.15
4. Carbon Offset Charge $0.00-$0.10
Distribution Charge. $0.99/189319
D. SPECIAL NOTES:
1. Calculation of Cost Components
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-1
dated 4-19-1-20176
CITY OF PALO ALTO
UTILITIES
Effective 97-1-20187
Sheet No G-1-1
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, accounting for delivery losses to the Customer's Meter.
The Cap and Trade Compliance Charge reflects the City's cost of regulatory compliance
with the state's Cap and Trade Program, including the cost of acquiring compliance
instruments sufficient to cover the City's Gas Utility's compliance obligations. The Cap
and Trade Compliance Charge will change in response to changing market conditions,
retail sales volumes and the quantity of allowances required.
The Carbon Offset Charge reflects the City's cost to purchase offsets for greenhouse
gases produced in the burning of natural gas. The Carbon Offset Charge will change in
response to changing market conditions, changing sales volumes and the quantity of
offsets purchased within the Council -approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto,
accounting for delivery losses to the Customer's Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges
will fall within the minimum/maximum ranges set forth in Section C.
2. Seasonal Rate Changes:
The Summer period is effective April 1 to October 31 and the Winter period is effective from
November 1 to March 31. When the billing period includes use in both the Summer and the
Winter periods, the usage will be prorated based on the number of days in each seasonal
period, and the charges based on the applicable rates for each period. For further discussion
of bill calculation and proration, refer to Rule and Regulation 11.
3. Calculation of Usage Tiers
Tier 1 natural gas usage shall be calculated and billed based upon a level of 0.667 therms per
day during the Summer period and 2.0 therms per day during the Winter period, rounded to
the nearest whole therm, based on meter reading days of service. As an example, for a 30
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-2
dated 4-19-1-20176
CITY OF PALO ALTO
UTILITIES
Effective 17-1-20187
Sheet No G-1-2
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
day bill, the Tier 1 level would be 20 therms during the Summer period and 60 therms during
the Winter period months. For further discussion of bill calculation and proration, refer to
Rule and Regulation 11.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-3
dated 4-19-1-20176
CITY OF PALO ALTO
I\\ UTILITIES
Effective 17-1-20187
Sheet No G-1-3
RESIDENTIAL MASTER -METERED AND COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-2
A. APPLICABILITY:
This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto
Utilities:
1. Commercial Customers who use less than 250,000 therms per year at one site.
2. Master -metered residential Customers in multi -family residential facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides Gas Service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: $82.9278.23
Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) $0.10-$2.00
2. Cap and Trade Compliance Charges $0.00-0.25
3. Transportation Charge $0.00-$0.15
4. Carbon Offset Charge $0.00-$0.10
Distribution Charge: $0.61835767
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, accounting for delivery losses to the Customer's Meter.
The Cap and Trade Compliance Charge reflects the City's cost of regulatory compliance with
the state's Cap and Trade Program, including the cost of acquiring compliance instruments
sufficient to cover the City's Gas Utility's compliance obligations. The Cap and Trade
Compliance Charge will change in response to changing market conditions, retail sales
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-2-1
dated 19-1-2017
i CITY OF PALO ALTO
1\` UTILITIES
Effective 97-1-20187
Sheet No G-2-1
RESIDENTIAL MASTER -METERED AND COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-2
volumes and the quantity of allowances required.
The Carbon Offset Charge reflects the City's cost to purchase offsets for greenhouse gases
produced in the burning of natural gas. The Carbon Offset Charge will change in response to
changing market conditions, changing sales volumes and the quantity of offsets purchased
within the Council -approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto,
accounting for delivery losses to the Customer's Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges will
fall within the minimum/maximum ranges set forth in Section C.
{End)
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-2-2
dated 49-1-2017
i CITY OF PALO ALTO
1\` UTILITIES
Effective 17-1-20187
Sheet No G-2-2
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
A. APPLICABILITY:
This schedule applies to the following Customers receiving Gas Service from the City of Palo
Alto Utilities:
1. Commercial Customers who use at least 250,000 therms per year at one site.
2. Customers at City -owned generation facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides Nnatural Ggas Sservice.
C. UNBUNDLED RATES:
Monthly Service Charge:
Per Service
$400.08377.43
Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) $0.10-$2.00
2. Cap and Trade Compliance Charges $0.00-0.25
3. Transportation Charge $0.00-$0.15
4. Carbon Offset Charge $0.00-$0.10
Distribution Charge: $0.6098 7
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
The Commodity Charge is based on the monthly natural gas Bidweek Price Index for
delivery at PG&E Citygate, accounting for delivery losses to the Customer's Meter.
The Cap and Trade Compliance Charge reflects the City's cost of regulatory compliance
with the state's Cap and Trade Program, including the cost of acquiring compliance
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-1
dated 4-1-9-1-20176
/r
CITY OF PALO ALTO
l''` UTILITIES
Effective 97-1-20187
Sheet No G-3-1
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
instruments sufficient to cover the City's Gas Utility's compliance obligations. The Cap
and Trade Compliance Charge will change in response to changing market conditions,
retail sales volumes and the quantity of allowances required.
The Carbon Offset Charge reflects the City's cost to purchase offsets for greenhouse
gases produced in the burning of natural gas. The Carbon Offset Charge will change in
response to changing market conditions, changing sales volumes and the quantity of
offsets purchased within the Council -approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto,
accounting for delivery losses to the Customer's Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges
will fall within the minimum/maximum ranges set forth in Section C.
2. Request for Service
A qualifying Customer may request service under this schedule for more than one
account or meter if the accounts are located on one site. A site consists of one or more
contiguous parcels of land with no intervening public right -of- ways (e.g. streets).
3. Changing Rate Schedules
Customers may request a rate schedule change at any time to any applicable City of Palo
Alto full -service rate schedule.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-2
dated 449-1-20176
/r
CITY OF PALO ALTO
l'` UTILITIES
Effective 97-1-20187
Sheet No G-3-2
COMPRESSED NATURAL GAS SERVICE
UTILITY RATE SCHEDULE G-10
A. APPLICABILITY:
This schedule applies to the sale of natural gas to the City -owned compressed natural gas (CNG) fueling
station at the Municipal Service Center in Palo Alto_
B. TERRITORY:
Applies to the City's CNG fueling station location located at the Municipal Service Center in City of
Palo Alto.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: $56.1152.93
Per Therm
Supply Charges:
Commodity (Monthly Market Based) $0.10-$2.00
Cap and Trade Compliance Charges $0.00 to $0.25
Transportation Charge $0.00-$0.15
Carbon Offset Charge $0.00-$0.10
Distribution Charge $0.01000.0093
D. SPECIAL CONDITIONS
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for
any applicable discounts, surcharges and/or Taxes. On a Customer's bill statement, the bill amount
may be broken down into appropriate components as calculated under Section C.
The Commodity charge is based on the monthly natural gas Bidweek Price Index for delivery at
PG&E Citygate, accounting for delivery losses to the Customer's Meter.
The Cap and Trade Compliance Charge reflects the City's cost of regulatory compliance with the
state's Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to
cover the City's Gas Utility's compliance obligations. The Cap and Trade Compliance Charge will
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-10-1
dated 149-1-201
CITY OF PALO ALTO
Iv UTILITIES
Effective W7-1-20187
Sheet No.G-10-1
COMPRESSED NATURAL GAS SERVICE
UTILITY RATE SCHEDULE G-10
change in response to changing market conditions, retail sales volumes and the quantity of
allowances required.
The Carbon Offset Charge reflects the City's cost to purchase offsets for greenhouse gases produced
in the burning of natural gas. The Carbon Offset Charge will change in response to changing market
conditions, changing sales volumes and the quantity of offsets purchased within the Council -
approved per therm cap.
The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for
delivery losses to the Customer's Meter.
The Commodity, Cap and Trade Compliance, Carbon Offset and Transportation Charges will fall
within the minimum/maximum range set forth in Section C.
[End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-10-2
dated 149-1-201
CITY OF PALO ALTO
Iv UTILITIES
Effective W7-1-20187
Sheet No.G-10-2
ATTACHMENT J
NOT YET APPROVED
Resolution No.
Resolution of the Council of the City of Palo Alto Approving the Fiscal
Year 2019 Wastewater Collection Utility Financial Plan
RECITALS
A. Each year the City of Palo Alto ("City") assesses the financial position of its
utilities with the goal of ensuring adequate revenue to fund operations. This includes making
long-term projections of market conditions, the physical condition of the system, and other
factors that could affect utility costs, and setting rates adequate to recover these costs. It does
this with the goal of providing safe, reliable, and sustainable utility services at competitive
rates. The City adopts Financial Plans to summarize these projections.
B. The City uses reserves to protect against contingencies and to manage other
aspects of its operations, and regularly assesses the adequacy of these reserves and the
management practices governing their operation. The status of utility reserves and their
management practices are included in Reserves Management Practices attached to and made a
part of the Financial Plans.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby approves the FY 2019 Wastewater Utility Financial
Plan.
SECTION 2. The Council hereby approves the transfer of $342,000in FY 2019 from the
Rate Stabilization Reserve to the Operations Reserve, as described in the FY 2019 Wastewater
Utility Financial Plan approved via this resolution.
SECTION 3. The Council finds that the adoption of this resolution does not meet the
California Environmental Quality Act's definition of a project under Public Resources Code
Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative
//
//
//
//
180315jb 6054066
ATTACHMENT J
NOT YET APPROVED
governmental activity which will not cause a direct or indirect physical change in the
environment, and therefore, no environmental review is required.
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
180315jb 6054066
ATTACHMENT K
FY 2019 WASTEWATER
COLLECTION UTILITY
FINANCIAL PLAN
FY 2019 TO FY 2028
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
FY 2019 WASTEWATER COLLECTION
UTILITY FINANCIAL PLAN
FY 2019 TO FY 2028
TABLE OF CONTENTS
Section 1: Definitions and Abbreviations 4
Section 2: Executive Summary and Recommendations 4
Section 2A: Overview of Financial Position 4
Section 28: Summary of Proposed Actions 5
Section 3: Detail of FY 2018 Rate and Reserves Proposals 6
Section 3A: Rate Design 6
Section 38: Current and Proposed Rates 6
Section 3C: Bill Impact of Proposed Changes 7
Section 3D: Proposed Reserve Transfers 7
Section 4: Utility Overview 8
Section 4A: Wastewater Utility History 8
Section 48: Customer base 9
Section 4C: Collection System 9
Section 4D: Cost Structure and Revenue Sources 10
Section 4E: Reserves Structure 10
Section 4F: Competitiveness 11
Section 5: Utility Financial Projections 12
Section 5A: FY 2013 to FY 2017 Cost and Revenue Trends 12
Section 58: FY 2017 Results 13
Section 5C: FY 2018 Projections 13
Section 5D: FY 2019 — FY 2028 Projections 13
Section 5E: Risk Assessment and Reserves Adequacy 15
February 2018 2 'Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
Section 5F: Alternate Scenarios 16
Section 5G: Long -Term Outlook 18
Section 6: Details and Assumptions 18
Section 6A: Wastewater Treatment Costs 18
Section 68: Operations 19
Section 6C: Capital Improvement Program (CIP) 19
Section 6D: Debt Service 21
Section 6E: Other Revenues 23
Section 7: Communications Plan 23
Appendices 24
Appendix A: Wastewater Collection Financial Forecast Detail 25
Appendix 8: Wastewater Collection Utility Capital Improvement Program (CIP) Detail 27
Appendix C: Wastewater Collection Utility Reserves Management Practices 28
Appendix D: Map (CPA Wastewater Collection System - Sewer Mains Replaced or
Rehabilitated since 1990) 31
Appendix E: Sample of Wastewater Collection Outreach Materials 32
February 2018 31 Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
SECTION 1: DEFINITIONS AND ABBREVIATIONS
CCF The standard unit of measurement for water delivered to water customers, equal to
one hundred cubic feet, or roughly 748 gallons. When water usage is used to assess
wastewater charges for commercial customers, it is measured in CCF.
CIP Capital Improvement Program
CPAU City of Palo Alto Utilities Department
FOG Fats, oils, and grease. When flushed into the sewer system, these materials
accumulate in parts of the sewer system and create blockages.
O&M Operations and Maintenance
RWQCP Regional Water Quality Control Plant, the wastewater treatment plant owned and
operated by the City of Palo Alto that serves Palo Alto and several surrounding
communities.
UAC Utilities Advisory Commission
SECTION 2: EXECUTIVE SUMMARY AND RECOMMENDATIONS
This document presents a Financial Plan for the City of Palo Alto's Wastewater Collection Utility
for the next ten years. The Financial Plan provides revenues to cover the costs of operating the
utility safely over that time while adequately investing for the future. It also addresses the
financial risks facing the utility over the short term and long term, and includes measures to
mitigate and manage those risks.
SECTION 2A: OVERVIEW OF FINANCIAL POSITION
Overall costs in the Wastewater Collection Utility are expected to rise by an average of
approximately 6.9% per year from fiscal year (FY) 2018 to FY 2028. Wastewater treatment costs
are projected to rise by an average of approximately 6.6% annually and collection system CIP
costs are projected to rise substantially by FY 2019 as new sewer main replacement projects
begin. While CPAU aims to complete one main replacement project each year, no project was
budgeted for FY 2017 and FY 2018 to allow staff to complete previous year projects that had
been delayed. After FY 2019, staff project CIP costs to rise at approximately 1.5% annually
through the projection period. Table 1 below shows the costs for the Wastewater Collection
Utility.
Table 1: Expenses for FY 2017 to FY 2028
Expenses
($000)
FY
2017
(act.)
FY
2018
(est.)
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
Treatment
Costs
8,391
10,418
10,798
11,846
12,888
13,571
14,005
14,692
15,676
16,083
16,453
16,914
Operations
5,536
5,923
6,086
6,270
6,455
6,629
6,803
6,828
6,979
7,143
7,250
7,407
Capital
Projects
1,332
2,955
6,629
5,936
6,133
6,296
6,486
6,681
6,882
7,088
7,302
7,521
TOTAL
15,258
19,296
23,513
24,051
25,476
26,497
27,294
28,201
29,536
30,315
31,005
31,842
February 2018
41 Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
The increase in CIP expenses also reflects higher contract bid prices for underground
construction. Going forward, to ensure that revenues cover rising costs and reserves remain
healthy, the financial plan includes the proposed and projected rate changes shown in Table 2.
The table also shows rate projections from last year's Financial Plan. Last year's plan projected
lower increases through FY 2028 because of lower treatment cost projections and lower capital
budget estimates.
Staff originally proposed a 10% rate increase for FY 2019 at the March 7, 2018 UAC meeting.
The UAC voted instead to recommend an 11% increase (Alternative Scenario 1 from the FY
2019 Wastewater Financial Plan to the UAC, Section 5F: Alternate Scenarios), and Staff
concurred with the recommendation. This financial plan has been revised to reflect the 11%
proposal.
Table 2: Proposed / Projected Wastewater Collection Rate Trajectory for FY 2019 to FY 2028
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
Current Plan
11%
12%
10%
6%
4%
3%
3%
3%
3%
1%
FY 2018 Plan
7%
7%
7%
7%
7%
5%
5%
4%
3%
N/A
The Wastewater Collection Utility has a small balance in its Rate Stabilization Reserve. This
reserve is used to phase in rate increases over multiple years to reduce rate impacts to
customers. The FY 2018 Financial Plan projected a transfer from the Rate Stabilization Reserve
would not be needed until 2020. However, this Financial Plan anticipates that transfer in FY
2019. The Operations Reserve was above its target level in FY 2017, but will decline in FY 2019
through 2021, going below the minimum guideline levels in FY 2020 and going back above the
reserve minimum in FY 2023 (see more detail in Figure 5).
Table 3: Transfers To/(From) Reserves for FY 2018 to FY 2028 ($000)
Reserve
FY 2018
FY 2019
FY 2020 to FY 2028
CIP Reserve
-
-
(978)
Rate Stabilization
-
(342)
-
Operations
-
342
978
Unassigned
-
-
-
SECTION 2B: SUMMARY OF PROPOSED ACTIONS
Staff proposes the following actions for the Wastewater Collection Utility in FY 2019:
1. Increase rates by 11%, primarily reflecting increases to capital expenditures. This is
described in more detail in Section 3B: Current and Proposed Rates.
2. Transfer $342,000 from the Rate Stabilization Reserve to the Operations Reserve in FY
2019.
February 2018 5
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
SECTION 3: DETAIL OF FY 2018 RATE AND RESERVES PROPOSALS
SECTION 3A: RATE DESIGN
The Wastewater Collection Utility's rates are evaluated and implemented in compliance with
the cost of service requirements and procedural rules set forth in the California Constitution
(Proposition 218). Current rates were structured based on staff's annual assessment of the
wastewater utility's financial position, as well as the methodology from the January 2011
Wastewater Collection Utility Cost of Service & Rate Study completed by Utility Financial
Solutions (Staff Report 1399). Staff plans to review and update this cost of service study in FY
2019. Before conducting any new cost of service study, staff will review current rates and the
scope of the study with the Utilities Advisory Commission (UAC) and Council to determine the
City's policy priorities.
SECTION 3B: CURRENT AND PROPOSED RATES
The current rates were adopted July 1, 2016, when the City increased sewer rates by 9%.
CPAU has three sewer rate schedules: one for residents (S-1), one for commercial customers
(S-2), and a special schedule for restaurants (S-6), which discharge higher than average amounts
of grease and oil and, therefore, have a greater impact on the sewer system. Residential
customers are billed a monthly service charge, while commercial customers are billed based on
their winter month water usage (previous January through March). This closely approximates
non -irrigation water consumption, which represents actual sewer use. Restaurant customers are
billed monthly based on water usage. CPAU also maintains a rate schedule for industrial
dischargers (S-7), but there are currently no customers required to be on this rate schedule.
CPAU proposes an 11% rate increase in FY 2019 in order to fund upcoming capital projects and
operations costs. Table 4, below, summarizes the current and proposed rates for all customer
classes. Section 4F: Competitiveness discusses comparisons with neighboring communities.
February 2018 6IPage
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
Table 4: Current Sewer Rates
Current
(as of 7/1/2016)
Proposed
(effective 7/1/2018
Monthly Service and Minimum Charges ($/month)
S-1 (Residential)
Service charge
$34.83
$38.66
S-2 (Commercial),
S-6 (Restaurant)
Minimum
34.83
38.66
Quantity Rates: based on winter water usage (average
for January - March bill period)
S-2 (Commercial)
$/CCF
6.71
7.45
S-6 (Restaurant)
$/CCF
10.38
11.52
S-7 (Industrial)
$/CCF
3.08
3.42
SECTION 3C: BILL IMPACT OF PROPOSED CHANGES
Table 5 below shows the impact of the proposed July 1, 2018 rate changes:
Table 5: Impact of Proposed Sewer Changes
Current
(as of
7/1/2016)
Proposed
(effective
7/1/2018)
Change
$/mo.
%
Residential
$34.83
$38.66
$3.83
11%
General Commercial (14
CCF)
93.94
104.30
10.36
11%
Restaurant (56 CCF)
581.28
645.12
63.84
11%
SECTION 3C: PROPOSED RESERVE TRANSFERS
In the FY 2017 Financial Plan, staff recommended a $1.95 million transfer from the Rate
Stabilization Reserve in FY 2016. This left a small amount, $342,000, which was originally to be
transferred in FY 2017 to bring the Rate Stabilization Reserve balance to zero.
However, because new main replacement projects were deferred in FY 2017 and FY 2018,
resulting in one-time cost savings, the Operation Reserve ended above the maximum guideline
level, and the transfer was not needed. Staff anticipates it will need to transfer the remaining
$342,000 in FY 2019. In addition, staff will propose transferring the remaining $978,000 from
the CIP Reserve to the Operation Reserve in FY 2020.
These transfers are included in the financial projections in this Financial Plan, and will enable
CPAU to maintain adequate Operations Reserve levels while moderating the pace of increase in
Wastewater Collection rates. Appendix A: Wastewater Collection Financial Forecast Detail
shows the impact of these transfers on reserves levels.
February 2018 7 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
SECTION 4: UTILITY OVERVIEW
This section provides an overview of the utility and its operations. It is intended as general
background information and to help readers better understand the forecasts in later sections.
SECTION 4A: WASTEWATER UTILITY HISTORY
The Wastewater Utility commenced operation in 1899 to serve Palo Alto and Stanford. In its
first three decades the system grew to 60 miles of sewers. Raw sewage was discharged into
Mayfield Slough at the edge of the Bay. In the 1930s, at the behest of the State Department of
Health, Palo Alto built the South Bay's first wastewater treatment plant. At that time the sewer
system served 20,500 Stanford and Palo Alto residents and a cannery. The plant was upgraded
twice in the 1940s and 1950s to increase capacity.' At the same time, the postwar population
and industrial boom in the 1950s required rapid expansion of the sewer system. In the first half
of the 1960s Palo Alto's area doubled, as did wastewater flows, overwhelming the capacity of
several of the utility's "trunk lines," which are the largest diameter main sewer lines carrying
wastewater to the treatment plant. This prompted the City, in 1965, to perform the first of its
sewer master plans to identify needed capacity improvements. At that point the Wastewater
Utility's system comprised more than 150 miles of sewer mains.2
In 1968 the City signed agreements with the Cities of Mountain View and Los Altos to build a
new regional treatment plant, the RWQCP, which is still in operation today. Since 1940 the City
had been providing treatment services to the East Palo Alto Sanitary District through an existing
agreement, and was also serving Stanford University by transporting wastewater across the
City's sewer system to the treatment plant. Both of these organizations became partners in the
RWQCP as well. At the same time the Town of Los Altos Hills became the sixth partner as it
signed an agreement with the City to connect the Town's sewer system to the City's sewer
system to carry wastewater to the new RWQCP. The current agreements for the RWQCP
extend through 2035.3
In the 1980s the City directed increased attention to the condition of its sewer system,
performing a series of studies of groundwater inflow and infiltration into the system. The
studies found high rates of infiltration, estimating that as much as 40% of the water going to
the RWQCP from Palo Alto's system was groundwater and stormwater rather than
wastewater.4 In some parts of Palo Alto the land surface had subsided due to groundwater
pumping by the water utility, and though that practice had ceased many years earlier as the
water utility switched to the Hetch Hetchy Regional Water System, parts of the city had already
subsided two to five feet. This subsidence had damaged several parts of the sewer collection
system, leading to reduced slopes for sewer mains that caused reductions in capacity. In
1 Long Range Facilities Plan for the Regional Water Quality Control Plant, August 2012, Carollo Engineers, pp 2-1
through 2-2
2 Wastewater Collection and Storm Drainage, 1965, Brown and Caldwell Consulting Engineers, pp 4, 6-7, 143
3 Long Range Facilities Plan for the Regional Water Quality Control Plant, August 2012, Carollo Engineers, pg 2-2
4 Wastewater Collection System Master Plan — Capacity Assessment, January 2004, MWH Americas, Inc., pg ES -2
February 2018 8 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
response to these studies the City commenced an accelerated sewer system rehabilitation
program.5 At that point the sewer system comprised over 190 miles of mains.6
A Master Plan study in 1988 recommended a variety of capacity expansions, and in the 1990s
the City completed about half of them. However, a 2004 Master Plan update found that the
accelerated sewer rehabilitation plan started in the early 1990s had substantially reduced
infiltration, easing the capacity problems that had led the to the recommended capacity
increases in the 1988 study. Several of the outstanding projects were canceled and replaced
with a different set of projects.' At the same time the City updated its hydraulic model and
developed greater capacity to do system planning in house.
SECTION 4B: CUSTOMER BASE
The City of Palo Alto's Wastewater Collection Utility provides sewer service to the residents and
businesses of Palo Alto. It is distinct from the Wastewater Treatment Utility, which provides
treatment services for surrounding communities in addition to Palo Alto. Nearly 22,500
customers are connected to the sewer system, approximately 20,650 (92%) of which are
residential and 1,850 (8%) of which are non-residential. Residential customers pay a flat fee for
service. Non-residential customers are billed for sewer service based on their metered winter
water usage. There is relatively little variability in revenues for this utility.
SECTION 4C: COLLECTION SYSTEM
The Wastewater Collection Utility delivers all the wastewater it collects to the Regional Water
Quality Control Plant (RWQCP) operated by the City of Palo Alto under a partnership agreement
with several surrounding communities. Palo Alto is responsible for 35% to 40% of the
wastewater sent to the RWQCP. This Financial Plan does not describe the cost of running the
RWQCP in detail as this cost is contained in the Wastewater Treatment Utility; however since
these costs are a major driver of CPAU's sewer rates, Section 6A: Wastewater Treatment Costs
provides some discussion of future trends in treatment costs. Treatment costs make up nearly
half of the Wastewater Collection Utility's expenses as shown in Table 1 above.
To collect wastewater from its customers and deliver it to the RWQCP, CPAU owns roughly
18,140 sewer laterals (which collect wastewater from customers' plumbing systems) and 217
miles of sewer mains (which transport the waste to the treatment plant). These laterals and
mains, along with the associated manholes and cleanouts, represent the vast majority of
infrastructure used to collect wastewater in Palo Alto. CPAU conducts a sewer rehabilitation
and replacement program to replace mains over time as they deteriorate or to increase
capacity. For more discussion of this program, see Section 6C: Capital Improvement Program
(CIP). CIP expense accounts for roughly a quarter of the utility's expenditures.
In addition to its CIP, CPAU performs various maintenance activities on the sewer system.
These include inspecting and repairing sewer laterals, responding to sewer overflows, regularly
5 CMR 183:90, Infrastructure Review and Update, March 1, 1990
6 Master Plan of the Wastewater Collection System, December 1988, Camp Dresser & McKee, Inc., pg 1-2
7 Wastewater Collection System Master Plan — CapacityAssessment, January 2004, MWH Americas, Inc., pg ES -3
February 2018 9 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
cleaning sections of the system heavily impacted by fats, oils, and grease (FOG), and building
and replacing sewer laterals for new or redeveloped buildings. The utility also shares the costs
of other operational activities (such as customer service, billing, equipment maintenance, and
street restoration) with the City's other utilities. These maintenance and operations expenses,
as well as associated administration, debt service, rent, and other costs, make up approximately
another quarter of the utility's expenses.
SECTION 4D: COST STRUCTURE AND REVENUE SOURCES
In FY 2017, treatment costs represented slightly more than half of the Wastewater Collection
Utility's costs (54%), and Operations costs represented nearly a third (37%), while Capital
spending was relatively low (9%). Figure 1 shows these expenditures. The utility's revenue in FY
2017, shown in Figure 2, came primarily from sewer charges (92%), with the remainder coming
mainly from capacity and connection fees and other sources (8%).
Figure 1: Cost Structure (FY 2017) Figure 2: Revenue Structure (FY 2017)
MI Treatment
t Operations
Capital
Sales Revenues si Other Revenues
SECTION 4E: RESERVES STRUCTURE
CPAU maintains six reserves for its Wastewater Collection Utility to manage various types of
contingencies. Below is a summary of these reserves and Appendix C: Wastewater Collection
Utility Reserves Management Practices provides more detailed definitions and guidelines for
reserve management:
• Reserve for Commitments: A reserve equal to the utility's outstanding contract
liabilities for the current fiscal year. Most City funds, including the General Fund, have a
Commitments Reserve.
• Reserve for Reappropriations: A reserve for funds dedicated to projects reappropriated
by the City Council, nearly all of which are capital projects. Most City funds, including
the General Fund, have a Reappropriations Reserve.
• Capital Improvement Program (CIP) Reserve: The CIP reserve can be used to
accumulate funds for future expenditure on CIP projects and is anticipated to be empty
unless a major one-time CIP expenditure is expected in future years. It also acts as a
February 2018 101
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
contingency reserve for the CIP. This type of reserve is used in other utility funds
(Electric, Gas, and Water) as well.
• Rate Stabilization Reserve: This reserve is intended to be empty unless one or more
large rate increases are anticipated in the forecast period. In that case, funds can be
accumulated to spread the impact of those future rate increases across multiple years.
This type of reserve is used in other utility funds (Electric, Gas, and Water) as well.
• Operations Reserve: This is the primary contingency reserve for the Wastewater
Collection Utility, and is used to manage yearly variances from budget for operational
costs. This type of reserve is used in other utility funds (Electric, Gas, and Water) as well.
• Unassigned Reserve: This reserve is for any funds not assigned to the other reserves
and is normally empty.
SECTION 4F: COMPETITIVENESS
Table 6 shows the monthly sewer bills for residential customers compared to what they would
be in surrounding communities. The annual sewer bill for a Palo Alto customer is $418 under
current rates, 33% lower than the average neighboring community. Palo Alto has the second
lowest bill of the group.
Table 6: Residential Monthly Equivalent Sewer Bill Comparison ($)
Palo Alto
Neighboring Communities
Neighboring
Community
Average
Menlo
Park
Redwood
City
Mountain
View
Los Altos
Santa
Clara
Hayward
34.83
89.33
76.68
37.75
36.27
41.65
31.29
52.16
Based on rates as of February 2018
Table 7 compares the sewer bills for two classes of commercial customers to what they would
be under surrounding communities' rate schedules. Note that other communities often have
specific rates for industrial customers that discharge high intensity wastewater, such as food
processors or chemical or electronics manufacturers, but Palo Alto does not currently have any
customers that require these special rates. Palo Alto is less competitive with surrounding cities
with regards to commercial sewer rates, but is not the most expensive jurisdiction in all cases.
February 2018 111
WASTEWATER Cr)! ( ECTION UTILITY FINANCIAL PLAN
Table 7: Commercial Monthly Sewer Bill Comparison ($)
Palo Alto
Neighboring Communities
Neighboring
Community
Average
Menlo
Park
Redwood
_ City
Mountain
View
Los Altos
Santa
Clara
Hayward
General
Commercial
93.94
133.84
101.22
69.16
50.76
65.94
71.12
82.01
Restaurant
581.28
815.36
969.36
539.84
137.70
590.24
514.64
594.52
Based on rates as of February 2018
SECTION 5. TILITY FINANCIAL PROJECTION
T
SECTION 5A: FY 2013 TO FY 2017 COST AND REVENUE TRENDS
Figure 3 shows the Wastewater Collection Utility's actual expenses and revenues for the past
five years and projections through FY 2028. Collections operations expenses have fluctuated
but on average have grown around 2% per year. Wastewater collection capital investment
fluctuated greatly during this time period: FY 2014 saw a reduction in investment mainly due to
delayed main replacement projects, and FY 2015 and 2016 saw increased capital investment as
those capital projects were completed. Treatment operations costs and capital expense stayed
relatively flat during this timeframe.
Since the revenue for this utility is very stable, revenue changes closely follow rate changes. The
other large revenue item of note is the continued connection and capacity fees from new
construction. These fees have grown dramatically between FY 2010 and FY 2015 and then
plateaued.
Figure 3: Wastewater Collection Utility Expenses, Revenues and Rate Changes
Actual Costs through FY 2017 and Projections through FY 2028
535
5% 0% 0% 0% 9% 9% 0% 11% 12% 10% 6% 4% 4% 4% 4% 3%
530
525
$20
0
2
+n $15
510 --
55 —
50
2013
2014 2015
2015
Actual
2016
2017
2018
2019
2020
2021
2022 2023 2024
Projected
2025
2026
2027
194
2028
— Revenue
❑ Treatment
Operations
• Treatment Capital
Expense & Debt
7 Collection Capital
Expense
• Collection Debt
Service
0 Collection Operations
February 2018 121 Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
SECTION 5B: FY 2017 RESULTS
Actual revenues for FY 2017 were lower than forecast revenues ($18.4 million actual vs. $19.0
million projected). Total FY 2017 expenses were $15.3 million compared to projections of $17
million in the FY 2018 Financial Plan. Table 8 summarizes the variances from forecast.
Table 8: FY 2017, Actual Results vs. Financial Plan Forecast ($000)
Net Cost/
(Benefit)
Type of
Change
Wastewater treatment costs lower than forecast
$(1,464)
Cost decrease
Sales revenues higher than forecast
$(121)
Revenue increase
Interest, Connection, capacity fees and other revenues
$723
Revenue decrease
Operations, capital and other cost decreases
$(245)
Cost decrease
Net Cost / (Benefit) of Variances
$(1,108)
SECTION 5C: FY 2018 PROJECTIONS
This year staff is estimating higher costs for FY 2018. Capital Improvement costs increased by
around $0.8 million for main replacement project design costs not included in last year's
projections. Another contributing factor is staff projects higher treatment costs due to
increasing capital and operations costs at the RWQCP. Additionally, actual revenues from
connection and capacity fees and interest were lower than projected in FY 2017; for this reason
staff projects less revenue from these sources in FY 2019. Table 9 summarizes the variances
from the prior forecast.
Table 9: FY 2018, Updated Projections vs. Financial Plan Forecast ($000)
Net Cost/
(Benefit)
Type of
Change
Wastewater treatment cost increases
$486
Cost increase
Higher Capital Improvement and Operations costs
$1,197
Cost increase
Reduced Revenues
$478
Revenue decrease
Net Cost / (Benefit) of Variances
$2,162
SECTION 5D: FY 2019 — FY 2028 PROJECTIONS
As shown in Figure 3 above (and, in more detail, in Appendix A: Wastewater Collection Financial
Forecast Detail), the Wastewater Collection Utility's total costs are projected to increase by
roughly 5.3% per year on average for FY 2018 through FY 2028. The majority of this increase is
due to projected capital cost increases for treatment as well as collection. The treatment plant
itself is facing the need for major upgrades in coming years, due to aging equipment and
changing environmental regulations. The costs of the plant are shared among member
February 2018 13 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
agencies, with members expected to see average cost increases of around 5% per year over the
forecast horizon. As noted previously, capital expenses were lower than usual in FY 2017 and
FY 2018 as sewer main replacement projects were delayed to enable staff to complete previous
year projects, but regular annual main replacement will resume in FY 2019. However,
underground construction costs for all utilities have increased significantly. This means that the
FY 2019 capital budget for a main replacement project is 30.7% higher than in FY 2016, which
was the most recent "normal" year in the CIP program (a year when an annual sewer main
replacement project was budgeted). This increase in construction costs is a partial contributor
to future year rate increases. After FY 2019, staff expects overall collection system capital costs
to increase on average by 1.3% for FY 2020 through 2028.
The red line in Figure 3 shows revenue levels and the figure shows that there have been several
years where costs exceeded revenues. This trend is projected to continue every year from 2018
through 2021. This will result in a fairly rapid reduction of reserves. Staff projects annual rate
increases of 11% to 12% in the near term, decreasing in later years, are required to keep
reserves from dropping below minimum reserve guidelines. Figure 4 below shows the relative
drop in reserves through FY 2021, which begin to recover starting in FY 2022.
Figure 4: Wastewater Collection Reserves Projections
$20
$18
$16
$14
$12
5$10
$8
$6
$4
$2
so
N CO 01 0 rI N M L11 lD I. CO
a- 1 i--I 1--I N N N N N N N N N
O O O O O O O O O O O O
N N N N N N N N N N N N
>- >- >- >- } >- >- >- >- >- >- >-
u_ LL LL LL LL LL LL LI LL LL LL LA_
❑ Rate
Stabilization
❑ Operations
Reserve
• CIP Reserve
and
Commitments
February 2018
141Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
SECTION 5E: RISK ASSESSMENT AND RESERVES ADEQUACY
The Wastewater Collection Utility currently has one contingency reserve, the Operations
Reserve. This Financial Plan as presented results in the Operations Reserve nearing the
minimum guideline level, but reaching the Target level by the end of the forecast period.
Alternative plans could result in reserves being higher, but these would result in larger rate
increases. Similarly, lower rate increases would result in lower reserves for a longer period.
Figure 5 below shows the proposed Staff plan.
Figure 5: Operations Reserve Adequacy
$12
$10
$s
cc
0
$6
$4
$2
$o
N CO O1 0 .--1 N CO LA Lo r- W
I-1 .-1 .-1 N N N N N N N N N
0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N
>- r >- >- >- > >-
- r r > >-
LL LL LL LL LL LL LL LL LL LL LL
— Reserve (Year -End)
— Reserve Maximum
- - Reserve Target
— Reserve Minimum
— Risk Assessment
Staff performs an annual assessment of risks for the Wastewater Collection Utility. For this
evaluation, staff estimates the revenue shortfall due to:
1. the maximum observed budget -to -actual variance in one year during the past five years;
2. an increase of 10% in system improvement CIP expenditures for the year; and
3. an increase of 10% in treatment costs.
Table 10 summarizes the risk assessment calculation for the Wastewater Collection Utility
through FY 2023. The Operations Reserve is projected to be adequate to manage these levels
of risk over the entire forecast period.
February 2018 15 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
Table 10: Wastewater Collection Risk Assessment
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
Total Revenue ($000)
18,988
21,259
23,401
24,840
25,854
Max. Historical Budget -to -Actual variance
4%
4%
4%
4%
4%
Budget -to -Actual Risk ($000)
760
850
936
994
1,034
System Rehabilitation CIP Budget ($000)
6,211
5,505
5,690
5,840
6,015
CIP Contingency @10% ($000)
621
551
569
584
602
Treatment Budget ($000)
10,798
11,846
12,888
13,571
14,005
Treatment Cost Contingency @10% ($000)
1,080
1,185
1,289
1,357
1,401
Total risk assessment value ($000)
2,460
2,585
2,794
2,935
3,036
Projected Operations Reserve Level ($000)
3,461
3,503
3,269
3,373
3,884
SECTION 5F: ALTERNATE SCENARIOS
When utilizing a combination of reserves and rate changes, many possible alternatives exist.
Alternative scenario 1 explores a revised set of rate increases that brings reserves below the
minimum guideline level for three years (This 10% proposal was originally brought to the UAC
on March 7, 2018, but the UAC instead voted for the Current Plan of 11%). Table 11 below
shows the rate increases associated with this scenario and Figure 6 show the reserves dropping
below the minimum guideline level.
Table 11: Alternative Scenario 1- Reserves Below Minimum Guideline
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
Current Plan
11%
12%
10%
6%
4%
Alternative
10%
11%
11%
9%
4%
February 2018 16 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
Figure 6: Alternative Scenario 1— Reserves Below Minimum Guideline
$12
N
0
$10 -
$8 -
$6 -
$4
$2
$0
N CO 01 0 .-1 N CO C N lO N CO
.-4 .--1 .-1 N N N N r.1 N N N N
0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N
>- >- >- >- >- >- >- >- >- >- >- >-
LL LL LL LL LL LL LL LL LL LL LL LL
— Reserve (Year -End)
— Reserve Maximum
- - Reserve Target
- Reserve Minimum
— • Risk Assessment
Similarly, another possible alternative would be to try and keep rate increases below 10%. In
alternative scenario 2, a series of 9% rate increases from FY 2019 to FY 2024 would result in
reserves nearly going to zero in FY 2022. While useful for purposes of illustration, this is not a
course Staff would recommend. Figure 7 below shows the impact of alternative scenario 2 on
reserves.
February 2018 171
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
Figure 7: Alternative Scenario 2 — Keep Rate Increases Below 10%
$12
$10
01
c
0
2
$8
$6
$4
$2
$0
n CO Q1 O .-1 (N m v ui tO i\ CO
.-1 .--1 .-1 N N N N N N N N N
O 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N
>- LL LL LL LL LL LL LL LL U LL LL
SECTION 5G: LONG-TERM OUTLOOK
— Reserve (Year -End)
— Reserve Maximum
— — Reserve Target
— Reserve Minimum
— Risk Assessment
In the longer term (5 to 35 years) the primary factor that could lead to increased costs for the
Wastewater Collection Utility are major upgrades at the RWQCP, a share of which will be
allocated to the utility as part of treatment costs. These upgrades includes replacement or
rehabilitation of the parts of the facility that pump raw sewage to the main treatment works
(the headworks), separate out primary sludge (the primary settling tank), process sludge (the
bio-solids facility), and treat wastewater (the fixed film reactors). Upgrades to the laboratories
and operational buildings are planned as well. In addition, the 72 -inch regional trunk sewer line
flowing into the plant needs to be evaluated and rehabilitated.
SECTION 6A: WASTEWATER TREATMENT COSTS
Treatment expenses represent the Wastewater Collection Utility's share of the costs of
operating the RWQCP. Per the partnership agreements between Palo Alto and its partner
agencies, these charges are assessed based on a formula that takes into account the total
amount of wastewater delivered, the amount of organic material in it, its ammonia content,
and the total suspended solids it is carrying. The Wastewater Collection Utility's assessed share
of the RWQCP's revenue requirement fluctuates in the 38% to 40% range. Mountain View is
February 2018 181
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
the other large agency served by the RWQCP (39% of the revenue requirement for FY 2014)
with the smaller agencies (Stanford, Los Altos, East Palo Alto, and Los Altos Hills) making up the
remainder of the flow to the treatment plant.
Based on detailed project cost projections provided by RWQCP staff, treatment costs are likely
to continue to increase by roughly 5% per year through at least 2030. Wastewater Treatment
Fund costs are increasing due to rising salary and benefit costs as well as the attendant
allocated charges for centralized city services needed to support wastewater treatment fund
operations. Additional expenses include increased water and air permitting fees from the
Regional Water Quality Control Board and the Bay Area Air Quality Management District.
Commodity and utility rates to operate the facility are also increasing with the largest increases
in FY 2019 for electrical, water, gas, and storm rates. Chemical expenses, needed to adjust
water quality and meet permit requirements, are also increasing modestly per the latest
chemical market conditions and procurement contract conditions.
Capital projects, parts, and materials are increasing at about 3% per year to keep up with
ongoing replacement of aging equipment. Larger increases to capital expenses are expected to
begin in FY 2020 in the form of new debt service for major projects to implement the Plant's
capital program. The Plant's major project in FY 2018 will be making progress constructing the
Sludge Dewatering and Truck Loadout Facility, which will allow (in about 2019) the retirement
of the Plant's two sewage sludge incinerators that have been in operation since 1972.
SECTION 6B: OPERATIONS
Operations costs include the Customer Service, Distribution Operations, Engineering, and
Allocated Charges categories in Appendix A: Wastewater Collection Financial Forecast Detail.
Debt service, rent, and transfers are also included in this category. Customer Service costs are
primarily related to the call center and collections on delinquent accounts. The Distribution
Operations category includes preventative and corrective maintenance on sewer mains and
laterals, investigation of sewer overflows, regular cleaning of heavily impacted sections of the
sewer system, and services shared with other utilities (such as street restoration and
equipment maintenance). Allocated Charges include the costs of accounting, purchasing, legal,
and other administrative functions provided by the City's General Fund staff, as well as shared
communications services and Utilities Department administrative overhead and billing system
maintenance costs.
Operations costs are projected to increase by 2.7% per year, on average, over the forecast
period. Underlying these projections are salary and benefit, consumer price index, and other
cost projections used in the City's long-range financial forecast.
SECTION 6C: CAPITAL IMPROVEMENT PROGRAM (CIP)
The Wastewater Collection Utility's CIP consists of the following programs:
February 2018 19 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
• The Sanitary Sewer Replacement/Rehabilitation (SSR) Program, under which the
Wastewater Collection Utility replaces aging sewer mains.
• Customer Connections, which covers the cost when the Wastewater Collection Utility
installs new laterals or upgrades existing laterals at a customer's request in response to
development or redevelopment. CPAU charges a fee to these customers to cover the
cost of these projects.
• Ongoing Projects, which covers the cost of replacing deteriorated manholes and sewer
laterals, as well as the cost of capitalized tools and equipment.
The Sanitary Sewer Replacement and Rehabilitation Program funds the replacement of
deteriorating sewer mains to increase capacity or improve pipe condition in various parts of the
sewer system. The sewer system consists of over 217 miles of mains, and CPAU uses a variety
of tools to establish which sections are in need of replacement. The 2004 Master Plan study
identified wastewater mains with capacity deficiency and they have been corrected in past CIP
projects. For condition assessment, maintenance statistics (such as records of the location and
number of sewer overflows on the system) and videotape of sewer mains from a past video
inspection of sewer main project or during regular cleaning can reveal areas with deteriorating
pipe. CPAU uses a structural rating system to grade the pipe defects. The video -inspection
data and maintenance records are used to plan and prioritize sewer main replacement and
rehabilitation.
Utilities also coordinates with the Public Works street maintenance program to avoid cutting
into newly repaved streets. A major goal of the replacement program is to minimize sewer
overflow and reduce groundwater and rainwater infiltration. As mains deteriorate they begin
to allow roots into the pipe joints to create blockages, permitting groundwater and rainwater to
infiltrate the system. Some level of infiltration is expected on any sewer system, but if there is
too much, the combined flow of wastewater and groundwater/rainwater can overwhelm the
capacity of various parts of the sewer system. Reducing infiltration can reduce the need to
expand the system to accommodate increased flow, as well as reducing unnecessary amounts
of water to be treated at the treatment plant. To achieve this goal, deteriorating mains are
either rehabilitated with a plastic lining or replaced with new HDPE pipe. Staff has been
replacing/rehabilitating the mains as needed according to their condition. In addition,
Wastewater Operations' routine maintenance continues to stay on schedule to minimize sewer
overflows.
Over the last few years, main replacement costs have been increasing for utilities due to
economic activity in the Bay Area causing construction cost inflation. It is likely that this trend
will continue in the short term.
This increase in cost is a partial reason for a one year delay in projects. Staff deferred its FY
2018 replacement project because all Field Inspectors were busy providing inspection services
for one water and two previous wastewater construction projects. Several Engineers were also
focusing on designing, coordinating amongst all departments, and setting up the contract for
the complicated Upgrade Downtown project. However, Utilities Engineering has been
consistently replacing aging sewer mains since the early 90's. The proactive replacement
program keeps the collection system in good condition. Between 1990 and 2017, 67 miles or
February 2018 20IPage
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
31% of the collection system has been replaced or rehabilitated (the red -colored lines shown in
the attached map in Appendix D: Map (CPA Wastewater Collection System - Sewer Mains
Replaced or Rehabilitated since 1990). This is an average of approximately 13,530 feet (^'2.6
miles), or 1.2% of the system, of sewer main being replaced or rehabilitated per year. Given
sewer main expected lifetimes, this is a sustainable replacement rate.
In many cases, annual projects get combined together to save administrative time/cost and to
make the project more attractive for contractors to bid. The most recent Sanitary Sewer
Replacement (SSR) projects SSR 24/25/26 and SSR 27 were substantially completed in April of
2017. Staff is currently working on re-evaluating and re -prioritizing the scope of future projects
based on the structural rating system and available budget. Part of the assessment is to
evaluate whether a slightly reduced replacement rate would jeopardize the integrity of the
system, since large portions of the mains that have not been replaced or rehabilitated are
located in sub -divisions that were developed between 1950 and 1970.
Customer Connections costs are projected to increase steadily by around 3% each year through
the end of the forecast period. Actual expenses for these projects fluctuate annually depending
on how many defective laterals and manholes are discovered during routine maintenance, as
well as how much development and redevelopment is going on that prompts the replacement
or upgrade of sewer laterals. It is worth noting that property owners pay a fee for sewer lateral
replacement or expansion during redevelopment, so when the number of projects increases, so
does fee revenue.
Table 12 displays projected CIP spending for the 5 -year financial forecast period.
Table 12: Projected CIP Spending
Project Category
Sewer Rehab/Augmentation
Current Spending, Remain.
Budget* Curr. Yr Budget** Committed FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
2,665
1,626 (290) 1,336
(960)
1,704
1,416
4,800
4,520
4,675
4,796
4,939
Ongoing Projects
535
959 985 1,015 1,043 1,073
Customer Connections
458 (136) 321
54
418 431 443 457 470
TOTAL
4,748
(1,386) 3,362
2,005
6,176 5,936 6,133 6,296 6,483
*Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year
**Equal to CIP Reserves (Reserve for Reappropriations + Reserve for Commitments).
Aside from Customer Connections, the CIP plan for FY 2019 to FY 2023 is funded by sewer rates
and capacity fees. Appendix B: Wastewater Collection Utility Capital Improvement Program
(CIP) Detail shows the details of the plan.
SECTION 6D: DEBT SERVICE
The Wastewater Collection Utility currently pays its share of one bond issuance, the 1999 Utility
Revenue Bonds, Series A, which is due to be retired in 2024. This $17.7 million issuance
refinanced various earlier Storm Drain, Wastewater Treatment, and Wastewater Collection
Utility bond issuances. The Wastewater Collection Utility's share of the issuance was roughly
$1.9 million. This amount represented the second refinancing of the remaining principal of a
1990 bond issuance, which itself was a refinancing of a 1985 issuance that financed a variety of
improvements to the sewer system. The cost of debt service for the Wastewater Collection
February 2018 21 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
Utility's share of this bond issuance for the financial forecast period is roughly $128,000 per
year as shown in Table 13 below.
Table 13: Wastewater Collection Utility Debt Service ($000)
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
1999 Utility Revenue Bonds, Series A
128
128
129
129
129
0
The 1999 Utility Revenue Bonds include two covenants stating that 1) the Wastewater
Collection Utility will maintain a debt coverage ratio of 125% of debt service, and 2) that the
City will maintain "Available Reservesi8 equal to five times the annual debt service. The current
financial plan maintains compliance with both covenants throughout the forecast period. Table
14, below, shows compliance with the first covenant. Due to the small size of the annual debt
service payment for these bonds, the Wastewater Collection Utility's Operations Reserve alone
more than satisfies the second covenant at more than 30 times annual debt service throughout
the forecast period.
Table 14: Debt Service Coverage Ratio ($000)
FY 2018
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
Revenues
17,167
18,978
21,249
23,391
24,830
25,844
Expenses (Excl. CIP
and Debt Service)
14,214
14,320
15,531
16,732
17,560
18,024
Net Revenues
2,952
4,658
5,718
6,658
7,270
7,819
Debt Service
128
128
128
129
129
129
Coverage Ratio
2299%
3633%
4477%
5179%
5632%
6049%
The Wastewater Collection Utility's reserves (but not its net revenues) are also considered
security for the Storm Drain and Wastewater Treatment Utilities' shares of the debt service on
the 1999 bonds. Throughout the term of the bonds there remains a small risk that the
Wastewater Collection Utility's reserves could be called upon to make a debt service payment
on behalf of one of those utilities if it cannot meet its debt service obligations. Staff does not
foresee this occurring based on the current financial condition of those utilities. If the
Wastewater Collection Utility's reserves were used this way, any amounts advanced would
have to be repaid by the borrowing utility.
One other bond series is secured by the net revenues (but not the reserves) of the Wastewater
Collection Utility. The 1995 Series A Utility Revenue Bonds issued for the Storm Drain utility
were secured by the net revenues of the City's "Enterprise," which was defined as the City's
water, gas, wastewater, storm drain, and electric utilities, and are senior to the 1999 bonds
referenced above. Debt service payments of roughly $680,000 per year are made on the 1995
Series A bonds by the City's Storm Drain Utility, and staff does not currently foresee any risk of
that utility being unable to make payment.
8 Available Reserves as defined in the 1999 Utility Revenue Bonds included reserves for the Water, Wastewater
Treatment, Wastewater Collection, Refuse, Storm Drain, Electric, and Gas Utilities
February 2018 22 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
SECTION 6E: OTHER REVENUES
The utility has seen substantial increases in connection and capacity fee revenues in recent
years. These fees are imposed to cover the cost of installing new service lines and the
customer's impact on the overall system capacity. These are assumed to continue, albeit
slightly reduced from current levels. Income from interest and transfers in are projected to
remain steady through the forecast horizon.
SECTION 7: COMMUNICATIONS PLAN
The FY 2019 Wastewater Collection Utility communications strategy covers three primary areas:
rates, maintenance and operations, and safety. Communication about wastewater rate
adjustments will highlight the important infrastructure and operations upgrades that are
occurring at the Regional Water Quality Control Plant to improve wastewater collection utility
services. To keep customers apprised of the status and accomplishments of CIP projects, a
network of project web pages are maintained and updated as needed. Traffic is driven to the
website via ads in newspapers and local publications, utility bill inserts, social media and email
newsletters.
An important communications topic for the wastewater utility is avoiding sewer back-ups due
to FOG (fats, oil and grease) and trash being dumped down drains and toilets. Safety topics are
emphasized year-round. Staff continues its outreach goal of educating customers about the
utility's gas -sewer line cross -bore inspection program, including the importance of calling
Utilities prior to clearing sewer lines in the event of a sewer back-up.
Promotional activity about wastewater utility maintenance and safety operations includes use
of bill inserts, ads in local print publications, website pages, email newsletters and social
media. While print materials and website pages feature prominently, CPAU is increasing the
outreach emphasis on more direct communication with customers, including through use of
social media, email newsletters, digital ads and videos, including featuring actual staff who
work in the Wastewater division. Staff is also attending more community safety/emergency
preparation events and neighborhood meetings.
February 2018 23 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
Appendix A: Wastewater Collection Financial Forecast Detail
Appendix B: Wastewater Collection Utility Capital Improvement Program (CIP) Detail
Appendix C: Wastewater Collection Utility Reserves Management Practices
Appendix D: Map (CPA Wastewater Collection System - Sewer Mains Replaced or Rehabilitated
since 1990)
Appendix E: Sample of Wastewater Collection Outreach Materials
February 2018 241 Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
APPENDIX A: WASTEWATER COLLECTION FINANCIAL FORECAST DETAIL
February 2018 25 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
City of Palo Alto
Actual
2016
($'000)
1
Wastewater Collection
Actual
2017 2018
2019 2020
2021 2022 2023 2024 2025 2026 2027
2028
Fiscal Year
Actual
2013
Actual 1 Actual
2014 1 2015
1
2
3
% CHANGE IN RETAIL RATE
PROJECTED CHANGE IN RETAIL SALES REVENUE
1. 5%
715
0% 0%
- ( -
9%
1,352
9% 0%
1,416 '', -
11%
1,889
12%
2,288
10% 6%
2,135 ''. 1,409
4% 4%
996 1,036
4% 4%
1,077 1,120
3%
874
1%
300
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
RETAIL SALES REVENUE 15,019
CONNECTION AND CAPACITY FEES --. 1,609
OTHER/TRANSFERSIN 545
INTEREST (211)
TOTAL SOURCES OF FUNDS 16,963
PURCHASES/CHARGES OF UTILITIES(TREATMDIT) 8,314
ALLOCATED CHARGES(cP&oPrannNG) 1,926
CUSTOMER SERVICE 1
DISTRIBUTION OPERATIONS 2,617
ENGINEERING(OPERATING) 271
DEBT SERVICE 128
RENT 110
OTHER/ TRANSFERS OUT 147
CAPITAL IMPROVEMENT FUNDING 4,094
ALLOWANCE FOR UNSPENT CAPITAL FUNDS i
TOTAL USES OF FUNDS 17,610
INTO / (OUT OF) RESERVES (647)
14,588
1,703
361
339
16,991
6,863
2,359
133
2,570
_ 310,
129
217
241
989
-
13,811
3,180
1 14,658
1,392
753
315
17,119
I.
1 8,589
1,062
(324)
2,646
319
_ 51
223
108
3,477
-
16,150
1 969
15,648
794
321
475
17,238
8,770
1,900
(22)
2,635
347
47
293
230
4,985
-
19,184
(1,946)
17,126 '.. 17,167
1,047, 906
355 291
(88) 328
18,441 18,692
8,391 10,418
1,477 '.. 1,612
345 358
2,759 2,859
292 302
43 128
300 317
320.. 346
1,332 '.. 2,955
- -
15,259 19,296
18,978
918.
261
287
20,444
10,798
1,645
371
2,950.
311
128
334
346
6,629
(400)
23,113
21,249.
930
_ 324
212
22,715
11,846
1,676
389
3,071
323
128
337
346
5,936
(400)
23,651
23,391 24,830
943 957
291 261
217:. 153
24,842 26,201
12,888 13,571
1,711 1,749
406 421
3,188: 3,295
335 346
129 129
340 343
346 346
6,133 ': 6,296
(400)', (400)
25,076 26,097
25,844 26,878
970 985
324 ! 291
152 161
27,290 28,314
14,005 '.. 14,692
1,788 1,823
435 448
3,400 3,494
357 .. 366.
129.. -
347'.. 350
346 346
6,486'. 6,681
(515) (515)
26,779 27,686
27,953 '.. 29,072
999 1,014
261 324
164 180
29,378 30,590
15,676 16,083
1,859 1,913
461 '.. 471
3,583 3,670
376 385
- -
354 357
346'.. 346
6,882'.. 7,088
(515), (515)
29,021 29,800
29,956
1,030
291
199
31,476
16,453
1,950
477
3,724
391
-
361
346
7,302
(515)
30,490
30,280
1,045
261
210
31,797
16,914
1,995
489
3,812
400
-
364
346
7,521
(515)
31,327
3,182 (605)
(2,669)
(936)
(235) 104
511 628
356 790
986
469
21
24
23
22
25
26
27
28
29
30
31
ENDING COMMFTMENTS & REAPPROPRIATIONS 11,228
ENDING PLANT REPLACEMENT RESERVE 1,000
ENDING CIP RESERVE -
ENDING RATE STABILIZATION RESERVE . 4,104
ENDING OPERATIONS RESERVE -
_ 8,312 8,291
_ - -
- I 2,551
4,556 1 4,292
3,728 ' 2,431
4
11,088
-
978
342
3,211
-
1,814
2,224
3,891 .
5,559
1,922
-
-
-
5,658
-
3,429
3,818
6,681
9,545
1,922
-
-_
_ -
6,644
-
3,521:
3,896
6,819
9,741
1.,922
-
-
-
7,113
-
3,601
3,998
6,996
9,995
1,922'.. 1,922
- -
978 978
342 342
6,393 , 5,788
- -
1,922
-
978
-
3,461
-
1,922
-
-
-
3,503
-
1,922 1,922
- -
-
- -
3,269 3,373
- -
1,922 '.. 1,922
- -
- -
_ 3,884 4,512
- -
1,922
-
-
_ 4,868
-
UNASSIGNED RESERVES -
- -
RISK ASSESSMENT VALUE !. 2,736
OPERATIONS RESERVE GUIDELINES
MIN (60 DAYS TREATMENT/O&M EXP) :. 2,253
TARGET (105 DAYS TREATMENT/O&MEXP) 1,831
MAX (150 DAYS TREATMENT/O&M EXP) 4,506
2,230 2,722
1,915 1 2,083
3,3521. 3,646
4,788 5,208
1,618 1,984
2,460
2585
2,794; 2,935
3,036 '.. 3,164
3,324
2,305 2,686.
4,034 4,701
5,762 6,715
2,775
4,857
6,939
2,978
5,211 .
7,445
3,180 3,321
5,565 . 5,811.
7,949.. 8,301
3,421 3,538
5,986 6,191
8,551 8,844
3,724:
6,517 .
9,310
February 2018
261 Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
APPENDIX B: WASTEWATER COLLECTION UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL
Reappropriated /
Carried Forward from
Project # Project Name Previous Years
Proposed
Current Year Budget
Funding Amendments
Remaining in
Spending, CIP Reserve
Current Year Fund Commitments FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
SEWER SYSTEM REHABILITATION AND AUGMENTATION (SSR/A) PROGRAM
WC -07004 SSR/A - Project 20
WC -08012 SSR/A - Project 21
WC -09001 SSR/A - Project 22
WC -10002 SSR/A - Project 23
WC -11000 SSR/A - Project 24
WC -12001 SSR/A - Project 25
WC -13001 SSR/A - Project 26
WC -14001 SSR/A - Project 27
WC -15001 SSR/A - Project 28
WC -16001 SSR/A - Project 29
WC -17001 SSR/A - Project 30
WC -19001 SSR/A - Project 31
WC -20000 SSR/A - Project 32
WC -21000 SSR/A - Project 33
-
-
250,609
468,772
428,130
717,106
-
-
-
-
-
-
- -
- -
- -
- -
- -
97,440 -
702,600 -
-
- -
- -
- -
- -
-
-
(121,353)
(262,897)
(166,536)
(409,505)
-
-
-
-
-
-
-
-
129,256
205,875
261,594
405,041
702,600
-
-
-
-
-
-
-
94,404
186,531
518,475
616,220
-
-
-
-
-
-
-
-
-
-
-
-
4,390,000
409,849
-
-
-
-
-
-
-
-
-
-
-
4,098,490
421,684
-
-
-
-
-
-
-
-
-
-
4,209,845
465,185
-
-
-
-
-
-
-
-
-
-
-
4,348,150
448,249
-
-
-
-
-
-
-
-
-
-
4,477,495
461,696
Subtotal, Sewer Rehab./Augmentation
1,864,617
800,040 -
(960,291)
1,704,366
1,415,630
4,799,849
4,520,174
4,675,030
4,796,399
4,939,191
ONGOING PROJECTS
WC -13002 Fusion & Gen. Equip./Tools
WC -15002 WW System Improvements
WC -99013 Sewer/ Manhole Rehab.
22,854
5,452
664,965
50,000 -
246,000 -
636,540 -
-
-
(289,730)
72,854
251,452
1,011,775
22,854
185,453
326,662
50,000
253,000
655,636
50,000
260,000
675,305
50,000
269,000
695,564
50,000
276,875
716,431
50,000
285,181
737,924
Subtotal, Ongoing Projects
693,271
932,540 -
(289,730)v 1,336,081
534,969
958,636
985,305
1,014,564
1,043,306
1,073,105
CUSTOMER CONNECTIONS (FEE FUNDED)
WC -80020 Sewer System Extensions
51,9001
405,8201 -
(136,328)
321,392
54,418
417,995
430,534
443,450
456,754
470,457
Subtotal, Customer Connections
51,900
405,820 -
(136,328)v
321,392
54,418
417,995
430,534
443,450
456,754
470,457
GRAND TOTAL
2,609,788
2,138,400 -
(1,386,349)
3,361,839
2,005,017
6,176,480
5,936,013
6,133,044
6,296,459
6,482,754
Funding Sources
Connection/Capacity Fees
Funded by Rates and Other Revenue
405,820 -
1,732,580 -
417,995
5,758,485
430,534
5,505,479
443,450
5,689,594
456,754
5,839,705
470,457
6,012,297
CIP-RELATED RESERVES DETAIL
6/30/2017
6/30/2018
(Unaudited)
Reappropriations
Commitments
159,316
2,450,472
1,356,822
2,005,017
February 2018
271 Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
APPENDIX C: WASTEWATER COLLECTION UTILITY RESERVES
MANAGEMENT PRACTICES
The following reserves management practices shall be used when developing the Wastewater
Collection Utility Financial Plan:
Section 1. Definitions
a) "Financial Planning Period" — The Financial Planning Period is the range of future fiscal
years covered by the Financial Plan. For example, if the Financial Plan delivered in
conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY
2015 to FY 2019 would be the Financial Planning Period.
b) "Fund Balance" — As used in these Reserves Management Practices, Fund Balance refers
to the Utility's Unrestricted Net Assets.
c) "Net Assets" - The Government Accounting Standards Board defines a Utility's Net
Assets as the difference between its assets and liabilities.
d) "Unrestricted Net Assets" - The portion of the Utility's Net Assets not invested in capital
assets (net of related debt) or restricted for debt service or other restricted purposes.
Section 2. Reserves
The Wastewater Collection Utility's Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 3 (Reserve for Commitments)
b) For operating and capital budgets re -appropriated from previous years, as described in
Section 4 (Reserve for Re -appropriations)
c) For cash flow management and contingencies related to the Wastewater Collection
Utility's Capital Improvement Program (CIP), as described in Section 5 (CIP Reserve)
d) For rate stabilization, as described in Section 6 (Rate Stabilization Reserve)
e) For operating contingencies, as described in Section 7 (Operations Reserve)
f) Any funds not included in the other reserves will be considered Unassigned Reserves
and shall be returned to ratepayers or assigned a specific purpose as described in
Section 8 (Unassigned Reserves).
Section 3. Reserve for Commitments
At the end of each fiscal year the Reserve for Commitments will be set to an amount equal
to the total remaining spending authority for all contracts in force for the Wastewater
Collection Utility at that time.
Section 4. Reserve for Re -appropriations
At the end of each fiscal year the Reserve for Re -appropriations will be set to an amount
equal to the amount of all remaining capital and non -capital budgets, if any, that will be re -
appropriated to the following fiscal year in accordance with Palo Alto Municipal Code
Section 2.28.090.
February 2018 281
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
Section 5. CIP Reserve
The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for
capital contingencies. Staff will manage the CIP Reserve according to the following
practices:
a) The following guideline levels are set forth for the CIP Reserve. These guideline levels
are calculated for each fiscal year of the Financial Planning Period based on the levels of
CIP expense budgeted for that year.
Minimum Level
12 months of budgeted CIP expense
Maximum Level
24 months of budgeted CIP expense
b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and
the Reserve for Commitments when funds are added or removed from to that reserve
as a result of a change in contractual commitments related to CIP projects. Any other
additions to or withdrawals from the CIP reserve require Council action.
c) Minimum Level:
i) Funds held in the Reserve for Commitments may be counted as part of the CIP
Reserve for the purpose of determining compliance with the CIP Reserve minimum
guideline level.
ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present
a plan to the City Council to replenish the reserve. The plan shall be delivered by the
end of the following fiscal year, and shall, at a minimum, result in the reserve
reaching its minimum level by the end of the next fiscal year. For example, if the CIP
Reserve is below its minimum level at the end of FY 2017, staff must present a plan
by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In
addition, staff may present, and the Council may adopt, an alternative plan that
takes longer than one year to replenish the reserve, or that does so in a shorter
period of time.
d) Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds
may be added to this reserve. If there are funds in this reserve in excess of the
maximum level staff must propose to transfer these funds to another reserve or return
them to ratepayers in the next Financial Plan. Staff may also seek City Council to
approve holding funds in this reserve in excess of the maximum level if they are held for
a specific future purpose related to the CIP.
Section 6. Rate Stabilization Reserve
Funds may be added to the Rate Stabilization Reserve by action of the City Council and held
to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate
Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization
Reserve at the end of any fiscal year, any subsequent Wastewater Collection Utility
Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the
Financial Planning Period.
February 2018 29 I Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
Section 7. Operations Reserve
The Operations Reserve is used to manage normal variations in costs and as a reserve for
contingencies. Any portion of the Wastewater Collection Utility's Fund Balance not
included in the reserves described in Section 3 -Section 6 above will be included in the
Operations Reserve unless this reserve has reached its maximum level as set forth in Section
7(d) below. Staff will manage the Operations Reserve according to the following practices:
a) The following guideline levels are set forth for the Operations Reserve. These guideline
levels are calculated for each fiscal year of the Financial Planning Period based on the
levels of Operations and Maintenance (O&M) and commodity expense forecasted for
that year in the Financial Plan.
Minimum Level
60 days of O&M and commodity expense
Target Level
105 days of O&M and commodity expense
Maximum Level
150 days of O&M and commodity expense
b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations
Reserve are lower than the minimum level set forth above, staff shall present a plan to
the City Council to replenish the reserve. The plan shall be delivered within six months
of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its
minimum level by the end of the following fiscal year. For example, if the Operations
Reserve is below its minimum level at the end of FY 2014, staff must present a plan by
December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In
addition, staff may present, and the Council may adopt, an alternative plan that takes
longer than one year to replenish the reserve.
c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower
than the target level, any Financial Plan created for the Wastewater Collection Utility
shall be designed to return the Operations Reserve to its target level within four years.
d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no
funds may be added to this reserve. Any further increase in the Wastewater Collection
Utility's Fund Balance shall be automatically included in the Unassigned Reserve
described in Section 8, below.
Section 8. Unassigned Reserve
If the Operations Reserve reaches its maximum level, any further additions to the
Wastewater Collection Utility's Fund Balance will be held in the Unassigned Reserve. If
there are any funds in the Unassigned Reserve at the end of any fiscal year, the next
Financial Plan presented to the City Council must include a plan to assign them to a specific
purpose or return them to the Wastewater Collection Utility ratepayers by the end of the
first fiscal year of the next Financial Planning Period. For example, if there were funds in the
Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is
FY 2016 through FY 2020, the Financial Plan shall include a plan to return or assign any
funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative
plan that retains these funds or returns them over a longer period of time.
February 2018 30IPage
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
APPENDIX D: MAP (CPA WASTEWATER COLLECTION SYSTEM - SEWER
MAINS REPLACED OR REHABILITATED SINCE 1990)
February 2018
311 Page
WASTEWATER COLLECTION UTILITY FINANCIAL PLAN
APPENDIX E: SAMPLE OF WASTEWATER COLLECTION OUTREACH
MATERIALS
e Fat: -IF..� a Apt—✓-'
Correct alignment
St Lateral
Fats, Oils, and Grease (FOG) poured
down your sink may be costing you
money, time and hassle.
Keeping sewers clean and
safe is our job and yours.
Your Responsibility as a Customer
City of Palo Alto Utilities customers are
responsible for maintaining the sewer line, or
"lateral," that connects their home or building to
the large City sewer main, and keeping sewer
cleanouts accessible, For mare on customer and
City responsibilities far sewer lines, please visit
TOILET OR SINK BACKING UP?
CALL THE CITY
.FIRST!
(650) 496-6995
SEWER CROSSBORE
NEED TO CLEAR A SEWER LINE?
CALL US FIRST (650) 496-6995
On rare occasion:, natural gas pipelines have been found within sewer
lines_ When there is a sewer blockage, equipment used to unclog the sewer
line can penetrate the gas pipe, causing a gas release. Please call I65Up 496-6995
BEFORE your sewer pipe is cleared or rooted out. At no cost to you, we will come out
promptly to verify a natural gas pipeline is not near your sewer lime. If you fail to call us prior
to cleaning out your sewer line and you or your plumber sense or see an obstruction, be sure
to call us immediately so we can verify that a natural gas pipeline has not been damaged. Of
course, if you believe you've penetrated a gas line —or any time you smell gas —leave the
ATTACHMENT L
Not Yet Approved
Resolution No.
Resolution of the Council of the City of Palo Alto Increasing Wastewater
Rates by 11% by Amending Rate Schedules S-1 (Residential Wastewater
Collection and Disposal), S-2 (Commercial Wastewater Collection and
Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7
(Commercial Wastewater Collection and Disposal — Industrial Discharger)
RECITALS
A. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of
the City of Palo Alto may by resolution adopt rules and regulations governing utility services,
fees and charges.
B. On April 3, 2018, the City Council held a full and fair public hearing regarding the
proposed rate increase and considered all protests against the proposals.
C. As required by Article XIIID, Section 6 of the California Constitution and
applicable law, notice of the June 11, 2018 public hearing was mailed to all City of Palo Alto
wastewater customers and property owners on April 27, 2018.
D. The City Clerk has tabulated the total number of written protests presented by
the close of the public hearing, and determined that it was less than fifty percent (50%) of the
total number of customers and property owners subject to the proposed wastewater rate
amendments, therefore a majority protest does not exist against the proposal.
The Council of the City of Palo Alto hereby RESOLVES as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-1 (Residential Wastewater Collection and Disposal) is hereby amended to read as
attached and incorporated. Utility Rate Schedule S-1, as amended, shall become effective July
1, 2018.
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-2 (Commercial Wastewater Collection and Disposal) is hereby amended to read as
attached and incorporated. Utility Rate Schedule S-2, as amended, shall become effective July
1, 2018.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-6 (Restaurant Wastewater Collection and Disposal) is hereby amended to read as
attached and incorporated. Utility Rate Schedule S-6, as amended, shall become effective July
1, 2018.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule S-7 (Commercial Wastewater Collection and Disposal — Industrial Discharger) is hereby
amended to read as attached and incorporated. Utility Rate Schedule S-7, as amended, shall
become effective July 1, 2018.
180312 jb 6054068
ATTACHMENT L
Not Yet Approved
SECTION 5. The Council finds that the revenue derived from the wastewater rates
approved by this resolution do not exceed the funds required to provide wastewater service,
and the revenue derived from the adoption of this resolution shall be used only for the
purposes set forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
SECTION 6. The Council finds that the fees and charges adopted by this resolution are
charges imposed for a specific government service or product provided directly to the payor
that are not provided to those not charged, and do not exceed the reasonable costs to the City
of providing the service or product.
SECTION 7. The Council finds that the adoption of this resolution changing wastewater
collection rates to meet operating expenses, purchase supplies and materials, meet financial
reserve needs and obtain funds for capital improvements necessary to maintain service is not
subject to the California Environmental Quality Act (CEQA), pursuant to California Public
Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec.
15273(a). After reviewing the staff report and all attachments presented to Council, the Council
incorporates these documents herein and finds that sufficient evidence has been presented
setting forth with specificity the basis for this claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Mayor
APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
180312 jb 6054068
ATTACHMENT M
RESIDENTIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-1
A. APPLICABILITY:
This schedule applies to each Occupied Domesticresidential Ddwelling unit.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wwastewater Sservice.
C. RATES:
Per Month
Each Occupied Ddomestic Ddwelling unit
$3'1.8338.66
D. SPECIAL NOTES:
1. Any dwelling unit being individually served by a Wwater, Ggas, or Eelectric mMeter will be
considered continuously occupied.
2. For two or more Occupied Domestic Ddwelling units served by one Wwater Mmeter, the
monthly wWastewater charge will be calculated by multiplying the current wWastewater rate
by the number of dwelling units.
3. Each developed separate lot shall have a separate service lateral to a sanitary main or
manhole.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-1-1
dated 7-1-201.E :
CITY OF PALO ALTO
l\` UTILITIES
Effective 7-1-20186
Sheet No S-1-1
COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-2
A. APPLICABILITY:
This schedule applies to all commercial establishments other than those served under Utility Rate
Schedule S-1 (Residential Wastewater Collection and Disposal), Rate Schedule S-6 (Restaurant
Wastewater Collection and Disposal) or Rate Schedule S-7 (Commercial Establishments
Wastewater Disposal — Industrial Discharger).
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wwastewater Sservices.
C. RATES:
1. Minimum Charge per connection per month $34.8338.66
2. Quantity Rates, per 100 cubic feet (See Section D.1) $6.717.45
D. SPECIAL NOTES:
1. The monthly charge for the quantity rate set forth in Section C.2 of this rate schedule will
be based upon the average Wwater usage for the months of January, February and March,
and applied in the following July. If a Wwater Mmeter is identified as exclusively
serving irrigation landscaping, such Mmeter will be exempted from Wwastewater charge
calculations. Customers without an applicable usage history will be charged at the
minimum monthly charge until such time as such usage may reasonably be established by
the City of Palo Alto Utilities Department.
2. The City of Palo Alto Utilities Department may require Wwastewater Mmetering
facilities, in which case Sservice will be governed by terms of a special agreement
between the City and the Customer.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-2-1
dated 7-1-201:.
CITY OF PALO ALTO
l'\'% UTILITIES
Effective 7-1-20186
Sheet No S-2-1
RESTAURANT WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-6
A. APPLICABILITY:
This schedule applies to all restaurants.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wwastewater Sservices.
C. RATES:
1. Minimum charge per connection per month $34:&338.66
2. Quantity Rates, per 100 cubic feet of monthly metered Wwater usage $
10.3&11.52
D. SPECIAL NOTES:
1. The City of Palo Alto Utilities Department may require Wwastewater Mmetering facilities,
in which case Sservice will be governed by terms of a special agreement between the City
and the Customer.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-6-1
dated 7-1-201.7:=
CITY OF PALO ALTO
UTILITIES
Effective 7-1-20186
Sheet No S-6-1
COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
— INDUSTRIAL DISCHARGER
UTILITY RATE SCHEDULE S-7
A. APPLICABILITY:
This schedule applies to any establishment requiring sampling of industrial discharges in excess
of 25,000 gallons per day, or special discharge monitoring, as defined in Rule and Regulation 23,
Section D.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wwastewater Sservices.
C. RATES:
1. Collection System Operation, Maintenance, and Infiltration Inflow:
$1.912.15 per 100 cubic feet of metered water use.
2. Advanced Waste Treatment Operations and Maintenance Charge:
$1.111.27 per 100 cubic feet of metered water use
3. $ 247.56 per 1000 pounds (lbs) of COD (Chemical Oxygen Demand)
4. $ 596.62 per 1000 lbs of SS (Suspended Solids)
5. $ 3,983.85 per 1000 lbs of NH3 (Ammonia)
6. $ 14,781.25 per 1000 lbs of toxics (chromium, copper, cyanide, lead, nickel, silver, and zinc)
D. SPECIAL NOTES:
1. Water usage will be determined as defined in Rule and Regulation 23, Section D. If a
Wwater Mmeter is identified as exclusively serving irrigation landscaping, such Mmeter
will be exempted from Wwastewater charge calculations.
2. The City of Palo Alto Utilities Department may require Wwastewater Mmetering
facilities, in which case Sservice will be governed by terms of a special agreement
between the City of Palo Alto and the Customer.
3. Charges for large discharges will be determined on the basis of sampling as outlined in
Utilities Rule and Regulation 23, Section D. However, for purposes of arriving at an
accurate flow estimate, discharge Mmeters, if installed, can be utilized to measure
outflow for billing purposes. Annual charges will be determined and allocated monthly
for billing purposes.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-7-1
dated 7-1-201 65
��111/f
CITY OF PALO ALTO
1\\ UTILITIES
Effective 7-1-20186
Sheet No S-7-1
ATTACHMENT N
* NOT YET APPROVED *
Resolution No.
Resolution of the Council of the City of Palo Alto Approving the
FY 2019 Water Utility Financial Plan
RECITALS
A. Each year the City of Palo Alto ("City") regularly assesses the financial position of
its utilities with the goal of ensuring adequate revenue to fund operations. This includes
making long-term projections of market conditions, the physical condition of the system, and
other factors that could affect utility costs, and setting rates adequate to recover these costs. It
does this with the goal of providing safe, reliable, and sustainable utility services at competitive
rates. The City adopts Financial Plans to summarize these projections.
B. The City uses reserves to protect against contingencies and to manage other
aspects of its operations, and regularly assesses the adequacy of these reserves and the
management practices governing their operation. The status of utility reserves and their
management practices are included in Reserves Management Practices attached to and made
part of the Financial Plans.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby adopts the FY 2019 Water Utility Financial Plan.
SECTION 2. The Council finds that the adoption of this resolution does not meet the
California Environmental Quality Act's (CEQA) definition of a project under Public Resources
Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative
governmental activity which will not cause a direct or indirect physical change in the
environment„ and therefore, no environmental review is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
6054073
Attachment N
* NOT YET APPROVED *
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
6054073
ATTACHMENT 0
FY 2019 WATER
UTILITY
FINANCIAL PLAN
FY 2019 TO FY 2028
WATER UTILITY FINANCIAL PLAN
FY 2019 WATER UTILITY
FINANCIAL PLAN
FY 2019 TO FY 2028
TABLE OF CONTENTS
Section 1: Definitions and Abbreviations 4
Section 2: Executive Summary and Recommendations 4
Section 2A: Overview of Financial Position 4
Section 28: Summary of Proposed Actions 5
Section 3: Detail of FY 2019 Rate and Reserves Proposals 6
Section 3A: Rate Design 6
Section 38: Current and Proposed Rates 6
Section 3C: Bill Impact of Proposed Rate Changes 8
Section 3D: Proposed Reserve Transfers 9
Section 4: Utility Overview 9
Section 4A: Water Utility History 10
Section 48: Customer Base 10
Section 4C: Distribution System 11
Section 4D: Cost Structure and Revenue Sources 11
Section 4E: Reserves Structure 12
Section 4F: Competitiveness 12
Section 5: Utility Financial Projections 13
Section 5A: Load Forecast 13
Section 58: FY 2012 to FY 2016 Cost and Revenue Trends 14
Section 5C: FY 2017 Results 15
Section 5D: FY 2018 Projections 16
Section 5E: FY 2019 — FY 2028 Projections 16
Section 5F: Risk Assessment and Reserves Adequacy 18
Section 5G: Alternate Scenarios 19
May 2018 Wage
WATER UTILITY FINANCIAL PLAN
Section 5H: Long -Term Outlook 20
Section 6: Details and Assumptions 20
Section 6A: Water Purchase Costs 20
Section 6B: Operations 22
Section 6C: Capital Improvement Program (CIP) 23
Section 6D: Debt Service 26
Section 6E: Other Revenues 27
Section 6F: Sales Revenues 27
Section 7: Communications Plan 28
Appendices 29
Appendix A: Water Utility Financial Forecast Detail 30
Appendix 8: Water Utility Capital Improvement Program (CIP) Detail 32
Appendix C: Water Utility Reserves Management Practices 33
Appendix D: Description of Water Utility Operational Activities 36
Appendix E: Sample of Water Utility Outreach Communications 37
May 2018 3 I Page
WATER UTILITY FINANCIAL PLAN
SECTION 1: DEFINITIONS AND ABBREVIATIONS
BAWSCA Bay Area Water Supply and Conservation Agency
CCF The standard unit of measurement for water delivered to water customers, equal to
one hundred cubic feet, or roughly 748 gallons.
CIP Capital Improvement Program
CPAU City of Palo Alto Utilities Department
O&M Operations and Maintenance
RFC Raftelis Financial Consultants, Inc.
SFPUC San Francisco Public Utilities Commission
SFWD San Francisco Water Department
UAC Utilities Advisory Commission
WSIP The SFPUC's Water System Improvement Program to seismically strengthen the
transmission lines of the Hetch Hetchy regional water system.
SECTION 2: EXECUTIVE SUMMARY AND RECOMMENDATIONS
This document presents a Financial Plan for the City's Water Utility for the next ten years. This
Financial Plan provides revenues to cover the costs of operating the utility safely over that time
while adequately investing for the future. It also addresses the financial risks facing the utility
over the short term and long term, and includes measures to mitigate and manage those risks.
SECTION 2A: OVERVIEW OF FINANCIAL POSITION
Based on staff's most recent analysis, staff expects overall costs in the Water Utility to rise by
about 3.3% per year from fiscal year (FY) 2018 to 2028. Excluding FY 2017 (which, unlike normal
years, did not include a water main replacement project), most costs are projected to rise by 2-
4% annually through the projection period. Water supply costs, the largest component of the
utility's costs, are projected to remain relatively flat through FY 2022, based on current SFPUC
projections, then rise steeply thereafter due to a series of major capital projects on the Hetch
Hetchy water system. See Section 6A: Water Purchase Costs for more information. Capital
projects, with several reservoir and tank rehabilitation projects scheduled for FY 2019 through
FY 2021, as well as increases to main replacement project costs to reflect rising construction
costs. More detail on CIP costs is discussed in Section 6C: Capital Improvement Program (CIP)
below. Table 1 below shows the costs for the Water Utility from FY 2017 through FY 2028.
Table 1: Expenses for FY 2017 to FY 2028 (Thousand $'s)
Expenses
($000)
2FY
017
(act.)
FY
2018
(est.)
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
Water
Purchases
20,075
22,062
22,611
22,366
22,124
21,884
23,401
25,915
26,874
28,261
29,212
30,624
Operations
15,965
18,627
19,087
19,559
20,032
20,472
20,916
21,306
21,684
22,095
22,371
22,766
Capital
Projects
4,110
8,267
13,695
13,210
16,765
10,709
11,023
11,344
11,675
12,024
12,373
12,737
TOTAL
40,151
48,956
55,394
55,135
58,920
53,065
55,340
58,566
60,233
62,380
63,956
66,127
May 2018
41 Page
WATER UTILITY FINANCIAL PLAN
This proposed financial plan projects that the Water Utility needs the rate increases shown in
Table 2 to ensure that revenues cover rising costs and reserves remain healthy. While costs are
increasing roughly 3.4% per year through FY 2024, staff projects a need for sales revenue
increases averaging roughly 4% per year over that period. This is due to the fact that revenue is
currently slightly below costs and also because little or no increase is expected in non -sales
revenue (e.g. interest, connection fees).
The table also shows rate projections from last year's Financial Plan. Last year's plan projected
earlier, generally higher rate increases. However, the delay of FY 2017 water main replacement
projects as well as post -drought sales revenues resulted in an increase in reserves, which
enabled the more gradual increases projected in the current plan. The current plan assumes
that the Rate Stabilization Reserve will be drawn down faster and the Operations Reserve run
closer to the minimum guideline level for the next several years, in accordance with the
Finance Committee's direction on April 17, 2018.
Table 2: Proposed and Projected Water Rate Changes for FY 2019 to FY 2028
Projection
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
Current
3%
4%
4%
4%
5%
6%
5%
5%
4%
4%
Last year
6%
6%
6%
6%
6%
2%
2%
2%
1%
N/A
2 years
9%
6%
2%
2%
2%
3%
5%
3%
N/A
N/A
The Water Utility has a Rate Stabilization Reserve that can be used to smooth rate increases
over several years. This Financial Plan projects that these reserves will be exhausted by the end
of FY 2021. The Water Utility also has a Capital Improvement Program (CIP) Reserve that can be
used to offset one-time unanticipated capital costs. This Financial Plan assumes that the CIP
Reserve will be used for unanticipated capital expenses or returned to the Operations Reserve
by the end of FY 2020. The Water Utility Operations Reserve was above the maximum guideline
level at the end of FY 2017, mainly due to larger than anticipated drought surcharge revenue.
However, these funds will be needed to fund the Water Utility in FY 2018 and FY 2019, bringing
the Operations Reserve within guidelines by FY 2020. Table 3 shows the projected reserve
transfers over the forecast period.
Table 3: Transfers To/(From) Reserves for FY 2018 to FY 2028 ($000)
Reserve
FY 2018
FY 2019
FY 2020 to FY 2028
Capital Improvement
-
-
(2,726)
Rate Stabilization
-
-
(4,069)
Operations
-
-
6,785
SECTION 2B: SUMMARY OF PROPOSED ACTIONS
Staff proposes the following actions for the Water Utility in FY 2019:
1. Increase rates to raise an additional 3% in revenue to fund increases to capital
expenditures and increased operations costs. Section 38: Current and Proposed Rates
describes this increase in more detail.
May 2018 51
WATER UTILITY FINANCIAL PLAN
SECTION 3: DETAIL OF FY 2019 RATE AND RESERVES PROPOSALS
SECTION 3A: RATE DESIGN
The Water Utility's rates are evaluated and implemented in compliance with the cost of service
requirements and procedural rules set forth in the California Constitution under Article 13 (per
Proposition 218). The City structured current rates based on staff's assessment of the financial
position of the Water Utility, and updated current rates using the methodology from the March
2012 Palo Alto Water Cost of Service & Rate Study by Raftelis Financial Consultants, Inc. (RFC)
(Staff Report 2676), as well as RFC's 2015 Memorandum: Proposed Water Rates updating the
2012 Study and analyzing drought rates (Staff Report 5951). Staff plans to review and update
this cost of service study in 1 to 2 years, unless any major changes occur to the utility's
operations or customer base that would necessitate an earlier study. Before conducting any
new cost of service study, staff will review current rates and the scope of the study with the
Utilities Advisory Commission (UAC) and Council to determine the City's policy priorities.
In 2015 Council adopted a drought surcharge to assist the water utility in recovering its costs
due to decreased revenue resulting from lower water consumption as customers conserved.
With the State declaring the drought over in FY 2017, the drought surcharge was discontinued
as of July 1, 2017.
SECTION 3B: CURRENT AND PROPOSED RATES
The current rates and surcharges were effective on July 1, 2017. Current rates reflect
adjustments in accordance with the results of an updated cost of service study performed by
RFC in 2015. The 2015 study developed the drought surcharges and evaluated the City's water
rate methodology and structure in light of court decisions interpreting provisions of the State
Constitution applicable to water rates. RFC validated the City's rate structure, recommending
only minor adjustments to ensure that peaking costs were equitably allocated to each customer
class and residential rate tier.
CPAU has five rate schedules: separately metered residential customers (W-1), commercial and
master -metered multi -family residential customers (W-4), irrigation -only services (W-7),
services to fire sprinkler systems in buildings and private hydrants (W-3), and service to fire
hydrant rental meters used for construction (W-2). All customers pay a monthly service charge
based on the size of their inlet meter. This charge represents meter reading, billing, and other
customer service costs, but also the cost of maintaining the capability to deliver a peak flow for
that customer corresponding to their meter size. All customers are also charged for each CCF
(one hundred cubic feet) of water used. Separately metered residential customers are charged
on a tiered basis, with the first 0.2 CCF per day (6 CCF for a 30 day billing period) charged at the
first tier price per CCF, and all additional units charged a higher tier price per CCF. Commercial
customers pay a uniform price for each CCF used, and a higher price for separately metered
irrigation service.
For July 1, 2018 staff is proposing an increase in rates of approximately three percent. Water
rates are composed of two general types of costs: commodity and distribution. Commodity
May 2018 6 I Page
WATER UTILITY FINANCIAL PLAN
costs are mainly volumetric in nature and charged by the San Francisco Public Utilities
Commission (SFPUC). In late December 2017, the SFPUC provided a preliminary estimate that
their FY 2019 W-25 wholesale rate for agencies with long-term contracts would remain at
$4.10/CCF in FY 2019. The SFPUC will not determine its final rate until May or June. However,
in order to have the City's water rates in place for July 1, staff must notify customers by the end
of April. Staff is using the SFPUC's December 2017 estimate in this forecast.
For FY 2018, early indications were that the SFPUC would raise their rates to $4.37/CCF, and
this was what was used in CPAU staffs rate setting analysis. Since the SFPUC's actual rate
increase was lower, and FY 2019 indications forecast no change, staff will reduce the
commodity portion of CPAU's rates accordingly.
Distribution rates cover all the costs to deliver water within the City, such as operations,
maintenance, metering and billing, and capital improvement. Capital improvement costs have
been increasing by about 5% annually, are projected to continue rising in the future, and staff is
reflecting these changes in distribution costs. Operations costs are discussed in Section 68:
Operations, below. The decrease in commodity rates partially offsets the distribution increases,
thus the percentage change differs between volumetric rates and monthly service charges.
Table 4 shows the current and proposed consumption charges.
Table 4: Current and Proposed Water Consumption Charges
Current
(7/1/17)
Proposed
(7/1/18)
Change
$/CCF
%
W-1 (Residential) Volumetric Rates ($/CCF)
Tier 1 Rates
6.66
6.64
(0.02)
0%
Tier 2 Rates
9.18
9.44
0.26
3%
W-2 (Construction) Volumetric Rates ($/CCF)
Uniform Rate
7.68
7.77
0.09
1%
W-4 (Commercial) Volumetric Rates ($/CCF)
Uniform Rate
7.68
7.77
0.09
1%
W-7 (Irrigation) Volumetric Rates ($/CCF)
Uniform Rate
9.08
9.33
0.25
3%
Table 5 shows the current and proposed monthly service charges for rate schedules W-1, W-4,
and W-7.
May 2018 7
1
WATER UTILITY FINANCIAL PLAN
Table 5: Current and Proposed Monthly Service Charges for W-1, W-4, and W-7
Meter
Size
Monthly Service Charge
($/month based on meter size)
Change
Current (7/1/17)
Residential (W-1)
Commercial (W-4)
Irrigation (W-7)
Proposed (7/1/18)
Residential (W-1)
Commercial (W-4)
Irrigation (W-7)
$
%
5/8"
$16.77
$18.43
$1.66
9.9%
3/4"
$22.60
$24.83
$2.23
9.9%
1"
$34.26
$37.64
$3.38
9.9%
1 %2"
$63.40
$69.66
$6.26
9.9%
2"
$98.37
$108.08
$9.71
9.9%
3"
$209.11
$229.75
$20.64
9.9%
4"
$372.31
$409.05
$36.74
9.9%
6"
$762.81
$838.09
$75.28
9.9%
8"
$1,403.94
$1,542.50
$138.56
9.9%
10"
$2,219.92
$2,439.01
$219.09
9.9%
12"
$2,919.34
$3,207.45
$288.11
9.9%
Table 6 shows the current and proposed monthly service charges for rate schedule W-3
Table 6: Current and Proposed Monthly Service Charges for Fire Services (W-3)
Meter
Size
Monthly Service Charge
($/month based on meter size)
Change
Current (7/1/17)
Proposed (7/1/18)
$
%
2"
$3.79
$4.16
$0.37
9.9%
4"
$23.42
$25.73
$2.31
9.9%
6"
$68.03
$74.74
$6.71
9.9%
8"
$144.97
$159.28
$14.31
9.9%
10"
$260.70
$286.43
$25.73
9.9%
12"
$421.11
$462.67
$41.56
9.9%
SECTION 3C: BILL IMPACT OF PROPOSED RATE CHANGES
Table 7 shows the impact of the proposed July 1, 2018 rate changes on the median residential
bill. The average increase is projected to be about three percent, but some customers may see
slightly higher or lower increases due to slight changes in the composition of the utility's costs.
May 2018
8
WATER UTILITY FINANCIAL PLAN
Table 7: Impact of Proposed Water Rate Changes on Residential Bills
Usage
(CCF/month)
Bill under
Current Rates
(7/1/17)
Bill under
Proposed
Rates (7/1/18)
Change
$/mo.
%
4
$43.41
$44.99
$1.58
3.6%
(Winter median) 7
$65.91
$67.71
$1.80
2.7%
(Annual median) 9
$84.27
$86.59
$2.32
2.7%
(Summer median) 14
$130.17
$133.79
$3.62
2.8%
25
$231.15
$237.63
$6.48
2.8%
Table 8 shows the impact of the proposed July 1, 2018 rate changes on various representative
commercial customer bills.
Table 8: Impact of Proposed Water Rate Changes on Commercial Bills
Usage
(CCF/month)
Bill under
Current Rates
(7/1/17)
Bill under
Proposed
Rates
(7/1/18)
Change
$/mo.
Commercial (W-4) (5/8" meters)
(Annual median) 12
$108.93
$111.67
$2.74
2.5%
(Annual average) 64
$508.29
$515.71
$7.42
1.5%
Irrigation (W-7) (1 Y2" meters)
(Winter median) 9
$ 145.12
$ 153.63
$ 8.51
5.9%
(Summer median) 37
$ 399.36
$ 414.87
$ 15.51
3.9%
(Winter average) 56
$ 571.88
$ 592.14
$ 20.26
3.5%
(Summer average) 199
$ 1,870.32
$ 1,926.33
$ 56.01
3.0%
SECTION 3D: PROPOSED RESERVE TRANSFERS
In the FY 2018 Financial Plan, staff proposed transferring $1.87 million from the Rate
Stabilization Reserve to the Operations Reserve in FY 2018. This transfer was not necessary as
increased sales during FY 2017 resulted in larger than expected revenues, largely from the
drought surcharge. The drought surcharge was discontinued at the start of FY 2018. Customer
sales recovery after the drought continues to be more robust than staff's initial projections.
Section 4E: Reserves Structure and Appendix A: Water Utility Financial Forecast Detail shows
details of reserves levels.
SECTION 4: UTILITY OVERVIEW
This section provides an overview of the utility and its operations. It provides general
background information and helps readers better understand the forecasts in Section 5: Utility
Financial Projections and Section 6: Details and Assumptions.
May 2018 91
WATER UTILITY FINANCIAL PLAN
SECTION 4A: WATER UTILITY HISTORY
The Water Utility was established on May 9, 1896, two years after the city was incorporated.
Voters of the 750 person community approved a $40,000 bond to buy local, private water
companies who operated one or more shallow wells to serve the nearby residents. The city
grew and the well system expanded until nine wells were in operation in 1932. Palo Alto began
receiving water from the San Francisco Water Department (SFWD) in 1937 to supplement these
sources.
A 1950 engineering report noted, "the capricious alternation of well waters and the San
Francisco Water Department water...has made satisfactory service to the average customer
practically impossible". By 1950, only eight wells were still in operation. Despite this,
groundwater production increased in the 1950's leading to lower groundwater tables and water
quality concerns. In 1962, a survey of water softening costs to CPAU customers determined that
CPAU should purchase 100% of its water supply needs from the SFWD. CPAU signed a 20 -year
contract with SFWD, and CPAU's wells were placed in standby condition. The SFWD later
became known as the SFPUC. Since 1962 (except for some very short periods) CPAU's entire
supply of potable water has come from the SFPUC.
As the city grew, so did the number of mains in the water system. The system of mains
expanded along with the city, while existing sections of the system continued to age. In the
mid -1980s, the number of breaks in cast iron mains installed during the 1940s and earlier
started to accelerate. In FY 1994, to combat deterioration of older sections of the system, CPAU
performed an analysis of cost effective system improvements and increased the rate of main
replacement from one mile per year to three. CPAU began a plan to replace 75 miles of
deficient mains within 25 years.
In 1999, a study of system reliability concluded that major upgrades were needed to the
distribution system to provide adequate water supply during a natural disaster. This ultimately
resulted in the $40 million Emergency Water Supply and Storage Project, completed in 2013,
which involved a new underground reservoir in El Camino Park, the siting and construction of
several emergency supply wells, and the upgrade of several existing wells and the Mayfield
pump station. Upon completion, the city began to focus reliability efforts on its system of water
storage reservoirs and transmission lines in the Foothills.
At the same time that CPAU was evaluating the reliability of its own system, the SFPUC, in
consultation with BAWSCA members, was evaluating the reliability of the Hetch Hetchy water
system, which crosses two major fault lines between the Sierras and the Bay Area. That
evaluation concluded that major upgrades to the system were required. This planning process
culminated in the SFPUC's $4.8 billion Water System Improvement Project (WSIP), which is
ongoing. The SFPUC continues to evaluate its aging system for other needed infrastructure
improvements.
SECTION 4B: CUSTOMER BASE
CPAU's Water Utility provides water service to the residents and businesses of Palo Alto, plus a
handful of residential customers not in Palo Alto (Los Altos Hills, primarily). Nearly 20,300
May 2018 101
WATER UTILITY FINANCIAL PLAN
customers are connected to the water system, approximately 16,500 (81%) of which are
separately metered residential customers and 3,800 (19%) of which are commercial, master -
metered residential, irrigation and fire service customers.
Judging from seasonal consumption patterns, between 35% and 50% of Palo Alto's water is
used for irrigation, and that consumption is heavily weather dependent. It also varies
significantly by season. As a result of these two factors, there is significant variability in the
amount of water that is demanded from the system month to month and year to year.
SECTION 4C: DISTRIBUTION SYSTEM
To deliver water to its customers, CPAU owns roughly 233 miles of mains (which transport the
water from the SFPUC meters at the city's borders to the customer's service laterals and
meters), eight wells (to be used in emergencies), five water storage reservoirs (also for
emergency purposes) and several tanks used to moderate pressure and deal with peaks in flow
and demand (due to fire suppression, heavy usage times, etc.). These represent the vast
majority of the infrastructure used to distribute water in Palo Alto.
SECTION 4D: COST STRUCTURE AND REVENUE SOURCES
As shown in Figure 1, water purchase
costs accounted for roughly 50% of the
Water Utility's costs in FY 2017.
Operational costs represented roughly
40%, and capital investment was
responsible for the remaining 10%. These
percentage distributions are projected to
remain similar over the forecast period
with the capital investment increasing to
approximately 20% of the Water Utility's
costs and operations declining to
approximately 35%.
The Water Utility receives nearly all of its
revenue from sales of water and the
remainder from capacity and connection
fees, interest on reserves, and other
sources. Appendix A: Water Utility
Financial Forecast Detail shows more
detail on the utility's cost and revenue
structures. Roughly 15% of the utility's
revenues come from fixed service
charges, though most of its costs are
fixed.
Figure 1: Cost Structure (FY 2017)
■ Water Purchases
■ Operations
Capital
Figure 2: Revenue Structure (FY 2017)
■ Sales of Water
■ Other Revenue
May 2018 111 Page
WATER UTILITY FINANCIAL PLAN
SECTION 4E: RESERVES STRUCTURE
CPAU maintains six reserves for its Water Utility to manage various types of contingencies. The
descriptions below summarize these reserves; see Appendix C: Water Utility Reserves
Management Practices for more detailed definitions and guidelines for reserve management:
• Reserve for Commitments: A reserve equal to the utility's outstanding contract
liabilities for the current fiscal year. Most City funds, including the General Fund, have a
Commitments Reserve.
• Reserve for Reappropriations: A reserve for funds dedicated to projects reappropriated
by the City Council, nearly all of which are capital projects. Most City funds, including
the General Fund, have a Reappropriations Reserve.
• Capital Improvement Program (CIP) Reserve: The CIP reserve can be used to
accumulate funds for future expenditure on CIP projects and is anticipated to be empty
unless a major one-time CIP expenditure is expected in future years. This CIP can also
act as a contingency reserve for the CIP. This type of reserve is used in other utility funds
(Electric, Gas, and Wastewater Collection) as well.
• Rate Stabilization Reserve: This reserve is intended to be empty unless the city
anticipates one or more large rate increases in the forecast period. In that case, funds
can be accumulated to spread the impact of those future rate increases across multiple
years. This type of reserve is used in other utility funds (Electric, Gas, and Wastewater
Collection) as well.
• Operations Reserve: This is the primary contingency reserve for the Water Utility, and is
used to manage yearly variances from the budget for operational water supply costs.
This type of reserve is used in other utility funds (Electric, Gas, and Wastewater
Collection) as well.
• Unassigned Reserve: This reserve is for any funds not assigned to the other reserves
and is normally empty.
SECTION 4F: COMPETITIVENESS
Table 9 shows the current water bills for residential customers compared to what they would
be under surrounding communities' rate schedules. CPAU has the highest monthly bills of the
group, although bills for smaller water users are less than in some surrounding communities.
May 2018 12 I Page
WATER UTILITY FINANCIAL PLAN
Table 9: Residential Monthly Water Bill Comparison
Usage
(CCF/month)
Residential monthly bill comparison ($/month)*
As of January 2018
Palo
Alto
Menlo
Park
Mountain
View
Hayward
Redwood
City
Santa
Clara
4
43.41
50.51
37.10
33.20
50.10
22.76
(Winter median) 7
65.91
73.36
57.50
54.62
70.56
39.83
(Annual median) 9
84.27
88.60
71.10
68.90
84.20
51.21
(Summer median) 14
130.17
126.70
105.10
106.51
128.86
79.66
25
231.15
210.50
220.70
199.02
247.97
142.25
* All comparisons use the 5/8" meter size.
SECTION 5: UTILITY FINANCIAL PROJECTIONS
SECTION 5A: LOAD FORECAST
Figure 3 shows 40 years of water consumption history. Average water use has trended
downward over time even as Palo Alto's population has grown. Significant water use reductions
over the 40 -year history were in response to requests to reduce water use in the 1976-77 and
1988-92 drought periods. During these periods, customers invested in efficient equipment and
modified behavior to achieve water reduction goals. Reductions in usage achieved during these
drought periods endured even after those periods. More recently, water sales decreased
substantially during the 2007-2009 recession and during the 2014 - 2017 drought. Usage has
started to recover after the drought, though the level at which usage will finally plateau is
unknown.
Figure 3: Historical Water Consumption
10
9
11 8
u 7
V
6
S
4
3
2
0
°:Rs °J CO �� � 55 m m m m m rn m m m m o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0� � m o+ �� ��
May 2018 13 I Page
WATER UTILITY FINANCIAL PLAN
Figure 4 shows the forecast of water consumption through FY 2028, as denoted by the dotted
line.
Figure 4: Forecast Water Consumption
10
9
cg (Mijons)<
5
4
3
2
1
♦
N M Cr ul lD I. 00 0 0 ri N co 71" ul 0D N.
.-I .--I .--I .-i .-I ,-I a-1 rl N N N N N N N (N
> T T T T ? T T > >, >, > T T > >-
7 7 7 7 7 7 3 7 n 7 7 7 n 7 7 7
California has until recently been experiencing drought conditions, and the State had mandated
a 24% water use restriction for Palo Alto up until May 2016. Customers continue to conserve,
but water usage has been increasing. Based on patterns experienced in previous droughts and
in recognition of continued state -level calls for conservation, this forecast assumes
consumption will only rebound by 50% of the difference between pre -drought and drought
levels, then resume with the previous trend of decreasing usage over time.
SECTION 5B: FY 2012 TO FY 2016 COST AND REVENUE TRENDS
Figure 5 and the tables in Appendix A: Water Utility Financial Forecast Detail show how costs
have changed during the last five years as well as how staff projects they will change over the
next decade.
The annual expenses for the water utility rose substantially between 2013 and 2017. The
increases were primarily related to water purchase costs, which increased 21% from $16.6
million in FY 2013 to $20.1 million in FY 2017. Section 6A: Water Purchase Costs contains a
more in-depth discussion of water purchase costs. Operations costs have remained fairly steady
since FY 2014, while CIP costs have generally increased but fluctuated down in certain years.
For example, in FY 2013 a new water main replacement project was delayed to permit
completion of a backlog of projects budgeted in prior years. In FY 2017, delays were in part due
14 1
WATER UTILITY FINANCIAL PLAN
to the rising CIP costs; during that year a water main replacement project that was put out for
bid resulted in very few contractors competing, and project bids that were higher than
budgeted.
Figure 5: Water Utility Expenses, Revenues, and Rate Changes:
Actual Costs through FY 2017 and Projections through FY 2028
$70 -
$60
0
$50
$40
$30
$20
$10
$0
Actual
7%
15%
INI
11%
0% —
AOC
Projected
4%
6%
3% 4%
min
r° h CO al
O 0 0 0 0 0 0
LL L• PL LL LL LL LL U-
4% 4%
5%
4%
frl
5%
5% r—
N!'!'!'!ii
NN OO ▪ NN
Rate Changes
Capital Investment
'Operations
!Water Supply
Debt Service
Revenue
SECTION 5C: FY 2017 RESULTS
Actual revenues for FY 2017 were higher than projected ($47.5 million vs. $41.8 million). The
drought was declared over by the Governor during FY 2017, and customers started consuming
more water. Higher sales, along with the drought surcharge in place until the beginning of FY
2018, resulted in higher revenue. The trend of higher connection and capacity fee income
continued during FY 2017. Costs were also lower during FY 2017, mainly due to savings in
operations, administrative fees and some CIP savings, although increased purchase costs from
higher sales offset some of this. Table 10 summarizes the variances from forecast.
May 2018 151
WATER UTILITY FINANCIAL PLAN
Table 10: FY 2017, Actual Results vs. Financial Plan Forecast
Net Cost/
(Benefit) (000)
Type of
change
Higher sales revenues
$(3,185)
Revenue increase
Increased connection and capacity fees, other income
(2,453)
Revenue increase
Operations and maintenance, general admin costs lower
than expected
(1,634)
cost savings
Purchase costs higher than expected
833
cost increase
Net Cost / (Benefit) of Variances
$(6,439)
SECTION 5D: FY 2018 PROJECTIONS
Sales levels for FY 2018 were increased based on recent usage trends, and estimated sales
revenues are also estimated to increase by about $4.2 million. Other revenues are also
expected to increase, partially due to the trend of higher connection and capacity fee income,
but also from higher interest income resulting from larger reserve balances. On the expense
side, the most notable change from the FY 2018 budget identified at this time are increases for
CIP expenditures. The effort to rehabilitate mains along University Avenue is anticipated to
have much higher costs than initially projected, and some additional projects were included
after last year's financial plan was created. Additional expense increases are anticipated from
higher water supply costs associated with higher water sales, as well as some increases to
operations and administrative costs. Table 11 summarizes the changes from last year's forecast.
Table 11: FY 2018 Change in Projected Results, 2018 Forecast vs 2019 Forecast
Net Cost/
(Benefit)
Type of
Change
Higher sales revenues
$(4,232)
revenue increase
Higher misc. revenues
(1,269)
revenue increase
Increase in capital projects
4,185
cost increase
Higher operations and purchase budgets
1,233
cost increase
Net Cost / (Benefit) of Variances
$(83)
SECTION 5E: FY 2019 — FY 2028 PROJECTIONS
Figure 5 above shows that costs for the Water Utility are increasing through the rest of the
forecast period, though mainly after FY 2022 based on current estimates from the SFPUC.
Water supply costs are the largest component, and are generally projected to grow steadily by
about four percent over the forecast period. Operations and capital investment costs are also
expected to increase at the same rate of inflation used in the City's long-term financial plans
(2.5% to 3.0% per year). While future CIP costs have been revised upwards to reflect the higher
construction costs seen in recent projects, there is still uncertainty with regard to the utility's
future costs for main replacement. See Section 6: Details and Assumptions for more detail on
the costs that make up these projections, as well as the various assumptions underlying the
projections.
As shown in Figure 5, above, staff currently projects revenues to be below expenses for FY 2018
and for the three subsequent years. Revenues exceeded expenses in FY 2017 due to delays in
water main replacement projects, leading to lower annual CIP spending in that year, as well as
drought surcharge revenue that made up for reduced distribution revenue as a result of
May 2018 16 I Page
WATER UTILITY FINANCIAL PLAN
drought conservation. As main replacement resumes, the Water Utility requires rate increases
of between 4% and 6% per year through FY 2024 to bring revenues up to match annual
expenses. This forecast assumes the use of the Rate Stabilization Reserve to spread the
increases over multiple years.
Figure 6 below shows reserves trends based on these revenue projections. Staff projects the
Rate Stabilization Reserve to have a zero balance by the end of FY 2021, and the CIP Reserve to
decrease by $2.7 million by the end of FY 2020. Assuming these increases in revenue, staff
expects the Operations Reserve, the main contingency reserve, to be at or near the minimum
reserve level during the forecast period, and that this reserve will be adequate to meet all
identified risks, as discussed in Section SF: Risk Assessment and Reserves Adequacy. In addition,
the Unassigned reserve reflects reserve funds in the Operations reserve above the maximum
guideline level. With the expected increase in costs between FY 2018 and FY 2019, these excess
reserves will be utilized quickly and moderate the pace of increases going forward, but must be
used before Rate Stabilization Reserve funds are utilized.
These projections assume that drought restrictions are not re -imposed by the State.
Figure 6: Water Utility Reserves
Actual Reserve Levels for FY 2017 and Projections through FY 2028
$50
$45 -
$40
$35
$30
$25
2
$20
$15
$10
$5
$0
LI
1
1
1
1
1
1
1
1
FY FY FY FY FY FY FY FY FY FY FY FY
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
■ Unassigned
Rate Stabilization
Reserve
El Operations Reserve
® Capital Reserve
■ Commitments (Non-
CIP)
■ CIP Reappropriations &
Commitments
May 2018
171 1 age
WATER UTILITY FINANCIAL PLAN
SECTION 5F: RISK ASSESSMENT AND RESERVES ADEQUACY
The Water Utility currently has one contingency reserve, the Operations Reserve, and this
Financial Plan proposes using funds and raising rates slowly such that reserves hover at or near
the minimum guidelines throughout the forecast period, as shown in Figure 7. Funds in excess
of the maximum as of the end of FY 2018 will be recommended to be moved to the Unassigned
Reserve. While the Operations Reserve may drop below the minimum reserve level periodically,
it is expected to exceed the short term risk assessment for the utility.
Figure 7: Operations Reserve Adequacy
$20
0
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
FY FY FY FY FY FY FY FY FY FY FY FY
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
— Reserve Maximum
Reserve Target
— Reserve Minimum
— Reserve (Year -End)
— • Risk Assessment
Table 12 summarizes the risk assessment calculation for the Water Utility through FY 2023.
Staff used the same methodology for FY 2024 through FY 2028 as well. The risk assessment
includes the revenue shortfall that could accrue due to:
1. Lower than forecasted sales revenue; and
2. An increase of 10% of planned system improvement CIP expenditures for the budget
year.
May 2018 18 I Pa=g
WATER UTILITY FINANCIAL PLAN
Table 12: Water Risk Assessment ($000)
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
Total non -commodity revenue
$20,284
$21,501
$22,748
$24,045
$24,525
Max. revenue variance, previous ten years
13%
13%
13%
13%
13%
Risk of revenue loss
$2,004
$2,125
$2,248
$2,376
$2,423
CIP Budget
$13,695
$13,210
$16,765
$10,709
$11,023
CIP Contingency @10%
$1,369
$1,321
$1,676
$1,071
$1,102
Total Risk Assessment value
$3,374
$3,446
$3,924
$3,447
$3,526
SECTION 5G: ALTERNATE SCENARIOS
Staff had originally proposed a 4% rate increase for FY 2019, which the Utilities Advisory
Commission approved at its March 7, 2018 meeting. At its April 3, 2018 meeting, the Finance
Committee had a concern that future rate increases of 6 to 7% were rather large, and
requested that staff return with some possible alternate proposals at the April 17, 2018
meeting. Four alternatives were brought back to the Finance Committee.
The first scenario was the original proposal presented at the March 7 UAC meeting (Item #21).
The second scenario is the one shown in this current version of the Financial Plan.
The third scenario added the financing of two large, one-time CIP projects (the Advanced
Metering Infrastructure and Reservoir rehabilitation/replacement projects) totaling $13 million.
These items would be financed internally from the Electric Special Projects Reserve for a term
of 20 years and create the following long-term cost and revenue profile.
The fourth scenario also included reducing the amount allocated for capital investments by $2
million per year. This would extend the current 20 year capital plan to 30 years, and lengthen
the rate of system main replacement to over 100 years. Staff recommended against this
particular plan.
A recap of the various proposals and how they were anticipated to affect rates is shown in the
table below:
Water Rate Proposal Alternatives
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Alternative 1
Alternative 2
Alternative 3
Alternative 4
4% 7% 7% 6% 4% 4% 1% 3% 1% 2%
3% 4% 4% 4% 5% 6% 5% 5% 4% 4%
3% 3% 4% 4% 4% 5% 5% 5% 5% 5%
2% 3% 3% 3% 4% 5% 4% 4% 5% 5%
1 https://www.citvofpaloalto.org/civicax/filebank/documents/63751
May 2018
191 Page
WATER UTILITY FINANCIAL PLAN
The Finance Committee chose Alternative 2, and that is the proposal shown in this amended
Financial Plan.
SECTION 5H: LONG-TERM OUTLOOK
CPAU has put its Water Utility on strong footing by investing in its distribution system
infrastructure and emergency water facilities over the last 20 years. The Water System Master
Plan, recently completed and under review, will give CPAU a better picture of the long-term
outlook for its infrastructure and will result in a plan for an appropriate schedule for
infrastructure replacement and upgrades. In addition, CPAU's water supplier, the SFPUC, has
replaced and seismically strengthened its water transmission infrastructure, which will benefit
Palo Alto and all Hetch Hetchy customers over the long term.
The opportunities for CPAU's Water Utility to obtain additional supplies over the long term may
be in alternative water supplies such as recycled water, groundwater, and water from the Santa
Clara Valley Water District. These alternatives have been analyzed in the past, and will be
analyzed again in an upcoming update to the Water Integrated Resource Plan. Some of these
alternatives may provide cost savings or increased drought protection.
Climate change may begin to present challenges for the Water Utility over the next 20 to 40
years. Availability of water from SFPUC's Regional Water System may change with changing
seasonal precipitation patterns. Water consumption patterns may change. Consumption could
increase due to drier weather or decrease as customers become even more focused on water
conservation. Droughts may become more frequent. The risk of wildfire in the foothills could
increase, possibly threatening utility infrastructure or placing greater demands on it. Sea level
rise could result in greater exposure of utility infrastructure to saltwater intrusion or the need
to protect infrastructure from inundation, possibly resulting in higher maintenance and
replacement costs. It could also affect the groundwater aquifer that the utility relies on in
emergencies. Any of these could result in increases to the costs of operating the Water Utility.
As part of the Sustainability/Climate Action Plan, CPAU is currently working on a Climate
Change Adaptation Roadmap that will begin to assess some of these risks.
SECTION 6: DETAILS AND ASSUMPTIONS
SECTION 6A: WATER PURCHASE COSTS
CPAU purchases all of the potable water supplies from the SFPUC, which owns and operates the
Hetch Hetchy Regional Water System. CPAU is one of several agencies that purchase water
from the SFPUC, all of whom are members of the Bay Area Water Supply and Conservation
Agency (BAWSCA). Palo Alto uses roughly 7% of the water delivered by the SFPUC to BAWSCA
member agencies.
The Hetch Hetchy Regional Water System begins with a system of reservoirs and tunnels in the
high Sierra in Yosemite County and water is transported by a gravity -fed pipeline to the Bay
Area. Currently, the SFPUC is in the midst of a $4.8 billion bond -financed capital improvement
program (the Water System Improvement Program, or WSIP) to seismically retrofit the facilities
that transport water to the Bay Area. As of September 2017, nearly 60% of the program (by
May 2018 201
WATER UTILITY FINANCIAL PLAN
dollar value) had been completed, while 40% was under construction.2 This has resulted in large
increases in the annual debt service costs assigned to wholesale customers like Palo Alto. The
wholesale customer debt service share of the WSIP is increasing from $53 million in FY 2010 to
over $200 million in FY 2020. As a result, the SFPUC's wholesale water rate has already
increased from $1.43 per CCF in FY 2009 to $4.10 per CCF in FY 2018, and is forecast to increase
to over nearly $6.00 per CCF by FY 2027 (these projections are subject to change based on
future SFPUC budget estimates). Figure 8 shows the SFPUC's actual wholesale water rate since
FY 2009 and a projection through FY 2027. Note that the wholesale water rate decreased in FY
2014, but the apparent rate decrease is due to a part of the debt being directly paid by the
BAWSCA agencies. This cost is paid in addition to the wholesale water rate and adds about
$0.35 to $0.45 per CCF to the wholesale rate.
The SFPUC's water rate projections show a less steeply increasing rate trajectory after all of the
debt for the WSIP has been issued. Still, debt service costs are projected to nearly double
between FY 2019 and FY 2028. Parts of SFPUC's system not included in the WSIP will also need
rehabilitation after the WSIP is completed, and some of these projects are already included in
the SFPUC's rate projections, such as additional Transmission, Supply & Storage and Treatment
system upgrade projects, slated to start after the WSIP ends. The SFPUC is also conducting
condition assessments of other "up -country" facilities, located in the Sierras, in the coming
years. Current estimates are that $1.8 billion will be needed between FY 2019 and FY 2028 for
these non-WSIP projects, but if these assessments identify other facilities that need
replacement, it may result in additional rate increases as new debt is issued to finance the
projects. For comparison, the WSIP was $4.8 billion.
In December 2017, the SFPUC provided an early estimate for FY 2019 wholesale water rates to
remain at $4.10 per CCF. Staff received a subsequent estimate which anticipates no change to
the SFPUC volumetric rate for several years. However, there is much uncertainty surrounding
continued water usage by the BAWSCA agencies. While drought restrictions ended in May
2016, customers' behavior changes are showing a steady increase during the dry winter of
2018.
As the drought ended in FY 2017 and sales have started increasing, if that trend continues in
upcoming years, rate projections may level out. However, if snow and rain do not materialize in
future years further calls for restricted usage may reoccur.
2 First Quarter FY 2017-18 WSIP Regional Quarterly Report, http://www.sfwater.org/index.aspx?page=307
May 201.8 21 I Page
WATER UTILITY FINANCIAL PLAN
Figure 8: Historical and Projected SFPUC Wholesale Water Rate
$7.00
ri $6.00
• $5.00
fr
$4.00
fa $3.00
a
0
$2.00
u
o-
1,1) $1.00
$-
Ch 0 .--I N (o Cf lf) LO N co Qt 0 .1 N Cl G -
0 c -I -I i -I i -I -I -I -I -I i -I r -I N N N N N
N N N N N N N N N N N N N N N N
U) to r
N N N
0 0 0
N N N
Actual/Projected Rates
— — Prior Projection
LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL U- LL LL LL
SECTION 6B: OPERATIONS
CPAU's Water Utility operations include the following activities:
• Administration, a category that includes charges allocated to the Water Utility for
administrative services provided by the General Fund and for Utilities Department
administration, as well as debt service and other transfers. Additional detail on Water
Utility debt service is provided in Section 6D: Debt Service
• Customer Service
• Engineering work for maintenance activities (as opposed to capital activities)
• Operations and Maintenance of the distribution system; and
• Resource Management
Appendix D: Description of Water Utility Operational Activities includes detailed descriptions of
the work associated with each of these activities.
From FY 2013 to FY 2017 Operations costs (excluding debt service, rent, and transfers)
increased 3.5% per year on average (see Figure 9). Operations costs were the main driver. Debt
service costs increased by $2.4 million per year as a result of a bond issued to finance the
Emergency Water Supply and Storage Project. Transfers have varied from year to year, but are
expected to remain relatively low and stable through the forecast period.
May 2018 22 I Page
WATER UTILITY FINANCIAL PLAN
Staff project inflationary increases for Operations costs with underlying assumptions for salary
and benefit costs, consumer price index, and other cost projections that match the City's
long-range financial forecast.
Figure 9: Historical and Projected Operational Costs
0
2
$25
$20
$15 -
$10
$5
so
Actual
I 1
Projected
m CO Cr) 0
c -I r-1 c -I c -I c -I c -I c -I N
O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N N N N N
>- >- >- >- >- >- >- >- >- >- >- >- >- >- >- >-
u_ LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL
SI
r
r-1 N M V1 l0 r co
N N N N N N N
❑ Debt service and
transfers
❑ Resource Management
❑ Operations &
Maintenance (including
Engineering)
❑ Customer Service
❑Administration (excluding
debt service and
transfers)
SECTION 6C: CAPITAL IMPROVEMENT PROGRAM (CIP)
The Water Utility's CIP consists of the following types of projects:
• One time projects, or large, non -recurring replacement of system assets (such as
reservoir rehabilitation).
• Water main replacement, which represents the ongoing replacement of aging water
mains, and sometimes the services associated with those mains.
• Ongoing projects, which represent the cost of replacing aging and under -recording
meters and degraded boxes and covers, minor replacements of various types of
distribution system equipment, and the cost of capitalized tools and equipment.
• Customer connections, which represents the cost when the Water Utility installs new
services or upgrades existing services at a customer's request in response to
development or redevelopment. CPAU charges a fee to these customers to cover the
cost of these projects.
May 2018 231
WATER UTILITY FINANCIAL PLAN
Table 13 shows the FY 2018 projected budget and the five year CIP spending plan, although
these figures are preliminary pending budget discussions starting in May. The 'committed'
column represents funds committed to contracts for which work has not yet been completed or
invoices paid.
Table 13: Budgeted Water Utility CIP Spending ($000)
Project Category
One Time Projects
Current
Budget*
6,123
Spending,
Curr. Yr
(606)
Remain.
Budget**
5,516
Committed
3,578
FY 2019
2,200
FY 2020
2,200
FY 2021
2,200
FY 2022
-
FY 2023
-
Water Main Replacement
10,637
(1,387)
9,251
4,780
7,685
6,454
6,647
6,847
7,055
Ongoing Projects
3,086
(518)
2,568
749
2,025
1,982
2,039
2,099
2,161
Customer Connections
773
(373)
401
72
732
754
777
800
824
TOTAL
20,619
(2,884)
17,736
9,180
12,642
11,389
11,663
9,746
10,040
*Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year
**Equal to CIP Reserves (Reserve for Reappropriations + Reserve for Commitments).
The water main replacement program funds the replacement of deteriorating water mains. The
water system consists of over 236 miles of mains, approximately 2,000 fire hydrants, and over
20,000 metered service connections spanning 9 pressure zones over a 26 square mile service
area. CPAU utilizes an asset management database in conjunction with hydraulic modeling
software to prioritize capital improvements. CPAU selects mains for replacement by
researching the maintenance history of the system and identifying those that are undersized,
corroded, and subject to recurring breaks. CPAU uses a scoring system based on criticality in
order to prioritize which mains to replace first, and coordinates with the Public Works street
maintenance program to avoid cutting into newly repaved streets. CPAU replaces
approximately 3 miles of main per year, or 1.3% of the system.
Costs for the water main replacement program are increasing for a variety of reasons:
• Fire Code regulations now mandate fire sprinklers for new residential units. To
accommodate increased fire flows, new main replacement projects require larger
diameter pipe.
• CPAU has switched to high -density polyethylene (HDPE) for its mains. Installation costs
for this material are slightly higher, though lifecycle costs are lower, and the material
performs better. Joints in distribution mains are the most likely place for failure, and
sections of HDPE pipe can be fused together rather than connected with fittings. In the
long run, this will reduce losses and maintenance costs.
• To take full advantage of HDPE's fusibility, CPAU is now replacing the services along
with the water mains with new HDPE services. In the past, the existing services were
reconnected, regardless of the material. This new practice costs more in the short run,
but will provide long term benefits.
• Lastly, costs have escalated after the recession. The regional and even national focus
on infrastructure improvement has created labor shortages in the construction market,
leading to higher bids than were seen in the past.
These factors have created some uncertainty in future water main replacement costs. As bids
for new projects, such as upgrades to University Avenue, have consistently come in higher over
the last few years, future main replacement project budgets have been increased from prior
`k,%1 a y 0 1 8 24 1 P a g e
WATER UTILITY FINANCIAL PLAN
year's estimates to reflect expected bid estimates. If the cost of water main replacement
continues to rise at its current levels, budgets may need to be revised further. However, CPAU
is nearing the end of a long term water main replacement program initiated in 1993 to replace
the oldest and most degraded parts of the system. Roughly 25% of the system has been
replaced, and the rate of water leaks has decreased 50%. CPAU initiated a master planning
process in FY 2015 that was completed in 2016 to evaluate the current state of the distribution
system and determine the necessary rate of main replacement in future years. Currently the
replacement rate of about 1.3% of the system each year is an 80 -year replacement cycle.
In last year's financial forecast, staff projected a two year delay in new main replacement
projects. However, some of these delayed projects are now moving forward. The University
Avenue Business District project is progressing, and may require a budget increase of $3 million
in FY 2018 to continue. However, there still could be delays due to rising construction costs and
also the ongoing issue with keeping and maintaining qualified staff to design and work on
projects. The Water CIP estimates assume the resumption of annual main replacement
projects, starting in FY 2019. Staff assumes capital investment cost increases in 2024 and
beyond of approximately 3% annually.
Included in the one-time project budget is seismic water system upgrades and/or replacement
for the Corte Madera, Park, Boronda and Dahl reservoirs to improve earthquake resistance.
This work will improve protection from water loss at these reservoirs in a seismic event. If an
earthquake caused a significant water leak, this could lead to loss of water for firefighting, loss
of water storage for drinking, property damage from flooding or mudslides, and environmental
damages. Staff estimates this work will cost $2 million each year for three years beginning in FY
2019. In FY 2021, as part of the Electric fund CIP plan, there is an initiative to move meters to an
Advanced Metering Infrastructure, or AMI, to allow for more advanced monitoring, metering
and billing of the electric usage. This AMI network, however, can also be used to read water
and gas meters as well, and thus the plan to transition all Utility meters to the AMI platform.
Staff has included an additional $1.5 million in FY 2019 and FY 2020 for preparatory work and
meter testing, and $4.16 million for general meter replacement costs in FY2021.
One project not included in this forecast is the seismic strengthening of a large water
transmission line in the foothills. Staff has engaged a consultant to investigate alternatives for
this project. The consultant is analyzing an alternative that involves installing a valve and hose
system that could be used to bypass breaks in the line while they are repaired after an
earthquake. This is a relatively low cost alternative that would not substantially affect the
financial forecast. The study is not finalized yet, however, and if it is determined that the entire
pipeline needs to be replaced, it could cost between $15 million and $20 million, which would
likely require bond financing and would substantially affect the financial forecast.
Ongoing Projects and Customer Connections are projected to cost approximately $2.8 million in
FY 2019 and increase by an average of 2% per year through the end of the forecast period.
Actual expenses for these projects fluctuate annually depending on how many defective meters
are discovered and replaced during routine maintenance, as well as how much development
and redevelopment is going on that prompts the replacement or upgrade of water services. It is
worth noting that property owners pay a fee for water service replacement or expansion during
May 2018 25 I Page
WATER UTILITY FINANCIAL PLAN
redevelopment, so when the number of projects go up (meaning higher costs for this activity),
so does fee revenue.
Aside from customer connections, the CIP plan for FY 2019 to FY 2023 is funded by revenue
from utility rates and capacity fees. Appendix B: Water Utility Capital Improvement Program
(CIP) Detail shows the details of the plan.
SECTION 6D: DEBT SERVICE
The Water Utility's annual debt service is roughly $3.2 million per year. This is related to two
bond issuances, one requiring payments through 2026, the other through 2035. CPAU is in
compliance with all covenants on both bonds.
The first bond is the 2009 Water Revenue Bond, Series A, issued for $35 million to finance
construction of the Emergency Water Supply and Storage project (the El Camino Reservoir, new
wells, rehabilitation of existing wells and tanks, etc.) and to be retired by 2035. As part of the
'Build America' bond program, there is an interest payment subsidy from the Federal
Government of 35%. There is always the possibility that the federal government will choose to
stop payment on this subsidy. The automatic federal spending cuts under the Budget Control
Act (BCA) of 2011 have already reduced the subsidy by $50,000 per year, and if planned cuts
through 2021 proceed without amendment, staff estimates that the subsidy would be reduced
by over $200,000 per year by 2021. The Bipartisan Budget Act of 2013, which relieved some of
the discretionary spending cuts in the 2011 BCA, did not affect automatic cuts to the subsidy,
and actually extended the automatic cuts through 2023.
The second bond issuance is the 2011 Utility Revenue Refunding Bond, Series A, which is to be
retired in 2026. This $17.2 million issuance refinanced an earlier Water and Gas Utility bond
issuance, the 2002 Utility Revenue Bonds, Series A, which was issued to finance various capital
improvements for both systems. The Water Utility's share of the issuance was roughly $7.8
million.
Table 14 shows the cost of debt service for the Water Utility's share of these bond issuances for
the financial forecast period:
Table 14: Water Utility Debt Service ($000)
FY 2018
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
FY 2024
FY 2025
2009 Water Revenue Bonds,
Series A (net of grants)
2,066
2,081
2,097
2,114
2,132
2,151
2,151
2,151
2011 Utility Revenue Bonds,
Series A
656
654
654
656
657
658
658
658
Both the 2009 and 2011 Bonds include the following covenants: 1) net revenues plus Available
Reserves shall at least equal 125% of the maximum annual debt service, and 2) Available
Reserves shall be at least 5 times the maximum annual debt service. Note that "Available
Reserves," as defined for both bonds, include the reserves for the Gas and Electric systems, not
just the Water system. This Financial Plan maintains compliance with these covenants
throughout the forecast period, as shown in Appendix A: Water Utility Financial Forecast Detail.
May 201.3
261 Page
WATER UTILITY FINANCIAL PLAN
The net revenues (but not the reserves) of the Water Utility are also pledged for one other
bond as shown in Table 15 below, even though the Water Utility is not responsible for the debt
service payments. The Water Utility's reserves or net revenues would only be called upon if the
responsible utilities are unable to make their debt service payments. Staff does not currently
foresee this occurring. Requirements of the California Constitution require that any amounts
advanced from one utility to pay debt service for another utility must be repaid by the
borrowing fund.
Table 15: Other Issuances Secured by the Water Utility's Revenues or Reserves
Bond Issuance
Responsible
Utilities
Annual Debt
Service ($000)
Secured by Water Utility's:
Net Revenues
Reserves
1995 Series A Utility
Revenue Bonds
Storm Drain
$680
Yes
No
SECTION 6E: OTHER REVENUES
The Water Utility receives most of its revenues from sales of water. The next largest source is
connection and capacity fees, which in FY 2017 represented 58% of revenue from sources other
than water sales. The remainder consisted of a variety of miscellaneous charges, transfers and
interest income.
Revenues from connection and capacity fees have more than doubled since FY 2009.
Connection fees are charged to new developments that need new or replacement service
connections, while capacity fees are charged to development that put additional demands on
the water distribution system. Revenue from these sources decreased slightly during the
recession, but has increased substantially since then. Staff is forecasting lower revenue from
these sources in subsequent years, but has increased connection fees that are expected to
offset these reductions to some extent.
Other revenue sources are projected to stay stable through the forecast period, though interest
income always fluctuates depending on changes in interest rates. Some uncertainty also exists
related to the Federal government's commitment to continuing to pay the interest subsidy on
the Build America Bonds.
SECTION 6F: SALES REVENUES
Staff based the sales revenue projections on the load forecast in Section 5A: Load Forecast and
the projected rate changes shown in Figure 5. Except where stated otherwise, these load
forecasts are based on normal precipitation. Precipitation can vary substantially, and this can
affect revenues substantially. In dry years customers use more water, increasing revenues, and
in wet years they use less. One factor that is difficult to predict is customer usage recovery
post -drought. Usage will continue to rise until customers reach their level of desired
consumption. Where this new 'normal' level plateaus at, and the speed with which it reaches
level, is difficult to predict. Staff will continue to monitor these patterns and adjust projections
accordingly.
May 2018 27 I Page
WATER UTILITY FINANCIAL PLAN
SECTION 7: COMMUNICATIONS PLAN
In FY 2019, communications will continue to focus on water utility rate increases, including the
reasons why and how rates may change contingent upon varying precipitation levels.
Additionally, we will focus on how infrastructure costs and rising rates from our wholesale
water supplier, the San Francisco Public Utilities Commission, increases CPAU costs and must be
recovered through rate increases. Rates communications will include a substantial update to
information on a webpage dedicated to Utilities rates, "breaking news" on the Utility home
webpage, discussion in the Proposition 218 rate adjustment notice, bill insert and frequent
educational updates to internal and external stakeholders (customer service, marketing, City
Manager's Office, UAC, City Council, business and residential customers). Other
communications vehicles will include financial plans, presentations to UAC, Finance Committee,
City Council and any media coverage as a result of the rate increases. CPAU will continue its
outreach about continuing to make water conservation a way of life, regardless of drought or
rain conditions. Messaging will reinforce the importance of water use efficiency, and that
although rates are increasing, efficient usage should mean that a customer should not see a
significant increase in water utility costs on their bills.
Water conservation outreach will promote water use efficiency rebates, incentives and easy
water -saving behaviors through bill inserts, web updates, email newsletters, videos for the web
and television, presentations to customer groups and the use of social media. To keep
customers apprised of the status and accomplishments of CIP projects, a network of project
web pages are maintained. Traffic is driven to the website via ads in publications, newspaper
inserts, and through the comprehensive portfolio of outreach strategies as outlined above.
Safety topics are also emphasized year-round. For all utility outreach, while print materials and
website pages still feature prominently, CPAU is placing more emphasis on digital advertising
content, direct mail, community safety/emergency preparation events and presentations.
May 2018 281 Page
WATER UTILITY FINANCIAL PLAN
APPENDICES
Appendix A: Water Utility Financial Forecast Detail
Appendix B: Water Utility Capital Improvement Program (CIP) Detail
Appendix C: Water Utility Reserves Management Practices
Appendix D: Description of Water Utility Operational Activities
Appendix E: Sample of Water Utility Outreach Communications
May 2018 29 I Page
APPENDIX A: WATER UTILITY FINANCIAL FORECAST DETAIL
1
2
3
f 4:.1:11_
5 FY 2016 - 7 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
4 Purchases
5 Sales
6
7
5,532,947 5,507,153 4,671,433 4,127,085 4,172,038 4,852,150 4,986,189 4,926,355 4,867,238 4,808,832 4,751,126 4,694,112 4,637,783 4,582,129 4,527,144 4,472,818
5,097,392 5,047,148 4,433,016 3,858,825 3,852,185 4,580,430 4,706,962 4,650,479 4,594,673 4,539,537 4,485,063 4,431,242 4,378,067 4,325,530 4,273,624 4,222,340
BILL AND RATE CHANGES
8 Variable Charge (Supply)
9 Variable Charge (Distribution)
10 Service Charge (Distribution)
11 Change in System Average Rate
12 Change in Average Residential Bill
13
14
11%
17%
75%
22%
21%
-16%
30%
9%
8%
7%
9%
5%
3%
7%
4%
7%
- l%
0%
2%
- 2 %
-6%
13%
12%
4%
3%
5%
8%
7%
7%
5%
5%
9%
7%
7%
5%
60/0
6%
5%
6%
5%
3%
2%
4%
5% 3%
7% 2% 4% 2% 2%
2% l% 3% 1% 2%
1% 1% 2% 2% 4%
4% 1% 3% 1% 2%
3% 1% 2% 2% 3%
STARTING RESERVES
15 Reappropriations (Non-CIP) - - - - - -
16 Commitments (Non-CIP) 714,000 2,000 347,000 347,000 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273
17 Restricted for Debt Service 3,225,000 3,225,000 3,331,000 3,316,000 3,299,194 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000
18 Emergency Plant Replacement 1,000,000 1,000,000 1,000,000 - - - - - - - - - - - -
19 Capital Reserve - - - 4,000,000 2,726,096 2,726,096 2,726,096 2,726,096 - - - - - -
20 Rate Stabilization Reserve 7,996,000 17,272,000 20,133,000 6,567,000 1,877,437 4,069,000 4,069,000 4,069,000 4,069,000 - - - - - -
21 Operations Reserve 11,663,836 14,606,828 12,734,948 13,741,000 12,896,930 11,728,634 9,937,852 11,244,928 12,473,900 13,253,905 13,498,028 13,525,556 13,122,780
22 Unassigned - 7,056,052 4,986,007
23 TOTAL STARTING RESERVES 12,935,000 21,499,000 24,811,000 25,893,836 22,686,828 30,023,369 28,959,376 23,129,299 19,234,907 13,375,125 14,682,201 15,911,173 16,691,178 16,935,301 16,962,829 16,560,053
24
25
REVENUES
26 Net Sales 36,647,924 39,029,262 33,654,549 36,136,644 41,657,382 43,189,169 45,946,518 48,550,827 51,381,619 53,992,359 55,490,378 56,986,955 57,211,828 58,435,519 58,630,830 59,331,362
27 Other Revenues and Transfers In 6,811,461 4,053,920 7,504,848 3,258,936 5,829,851 4,702,923 3,671,998 3,735,314 3,800,902 3,870,756 3,942,093 4,034,793 4,129,947 4,227,619 4,327,878 4,430,793
28 TOTAL REVENUES 43,459,385 43,083,182 41,159,397 39,395,579 47,487,233 47,892,092 49,618,516 52,286,141 55,182,521 57,863,115 59,432,471 61,021,747 61,341,775 62,663,138 62,958,709 63,762,155
29
30
EXPENSES
31 Water Purchases 16,605,351 15,705,288 15,669,935 17,626,020 20,075,322 22,061,917 22,611,475 23,355,859 24,190,148 25,318,382 26,207,075 27,533,642 27,680,356 28,458,072 28,558,184 28,658,677
32 Operating Expenses
33 Administration
34 Allocated Charges 2,422,880 2,366,077 2,342,985 2,953,291 3,151,373 2,438,768 2,490,375 2,540,960 2,597,475 2,657,609 2,719,082 2,773,765 2,829,463 2,911,318 2,966,458 3,034,716
35 Rent 1,911,963 2,192,454 2,249,457 1,803,087 1,720,711 2,931,563 3,092,799 3,120,634 3,148,720 3,177,058 3,208,829 3,240,917 3,273,326 3,306,059 3,339,120 3,372,511
36 Debt Service 3,219,165 3,220,208 3,218,869 3,222,606 3,219,316 3,222,669 3,220,858 3,220,638 3,222,843 3,223,563 3,224,553 3,224,553 3,224,553 3,224,553 3,224,553 3,224,553
37 Transfers and Other Adjustments 2,241,793 335,808 63,612 (377,200) (256,608) 391,302 399,129 407,111 415,253 423,558 432,030 432,030 432,030 432,030 432,030 432,030
38 Subtotal, Administration 9,795,801 8,114,546 7,874,923 7,601,785 7,834,792 8,984,302 9,203,160 9,289,342 9,384,290 9,481,788 9,584,493 9,671,264 9,759,372 9,873,960 9,962,160 10,063,809
39 Resource Management 557,910 570,040 488,331 592,744 868,038 1,089,530 1,121,904 1,163,283 1,204,080 1,241,610 1,278,957 1,312,198 1,344,159 1,378,016 1,399,695 1,432,650
40 Operations and Mtc 4,944,064 4,986,274 5,283,426 5,038,570 5,290,549 6,426,788 6,623,269 6,878,570 7,128,663 7,356,594 7,583,011 7,784,574 7,977,523 8,175,463 8,301,450 8,497,350
41 Engineering (Operating) 338,659 381,502 358,128 282,472 355,852 397,451 409,827 426,073 441,926 456,290 470,543 483,234 495,348 507,516 515,230 527,406
42 Customer Service 1,584,759 1,677,926 1,821,447 2,076,559 1,616,008 2,193,588 2,262,089 2,352,159 2,439,994 2,519,510 2,598,397 2,668,637 2,735,657 2,802,749 2,845,252 2,912,511
43 Allowance for Unspent Budget - - - - - (464,458) (477,834) (494,626) (511,325) (526,854) (542,343) (556,130) (569,447) (583,993) (593,360) (607,300)
44 Subtotal, Operating Expenses 17,221,192 15,730,288 15,826,254 15,592,128 15,965,239 18,627,201 19,142,414 19,614,801 20,087,627 20,528,938 20,973,059 21,363,777 21,742,612 22,153,711 22,430,426 22,826,428
45 Capital Program Contribution
46 TOTAL EXPENSES
47
48
1,068,841 8,335,605 8,580,372 9,082,021 4,110,131 8,266,967 13,694,704 13,209,873 16,764,528 10,708,718 11,023,365 11,344,323 11,674,684 12,023,827 12,372,875 12,736,548
34,895,385 39,771,182 40,076,561 42,300,170 40,150,692 48,956,085 55,448,593 56,180,534 61,042,304 56,556,039 58,203,499 60,241,742 61,097,652 62,635,610 63,361,485 64,221,653
ENDING RESERVES
49 Reappropriations (Non-CIP) - - - - - -
50 Commitments (Non-CIP) 2,000 347,000 347,000 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273 177,273
51 Restricted for Debt Service 3,225,000 3,331,000 3,316,000 3,299,194 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000 3,260,000
52 Emergency Plant Replacement 1,000,000 1,000,000 - - - - - - - - - - - -
53 Capital Reserve - - 4,000,000 2,726,096 2,726,096 2,726,096 2,726,096 - - - - -
54 Rate Stabilization Reserve 17,272,000 20,133,000 6,567,000 1,877,437 4,069,000 4,069,000 4,069,000 4,069,000 - - - - - -
55 Operations Reserve 11,663,836 14,606,828 12,734,948 13,741,000 12,896,930 11,728,634 9,937,852 11,244,928 12,473,900 13,253,905 13,498,028 13,525,556 13,122,780 12,663,281
56 Unassigned - - 7,056,052 4,986,007 - - - - -
57 TOTAL ENDING RESERVES 21,499,000 24,811,000 25,893,836 22,686,828 30,023,369 28,959,376 23,129,299 19,234,907 13,375,125 14,682,201 15,911,173 16,691,178 16,935,301 16,962,829 16,560,053 16,100,554
58
59
OPERATIONS RESERVE
60 Min (60 days of non -capital expenses)
61 Target (90 days of non -capital expenses)
62 Max (120 days of non -capital expenses)
63 Risk Assessment Value
64
65
5,230,611 5,145,323 6,320,551 7,015,601 7,197,171 7,403,859 7,625,531 7,890,478 8,116,649 8,398,943 8,485,334 8,680,756 8,742,700 8,824,316
9,395,240 8,698,557 9,527,750 10,378,300 10,847,792 11,159,004 11,493,609 11,893,618 12,235,541 12,668,887 12,808,565 13,116,527 13,219,432 13,354,222
13,559,870 12,251,790 12,734,948 13,741,000 14,498,412 14,914,150 15,361,686 15,896,759 16,354,432 16,938,832 17,131,796 17,552,298 17,696,164 17,884,127
2,481,768 2,677,436 2,229,786 2,645,469 3,404,677 3,498,658 4,006,561 3,517,485 3,605,222 3,662,346 3,720,662 3,806,640 3,893,630 4,036,251
DEBT SERVICE COVERAGE RATIO
66 Net Revenues (125% of Debt Service) 951% 876% 878% 931% 1020% 1163% 1196% 1234% 1274% 1322% 1363% 1416% 1433% 1470% 1481% 1497%
67 Available Reserves (5x Debt Service)*
5.7 6.6
6.9 6.0
8.3 7.9
6.1 4.9
3.1 3.5
3.9 4.1
4.2 4.2
4.1 3.9
Appendix A (continued)
1
2
3
,FISCAL YI AR
FY 2013 FY 2014
FY 2015 FY 2016
FY 2017 FY 2018 _.i X2020
FY 20
FY 2022 FY 2023
FY 2024 FY 2025
FY 2026 FY 2027
REVENUES
4 Net Sales
5 Other Revenues and Transfers In
84%
16%
91%
9%
82%
18%
92%
8%
88%
12%
90%
10%
93%
7%
93%
7%
93%
7%
93%
7%
93%
7%
93%
7%
93%
7%
93%
7%
93%
7%
93%
7%
6 TOTAL REVENUES 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
EXPENSES
9 Water Purchases
48% 39% 39% 42% 50% 45% 41% 42% 40% 45% 45% 46% 45% 45% 45% 45%
10 Operating Expenses
11 Administration
12 Allocated Charges 7% 6% 6% 7% 8% 5% 4% 5% 4% 5% 5% 5% 5% 5% 5% 5%
13 Rent 5% 6% 6% 4% 4% 6% 6% 6% 5% 6% 6% 5% 5% 5% 5% 5%
14 Debt Service 9% 8% 8% 8% 8% 7% 6% 6% 5% 6% 6% 5% 5% 5% 5% 5%
15 Transfers and Other Adjustments 6% 1% 0% -1% -1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
16 Subtotal, Administration 28% 20% 20% 18% 20% 18% 17% 17% 15% 17% 16% 16% 16% 16% 16% 16%
17 Resource Management 2% 1% 1% 1% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%
18 Operations and Mtc 14% 13% 13% 12% 13% 13% 12% 12% 12% 13% 13% 13% 13% 13% 13% 13%
19 Engineering (Operating) l% 1% l% 1% 1% l% 1% 1% l% l% 1% 1% 1% l% 1% 1%
20 Customer Service 5% 4% 5% 5% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 5%
21 Allowance for Unspent Budget 0% 0% 0% 0% 0% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1% -1%
22 Subtotal, Operating Expenses 49% 40% 39% 37% 40% 38% 35% 35% 33% 36% 36% 35% 36% 35% 35% 36%
23 Capital Program Contribution
24
25
26
27
28
29
30
31
32
33
TOTAL EXPENSES
3% 21% 21% 21% 10% 17% 25% 24% 27% 19% 19% 19% 19% 19% 20% 20%
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
RISK ASSESSMENT DETAIL
Distribution Revenue Variance
10% CIP Program Contingency
Total Risk Asssessment Value
Projected Operations Reserve
Operations Reserve, % of Risk Value
1,623,731 1,769,234 1,818,772 1,818,772 2,035,206 2,177,671 2,330,108 2,446,613 2,502,885 2,527,914 2,553,193 2,604,257 2,656,342 2,762,596
858,037 908,202 411,013 826,697 1,369,470 1,320,987 1,676,453 1,070,872 1,102,337 1,134,432 1,167,468 1,202,383 1,237,287 1,273,655
2,481,768 2,677,436 2,229,786 2,645,469 3,404,677 3,498,658 4,006,561 3,517,485 3,605,222 3,662,346 3,720,662 3,806,640 3,893,630 4,036,251
11,663,836 14,606,828 12,734,948 13,741,000 12,896,930 11,728,634 9,937,852 11,244,928 12,473,900 13,253,905 13,498,028 13,525,556 13,122,780 12,663,281
470% 546% 571% 519% 379% 335% 248% 320% 346% 362% 363% 355% 337% 314%
OPERATIONS RESERVE
34 Min (60 days of non -capital expenses)
35 Target (90 days of non -capital expenses)
36 Max (120 days of non -capital expenses)
37 Risk Assessment Value
38
39
5,230,611 5,145,323 6,320,551 7,015,601 7,197,171 7,403,859 7,625,531 7,890,478 8,116,649 8,398,943 8,485,334 8,680,756 8,742,700 8,824,316
9,395,240 8,698,557 9,527,750 10,378,300 10,847,792 11,159,004 11,493,609 11,893,618 12,235,541 12,668,887 12,808,565 13,116,527 13,219,432 13,354,222
13,559,870 12,251,790 12,734,948 13,741,000 14,498,412 14,914,150 15,361,686 15,896,759 16,354,432 16,938,832 17,131,796 17,552,298 17,696,164 17,884,127
2,481,768 2,677,436 2,229,786 2,645,469 3,404,677 3,498,658 4,006,561 3,517,485 3,605,222 3,662,346 3,720,662 3,806,640 3,893,630 4,036,251
DEBT SERVICE COVERAGE RATIO
40 Net Revenues (125% of Debt Service) 951% 876% 878% 931% 1020% 1163% 1196% 1234% 1274% 1322% 1363% 1416% 1433% 1470% 1481% 1497%
41 Available Reserves (5x Debt Service)* 5.7 6.6 6.9 6.0 8.3 7.9 6.1 4.9 3.1 3.5 3.9 4.1 4.2 4.2 4.1 3.9
42 *For the purposes of debt covenants, the unrestricted reserves of other utilities may be counted toward the available reserves for meeting this measure. A ratio below 5x means that this utility is relying on the reserves of other utilities to meet its debt covenants.
WATER UTILITY FINANCIAL PLA^.'
APPENDIX B: WATER UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL
Reappropriated / Carried
Forward from Previous
Project n Project Name Years
Current Vear
Funding
Proposed Budget
Amendments
Spending, Current Remaining in CIP
Vear Reserve Fund Commitments FY 2019 FY 2020 FY 2021 IMF
FY 2023
ONE TIME PROJECTS
WS -07000 Regulation Station Imp. 776,358
196,054
-
-
972,412
624,149
-
-
-
-
-
W5-07001 Water Recycling Facilities -
395,649
-
-
395,649
-
-
-
-
-
-
WS -08001 Water Reservoir Coating 1,130,852
-
-
(152,532)
978,320
621,825
-
-
-
-
-
WS -09000 Seismic Water System 2,495,234
1,128,594
-
(453,807)
3,170,021
2,332,347
2,000,000
2,000,000
2,000,000
-
-
WS -15004 Water System Master Plan 16
-
-,,.
-
16
16
-
-
-
-
-
WS -19000 Mayfield Reservoir -
- ,w
-
-
-
200,000
200,000
200,000
-
-
Subtotal, One-time Projects
4,402,460 r
1,720,297
(606,339)
5,516,418
3,578,337
2,200,000
2,200,000
2,200,000
-
-
WATER MAIN REPLACEMENT PROGRAM
WS -11000 WMR-Project 25 381,939
-
-
-
381,939
-
-
-
-
-
-
WS -12001 WMR- Project 26 5,410,048
1,143,000
3,027,320
(1,386,803)
8,193,565
4,780,180
600,000
-
-
-
-
WS -13001 WMR - Project 27 80,000
595,000
-
-
675,000
-
6,500,000
-
-
-
-
WS -14001 WMR - Project 28 -
-
-
-
-
-
585,107
5,851,070
-
-
-
WS -15002 WMR - Project 29 -
-
-
-
-
-
-
602,660
6,026,602
-
-
WS -16001 WMR - Project 30 -
-
-
-
-
-
-
-
620,740
6,207,400
-
WS -19001 WMR - Project 31 -
-
-
-
-
-
-
-
-
639,362
6,396,320
WS -20000 WMR - Project 32 -
-
-
-
-
-
658,820
Subtotal, Water Main Replacement Prog.
5,871,987
1,738,000
3,027,320
(1,386,803)r 9,250,504
4,780,180
7,685,107
6,453,730
6,647,342
6,846,762
7,055,140
ONGOING PROJECTS
WS -80014 Services/Hydrants 11,158
412,000
-
(231,440)
191,718
30,534
424,360
437,091
450,204
463,710
477,621
WS -80015 Water Meters -
565,000
-
(87,733)
477,267
-
500,000
515,000
530,450
546,364
562,755
W5-02014 W -G -W Utility GIS Data 148,826
402,628
-
(43,526)
507,928
405,300
442,890
456,177
469,862
483,958
498,477
WS -13002 Equipment/Tools -
50,000
-
-
50,000
-
50,000
50,000
50,000
50,000
50,000
WS -11003 Dist. Sys. Improvements 863,136
247,000
-
(128,810)
981,326
126,122
354,000
261,620
269,469
277,553
285,880
WS -11004 Supply Sys. Improvements 139,213
247,000
-
(26,493)
359,720
187,227
254,000
261,620
269,469
277,553
285,880
Subtotal, Ongoing Projects
1,162,333
1,923,628
-
(518,002)1' 2,567,959
749,183
2,025,250
1,981,508
2,039,454
2,099,138
2,160,613
CUSTOMER CONNECTIONS (FEE FUNDED)
WS -80013 Water System Extensions 62,665
710,700
-
(372,686)
400,679
71,918
732,021
753,981
776,601
799,899
823,896
Subtotal, Customer Connections
62,665
710,700
-
(372,686)
400,679
71,918
732,021
753,981
776,601
799,899
823,896
GRAND TOTAL
11,499,445
6,092,625
3,027,320
(2,883,830)
17,735,560
9,179,618
12,642,378
11,389,219
11,663,397
9,745,799
10,039,649
Funding Sources
Connection/Capacity Fees
902,280
-
929,348
957,228
985,946
1,015,524
1,045,990
Other Utility Funds (Asset Mgmt, GI5 Systems)
268,418
-
295,260
304,118
313,242
322,640
332,320
Water Service Hydrant Replacement
1,224,608
1,261,346
1,299,188
1,338,164
1,378,310
Utility Rates
4,921,927
3,027,320
10,193,162
8,866,527
9,065,021
7,069,471
7,283,029
6/30/2017
6/30/2018
CIP-RELATED RESERVES DETAIL
(Actual)
(Unaudited)
Reappropriations (excl. Bond Funded)
1,292,081
8,555,942
Commitments (excl. Bond Funded)
10,207,364
9,179,618
February, 2017
321 Page
WATER UTILITY FINANCIAL PLAN
APPENDIX C: WATER UTILITY RESERVES MANAGEMENT PRACTICES
The following reserves management practices shall be used when developing the Water Utility
Financial Plan:
Section 1. Definitions
a) "Financial Planning Period" — The Financial Planning Period is the range of future fiscal
years covered by the Financial Plan. For example, for the Water Utility Financial Plan
delivered in conjunction with the FY 2015 budget, FY 2015 to FY 2021 is the Financial
Planning Period.
b) "Fund Balance" — As used in these Reserves Management Practices, Fund Balance refers
to the Utility's Unrestricted Net Assets.
c) "Net Assets" - The Government Accounting Standards Board defines a Utility's Net
Assets as the difference between its assets and liabilities.
d) "Unrestricted Net Assets" - The portion of the Utility's Net Assets not invested in capital
assets (net of related debt) or restricted for debt service or other restricted purposes.
Section 2. Reserves
The Water Utility's Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 3 (Reserve for Commitments)
b) For operating and capital budgets re -appropriated from previous years, as described in
Section 4 (Reserve for Re -appropriations)
c) For cash flow management and contingencies related to the Water Utility's Capital
Improvement Program (CIP), as described in Section 5 (CIP Reserve)
d) For rate stabilization, as described in Section 6 (Rate Stabilization Reserve)
e) For operating contingencies, as described in Section 7 (Operations Reserve)
f) Any funds not included in the other reserves will be considered Unassigned Reserves
and shall be returned to ratepayers or assigned a specific purpose as described in
Section 8 (Unassigned Reserves).
Section 3. Reserve for Commitments
At the end of each fiscal year the Reserve for Commitments will be set to an amount equal
to the total remaining spending authority for all contracts in force for the Water Utility at
that time.
Section 4. Reserve for Re -appropriations
At the end of each fiscal year the Reserve for Re -appropriations will be set to an amount
equal to the amount of all remaining capital and non -capital budgets, if any, that will be re -
appropriated to the following fiscal year in accordance with Palo Alto Municipal Code
Section 2.28.090.
February, 2017 331 Pa
WATER UTILITY FINANCIAL PLAN
Section S. CIP Reserve
The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for
capital contingencies. Staff will manage the CIP Reserve according to the following
practices:
a) The following guideline levels are set forth for the CIP Reserve. These guideline levels
are calculated for each fiscal year of the Financial Planning Period based on the levels of
CIP expense budgeted for that year.
Minimum Level
Maximum Level
12 months of budgeted CIP expense
24 months of budgeted CIP expense
b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and
the Reserve for Commitments when funds are added or removed from to that reserve
as a result of a change in contractual commitments related to CIP projects. Any other
additions to or withdrawals from the CIP reserve require Council action.
c) Minimum Level:
i) Funds held in the Reserve for Commitments may be counted as part of the CIP
Reserve for the purpose of determining compliance with the CIP Reserve minimum
guideline level.
ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present
a plan to the City Council to replenish the reserve. The plan shall be delivered by the
end of the following fiscal year, and shall, at a minimum, result in the reserve
reaching its minimum level by the end of the next fiscal year. For example, if the CIP
Reserve is below its minimum level at the end of FY 2017, staff must present a plan
by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In
addition, staff may present, and the Council may adopt, an alternative plan that
takes longer than one year to replenish the reserve, or that does so in a shorter
period of time.
d) Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds
may be added to this reserve. If there are funds in this reserve in excess of the
maximum level staff must propose to transfer these funds to another reserve or return
them to ratepayers in the next Financial Plan. Staff may also seek City Council to
approve holding funds in this reserve in excess of the maximum level if they are held for
a specific future purpose related to the CIP.
Section 6. Rate Stabilization Reserve
Funds may be added to the Rate Stabilization Reserve by action of the City Council and
held to manage the trajectory of future year rate increases. Withdrawal of funds from
the Rate Stabilization Reserve requires Council action. If there are funds in the Rate
Stabilization Reserve at the end of any fiscal year, any subsequent Water Utility
Financial Plan must result in the withdrawal of all funds from this Reserve by the end of
the next Financial Planning Period.
February, 2017 341 Page
WATER UTILITY FINANCIAL PLAN
Section 7. Operations Reserve
The Operations Reserve is used to manage normal variations in costs and as a reserve for
contingencies. Any portion of the Water Utility's Fund Balance not included in the reserves
described in Section 3 -Section 6 above will be included in the Operations Reserve unless this
reserve has reached its maximum level as set forth in Section 7(d) below. Staff will manage
the Operations Reserve according to the following practices:
a) The following guideline levels are set forth for the Operations Reserve. These guideline
levels are calculated for each fiscal year of the Financial Planning Period based on the
levels of Operations and Maintenance (O&M) and commodity expense forecasted for
that year in the Financial Plan.
Minimum Level
60 days of O&M and commodity expense
Target Level
90 days of O&M and commodity expense
Maximum Level
120 days of O&M and commodity expense
b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations
Reserve are lower than the minimum level set forth above, staff shall present a plan to
the City Council to replenish the reserve. The plan shall be delivered within six months
of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its
minimum level by the end of the following fiscal year. For example, if the Operations
Reserve is below its minimum level at the end of FY 2014, staff must present a plan by
December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In
addition, staff may present, and the Council may adopt, an alternative plan that takes
longer than one year to replenish the reserve.
c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower
than the target level, any Financial Plan created for the Water Utility shall be designed
to return the Operations Reserve to its target level within four years.
d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no
funds may be added to this reserve. Any further increase in the Water Utility's Fund
Balance shall be automatically included in the Unassigned Reserve described in Section
8, below.
Section 8. Unassigned Reserve
If the Operations Reserve reaches its maximum level, any further additions to the Water
Utility's Fund Balance will be held in the Unassigned Reserve. If there are any funds in the
Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the
City Council must include a plan to assign them to a specific purpose or return them to the
Water Utility ratepayers by the end of the first fiscal year of the next Financial Planning
Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2015,
and the next Financial Planning Period is FY 2016 through FY 2021, the Financial Plan shall
include a plan to return or assign any funds in the Unassigned Reserve by the end of
FY 2016. Staff may present an alternative plan that retains these funds or returns them over
a longer period of time.
February, 2017 35 I Page
WATER UTILITY FINANCIAL PLAN
APPENDIX D: DESCRIPTION OF WATER UTILITY OPERATIONAL ACTIVITIES
This appendix describes the activities associated with the various operational activities referred
to in Section 68: Operations of this Financial Plan.
Administration: Accounting, purchasing, legal, and other administrative functions provided by
the City's General Fund staff, as well as shared communications services, CPAU administrative
overhead, and billing system maintenance costs. This category also includes Water Utility debt
service and rent paid to the General Fund for the land associated with reservoirs and various
other facilities.
Customer Service: This category includes the Water Utility's share of the call center, meter
reading, collections, and billing support functions. Billing support encompasses staff time
associated with bill investigations and quality control on certain aspects of the billing process. It
does not include maintenance of the billing system itself, which is included in Administration.
This category also includes CPAU's key account representatives, who work with large
commercial customers who have more complex requirements for their water services.
Engineering (Operating): The Water Utility's engineers focus primarily on the CIP, but a small
portion of their time is spent assisting with distribution system maintenance.
Operations and Maintenance: This category includes the costs of a variety of distribution
system maintenance activities, including:
• investigating reports of damaged mains or services and performing emergency repairs;
• testing and operating valves;
• monitoring water quality and reservoir levels;
• monitoring the status of the different pressure zones;
• flushing water at hydrants and other closed end points of the system;
• building and replacing water services for new or redeveloped buildings; and
• testing and replacing meters to ensure accurate sales metering.
This category also includes a variety of functions the utility shares with other City utilities,
including:
• the Field Services team (which does field research of various customer service issues);
• the Cathodic Protection team (which monitors and maintains the systems that prevent
corrosion in metal tanks and reservoirs); and
• the General Services team (which manages and maintains equipment, paves and
restores streets after gas, water, or sewer main replacements, and provides welding
services)
Resource Management: This category includes water procurement, contract management,
water resource planning, interaction with BAWSCA, the SFPUC, and the SCVWD, and tracking of
legislation and regulation related to the water industry.
February, 2017 36IPage
APPENDIX E: SAMPLE OF WATER UTILITY OUTREACH COMMUNICATIONS
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• Booklet to record your results
• Form to request your bee water conservation toots, such
as a IOW4low srowertoead
GET STARTED
is rawest you DIY Water -Wise Indoor Survey kit or learn
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February, 2017
371Page
ATTACHMENT P
Resolution No.
Resolution of the Council of the City of Palo Alto Increasing Water Rates by 3%
by Amending Rate Schedules W-1 (General Residential Water Service), W-2
(Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4
(Residential Master -Metered and General Non -Residential Water Service),
and W-7 (Non -Residential Irrigation Water Service)
RECITALS
A. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the
City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and
charges.
B. On June, 11, 2018, the City Council held a full and fair public hearing regarding the
proposed rate increase and considered all protests against the proposals.
C . As required by Article XIIID, Section 6 of the California Constitution and applicable
law, notice of the June 11, 2018 public hearing was mailed to all City of Palo Alto water customers
and property owners on April 27, 2018.
D. The City Clerk has tabulated the total number of written protests presented by the
close of the public hearing, and determined that it was less than fifty percent (50%) of the total
number of customers and property owners subject to the proposed water rate amendments,
therefore a majority protest does not exist against the proposal.
The Council of the City of Palo Alto hereby RESOLVES as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule W-1 (General Residential Water Service) is hereby amended to read as attached and
incorporated. Utility Rate Schedule W-1, as amended, shall become effective July 1, 2018.
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule W-2 (Water Service from Fire Hydrants) is hereby amended to read as attached and
incorporated. Utility Rate Schedule W-2, as amended, shall become effective July 1, 2018.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule W-3 (Fire Service Connections) is hereby amended to read as attached and incorporated.
Utility Rate Schedule W-3, as amended, shall become effective July 1, 2018.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule W-4 (Residential Master -Metered and General Non -Residential Water Service) is hereby
amended to read as attached and incorporated. Utility Rate Schedule W-4, as amended, shall become
effective July 1, 2018.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule W-7 (Non -Residential Irrigation Water Service) is hereby amended to read as attached and
incorporated. Utility Rate Schedule W-7, as amended, shall become effective July 1, 2018.
SECTION 6. The City Council finds as follows:
180308 jb 6054082 1
Attachment P
a. Revenues derived from the water rates approved by this resolution do not exceed the
funds required to provide water service.
b. Revenues derived from the water rates approved by this resolution shall not be used
for any purpose other than providing water service, and the purposes set forth in Article VII, Section 2,
of the Charter of the City of Palo Alto.
c. The amount of the water rates imposed upon any parcel or person as an incident of
property ownership shall not exceed the proportional cost of the water service attributable to the
parcel.
SECTION 7. The Council finds that the fees and charges adopted by this resolution are
charges imposed for a specific government service or product provided directly to the payor that are
not provided to those not charged, and do not exceed the reasonable costs to the City of providing
the service or product.
SECTION 8. The Council finds that the adoption of this resolution changing water rates
to meet operating expenses, purchase supplies and materials, meet financial reserve needs and
obtain funds for capital improvements necessary to maintain service is not subject to the California
Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and
Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all
attachments presented to Council, the Council incorporates these documents herein and finds that
sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA
exemption.
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
180308 jb 6054082 2
ATTACHMENT Q
GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1
A. APPLICABILITY:
This schedule applies to all separately metered single -_family residential dwellings receiving Wwater
Sservices from the City of Palo Alto Utilities.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wwater Sservices.
C. RATES:
Per Meter
Monthly Service Charge: Per Month
For 5/8 -inch meter $ 16.7718.43
For 3/4 inch meter 22.6024.83
For 1 inch meter 3'1.2637.64
For 1 1/2 inch meter 63.1069.66
For 2 -inch meter 98.37108.08
For 3 -inch meter 209.11229.75
For 4 -inch meter 372.31 1 09.05
For 6 -inch meter 762.81838.09
For 8 -inch meter 1,103.91542.50
For 10 -inch meter 2,219.92139.01
For 12 -inch meter 32,919.31207.45
Commodity Rate: (To be added to Service Charge and applicable to all pressure zones.)
Per Hundred Cubic Feet (ccf)
Per Month All Pressure Zones
Tier 1 usage $6.646
Tier 2 usage (All usage over 100% of Tier 1) 9.4418
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-1
dated 7-1-20176
3/7
CITY OF PALO ALTO
l\\ UTILITIES
Effective 7-1-20187
Sheet No W-1-1
GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1
Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer's applicable cGommodity Rrate for Tier 1 and
Tier 2 Wwater usage when the City Council has determined that a Wwater reduction level is in effect
for the City as described in Section D.3. The drought surcharges in the table below are measured in
dollars per hundred cubic feet (ccf).
Water Usage
Reduction level
Level 1 (10/15%)
Level 2 (20%)
Level 3 (25%)
Tier 1
0.20
0.43
0.64
Tier 2
0.58
1.21
1.85
Temporary Service — Developers
Temporary unmetered service to residential
subdivision developers, per connection $6.00
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Ceustomer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Calculation of Usage Tiers
Tier 1 Wwater usage shall be calculated and billed based upon a level of 0.2 ccf per day
rounded to the nearest whole ccf, based on Mmeter reading days of Seervice. As an
example, for a 30 day bill, the Tier 1 level would be 0 through 6 ccf. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-2
dated 7-1-201:'
,ri
CITY OF PALO ALTO
l\` UTILITIES
Effective 7-1-20187
Sheet No W-1-2
GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1
3. Drought Surcharge
During period of Wwater shortage or restrictions on local Wwater use, the City Council
may, by resolution, declare the need for citywide Wwater conservation at the 10/15%,
20% or 25% level. While such a resolution is in effect, a drought surcharge will apply.
The purpose of the dDrought sSurcharge is to recover revenues lost as a result of reduced
consumption.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-3
dated 7-1-201:'
,ri
CITY OF PALO ALTO
l\` UTILITIES
Effective 7-1-20187
Sheet No W-1-3
WATER SERVICE FROM FIRE HYDRANTS
UTILITY RATE SCHEDULE W-2
A. APPLICABILITY:
This schedule applies to all Wwater taken from fire hydrants for construction, maintenance, and
other uses in conformance with provisions of a Hydrant Meter Permit.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wwater Sservices.
C. RATES:
1. Monthly Service Charge.
METER SIZE
5/8 inch 50.00
3 inch 125.00
2. Commodity Rate: (per hundred cubic feet) $ 7.77
3. Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer's applicable CCommodity Rrate when the
City Council has determined that a Wwater reduction level is in effect for the City as described
in Section D.5. The drought surcharges in the table below are measured in dollars per hundred
cubic feet (ccf).
Water Usage
Reduction level
Level 1 (10/15%)
Level 2 (20%)
Level 3 (25%)
Surcharge
0.26
0.53
0.77
D. SPECIAL NOTES:
1. Monthly charges shall include the applicable monthly Sservice Ceharge in addition to usage billed
at the commodity rate.
2. Any person or company applicant using a hydrant without first obtaining a valid Hydrant Meter
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-2-1
dated 7-1-201 67
'\`f ltf/
�. CITY OF PALO ALTO
I\ UTILITIES
Effective 7-1-20187
Sheet No W-2-1
WATER SERVICE FROM FIRE HYDRANTS
UTILITY RATE SCHEDULE W-2
Permit or any permittee using a hydrant without a Hydrant Meter Permit shall pay a fee of $50.00
for each day of such use in addition to all other costs and fees provided in this schedule. A hydrant
permit may be denied or revoked for failure to pay such fee.
3. A Mmeter deposit of $750.00 may be charged any applicant for a Hydrant Meter Permit as a
prerequisite to the issuance of a permit and Mmeter(s). A charge of $50.00 per day will be added
for delinquent return of hydrant Mmeters. A fee will be charged for any Mmeter returned with
missing or damaged parts.
4. Any person or company using a fire hydrant improperly or without a permit, or who draws Wwater
from a hydrant without a Mmeter installed and properly recording usage shall, in addition to all
other applicable charges be subject to criminal prosecution pursuant to the Palo Alto Municipal
Code.
5. During period of Wwater shortage or restrictions on local Wwater use, the City Council may, by
resolution, declare the need for citywide Wwater conservation at the 10/15%, 20% or 25% level.
While such a resolution is in effect, a drought surcharge will apply. The purpose of the dDrought
sSurcharge is to recover revenues lost as a result of reduced consumption.
{End)
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-2-2
dated 7-1-201=%
X11 ltf/
�. CITY OF PALO ALTO
I\ UTILITIES
Effective 7-1-20187
Sheet No W-2-2
FIRE SERVICE CONNECTIONS
UTILITY RATE SCHEDULE W-3
A. APPLICABILITY:
This schedule applies to all public fire hydrants and private fire Sservice connections.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wwater Sservices.
C. RATES:
1. Monthly Service Charges
Public Fire Hydrant $5.00
Private Fire Service:
2 -inch connection $3.791.16
4 -inch connection 23.1225.73
6 -inch connection 68.0374.74
8 -inch connection 141.97159.28
10 -inch connection 260.70286.43
12 -inch connection 121.11162.67
2. Commodity (To be added to Service Charge unless Wwater is used for fire extinguishing
or testing purposes.)
Per Hundred Cubic Feet
All water usage $10.00
D. SPECIAL NOTES:
1. Service under this schedule may be discontinued if Wwater is used for any purpose other
than fire extinguishing or testing and repairing the fire extinguishing facilities. Using
hydrants and fire Sservices for other purposes is illegal and will be subject to the
commodity charge as noted above, fines, and criminal prosecution pursuant to the Palo
Alto Municipal Code.
2. For a combination Wwater and fire Sservice, the general Wwater Sservice schedule shall
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-3-1
dated 97-1-20165
'fr
\III !.:-
' CITY OF PALO ALTO
tic` UTILITIES
Effective 7-1-20186
Sheet No W-3-1
FIRE SERVICE CONNECTIONS
UTILITY RATE SCHEDULE W-3
apply.
3. Utilities Rule and Regulation No. 21 provides additional information on Automatic Fire
Services.
4. Repairs and testing of fire extinguishing facilities are not considered unauthorized use of
Wwater if records and documentation are supplied by the Ceustomer.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-3-2
dated `1-1-201-
-- CITY OF PALO ALTO
I\ UTILITIES
Effective 7-1-20186
Sheet No W-3-2
RESIDENTIAL MASTER -METERED AND
GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4
A. APPLICABILITY:
This schedule applies to Water Services to non-residential buildings, and multi -family residential
dwellings served through a Master -Meter. water service in the City of Palo Alto and its distribution
area. This schedule is also applicable to multi family residential customers served through a master
meter.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wwater Sservices.
C. RATES:
Per Meter
Monthly Service Charge Per Month
For 5/8 -inch meter $ 16.7718.43
For 3/4 -inch meter 22.6024.83
For 1 -inch meter 34.2637.64
For 1 1/2 -inch meter 63.'1069.66
For 2 -inch meter 98.37108.08
For 3 -inch meter 209.11229.75
For 4 -inch meter 372.31 1 09.05
For 6 -inch meter 762.81838.09
For 8 -inch meter 1,103.91542.50
For 10 -inch meter 2,219.92139.01
For 12 -inch meter 32,919.31207.45
Commodity Rates: (to be added to Service Charge)
Per Hundred Cubic Feet (ccf)
Per Month
Per ccf
All Pressure Zones
$ 7 7.77
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-1
dated 7-1-2017&
3/I
CITY OF PALO ALTO
1't` UTILITIES
Effective 7-1-20178
Sheet No W-4-1
RESIDENTIAL MASTER -METERED AND
GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4
Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer's applicable Ecommodity Rrate when the City
Council has determined that a Wwater reduction level is in effect for the City as described in
Section D.2. The drought surcharges in the table below are measured in dollars per hundred cubic
feet (ccf).
Water Usage
Reduction level
Level 1 (10/15%)
Level 2 (20%)
Level 3 (25%)
Surcharge
0.26
0.53
0.77
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Ceustomer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Drought Surcharge
During period of Wwater shortage or restrictions on local Wwater use, the City Council
may, by resolution, declare the need for citywide Wwater conservation at the 10/15%,
20% or 25% level. While such a resolution is in effect, a drought surcharge will apply.
The purpose of the Ddrought sSurcharge is to recover revenues lost as a result of reduced
consumption.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-2
dated 7-1-20176
CITY OF PALO ALTO
Iv UTILITIES
Effective 7-1-20178
Sheet No W-4-2
NON-RESIDENTIAL IRRIGATION WATER SERVICE
UTILITY RATE SCHEDULE W-7
A. APPLICABILITY:
This schedule applies to non-residential Wwater Wservice supplying dedicated irrigation Mmeters-in
the City of Palo Alto and its distribution area.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Wwater Sservices.
C. RATES:
Monthly Service Charge
Per Meter
Per Month
For 5/8 -inch meter $ 16.7718.43
For 3/4 -inch meter 22.6024.83
For 1 -inch meter 34.2637.64
For 1 1/2 inch meter 63.1069.66
For 2 -inch meter 98.37108.08
For 3 -inch meter 209.11229.75
For 4 -inch meter 372.31 109.05
For 6 -inch meter 762.81838.09
For 8 -inch meter 1403.91542.50
For 10 -inch meter 2,219 92139.01
For 12 -inch meter 32,919.31207.45
Commodity Rates: (to be added to Service Charge)
Per Hundred Cubic Feet (ccf)
Per Month
Per ccf
Drought Surcharges (deactivated):
All Pressure Zones
$ 9.089.33
A drought surcharge will be added to the Customer's applicable cCommodity Rrate when the City
Council has determined that a Wwater reduction level is in effect for the City as described in Section
D.2. The drought surcharges in the table below are measured in dollars per hundred cubic feet (ccf).
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-7-1
dated 7-1-2017&
/1
CITY OF PALO ALTO
I` UTILITIES
Effective 7-1-20187
Sheet No W-7-1
NON-RESIDENTIAL IRRIGATION WATER SERVICE
UTILITY RATE SCHEDULE W-7
Water Usage
Reduction level
Level 1 (10/15%)
Level 2 (20%)
Level 3 (25%)
Surcharge
0.53
1.25
2.02
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Ceustomer's bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Drought Surcharge
During period of Wwater shortage or restrictions on local Wwater use, the City Council
may, by resolution, declare the need for citywide Wwater conservation at the 10/15%,
20% or 25% level. While such a resolution is in effect, a drought surcharge will apply.
The purpose of the Ddrought Ssurcharge is to recover revenues lost as a result of reduced
consumption.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-7-2
dated 7-1-20176
i CITY OF PALO ALTO
I\\ UTILITIES
Effective 7-1-20187
Sheet No W-7-2
ATTACHMENT R
Resolution No.
Resolution of the Council of the City of Palo Alto Amending Utility Rate
Schedule D-1 (Storm and Surface Water Drainage) Increasing the
Storm Water Management Fee Rates by 2.9% Per Month Per Equivalent
Residential Unit for Fiscal Year 2019
The Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule D-1 (Storm and Surface Water Drainage) is hereby amended to read in
accordance with sheet D-1-1, attached hereto and incorporated herein. The foregoing Utility
Rate Schedule, as amended, shall become effective July 1, 2018.
SECTION 2. The Council finds as follows:
a. This annual inflation adjustment is being imposed to offset the effects of inflation on
labor and material costs, as authorized by the voter -approved Storm Water Management
Fee, which was approved by a majority of Palo Alto property owners on April 11, 2017.
b. Revenues derived from the Fee approved by this resolution do not exceed the funds
required to provide storm and surface water drainage service.
c.
Revenues derived from the Fee approved by this resolution shall not be used for any
purpose other than providing storm and surface water drainage service, and the
purposes set forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
d. The amount of the Fee imposed upon any parcel or person as an incident of property
ownership shall not exceed the proportional cost of providing the storm and surface
water drainage service attributable to the parcel.
SECTION 3. The Council finds that modification and approval of this change to the
Utility Rate Schedule D-1 (General Storm and Surface Water Drainage) for the purpose of meeting
operating expenses, purchase supplies and materials, meet financial reserve needs and obtain
funds for capital improvements necessary to maintain service is not subject to the California
Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8)
and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report
and attachments presented to Council regarding the Storm Water Management Fee, the Council
incorporates these documents and finds that sufficient evidence has been presented setting forth
with specificity the basis for this claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Public Works
Director of Administrative Services
ATTACHMENT S
GENERAL STORM AND SURFACE WATER DRAINAGE
UTILITY RATE SCHEDULE D-1
A. APPLICABILITY:
This schedule applies to all storm and surface water drainage service, excepting only those
users and to the extent that they are constitutionally exempt under the Constitution of the
State of California or who are determined to be exempt pursuant to Rule and Regulation 25.
B. TERRITORY:
Inside the incorporated limits of the city of Palo Alto and land owned or leased by the city.
C. RATES:
Per Month:
Storm Drainage Fee per Equivalent Residential Unit (ERU) $14.0513.65
D. SPECIAL NOTES:
1. An Equivalent Residential Unit (ERU) is the basic unit for computation of storm
drainage fees for residential and non-residential customers. All single-family residential
properties shall be billed the number of ERUs specified in the following table, based on
an analysis of the relationship between impervious area and lot size for Palo Alto
properties.
RESIDENTIAL RATES (Single -Family Residential Properties
PARCEL SIZE (sq.ft.)
ERU
<6,000 sq.ft.
0.8 ERU
6,000 - 11,000 sq.ft.
1.0 ERU
>11,000 sq.ft.
1.4 ERU
All other properties will have ERU's computed to the nearest 1/10 ERU using the
following formula:
No. of ERU = Impervious Area (Sq. Ft.)
2,500 Sq. Ft.
2. For more details on the storm drainage fee, refer to Utilities Rule and Regulation 25.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No.D-1-1 dated 67-1-20175
CITY OF
PALO
ALTO
Effective 76-1-20187
Sheet No. D-1-1
Attachment T
* NOT YET APPROVED *
Resolution No.
Resolution of the Council of the City of Palo Alto Adopting a Dark
Fiber Rate Increase and Amending Rate Schedules EDF-1 (Dark Fiber
Licensing Services) and EDF-2 (Dark Fiber Connection Fees)
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule EDF-1 (Dark Fiber Licensing Services) is hereby amended to read as attached and
incorporated. Utility Rate Schedule EDF-1, as amended, shall become effective July 1, 2018.
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule EDF-2 (Dark Fiber Connection Fees) is hereby amended to read as attached and
incorporated. Utility Rate Schedule EDF-2, as amended, shall become effective July 1, 2018.
SECTION 3. The Council finds that the revenue derived from the adoption of this
resolution shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of
the City of Palo Alto.
SECTION 4. The Council finds that the adoption of this resolution increasing dark fiber
rates by the Consumer Price Index to meet operating expenses, purchase supplies and
materials, meet financial reserve needs and obtain funds for capital improvements necessary to
maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to
California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of
Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to
//
//
//
//
//
//
180524 jb 6055044
1
Attachment T
* NOT YET APPROVED *
Council, the Council incorporates these documents herein and finds that sufficient
evidence has been presented setting forth with specificity the basis for this claim of CEQA
exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Mayor
APPROVED:
Assistant City Attorney City Manager
180524 jb 6055044
2
Director of Utilities
Director of Administrative Services
ATTACHMENT U
DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1
A. APPLICABILITY:
This rate schedule applies to customer accounts established prior to September 18, 2006, unless the customer elects
to apply the EDF-3 rate to the entire customer account. This rate applies to Fiber Optic services from the City of
Palo Alto Utilities (CPAU) pertaining to the City's network (Backbone and associated connections).
B. TERRITORY:
Within the incorporated limits of the City of Palo Alto and land owned or leased by the City.
C. FEES:
1. DARK FIBER BACKBONE LICENSE FEES:
The values or ranges for each of these price components are shown below:
(1) Fiber Price
(2) Quantity discount
(3) Buffer tube discount
(4) Route length discount
(5) Ring topology discount
(6) Length of term discount
Minimum Backbone License Fee
$574.37557.95/month
$379.76368.91/FM/month
$0 to $59.84/FM/month
$0 to $59.84/FM/month
$0 to $77.80/FM/month
$0 to $23.94/FM/month
$0 to $46.80/FM/month
Project Minimum Backbone Fees apply to any project proposal signed after September 18, 2006 in which
the project connects with the Backbone.
Description for Discounts:
Quantity discount: based on an array of discounts for quantities of fiber licensed on a specific path.
Buffer tube discount: discount for numbers of full buffer tubes licensed on a specific path.
Route length discount: based on the route length licensed on a specific project.
Ring topology discount: The ring topology discount for customers contracting for complete rings.
Term discount: based on an array of discounts for contracts greater than one and less than ten years.
2. DARK FIBER LATERAL CONNECTION FEES:
Customer responsibilities and fees for drop and custom cable construction are described in the CPAU Rules
and Regulations, Rate Schedule EDF-2, project proposals and other associated documents. In all cases, the
Licensee shall pay an annual Drop/Custom Cable Management Fee based on the follow per foot fees:
(1) Drop Cable Management Fees (for the first 12 -Fibers) $0.03-$0.07/ft/month
(2) Custom Cable Management Fees (for the first 12 -Fibers) .. $0.373-6/ft/month
(3) Fees for additional Drop or Custom Cable fibers (each additional set of 12 -Fibers) $0.07/ft/month
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-1-1
dated 7-01-201
CITY OF PALO ALTO
UTILITIES
Effective 07-01-20187
Sheet No. EDF-1-1
DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1
Minimum Drop or Custom Cable Management Fees
$283.81275.69/month
Minimum Drop Cable Management Fees apply to any project proposal signed after September 18, 2006.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-1-2
dated 7-01-201
CITY OF PALO ALTO
UTILITIES
Effective 07-01-20187
Sheet No. EDF-1-2
DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1
3. EARLY TERMINATION FEES:
If the Licensee chooses to terminate for convenience the License Agreement or the term of any project
under the License Agreement, then the Licensee shall pay the applicable termination payment as specified
in this schedule or in the License Agreement, as provided below.
Unless otherwise provided in the License Agreement, the Licensee shall pay a termination fee in one of the
following amounts, whichever is less:
• Annual fee of the contract year that the Licensee chooses to terminates in full without term
discounts, or
• Remaining fees of the project term as indicated in the License Agreement.
D. SPECIAL NOTES:
1. All fees must be paid to the City in accordance with the terms of the Dark Fiber License Agreement, the
customer's project proposals and all the applicable Utilities Rates, Rules, and Regulations.
2. All fees and minimum charges are subject to Consumer Price Index (CPI) adjustments, to be applied
annually, except as defined by Section D.3 of this Rate Schedule. Discounts will not be modified by
changes to CPI.
3. The CPI adjustment will be based on the Consumer Price Index for All Urban Consumers (CPI -U) for the
San Francisco -Oakland -San Jose MSA, published by the U.S. Department of Labor, Bureau of Labor
Statistics. The adjustment is calculated by dividing the most recent calendar year December CPI by the
December CPI in the year rates last changed. In the event that the change between December CPI's
indicates an adjustment of less than 1% is required, a change to rate schedules may not be made for the
upcoming year. Future rate changes will take the last year of change as the new base year for purposes of
calculation.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-1-3
dated 7-01-201
CITY OF PALO ALTO
UTILITIES
Effective 07-01-20187
Sheet No. EDF-1-3
DARK FIBER SERVICE CONNECTION FEES
UTILITY RATE SCHEDULE EDF-2
A. APPLICABILITY:
This schedule applies to all connections, expansions, and upgrades to the City's Dark Fiber network (Backbone).
B. TERRITORY:
All territory within the incorporated limits of the City and land owned or leased by the City.
C. FEES:
1. ADVANCE ENGINEERING FEES:
Advance engineering (AER) fees must be paid to start the engineering process and are non-refundable. The
fees will be credited against the estimated project cost prior to the collection of the project construction
fees.
(1) Commercial/Industrial AER minimum fee $907 .00
(2) Special conditions (requiring expert assessment) By Estimate
2. ESTIMATED SERVICE CONNECTION AND RECONFIGURATION FEES
All estimated service connection and reconfiguration fees must be paid prior to the scheduling of any
construction or reconnections to the City's Dark Fiber network.
(1) Service connection (Interconnection) fee
(2) Reconfiguration Fees
Labor rates are subject to change as stated in the Utility Rate Schedule C-1.
D. NOTES:
By Estimate
By Estimate
1. The Customer is responsible for the installation and maintenance of all ducts and pathways from the facility to
the property line in compliance with City of Palo Alto Utilities Rules and Regulations and contract agreements.
2. The City shall not be held liable for delays or interruptions in service, but will make reasonable efforts to
provide timely continuous service.
3. All fees are subject to Consumer Price Index (CPI) adjustments, to be applied annually. The CPI adjustment
will be based on the Consumer Price Index for All Urban Consumers (CPI -U) for the San Francisco -Oakland -
San Jose MSA, published by the U.S. Department of Labor, Bureau of Labor Statistics. The adjustment is
calculated by dividing the most recent calendar year December CPI by the December CPI in the year rates last
changed. In the event that the change between December CPI's indicates an adjustment of less than 1% is
required, a change to rate schedules may not be made for the upcoming year. Future rate changes will take the
last year of change as the new base year for purposes of calculation.
[End]
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-2-1
dated 7-01-201
~- CITY OF PALO ALTO
�\'\ UTILITIES
Effective 7-01-20187
Sheet No. EDF-2-1
ATTACHMENT V
City of Palo Alto 1 City Clerk's Office 1 5/ 30/ 2018 2:07 PM
Carnahan, David
From: Roberta Ahlquist <roberta.ahlquist@sjsu.edu>
Sent: Tuesday, May 29, 2018 8:18 PM
To: Joyce Beattie; Council, City; Jolinda Decad; Rosalinda Quintanar; Beth Rosenthal; linda
lopez-otero; Gmail:linzjiang; Debbie Mytels
Subject: Re: AS I GET OLDER I REALIZE...
Joyce, Loved this! thanks much.
Friends,
When you have a moment, write the city council and tell them not to raise the water rates. We've had too many
utility rate increases and if enough people object, it might not happen.
city.cou nci l @cityofpaloalto.org
On Tue, May 29, 2018 at 4:39 PM, Joyce Beattie <jycbyt@gmail.com> wrote:
AS I GET OLDER I REALIZE:
#1 - I talk to myself, because there are times I need expert advice.
#2 - I consider "In Style" to be the clothes that still fit.
#3 - I don't need anger management I need people to stop pissing me off.
#4 - My people skills are just fine. It's my tolerance for idiots that needs work.
#5 - The biggest lie I tell myself is, "I don't need to write that down. I'll remember
it."
1
City of Palo Alto 1 City Clerk's Office 1 5/ 30/2018 2:07 PM
#6 - I have days when my life is just a tent away from a circus.
#7 - These days, "on time" is when I get there.
#8 - Even duct tape can't fix stupid - but it sure does muffle the sound.
#9 - Wouldn't it be wonderful if we could put ourselves in the dryer for ten minutes,
then come out wrinkle -free and three sizes smaller?
#10 - Lately, I've noticed people my age are so much older than me.
#11 - "Getting lucky" means walking into a room and remembering why I'm there.
#12 - When I was a child, I thought nap time was punishment. Now it feels like a
mini vacation.
#13 - Some days I have no idea what I'm doing out of bed.
#14 - I thought growing old would take longer.
#15 - Aging sure has slowed me down, but it hasn't shut me up.
#16 - I still haven't learned to act my age.
2
City of Palo Alto 1 City Clerk's Office 1 5/29/2018 1:51 PM
Carnahan, David
From: Roberta Ahlquist <roberta.ahlquist@sjsu.edu>
Sent: Tuesday, May 29, 2018 1:41 PM
To: Council, City
Subject: How to keep up with your problematic actions?
Dear Council Members and City Manager:
1. Why are you 'giving away' Avenidas $$? They advocated, against many residents, for this redevelopment.
Let them pay for it. Further -more, they are NOT really very non-profit, look at the costs for classes, look at the
administrative salaries of these folks! Make them pay the going rate. Think of how much we could make for a
low-income housing if they were charged anywhere near the going rate. Get them fund-raising and use the $$
for city sponsored low-income housing.
2. You want to help keep the existing low-income housing stock? Then don't let Stanford demolish vacant rental
houses that could be easily repaired and used for low-income Stanford workers, not demolished and replaced
with high income housing for faculty. Commit to acting on your 'talk' of supporting BMR housing.
3. You've PRIVATIZED the Rinconada City PUBLIC Pool! It used to have many kids, parents, in both pools
on Sundays. It was a festive, active place, full of kids learning to swim. This Sunday the kids pool was off
limits, (I think this is their regular schedule) and only a few swimmers were there at first (1pm), in lap lanes
only. When I left at 2:30 there were no more than 30 folks there, mostly adult lap swimmers, and only 1 life
guard on at 1pm, 2 later. Prices higher! Prices for lessons higher! What happened to our community pool??
Take it back. High school life -guards cost less, were very helpful, prices were not so high. Do a survey!
4. Once again, we are being asked to pay increased prices for our water! Every year or two we get increases for
either one utility or another. Stop it. You can't run a city off of the utilities, which although 'public', seem to be
not very economical. I oppose these increases. Nickel and dimeing the residents is not my idea of good
economics. Cut the $$ for the Council Chambers upgrade. It's way out of line.There are many ways to provide
services for this community. Get creative and economical.
Sincerely,
Roberta Ahlquist
1
10
City of Palo Alto Utilities Proposed Rate Changes for Fiscal Year 2019
The City is proposing rate increases this year for electric, gas, water & wastewater services. As a municipal utility, the
City's rates are cost -based & set at the minimum level needed to provide safe & reliable service to customers. The Palo
Alto City Council will review the proposed rate changes on June 11, 2018. If approved, the rate changes will go into
effect on July 1, 2018. Public input is welcome at the Council meeting or you can contact us at
UtilitiesCommunications a( ..cityofpaloalto.orq. Find more details on rates at www.cityofpaloalto.org/RatesOverview
As a City of Palo Alto Community Member, You Should Understand
Rates - Changes this year
Cost Drivers - Why are rates increasing
Cost Containment - What we are doing to keep costs down
Value - What you get for what you spend
Residential Rate Changes
O
14
0
$
6%
4%
3%
11%
2.7%
$11-$12
Average
Residential
Monthly Bill
Increase of 4-5`0
ELECTRIC —Up 6% - Costs are increasing for electricity production, energy transportation, operating &
contract construction expenses. Electric production costs have increased as more renewable energy projects
have been added to the City's supply mix. Transportation costs are increasing due to improvements in the
state transmission network to deliver renewable energy.
NATURAL GAS —Up 4% - Due to higher costs for gas transportation, operating & contract construction
expenses.
WATER— Up 3% - Costs are rising due to ongoing increases in water commodity, operating & contract
construction expenses. The City continues to upgrade reservoirs & storage for reliability & resiliency. Water
commodity costs will continue to increase due to ongoing seismic capital improvements on the Hetch Hetchy
water supply system.
WASTEWATER —Up 11% - Costs are increasing due to collection system construction & sewage treatment
expenses, as well as infrastructure costs for major upgrades at the Regional Water Quality Control Plant.
STORM DRAINAGE —Up 2.7% - Annual inflationary increase per the approved 2017 storm drain ballot
measure to cover increases in programmatic & infrastructure improvement expenses.
TOTAL BILL IMPACT —Up 4-5% for the average resident —All utilities are seeing operating & capital cost
increases due to inflationary pressures in construction & labor markets. Rates will vary for commercial
customers. For the average resident, considering all utility costs for electric, gas, water, wastewater & storm
drain, the total average monthly bill is estimated to increase about $11-$12.
Your Community -Owned Utility
•
AIL
Safety & reliability are
our highest priorities
& govern the
decisions we make
about investments in
utility infrastructure.
$
We can help you save
money with our tips &
tools to help you
reduce consumption &
conserve. Let us be
your trusted energy &
water advisors!
Our employees
work hard every
day to deliver on
our promise of
reliable utilities &
quality service.
Decisions are made
locally & we partner
with the community to
provide better
services, technologies
& information.
Sustainability is important to
our community values,
& resource supply
investments are in response
to input from you, our
community owners.
Page 1 of 2
City of Palo Alto Utilities Proposed Rate Changes for Fiscal Year 2019
Operations &
Administration
Capital
Improvement
Projects
Increase productivity
by standardizing
common business
processes &
applications across
five utilities.
Supply
jPurchasesj
Utility Cost Drivers
Fiscal Year 2019 Budget —$301.3M —All Utilities
• Supply Purchases— $137.3M-45%
• Operations & Administration— $104.5M-35%
• Capital Improvement Projects— $59.5M-20%
What We Are Doing to Keep Costs Down
$
Align & adjust
positions & service
delivery to match
evolving
organizational needs.
\""It
tt
- - ,:\
Evaluate &
prioritize large
capital
infrastructure
projects.
Streamline & automate
manual processes.
Implement prioritized &
integrated technology
roadmap to maximize
capital investment.
Review & renegotiate long term
supply purchases.
Partner with other agencies to
advocate cost control, including
electric & gas transmission costs
& water system upgrades.
The Value of Your Investment with Us
4
y
4
CID
Electricity —For about $1.80 per day, the average household can purchase enough electricity to run their
refrigerator, television, computer, lights in every room, hair dryer, space heater, power tools in the garage,
possibly a clothes dryer, stove, oven & anything else they plug in.
Gas —For under $1 per day in the summer & about $2 per day in the winter, the average household can
buy enough natural gas to heat their entire home, operate a gas stove, oven, clothes dryer & also heat water
for cooking, showering, bathing & clothes washing.
Water —For under $3 per day, the average household can buy enough water to drink, cook, wash dishes &
clothes, flush toilets, take showers & baths. During warm weather, when water use often doubles for
landscape irrigation or to fill pools, etc., the average price is still around $3-$4 per day.
Wastewater (sewer) —For Tess than $1.50 per day, residents receive the benefit of a municipal system that
carries away sewage & treats wastewater before safely disposing of it in the environment or reusing for
irrigation & other non -potable purposes.
Refuse —for about $1.50 per day, the average household has all their garbage, recycling, & compostables
hauled away and processed sustainably. Additional services include an annual clean up day, street sweeping,
& environmentally safe & convenient household hazardous waste collection & disposal.
Learn More at www.cityofpaloalto.org/RatesOverview
Page 2 of 2
CITY OF
PALO
ALTO
City of Palo Alto (ID # 8967)
City Council Staff Report
Report Type: Action Items
Meeting Date: 6/11/2018
Summary Title: PSB Project EIR, 350 Sherman Parking Garage and Public
Facilities Zoning Amendment
Title: PUBLIC HEARING LEGISLATIVE AND QUASI-JUDICIAL 250 and 350
Sherman Avenue, Public Safety Building Project: Adoption of: 1) Resolution
Certifying the Final Environmental Impact Report and Adopting Findings and
a Mitigation Monitoring and Reporting Program Pursuant to the California
Environmental Quality Act for the Project Comprised of a New Public Safety
Building at 250 Sherman Avenue and a new Four -Story Parking Structure at
350 Sherman Avenue; 2) Ordinance Amending the Public Facilities (PF) Zone
Development Standards in Chapter 18.28 of Title 18 of the Palo Alto
Municipal Code; and 3) Record of Land Use Action Approving Architectural
Review Application [File 17PLN-00257] for a new Four -Story Parking
Structure at 350 Sherman Avenue to Provide 636 Public Parking Spaces
Above and Below Grade. Planning and Transportation Commission Review
Recommended Modification to PF Zoning Development Standards on January
31, 2018
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that Council:
(1) Adopt a Resolution (Attachment A) certifying the Public Safety Building Project
Final Environmental Impact Report (EIR) and making required findings under the
California Environmental Quality Act (CEQA), including findings related to
environmental impacts, mitigation measures and alternatives, and adopting a
mitigation monitoring and reporting program (MMRP);
(2) Adopt an Ordinance (Attachment B) modifying the Public Facilities (PF) Zone
Development Standards in Chapter 18.28 of Title 18 of the Palo Alto Municipal
Code, as recommended by the Planning and Transportation Commission (PTC);
and,
City of Palo Alto Page 1
(3)
Approve a Record of Land Use Action (Attachment C) approving Architectural
Review Application [file 17PLN-00257] for a New Four -Story Parking Structure at
350 Sherman Avenue to Provide 636 Public Parking Spaces above and below
grade, as recommended by the Architectural Review Board (ARB).
Note: that Council will have the opportunity to review the Public Safety Building (PSB)
project component in the fall after ARB has conducted its final hearing of project.
Changes in the PSB plans may necessitate preparation of an addendum to the PSB
Project EIR.
Executive Summary
The 1970's -era building at 275 Forest Avenue cannot accommodate the growth of public safety
services and regulation changes. It does not meet current seismic and accessibility
requirements, and other regulatory codes required to meet the Essential Services Buildings
Seismic Safety Act (ESBSSA), a 1986 California law resulting from the Legislature's
determination that buildings providing essential services should be capable of providing those
services to the public after a disaster. This Act includes requirements that such buildings shall
be designed and constructed to minimize fire hazards and to resist the forces generated by
earthquakes, gravity, and winds.
The proposed PSB at 250 Sherman Avenue would house the Police Department, 911 Emergency
Dispatch Center, Emergency Operations Center, Office of Emergency Services, and Fire
Department administration. Prior to constructing the new PSB, the City intends to complete
the construction of the proposed public parking garage (a.k.a. "Cal Ave Garage") at 350
Sherman Avenue, shown on the vicinity map (Attachment D). The garage's 636 parking spaces
would replace the 310 existing parking spaces in lots C-6 and C-7 displaced by project
construction, creating 326 additional public parking spaces to support public parking demand
within the California Avenue business district.
Council previously directed staff to revise the Public Facility (PF) zone development standards in
Chapter 18.28 of the Palo Alto Municipal Code, to specifically accommodate city parking
garages. The PTC conducted a hearing on the PSB Project Draft EIR in January 2018, and
recommended the attached Ordinance adjusting the development and parking standards for
public parking facilities and Essential Services Buildings located within Downtown and the
California Avenue Business District. The amendments are necessary to facilitate the PSB Project
as well as the new Downtown garage project. The ARB conducted a hearing on the Draft EIR in
February 2018 and recommended Council approval of the public parking garage on March 1,
2018, based on the findings and approval conditions reflected in the proposed Record of Land
Use Action (RLUA). The PSB plans are being revised for resubmittal; the ARB has conducted one
formal review of the PSB in October 2017 and has not made any formal recommendation.
The Draft EIR for the PSB Project (comprised of the PSB and the Public Parking Garage) and PF
zone text changes was circulated for comments beginning January 8, 2018. The Final EIR
City of Palo Alto Page 2
(Attachment E), published May 11, 2018, includes responses to Draft EIR public comments and
is viewable here: https://www.cityofpaloalto.org/civicax/filebank/documents/65005. The links
to important documents for the PSB Project is found at this webpage link:
https://www.cityofpaloalto.org/gov/depts/pwd/infrastructure plan/psb and cal ave garage.
asp.
Council certification of the Final EIR is required (via adoption of the attached Resolution) prior
to Council action on the Ordinance and RLUA. Mitigation Measures are contained in the
Mitigation Monitoring and Reporting Program (MMRP, incorporated with the Resolution). The
Council will have the opportunity to review and approve the revised PSB plans this fall,
following ARB review in late summer. If an addendum is needed to address PSB modifications,
it will be prepared and included with the project documents for ARB and Council review.
Background
The PSB and proposed public parking garage were among nine key projects included in the
2014 Council Infrastructure Plan, which prioritized unfunded projects and defined a funding
plan for the projects. The PSB was identified as the plan's highest priority project. In December
2015, Council selected 250 Sherman as the site for the PSB within the California Avenue
Business District, and identified 350 Sherman as the structured parking site. During its April 3,
2017 meeting, Council provided direction for the Public Facilities (PF) zoning code text
amendment and the number of parking spaces for the public garage. The April 3rd staff report is
viewable here: http://www.cityofpaloalto.org/civicax/filebank/documents/56666 (Staff Report
#7738); the video of the Council meeting is viewable here: http://midpenmedia.org/city-
council-122/
PSB Project Description, Location and Setting
Chapter 3 of the EIR includes a complete description of the PSB Project proposed for
development on City parking lots C-6 and C-7. In summary, the existing pavement, curbs,
planters and utility items on the existing public parking lots would be demolished, all parking lot
trees would be removed, and new structures, hardscaping and landscaping would be
constructed and installed.
The new public parking garage would replace the existing 310 spaces (on both lots), and
increase the number of public parking spaces by 326 spaces. Council directed that the public
parking garage should contain 636 parking spaces (increased from the previously discussed 460
parking spaces plus retail space), with two basement levels and no retail, and the potential for
future photo -voltaic (PV) panels on the top, and that the project include design enhancements
to the Birch Street frontage. Once the parking structure is operational, construction of the
three-story PSB construction would begin.
The PSB would contain the offices of the Police Department, 911 Emergency Dispatch Center,
Emergency Operations Center, Office of Emergency Services, and Fire Department
administration. The new PSB would range from 45,400 sf to 48,000 sf in area and have a height
City of Palo Alto Page 3
of nearly 50 feet, with the exception of the emergency communications tower, proposed to be
135 feet tall. The microwave tower would be placed at the Park Boulevard side of the new
building. The height of the proposed tower is requested to allow Palo Alto to participate in the
Santa Clara County ECOMM Network for PSAP's (Public -Safety Answering Points). An employee
courtyard, with trees and seating, is proposed abutting Jacaranda Lane (alley) and separated
from the alley by a concrete wall. The design includes an overhead canopy to cover 50% of the
vehicle parking spaces, trees to provide screening, and a perimeter wall. Above -grade, the PSB
structure will observe the PF zone's required street setbacks; below grade, the building would
encroach into PF zone setbacks. The architect is finalizing the PSB plans in response to
comments made during the October 2017 ARB hearing, and expects to submit the package in
early summer for a second ARB review in late summer.
The 2.3 acre Project site is comprised of two parking lots (Lots C-6 and C-7) on two blocks
bound by Sherman Avenue, Jacaranda Lane, Ash Street, and Park Boulevard, and is bisected by
Birch Street. Jacaranda is generally the service and delivery alley for California Avenue
businesses. The Project site (plus the portion of Birch Street between the two lots) includes 39
trees. Properties across Sherman Avenue from the project site are the Santa Clara County
Courthouse (the tallest nearby building, at four stories), County parking lot, residential building,
and Visa office building. Properties fronting Ash Street between Grant Avenue and Sherman
Avenue include multiple -family residential uses and Sarah Wallis Park. Land uses along Park
Boulevard from Grant Avenue to Sherman Avenue include office/commercial uses, including
several restaurants. The buildings in the project vicinity are generally one to three stories. The
PSB site has a different Comprehensive Plan land use designation (Major Institution/Special
Facilities) than the land use designation of the parking garage site (Regional/Community
Commercial).
Development Phasing
The City intends to complete the public parking garage prior to PSB construction, with garage
construction completion estimated for February 2020 to allow parking operations prior to the
construction of the PSB, estimated to be completed in fall 2021. Additionally, staff is
developing a parking mitigation plan to address the loss of existing surface parking spaces
during garage construction. Staff has met with the California Avenue Business Association
(CAABA) group to review ideas and will discuss a draft plan at the group's June meeting.
PF Code Amendments
The proposed ordinance amending the PAMC would allow the City Council to modify existing
development standards and parking requirements generally for this and other similar
projects involving Essential Services Facilities in the Public Facilities (PF) zone in the city and
City parking garages in the PF zone in the Downtown and the California Avenue Business
District. The proposed PF zone changes are necessary for both the PSB Project and the new
Downtown Garage project. The PTC staff report included zoning compliance tables for each
of the three pending projects. The proposed amendment to Chapter 18.28 would allow
Council to approve the public parking garage at 350 Sherman with the following
City of Palo Alto Page 4
encroachments and overages:
(1) Setbacks less than the PF-code required 20 -foot minimum along Birch and Ash
Streets, Sherman Avenue, and less than the 10 -foot minimum along Jacaranda Lane;
above -grade:
• An 11'2" setback is proposed from Birch,
• a 0' setback is proposed from Ash and Sherman, and
• a 2'3" setback is proposed from Jacaranda across 2/3rd of the alley length.
(2) Heights of 40'7" to top of parking structure and 49' to the top of the solar panel
structure, exceeding the PF code maximum of 35 feet for the portion of the public
parking garage proposed within 150 feet radius of the RM-40 zone; and
(3) A floor area ratio (FAR) of 3.57:1 and site coverage of 89.3%, exceeding the
maximums of 1:1 FAR (on the most restrictive adjacent zone) and 45% coverage.
The Council will have the opportunity to review the proposed encroachments and overages for
the PSB and Downtown Garage when those projects are presented to Council in the fall. The
PSB and Downtown Garage will also:
(1) exceed the 50 foot maximum height limit (as the PSB emergency communications tower
would extend to 135 feet above grade, and the photo -voltaic panel support structure and
elevator tower of the Downtown Garage would also exceed the 50 foot limit), and
(2) encroach into minimum setbacks (as the PSB would encroach into the alley setback and the
Downtown Garage will encroach into the street setbacks).
Architectural Review
The ARB and Historic Resources Board (HRB) conducted preliminary reviews of the PSB Project
in May and June 2017. The HRB study session was held because the parking garage site is next
to a site identified as eligible for listing on the California Register of Historic Resources. In
October 2017, the ARB held one public hearing for the combined project applications (public
parking garage and PSB). The ARB held two additional public hearings for the public parking
garage, on January 18 and March 1, 2018, when the ARB recommended Council approval (on a
4-1 vote). Links to prior ARB reports, minutes and video feeds are provided in Attachment G.
One condition the ARB added to the parking garage approval was to relocate the transformer, if
possible, to preserve the open area at the corner of Sherman Avenue and Ash Street for seating
and other amenities. However, after several inter -departmental meetings, staff concluded the
transformer should be kept at its proposed location. The transformer's very large size
precludes its placement below grade, and there are no other feasible above grade locations.
The building code requires that the transformer be sized to support a future electrical load
assuming installation of Electrical Vehicle chargers at 25% of the parking spaces in the garage.
The ARB has not completed its review of the PSB. Initial feedback has required project
refinements that staff and the project architect are addressing. It is anticipated revised plans
will be submitted soon and continued ARB meetings will commence later this summer and
City of Palo Alto Page 5
return to Council in the fall.
PTC Review
On January 31, 2018, the PTC reviewed the PSB Project Draft EIR, and recommended Council
approval of the proposed amendments to the Public Facilities zone district regulations reflected
in the attached Draft Ordinance. Responses to the PTC members' comments on the Draft EIR
are included in the Final EIR. The PTC staff report provided zoning tables showing how PF
development standards apply to each of the three proposed public projects (PSB Project and
Downtown Garage) that will rely upon the Council's adoption of the ordinance modifying the PF
zone regulations.
Links to prior PTC reports, minutes and video feeds are provided in Attachment G.
Discussion
The subject public hearing is for Council action on the EIR, adoption of proposed text
amendments to the PF zone and, approval of a record of land use action for the proposed
garage. The PSB, which is addressed in the EIR, is not before the Council at this time as its final
design is pending ARB review and recommendation. The PSB will return for Council action in the
fall along with any updates to the EIR, if necessary. An expanded discussion on the EIR is
provided below.
Public buildings are subject to architectural review in accordance with the municipal code. The
subject garage and PSB are evaluated to required architectural review (AR) approval findings.
The ARB makes a recommendation to the director of planning as to project compliance with the
findings. For large city projects, such as the subject application, the director may refer final
decision to the City Council. This authority is set forth in the municipal code. The ARB and
director have reviewed the EIR and the public garage and found the project consistent with
required findings. The attached RLUA (Attachment C) provides the required AR approval
findings and reflects the ARB and director's evaluation of the project.
This project also required review by the PTC for the text amendment to PF zoned properties,
which was required to accommodate the proposed project. Applicability of the text
amendment is limited to essential public safety buildings and public parking garages within the
Downtown and California Avenue Business District. The code amendments are needed to
achieve the operational and design requirements of a new public safety building and to
maximize the number of garage parking spaces and other program objectives as directed by
Council for the two public parking garages. The proposed code changes have limited
applicability and give City Council the authority to grant modifications to development
standards for qualifying projects.
Resource Impact
As presented in the Proposed Fiscal Year 2019 Capital Budget, the total project cost for the
California Avenue Garage (PE -18000) is estimated to be $47.9 million, and the estimated total
City of Palo Alto Page 6
project cost for the PSB (PE -15001) is $92.2 million. Continued design work is in progress for the
PSB to assess increases in costs and value engineering opportunities. Pursuant to the Council
Infrastructure Plan, the majority of funding for the garage and the PSB will come from
certificates of participation supported by Transient Occupancy Tax (hotel tax) revenues
dedicated to the plan by Council, including the 2% increase approved by a super majority of
Palo Alto voters in November 2014. Additional funding for the PSB and garage will come from
the City's Capital Improvement Fund Infrastructure Reserve. The Finance Committee and
Council are currently evaluating potential revenue measures for the November 2018 ballot in
order to assure full funding for the nine Council Infrastructure Plan projects, which includes the
California Avenue Garage and PSB projects.
Staff time processing the CEQA document, ARB applications and PF zone change are subject to
cost recovery. Currently, no cost recovery development impact fees are imposed upon public
projects; however, a proposed update to the city-wide transportation impact fee (TIF),
scheduled to be presented to Council for adoption in late summer 2018, would make public
projects, including the California Avenue Garage and PSB projects, subject to the cost recovery
fees. Staff anticipates that the updated TIF could add approximately $500,000 to the current
project costs.
Policy Implications
Project compliance to applicable Comprehensive Plan policies is provided in Attachment C.
The recommended action in this report provides a path forward to advance work on the city's
public parking garage while final details of the PSB are addressed through a public hearing
process. To facilitate this approach, staff recommends the Council certify the subject EIR and
adopt the related MMRP (see below discussion). The EIR addresses the PSB as its design is
known now. If there are substative changes that require changes to the EIR, staff will prepare
necessary documents to support Council action when the PSB design returns in the fall.
The city continues to balance efficient application processing with rising construction costs. The
recommended approach in this report is consistent with that effort. In the event the proposed
ordinance is adopted, the garage not approved, or the EIR not certified at this time, the project
schedule would be extended and there may be additional unplanned construction -related and
application processing costs.
Environmental Review
Council certification of the Final EIR and Approval of the Mitigation Monitoring and Reporting
Program (MMRP) is required. Under the California Environmental Quality Act (CEQA), the PSB
and public parking garage are considered as a single project because the public parking garage
will mitigate for the loss of approximately 310 existing public surface parking spaces on both
sites. The PTC had provided initial comments on the PSB and public parking garage project
during an EIR scoping session on April 12, 2017.
City of Palo Alto Page 7
The City of Palo Alto published the Draft EIR for public review and comments on January 8,
2018; the public comment period closed February 22, 2018. During the public review period,
both the ARB and PTC held public meetings, on January 18th and January 315t, respectively, to
take public testimony on the Draft EIR. Substantive public comments received at these
meetings and in writing have been responded to in the Final EIR, provided to the Council in hard
copy and published on May 11, 2018 on the Public Works webpage for the project. The Final
EIR was also distributed via email to members of the public and agencies who commented on
the Draft EIR.
The EIR addresses the proposed amendment to Chapter 18.28 as well as the proposed
demolition and tree removals, grading, construction of the garage and PSB, and temporary
construction -related dewatering. The Draft EIR and the Final EIR identified significant and
potentially significant environmental impacts that can be fully addressed and reduced to less
than significant through the adoption and implementation of standard project requirements
incorporated as part of the Project and feasible mitigation measures. Attachment F provides
a short summary of topic areas identified as having potential and mitigated impacts.
The Downtown Garage, which will benefit from Council adoption of the PF zone ordinance
that is addressed in the PSB Project EIR, has a separate Draft EIR published on May 18, 2018.
A link to the Downtown Garage DEIR is found at the Public Works' webpage for the
Downtown Garage project, found at this link:
https://www.cityofpaloalto.org/gov/depts/pwd/infrastructure plan/new downtown garage
.asp. On June 21, 2018, the ARB is scheduled to conduct the second formal review of the
Downtown garage.
Council is requested to adopt the MMRP identifying responsibility and anticipated timing for
implementation of mitigation measures recommended in the Final EIR concurrently to ensure
compliance with standard project requirements incorporated as part of the Project and
mitigation measures during Project implementation. The MMRP will remain available for public
review during the compliance period.
Next Steps
Following acceptance of the recommendation in this report, staff will return to the ARB to
consider updated PSB plans and then return to Council for final action.
Attachments:
• Attachment A: Resolution Certifying EIR and Adopting MMRP
• Attachment B: PF Zone Amendment Ordinance 22072
• Attachment C: RLUA for 350 Sherman Garage
• Attachment D: Location Map Public Parking Garage
• Attachment E: Directions to get to EIR and project plans (Council to receive hardcopies)
• Attachment F: Mitigated Impact Topics Summary
• Attachment G: Links to PTC and ARB Documents and Summary
City of Palo Alto Page 8
Attachment A -
Resolution No. _
Resolution of the Council of the City of Palo Alto
Certifying the Adequacy of the Final Environmental Impact Report for the
Public Safety Building and California Avenue Parking Garage Project, Making
Certain Findings Concerning Significant Environmental Impacts and Mitigation
Measures, and Adopting a Mitigation Monitoring and Reporting Program, All
Pursuant to the California Environmental Quality Act
RECITALS
A. The City of Palo Alto ("City") has proposed a project to relocate its public safety
functions from their current Downtown location and construct a new public safety building and
public parking garage on adjacent sites at 250 and 350 Sherman Avenue that are currently used
as surface parking lots in the California Avenue commercial area in Palo Alto (the "PSB Project"
or the "Project").
B. Approval of the PSB Project would constitute a project under the provisions of
the California Environmental Quality Act of 1970, together with related state implementation
guidelines promulgated thereunder ("CEQA").
C. The City is the Lead Agency pursuant to Public Resources Code section 21067 as
it has the principal responsibility to approve and regulate the Project.
D. The City, in compliance with CEQA, prepared an Environmental Impact Report
(EIR) to provide an assessment of the potential environmental consequences of approving and
constructing the PSB Project and approving associated zoning code amendments.
E. A Draft Environmental Impact Report ("Draft EIR") was circulated for public
review from January 8, 2018 through February 22, 2018, during which time the City held public
hearings to receive comments on the Draft EIR. The hearings were held by the City's
Architectural Review Board (ARB) on January 18, 2018 and Planning and Transportation
Commission (PTC) on January 31, 2018.
F. The City considered the comments received during the Draft EIR public review
period and prepared a Final Environmental Impact Report ("Final EIR"). The Final
Environmental Impact Report is comprised of the Draft EIR, together with the Final
Environmental Impact Report published on May 11, 2018 (collectively, all of said documents are
referred to herein as the "EIR").
G. The Council is the decision -making body for approval of the proposed Project.
H. CEQA requires that in connection with approval of a project for which an
environmental impact report has been prepared that identifies one or more significant
environmental effects of the project, the decision -making body of a public agency make certain
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findings regarding those effects.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PALO ALTO
AS FOLLOWS:
SECTION 1. Certification and General Findings
The City Council, in the exercise of its independent judgment, makes and adopts the following
findings to comply with the requirements of CEQA, including Sections 15091, 15092, and 15093
of the CEQA Guidelines, based upon the entire record of proceedings for the Project. All
statements set forth in this Resolution constitute formal findings of the City Council, including
the statements set forth in this paragraph and in the recitals above.
1. The City Council was presented with, and has independently reviewed and analyzed the
EIR and other information in the record and has considered the information contained
therein prior to acting upon and approving the Project, and bases the findings stated
below on such review.
2. The EIR provides an adequate basis for considering and acting upon the Project. The City
Council has considered all of the evidence and arguments presented during
consideration of the Project and the EIR. In determining whether the Project may have a
significant impact on the environment, and in adopting the findings set forth herein, the
City Council certifies that it has complied with Public Resources Code Sections 21081,
21081.5, and 21082.2.
3. The City Council agrees with the characterization of the EIR with respect to all impacts
initially identified as "less than significant" and finds that those impacts have been
described accurately and are less than significant as so described in the EIR. This finding
does not apply to impacts identified as significant or potentially significant that are
reduced to a less than significant level by mitigation measures included in the EIR. The
disposition of each of those impacts and the mitigation measures adopted to reduce
them are addressed specifically in the findings below.
4. Mitigation measures associated with the potentially significant impacts of the Project
will be implemented through the Mitigation Monitoring and Reporting Program (MMRP)
described below, which is the responsibility of the City.
5. The EIR considers a reasonable range of potentially feasible alternatives, sufficient to
foster informed decision making, public participation and a reasoned choice, in
accordance with CEQA.
6. The Final EIR contains responses to comments received on the Draft EIR. The Final EIR
also contains corrections and clarifications to the text and analysis of the Draft EIR
where warranted. The City Council does hereby find that such changes and additional
information are not significant new information under CEQA because such changes and
additional information do not indicate that any of the following would result from
approval and implementation of the Project: (i) any new significant environmental
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impact or substantially more severe environmental impact (not already disclosed and
evaluated in the DEIR), (ii) any feasible mitigation measure considerably different from
those analyzed in the Draft EIR that would lessen a significant environmental impact of
the Project has been proposed and would not be implemented, or (iii) any feasible
alternative considerably different from those analyzed in the DEIR that would lessen a
significant environmental impact of the Project has been proposed and would not be
implemented. The City Council does find and determine that recirculation of the Final
EIR for further public review and comment is not warranted or required under the
provisions of CEQA.
7. The City Council does hereby find and certify that the EIR has been prepared and
completed in compliance with CEQA and reflects the City of Palo Alto's independent
judgment and analysis.
8. The City Council does hereby make the following findings with respect to significant
effects on the environment of the Project, as identified in the EIR, with the
understanding that all of the information in this Resolution is intended as a summary of
the full administrative record supporting the EIR, which full administrative record should
be consulted for the full details supporting these findings.
SECTION 2. Findings on Significant Impacts and Mitigation Measures
Pursuant to Public Resources Code Section 21081 and CEQA Guidelines Section 15091, the City
Council hereby makes these findings with respect to the potential for significant environmental
impacts from approval and implementation of the PSB Project and the means for mitigating
those impacts.
These findings do not attempt to describe the full analysis of each environmental impact
contained in the EIR. Instead, the findings provide a summary description of each impact,
describe the applicable mitigation measures identified in the EIR and adopted by the City, and
state the findings on the significance of each impact after imposition of the adopted mitigation
measures. A full explanation of these environmental findings and conclusions can be found in
the EIR. These findings hereby incorporate by reference the discussion and analysis in the EIR
that support the EIR's determinations regarding significant project impacts and mitigation
measures designed to address those impacts. The facts supporting these findings are found in
the record as a whole for the Project.
In making these findings, the City ratifies, adopts, and incorporates into these findings the
analysis and explanation in the EIR, and ratifies, adopts, and incorporates into these findings
the determinations and conclusions of the EIR relating to environmental impacts and mitigation
measures, except to the extent that any such determinations and conclusions are specifically
and expressly modified by these findings.
The Draft EIR and the Final EIR identified a number of significant and potentially significant
environmental impacts that the Project will cause or contribute to. All of these significant
3
effects can be fully addressed and reduced to less than significant through the adoption and
implementation of standard project requirements incorporated as part of the Project and
feasible mitigation measures. Those impacts, along with the standard project requirements
and mitigation measures to reduce them to less than significant, are listed below as referenced
in the Final EIR.
Air Quality
Impact 5-1: Project construction would expose sensitive receptors located adjacent to and in
close proximity of the proposed Project site to localized, outdoor concentrations of DPM and
PM2.5 that could exceed BAAQMD risk thresholds even with the implementation of standard
BAAQMD construction measures.
a) Potential Impact. The impact identified above is described and discussed in
Section 5.3.6 of the Draft EIR.
b) Mitigation Measures. The following mitigation measure will be adopted and will
be implemented as provided in the MMRP, and as further described in the remainder of these
findings:
MM 5-1 Construction Air Contaminant Emissions
To reduce potential short-term adverse health risks associated with PM2.5
emissions, including emissions of diesel particulate matter (DPM), generated
during Project construction activities, the City and/or its designated
contractors, contractor's representatives, or other appropriate personnel
shall:
1. Implement BAAQMD-recommended "Additional Construction Measures".
The City shall implement the following BAAQMD-recommended additional
construction mitigation measures during construction activities:
1. All exposed surfaces shall be watered at a frequency adequate to
maintain minimum soil moisture of 12 percent, to be verified by lab
samples or moisture probe.
2. All excavation, grading, and/or demolition activities shall be
suspended when average winds speeds exceed 20 miles per hour.
3. Temporary wind breaks (e.g., fences) shall be installed on the
windward (generally the north / northwest) of actively disturbed areas of
construction. The wind breaks should have at maximum 50 percent air
porosity
4. Vegetative ground cover (e.g., fast -germinating native grass seed)
shall be planted in disturbed areas as soon as possible and watered
appropriately until vegetation is established
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5. Simultaneous occurrence of excavation, grading, and ground -
disturbing construction activities in the same area at any one time shall
be limited and/or phased to reduce the amount of disturbed surfaces at
any one time.
6. All trucks and equipment, including their tires, shall be washed off
prior to leaving the site.
7. Site access to a distance of 100 feet from the paved road, or as much
as feasible, shall be treated with a compacted layer of wood chips, mulch,
gravel, or other cover as feasible to reduce track -out.
8. Minimize the idling time for diesel -powered construction equipment
to two minutes provided such idling restrictions are consistent with
manufacturer's equipment specifications.
2. Construction equipment restrictions. The City shall apply the following
construction equipment restrictions to the proposed Project:
1. Electric -powered and liquefied or compressed natural gas equipment
shall be employed instead of diesel powered equipment to the maximum
extent feasible.
2. All construction equipment with a rated power -output of 25
horsepower or greater shall meet U.S. EPA and CARB Tier IV Final
Emission Standards for particulate matter. This may be achieved via the
use of equipment with engines that have been certified to meet Tier IV
emission standards, or through the use of equipment that has been
retrofitted with a CARB-verified diesel emission control strategy (e.g.,
oxidation catalyst, particulate filter) capable of reducing exhaust PM
emissions to levels that meet Tier IV standards.
3. Prepare Construction Risk Reduction Plan. Prior to the start of construction
activity, the City and/or its contractor shall prepare a Construction Risk
Reduction Plan for the Project which:
1. Identifies the final planned construction phasing schedule and
anticipated equipment operations.
2. Estimates the proposed Project's construction emissions based on the
final phasing and equipment plan. Any emission update shall be
performed using the latest -recommended emissions estimator model
recommended by the BAAQMD or other standard, acceptable
methodology (e.g., contractor -specific fleet emission factors and
estimates of equipment operating hours)
3. Models the potential diesel particulate matter and total PM2.5
concentrations resulting from refined emissions estimates. Any modeling
shall be performed using an accepted screening or refined dispersion -
model recommended for use by the BAAQMD. The modeling shall focus
on discrete, residential receptors located at and near the proposed
Project site.
4. Estimates potential adverse health effects associated with exposure to
DPM. Risk estimates shall follow the latest recommendations of the
BAAQMD. The goal of the risk estimation shall be to identify the
receptor(s) or areas of receptors where carcinogenic and non -
carcinogenic risk thresholds may be exceeded. If risks are exceeded, the
plan shall identify feasible on- and off -site measures to reduce risks to
levels below BAAQMD thresholds. On -site measures may include the
BAAQMD "Additional Construction Measures" and construction
equipment restrictions included in Mitigation Measure 5-1, as well as
phasing / activity restrictions. Off -site measures may include coordinating
with all impacted receptors to replace and upgrade existing HVAC
systems to provide high-performance panel filters capable of reducing
potential modeled outdoor PM2.5 concentrations / risks to levels that are
below BAAQMD thresholds.
4. Implement Off -Site Mitigation. In -lieu of preparing the Construction Risk
Reduction Plan identified above, the City may, prior to the start of construction
activities, coordinate directly with impacted residential receptors to replace and
upgrade existing residential HVAC systems with a high-performance panel filter
with a rated minimum efficiency reporting value (MERV) for particles in the
range of 0.3 to 1.0 µm of 70% (presumed to be a minimum MERV-14), or
equivalent system upgrade. This level of control would reduce risks to levels
below current BAAQMD thresholds. Based on the results of the modeling
conducted for the EIR, the City shall coordinate with residential receptors
located in the area bound by Park Boulevard to the north, Ash Street to the
south, Sheridan Avenue to the east, and Sherman Avenue to the west.
c) Finding and Rationale. Changes or alterations have been required in, or
incorporated into, the project, which avoid or substantially lessen the significant environmental
effect identified in the EIR. Mitigation Measure 5-1 would limit construction activities and
require the implementation of controls that would reduce predicted adverse construction
health risks to less -than -significant levels. Mitigation Measure 5-1 would reduce toxic air
contaminant emissions generated during Project construction to less than significant.
d) Remaining Impact. Mitigation Measure 5-1 specified above would reduce all
potential impacts to less than significant.
Biological Resources
Impact 6-1: Potential Impacts on Nesting Birds. The proposed PSB Project is intended to
improve the natural environment on the Project site with an extensive array of coordinated
new landscaping and trees. However, 38 existing trees are proposed to be removed. Without a
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proactive mitigation procedure in place, Project construction could inadvertently result in the
removal of trees containing nests or eggs of migratory birds, raptors, or bird species during the
nesting season, which would be considered an "unlawful take" under the Federal Migratory
Bird Treaty Act and USFW provisions protecting migratory and nesting birds.
a) Potential Impact. The impact identified above is described and discussed in
Section 6.3.2 of the Draft EIR.
b) Mitigation Measures. The following mitigation measure will be adopted and will
be implemented as provided in the MMRP, and as further described in the remainder of these
findings.
MM 6-1 Potential Impacts on Nesting Birds
To avoid impacts to nesting birds and violation of State and federal laws
pertaining to birds, all construction -related activities (including but not
limited to mobilization and staging, clearing, grubbing, vegetation removal,
fence installation, demolition, and grading) should occur outside the avian
nesting season (that is, prior to February 1 or after August 31). If construction
and construction noise occurs within the avian nesting season (from
February 1 to August 31), all suitable habitats located within the Project's
area of disturbance, including staging and storage areas plus a 150 -foot
buffer around these areas, shall be thoroughly surveyed, as feasible, for the
presence of active nests by a qualified biologist no more than five days
before commencement of any site disturbance activities and equipment
mobilization. If Project activities are delayed by more than five days, an
additional nesting bird survey shall be performed. Active nesting is present if
a bird is sitting in a nest, a nest has eggs or chicks in it, or adults are observed
carrying food to the nest. The results of the surveys shall be documented. If it
is determined that birds are actively nesting within the survey area, the
additional procedures below shall apply. Conversely, if the survey area is
found to be absent of nesting birds, the additional procedures shall not be
required.
Additional Procedures. If pre -construction nesting bird surveys result in the
location of active nests, no site disturbance and mobilization of heavy
equipment (including but not limited to equipment staging, fence
installation, clearing, grubbing, vegetation removal, fence installation,
demolition, and grading) shall take place within 150 feet of nests, or as
determined by a qualified biologist, until the chicks have fledged. Monitoring
shall be required to insure compliance with the MBTA and relevant California
Fish and Game Code requirements. Monitoring dates and findings shall be
documented.
c) Finding and Rationale. Changes or alterations have been required in, or
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incorporated into, the project, which avoid or substantially lessen the significant environmental
effect identified in the EIR. Mitigation Measure 6-1 includes measures to protect nesting birds,
including conducting nesting surveys prior to construction and retaining a qualified biologist to
monitor activities and ensure nesting species are not disturbed. Mitigation Measure 6-1 would
reduce potential impacts on nesting birds to less than significant.
d) Remaining Impact. Mitigation Measure 6-1 specified above would reduce all
potential impacts to less than significant.
Impact 6-2: Removal of Protected and Street Trees. Because 6 protected trees and 5 street
trees (those within street rights -of -way) are proposed to be removed as part of the proposed
PSB Project, Palo Alto Municipal Code Title 8 (Trees and Vegetation) Chapters 8.04 and 8.10
would apply to the Project to require on -site tree replacement or off -site replacement and
mitigation in accordance with the standards in the City's Tree Technical Manual (Section
8.10.050(d)(2)). Without adequate replacement or other mitigation as set forth in the Tree
Technical Manual, the Project would be inconsistent with the Municipal Code tree protection
provisions.
a) Potential Impact. The impact identified above is described and discussed in
Section 6.3.2 of the Draft EIR.
b) Mitigation Measures. The following mitigation measure will be adopted and will
be implemented as provided in the MMRP, and as further described in the remainder of these
findings:
MM 6-2 Removal of Protected and Street Trees
Prior to removal of the protected trees and street trees, the applicant shall
obtain a tree removal permit issued by the City of Palo Alto Urban Forestry
Division for the removal of any and all protected, designated, or street trees
(referred to collectively as "Regulated Trees"). In all cases, replacement trees
would be required as a condition of the tree removal permit, and the Project
applicant must demonstrate to the satisfaction of the City that there is no
alternative that could preserve the tree(s) on -site. The Project applicant must
provide an evaluation and summary for any Regulated Tree (the collective
term for any protected, designated, or street tree) proposed to be removed.
The applicant shall be required, in accordance with the Tree Protection and
Management Regulations (PAMC 8.10) and Tree Technical Manual (PAMC
8.10.130), to replace the tree canopy for the six (6) protected trees and five
(5) street trees, in accordance with the tree canopy formula identified in the
Tree Technical Manual (TTM, 3.20). lithe tree canopy cannot be replaced on -
site, the canopy shall be replaced off -site as close to the project site as
feasible. If trees are being replaced off -site, the applicant must submit a Tree
Planting Plan to the Urban Forestry Division and obtain the Urban Forestry
8
Division's approval of the plan prior to issuance of a building permit. The Tree
Planting Plan must include:
■ The canopy calculation for trees removed and the number of trees planned to
replace them, consistent with the formula identified in the Tree Technical
Manual
■ The specific location where the new trees would be planted with specific
baseline information about that proposed site (e.g., surrounding vegetation or
development)
■ The species of trees to be planted
■ Specific planting details (e.g., size of sapling, size of containers, irrigation plan)
■ Success criteria
■ Monitoring and maintenance schedule
Replacement tree planting will be monitored by a qualified arborist. To verify the
success of replacement trees, monitoring shall occur for two years after initial
planting. After the two-year period, the arborist will determine if the trees are
capable of surviving without further maintenance.
c) Finding and Rationale. Changes or alterations have been required in, or
incorporated into, the project, which avoid or substantially lessen the significant environmental
effect identified in the EIR. Mitigation Measure 6-2 includes measures to replace trees
consistent with City of Palo Alto Tree Protection and Management Regulations (PAMC 8.10),
the Tree Technical Manual (PAMC 8.10.130), and the protocols and standards of the Urban
Forestry Division. Mitigation Measure 6-2 would reduce impacts on the removal of protected
and street trees to less than significant.
d) Remaining Impact. Mitigation Measure 6-2 specified above would reduce all
potential impacts to less than significant.
Cultural and Historic Resources
Impact 7-1: Potential Disturbance of Archaeological or Paleontological Resources. Project
construction (e.g., excavation for underground parking and utilities) could disturb existing
unrecorded sensitive archaeological or paleontological resources at the PSB Project site.
a) Potential Impact. The impact identified above is described and discussed in
Section 7.3.2 of the Draft EIR.
9
b) Mitigation Measures. The following mitigation measure will be adopted and will
be implemented as provided in the MMRP, and as further described in the remainder of these
findings:
MM 7-1 Potential Disturbance of Archaeological or Paleontological
Resources
In the event of the unanticipated discovery of subsurface archaeological or
paleontological resources during earth -moving operations, the following
measures are recommended to reduce potentially significant impacts on
these resources to a less -than -significant level:
■ Conduct Archaeological/Paleontological Sensitivity Training for Construction
Personnel. The City shall retain a qualified professional archaeologist who meets
U.S. Secretary of the Interior's Professional Qualifications and Standards, and a
professionally qualified paleontologist, to conduct an
Archaeological/Paleontological Sensitivity Training for construction personnel
prior to commencement of excavation activities. The training session will
include a written handout and will focus on how to identify archaeological and
paleontological resources that may be encountered during earth -moving
activities, including the procedures to be followed in such an event, the duties of
archaeological and paleontological monitors, and the general steps a qualified
professional archaeologist or paleontologist would follow in conducting a salvage
investigation if one is necessary.
■ Cease Ground -Disturbing Activities and Implement Treatment Plan if
Archaeological Resources Are Encountered. In the event that archaeological
resources are unearthed during ground -disturbing activities, the ground -
disturbing activities shall be halted or diverted away from the vicinity of the find
so that the find can be evaluated. A buffer area of at least 50 feet shall be
established around the find, where construction activities will not be allowed to
continue until a qualified archaeologist has examined the newly discovered
artifact(s) and has evaluated the area of the find. Work shall be allowed to
continue outside the buffer area.
All archaeological resources unearthed by project construction activities shall be
evaluated by a qualified professional archaeologist, who meets the U.S.
Secretary of the Interior's Professional Qualifications and Standards. Should the
newly discovered artifacts be determined to be prehistoric, Native American
Tribes/Individuals shall be contacted and consulted, and Native American
construction monitoring should be initiated. The City shall coordinate with the
archaeologist to develop an appropriate treatment plan for the resources. The
plan may include implementation of archaeological data recovery excavations to
address treatment of the resources, along with subsequent laboratory
processing and analysis.
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■ Conduct Periodic Archaeological Resources Spot Checks During Grading and
Earth -Moving Activities in All Sediments. The City shall retain a qualified
professional archaeologist who meets the U.S. Secretary of the Interior's
Professional Qualifications and Standards, to conduct periodic Archaeological
Spot Checks beginning at depths below two (2) feet to determine if construction
excavations have exposed, or have a high probability of exposing, archaeological
resources. After the initial Archaeological Spot Check, further periodic checks
shall be conducted at the discretion of the qualified archaeologist.
If the qualified archaeologist determines that construction excavations have
exposed, or have a high probability of exposing, archaeological artifacts,
construction monitoring for archaeological resources will be required. The City
shall retain a qualified archaeological monitor, who meets the qualifications set
forth by the U.S. Secretary of the Interior's Professional Qualifications and
Standards, who will work under the guidance and direction of a professional
archaeologist. The archaeological monitor shall be present during all
construction excavations (e.g., grading, trenching, or clearing/grubbing) into
non -fill sediments. Multiple earth -moving construction activities may require
multiple archaeological monitors.
The frequency of monitoring shall be based on the rate of excavation and
grading activities, proximity to known archaeological resources, the materials
being excavated (native versus artificial fill soils), the depth of excavation, and if
found, the abundance and type of archaeological resources encountered. Full-
time monitoring can be reduced to part-time inspections if determined adequate
by the project archaeologist.
■ If subsurface paleontological resources are encountered, excavation shall halt in
the vicinity of the resources and a qualified paleontologist shall evaluate the
resource and its stratigraphic context. The monitor shall be empowered to
temporarily halt or redirect construction activities to ensure avoidance of
adverse impacts to paleontological resources. During monitoring, if potentially
significant paleontological resources are found, "standard" samples shall be
collected and processed by the qualified paleontologist to recover micro
vertebrate fossils. If significant fossils are found and collected, they shall be
prepared to a reasonable point of identification. Excess sediment or matrix shall
be removed from the specimens to reduce the bulk and cost of storage.
Itemized catalogs of material collected and identified shall be provided to a
museum repository with the specimens. Significant fossils collected during this
work, along with the itemized inventory of these specimens, shall be deposited
in a museum repository for permanent curation and storage. A report
documenting the results of the monitoring and salvage activities, and the
significance of the fossils, if any, shall be prepared. The report and inventory,
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when submitted to the lead agency, shall signify the completion of the program
to mitigate impacts on paleontological resources.
c) Finding and Rationale. Mitigation Measure 7-1 includes measures to protect as -
yet undiscovered archaeological and paleontological resources, including conducting training
for construction personnel, ceasing ground -disturbing activities upon any discovery,
implementation of a treatment plan by a qualified professional archaeologist, conducting spot
checks, monitoring excavation activities, and collection and preparation of paleontological
resources by a qualified paleontologist. Mitigation Measure 7-1 would reduce impacts on
archaeological and paleontological resources to less than significant.
d) Remaining Impact. Mitigation Measure 7-1 specified above would reduce all
potential impacts to less than significant.
Impact 7-2: Unanticipated Discovery of Tribal Cultural Resources. Project construction
activities (e.g., excavation) could disturb as yet unidentified and/or unrecorded tribal cultural
resources, including possible human remains.
a) Potential Impact. The impact identified above is described and discussed in
Section 7.3.2 of the Draft EIR.
b) Mitigation Measures. The following mitigation measure will be adopted and will
be implemented as provided in the MMRP, and as further described in the remainder of these
findings:
MM 7-1 Unanticipated Discovery of Tribal Cultural Resources
In the event that cultural resources of Native American origin are identified
during construction, all earth -disturbing work within the vicinity of the find
must be temporarily suspended or redirected until an archaeologist has
evaluated the nature and significance of the find and an appropriate Native
American representative, based on the nature of the find, is consulted. If the
City determines that the resource is a tribal cultural resource and thus
significant under CEQA, a mitigation plan shall be prepared and implemented
in accordance with State guidelines and in consultation with Native American
groups. The plan would include avoidance of the resource or, if avoidance of
the resource is infeasible, the plan would outline the appropriate treatment
of the resource in coordination with the archaeologist and the appropriate
Native American tribal representative.
c) Finding and Rationale. Changes or alterations have been required in, or
incorporated into, the project, which avoid or substantially lessen the significant environmental
effect identified in the EIR. Mitigation Measure 7-2 includes measures to protect as -yet
undiscovered tribal cultural resources, including evaluation by a qualified archaeologist,
consultation with an appropriate Native American representative, and implementing a
12
mitigation plan. Mitigation Measure 7-2 would reduce potential impacts on tribal cultural
resources to less than significant.
d) Remaining Impact. Mitigation Measure 7-2 specified above would reduce all
potential impacts to less than significant.
Geology and Soils
Impact 8-1: Geotechnical Hazards Associated with Project Excavation and Grading. The
Project's proposed excavation and grading activities have the potential to create conditions that
would potentially compromise the safety or stability of proposed Project improvements. The
preliminary site -specific geotechnical investigation (Romig Engineers, May 2016) made initial
assessments of these conditions, but a construction -level geotechnical investigation will be
needed to adequately address all grading and excavation activities on the proposed Public
Safety Building and California Avenue Parking Garage (PSB Project) site. Without such a
detailed study --and without the associated supervision of an engineering geologist or
geotechnical engineer during Project grading and construction --the safety and long-term
stability of existing and proposed Project improvements cannot be assured.
a) Potential Impact. The impact identified above is described and discussed in
Section 8.3.3 of the Draft EIR.
b) Mitigation Measures. The following mitigation measure will be adopted and will
be implemented as provided in the MMRP, and as further described in the remainder of these
findings:
MM 8-1 Geotechnical Hazards Associated with Project Excavation and
Grading
As recommended by the Project's preliminary geotechnical investigation,
prior to City issuance of grading permits for individual Project construction
components, the City shall be required to retain a registered engineering
geologist or geotechnical engineer to prepare detailed, construction -level
geotechnical investigations to guide the construction of all Project grading
and excavation activities. The detailed, construction -level geotechnical
investigations shall be performed for each of the structures proposed for the
development site. Subsurface conditions shall be explored and laboratory
tests conducted on selected soil samples to establish parameters for the
design of excavations, foundations, shoring, and waterproofing.
Recommendations from the investigations shall be incorporated into all plans
for Project grading, excavation, soil support (both temporary and long-term),
and utility construction, to the satisfaction of the City Engineer.
The detailed, construction -level investigations, relevant recommendations,
13
and all associated Project grading, excavation and foundation plans, shall be
subject to review and approval by an independent engineering geologist or
geotechnical engineer retained by the City Engineer. In addition, the project
civil engineer shall certify to the City Engineer (e.g., through plan submittal
for City review) that all relevant provisions of the investigations have been
incorporated into the grading, excavation and construction plans, and all
earthwork and site preparation shall be performed under the direct
supervision of a registered engineering geologist or geotechnical engineer.
c) Finding and Rationale. Changes or alterations have been required in, or
incorporated into, the project, which avoid or substantially lessen the significant environmental
effect identified in the EIR. Mitigation Measure 8-1 includes measures to ensure the safety and
stability of all Project improvements, including the structures and associated infrastructure.
Mitigation Measure 8-1 would reduce geotechnical hazards associated with Project excavation
and grading to less than significant.
d) Remaining Impact. Mitigation Measure 8-1 specified above would reduce all
potential impacts to less than significant.
Hazards and Hazardous Materials
Impact 10-1: Potential Project -Related Exposure to Existing Soil or Groundwater
Contamination. Project -related excavation and construction activities could expose on -site
construction personnel, employees, and members of the public to existing soil and
groundwater contamination.
a) Potential Impact. The impact identified above is described and discussed in
Section 10.3.3 of the Draft EIR.
b) Mitigation Measures. The following mitigation measures will be adopted and
will be implemented as provided in the MMRP, and as further described in the remainder of
these findings:
MM 10-1 Potential Project -Related Exposure to Existing Soil or
Groundwater Contamination: Recommendations included in the Phase II
ESA (Stantec, June 8, 2017) shall be implemented, based on construction -
level project plans when more specific and precise design and construction
activities are formulated. The Phase II ESA recommends additional
assessment of local and regional groundwater conditions in advance of
dewatering activities, combined with, as necessary, evaluation of pertinent
and cost-effective water management strategies, including preparation of
Site Management Plans. Likewise, the Project must comply with the City's
standard dewatering requirements. This assessment and mitigation process
14
shall be subject to review and approval by the City Engineer.
c) Finding and Rationale. Changes or alterations have been required in, or
incorporated into, the project, which avoid or substantially lessen the significant environmental
effect identified in the EIR. Mitigation Measure 10-1 includes measures to ensure that the
Project would not result in soil or groundwater contamination. Mitigation Measure 10-1 would
reduce potential hazards and hazardous materials impacts to less than significant.
d) Remaining Impact. Mitigation Measure 10-1 specified above would reduce all
potential impacts to less than significant.
Noise
Impact 13-1 Project Construction Noise. Project construction would include site preparation,
excavation and grading, utility trenching, construction of a new parking garage and public
safety building, and application of architectural coatings. The noise levels generated by Project
construction would be in excess of 10 dB above ambient conditions at sensitive receptor
locations for several hours a day for a period of approximately 16 to 21 months.
a) Potential Impact. The impact identified above is described and discussed in
Section 13.3.2 of the Draft EIR.
b) Mitigation Measures. The following mitigation measure will be adopted and will
be implemented as provided in the MMRP, and as further described in the remainder of these
findings:
MM 13-1 Project Construction Noise: To reduce potential noise levels
associated construction of the proposed Project, the City and/or its
designated contractors, contractor's representatives, or other appropriate
personnel shall:
■ Restrict work hours/equipment noise. All work shall be subject to the
construction noise and time limits contained in City Municipal Code Chapter
9.10. Construction activities (including deliveries) shall only occur during the
following time periods:
— 8 AM to 6 PM Monday through Friday; and
— 9 AM to 6 PM on Saturday
Construction activities shall be prohibited on Sundays and holidays. The City
and/or its contractor shall post a sign at all entrances to the construction site
informing contractors, subcontractors, construction workers, etc. of these
requirements in accordance with Section 9.10.060(c). The sign shall also provide
a name (or title) and phone number for an appropriate on -site and City
15
representative to contact to submit a noise complaint.
■ Construction equipment care, siting, and design measures. The following
construction equipment care, siting, and design measures shall apply during
construction activities:
— Heavy equipment engines shall be covered and exhaust pipes shall include a
muffler in good working condition. Pneumatic tools shall include a noise
suppression device on the compressed air exhaust.
— All stationary noise -generating equipment such as pumps, compressors, and
welding machines shall be shielded and located as far from sensitive receptor
locations as practical. At a minimum, such shielding shall consist of a three -
sided sound enclosure (with a full or partial roof) that provides for proper
ventilation, equipment operation, and effective noise control. The enclosure
should be designed to achieve a 10 to 15 dB reduction in stationary
equipment noise levels. The design of the enclosure shall be reviewed by a
qualified acoustical consultant prior to installation to ensure the enclosure
will achieve a minimum 10 dB reduction in stationary equipment noise levels.
— The City shall connect to existing electrical service at the site to avoid the use
of stationary, diesel- or other alternatively -fueled power generators.
— No radios or other amplified sound devices shall be audible beyond the
property line of the construction site.
■ Construction traffic. Construction truck traffic, including soil hauling, equipment
deliveries, potential concrete deliveries, and other vendor deliveries shall follow
designated delivery routes prepared for the project, which are anticipated to
include travel on Oregon Expressway and Birch Road.
■ Construct/Install Temporary Noise Barrier: The City shall install and maintain
throughout the duration of all site preparation, excavation, foundation
construction, and building construction activities, one or more physical noise
barriers capable of achieving a minimum reduction in predicted construction
noise levels of 15.5 dB. Potential barrier options would include:
— A concrete, wood, or other barrier installed at -grade (or mounted to
structures located at -grade, such as K -Rail) along the project property line.
Such a wall/barrier shall consist of material that have a minimum rated
transmission loss value of 25.5 dB (or equivalent rating), and shall contain no
gaps in the structure through which noise may pass.
— Commercially available acoustic panels or other products such as acoustic
barrier blankets installed along the project property line, building envelope
or, if feasible and necessary, at or near sensitive residential receptor areas.
— Any combination of noise barriers and commercial products capable of
achieving a 15.5 dB reduction in construction noise levels at sensitive
receptor locations.
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— Prior to the start of the Project, the City may prepare an acoustical analysis
that reflects the final site plan, construction activities, equipment use and
duration, and refines potential construction noise reductions required for the
project.
The final type, placement, and design of the Project's temporary noise barrier(s)
shall be reviewed by a qualified acoustical consultant prior to installation to
ensure proper function and a minimum attenuation of 15.5 dBs in construction
noise levels.
■ Prepare Project Construction Noise Control Plan. Prior to the start of construction
activity, the City or its contractor shall prepare a Construction Noise Complaint
Plan for the Project which:
— Identifies the name and/or title and contact information (including phone
number and email) of the contractor and City representatives responsible for
addressing construction -noise related issues.
— Contains a detailed construction schedule and predicted noise levels
associated with construction activities.
— Includes procedures describing how the construction contractor will receive,
respond, and resolve to construction noise complaints. At a minimum, upon
receipt of a noise complaint, the contractor and/or City representative
described in the first sub -bullet above shall identify the noise source
generating the complaint, determine the cause of the complaint, and take
steps to resolve the complaint.
■ Prepare Construction Noise Monitoring Plan. Prior to the start of construction,
the City or its contractor shall prepare a Construction Noise Monitoring Plan
which identifies:
— Construction activities, hours of operation, and predicted construction noise
levels; and
— Construction noise monitoring locations, duration, and frequency.
The intent of the Construction Noise Monitoring Plan is to document updated
ambient noise levels, monitor construction noise levels, and verify compliance
with the noise reduction requirements in Mitigation Measure 13-1. If monitoring
indicates temporary noise barriers are not achieving a minimum 15.5 dB
reduction in construction noise levels or otherwise indicates construction noise
is resulting a 10 dB increase in noise levels above ambient conditions, the City
shall increase the height, size (length or width), density, and/or amount of noise
barriers installed such that attenuation requirements are achieved. The
Construction Noise Monitoring Plan may be combined with and/or incorporated
into the Construction Noise Complaint Plan described above.
The implementation of these measures would limit construction activities and
require the implementation of controls that would reduce predicted construction
17
noise levels to less than a 10 dB increase above existing ambient conditions.
c) Finding and Rationale. Changes or alterations have been required in, or
incorporated into, the project, which avoid or substantially lessen the significant environmental
effect identified in the EIR. Mitigation Measure 13-1 mandates that specific noise control
measures be included in contract specifications, such as work hour and construction noise
restrictions; construction equipment care, siting, and design measures; temporary noise
barriers; a Construction Noise Control Plan; and a Construction Noise Monitoring Plan.
Mitigation Measure 13-1 would limit construction activities and require the implementation of
controls that would reduce predicted construction noise levels to less than significant.
d) Remaining Impact. Mitigation Measure 13-1 specified above would reduce all
potential impacts to less than significant.
Impact 13-2 Project Groundborne Vibration Levels. Project construction activities could
generate perceptible groundborne vibration at adjacent buildings, including residential
buildings, for a period of approximately 8 months.
a) Potential Impact. The impact identified above is described and discussed in
Section 13.3.2 of the Draft EIR.
b) Mitigation Measures. The following mitigation measure will be adopted and will
be implemented as provided in the MMRP, and as further described in the remainder of these
findings:
MM 13-2 Potential Groundborne Vibration Levels
To reduce potential groundborne vibration levels associated with
construction of the proposed Project, the City and/or its designated
contractors, contractor's representatives, or other appropriate personnel
shall:
■ Prohibit Vibratory Equipment. The City shall prohibit the use of large vibratory
rollers (small plate compactors are acceptable) and vibratory pile driving
equipment during construction. Any deep foundation piers or caissons shall be
auger drilled.
■ Provide Notice to Adjacent Property Owners/Occupants. Five (5) days advanced
written notice shall be provided to adjacent property owners and building
occupants before commencing all drilling and significant earthmoving activities
within 65 feet of adjacent buildings. The notice shall provide the name (or title)
and contact information (including phone number and email) of the Contractor
and City -representatives responsible for addressing construction vibration -
related concerns.
18
■ Prepare Vibration Mitigation Plan. Prior to the start of construction activity, the
City or its contractor shall prepare a Construction Vibration Response Plan for
the project which:
— Identifies the name and/or title and contact information (including phone
number and email) of the Contractor and City -representatives responsible
for addressing construction vibration -related issues.
— Contains a detailed schedule of drilling and substantial earth moving
activities expected to occur within 65 feet of adjacent buildings.
— Includes procedures describing how the construction contractor will receive,
respond, and resolve to construction vibration complaints. At a minimum,
upon receipt of a vibration complaint, the Contractor and/or City
representative described in the first sub -bullet above shall identify the
vibration source generating the complaint, determine the cause of the
complaint, and take steps to resolve the complaint by reducing groundborne
vibration levels to less than 75 VdB and 0.04 in/sec PPV. Such measures may
include the use of non -impact drivers, use of rubber -tired equipment instead
of track equipment, or other measures that limit annoyance from
groundborne vibration levels.
The implementation of these measures would limit the potential for groundborne
vibration during construction activities, require advanced notice to adjacent
property owners and building occupants, and develop procedures designed to limit
potential annoyance and interference with daily activities at adjacent buildings.
c) Finding and Rationale. Changes or alterations have been required in, or
incorporated into, the project, which avoid or substantially lessen the significant environmental
effect identified in the EIR. Mitigation Measure 13-2 mandates that specific groundborne
vibration control measures be included in contract specifications, such as vibratory equipment
prohibitions, notice to adjacent property owners and occupants, and a Construction Vibration
Mitigation Plan. Mitigation Measure 13-2 would reduce groundborne vibration impacts to less
than significant.
d) Remaining Impact. Mitigation Measure 13-2 specified above would reduce all
potential impacts to less than significant.
Impact 13-3 Project Operational Noise. Noise generated by the parking garage ventilation
fans and the Public Safety Building generator, fire pump, and heating and air conditioning
equipment may exceed standards contained in the City Municipal Code unless shielding or
other means of attenuation is provided.
a) Potential Impact. The impact identified above is described and discussed in
Section 13.3.2 of the Draft EIR.
19
b) Mitigation Measures. The following mitigation measure will be adopted and will
be implemented as provided in the MMRP, and as further described in the remainder of these
findings:
MM 13-3 Project Operational Noise: To reduce potential stationary source
noise levels associated with the operation of the proposed Project, the City
and/or its designated contractors, contractor's representatives, or other
appropriate personnel shall:
■ Site equipment away from residential areas. Garage ventilation fans and public
safety building generators, fire pumps, and heating and air conditioning
equipment shall be located outside of setbacks and screened from view from
residential areas.
■ Enclose and/or Shield Stationary Noise -Generating Equipment. The City shall
enclose, shield, baffle, or otherwise attenuate noise generated from garage
ventilation fans and Public Safety Building generators, fire pumps, and heating
and air conditioning equipment. The attenuation achieved through such
enclosure, shielding, and/or baffling shall be sufficient to comply with Section
9.10.050(a) of the Municipal Code.
■ Prepare Acoustical Study. In accordance with Chapters 9.10 and 18.23 of the
Municipal Code, the City shall have an acoustical analysis prepared by a licensed
acoustical engineer that demonstrates:
— The proposed parking garage's generator would comply with the
requirements of the City's Noise Ordinance (Section 9.10.050, as excepted).
— The proposed parking garages ventilation fans would not result in a
calculated Ldn of 63.0 at sensitive residential receptor locations.
— The proposed Public Safety Building fire pump, back-up generator, and
heating and air conditioning equipment would comply with the requirements
of the City's Noise Ordinance (Section 9.10.050, as excepted) and would not
result in a calculated increase of more than 3.0 dB Ldn at sensitive receptor
locations.
The acoustical analysis shall be based on the final Project design, reflect the actual
equipment type and location at the Project site, and the actual noise enclosure,
shielding, or other attenuation measures included in the final Project design. If the
acoustical study demonstrates the noise levels from these sources would be at or
within 5 dB less than the Noise Ordinance limits, the City shall demonstrate through
monitoring that the equipment complies with the anticipated noise levels.
Implementation of these measures would ensure the Project is designed and
constructed in a manner consistent with the City's Municipal Code requirements.
c) Finding and Rationale. Changes or alterations have been required in, or
20
incorporated into, the project, which avoid or substantially lessen the significant environmental
effect identified in the EIR. Mitigation Measure 13-3 mandates that specific operational noise
control measures be included in contract specifications, such as the siting of noise -generating
equipment away from residential areas; enclosing and shielding noise -generating equipment;
and a subsequent acoustical analysis based on the final project design. Mitigation Measure 13-3
would reduce operational noise impacts to less than significant.
d) Remaining Impact. Mitigation Measure 13-3 specified above would reduce all
potential impacts to less than significant. No residual impacts would remain.
SECTION 3. Project Alternatives
Public Resources Code section 21002 prohibits a public agency from approving a project
if there are feasible alternatives or feasible mitigation measures available which would
substantially lessen the significant environmental effects of the project. When a lead agency
finds, even after the adoption of all feasible mitigation measures, that a project will still cause
one or more significant environmental effects that cannot be substantially lessened or avoided,
it must, prior to approving the project as mitigated, first determine whether there are any
project alternatives that are feasible and that would substantially lessen or avoid the project's
significant impacts.
Because all of the Project's impacts are being mitigated through the adoption of
mitigation measures described above, and because the Project will thus not result in any
significant environmental effects, the City Council finds that there is no need to further consider
the feasibility of any of the alternatives identified in the Final EIR.
SECTION 4. Mitigation Monitoring and Reporting Program
(a) CEQA requires the lead agency approving a project to adopt a Mitigation
Monitoring and Reporting Program (MMRP) for the changes made to the project that it has
adopted in order to mitigate or avoid significant effects on the environment. An MMRP has
been prepared and is recommended for adoption by the City Council concurrently with the
adoption of these findings to ensure compliance with standard project requirements
incorporated as part of the project and mitigation measures during Project implementation. As
required by Public Resources Code section 21081.6, the MMRP designates responsibility and
anticipated timing for the implementation of the mitigation measures recommended in the
Final EIR. The MMRP will remain available for public review during the compliance period.
(b) The City Council hereby adopts the MMRP for the Project attached hereto as
Exhibit A and incorporated by reference, and finds, determines, and declares that the adoption
of the MMRP will ensure enforcement and continued imposition of the mitigation measures
recommended in the Final EIR, and set forth in the MMRP, in order to mitigate or avoid
significant impacts on the environment.
21
SECTION 5. Location and Custodian of Records
The documents and other materials that constitute the record of proceedings on which
the City Council based the foregoing findings and approval of the Project are located at the
Department of Planning and Community Environment, 250 Hamilton Avenue, Palo Alto, CA
94301. The official custodian of the record is the Planning Director at the same address.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Mayor
APPROVED:
Assistant City Attorney City Manager
Director of Planning and
Community Environment
22
EXHIBIT A
MITIGATION MONITORING AND REPORTING PROGRAM
PUBLIC SAFETY BUILDING AND CALIFORNIA
AVENUE PARKING GARAGE
ENVIRONMENTAL IMPACT REPORT
State Clearinghouse No. 2017032066
CITY OF PALO ALTO
JUNE 2018
PREFACE
Section 21081 of the California Environmental Quality Act (CEQA) requires a Lead Agency
to adopt a Mitigation Monitoring or Reporting Program whenever it approves a project for
which measures have been required to mitigate or avoid significant effects on the
environment. The purpose of the monitoring or reporting program is to ensure
compliance with the mitigation measures during project implementation.
The Environmental Impact Report concluded that that all identified environmental impacts
associated with the proposed Project can be mitigated to less than significant levels, either
with the implementation of standard project requirements proposed as part of the Project
and/or mitigation measures identified in the analysis, and that no significant unavoidable
impacts would occur from proposed Project implementation. This Mitigation Monitoring
or Reporting Program addresses the required measures in terms of how and when they
will be implemented.
24
EXHIBIT B
PALO ALTO PUBLIC SAFETY BUILDING AND CALIFORNIA AVENUE PARKING GARAGE
MITIGATION MONITORING AND REPORTING PROGRAM
The environmental mitigation measures listed in column two below have been incorporated into the conditions of approval for the Palo Alto Public Safety Building and California Avenue Parking Garage
in order to mitigate identified environmental impacts_ A completed and signed chart will indicate that each mitigation requirement has been complied with, and that City and state monitoring
requirements have been fulfilled with respect to Public Resources Code section 21081.6.
MONITORING
VERIFICATION
IDENTIFIED IMPACT
RELATED MITIGATION MEASURE
(Performance Criteria)
Implementation
Entity
Monitoring and
Verification
Entity
Timing
Requirements
Signature
Date
AIR QUALITY
Impact 5-1: Construction Toxic Air
Contaminant Emissions. Project
construction would expose sensitive
receptors located adjacent to and in close
proximity of the proposed project site to
localized, outdoor concentrations of DPM
and PM2.5 that could exceed BAAQMD risk
thresholds even with the implementation of
standard BAAQMD construction measures_
Mitigation 5-1. To reduce potential short-term adverse
health risks associated with PM2.5 emissions, including
emissions of diesel particulate matter (DPM), generated
during project construction activities, the City and/or its
designated contractors, contractors' representatives, or
other appropriate personnel shall:
1. Implement BAAQMD-recommended "Additional
Construction Measures'_ The City shall implement the
following BAAQMD-recommended additional construction
mitigation measures during construction activities:
1. All exposed surfaces shall be watered at a frequency
adequate to maintain minimum soil moisture of 12
percent, to be verified by lab samples or moisture
probe
2. All excavation, grading, and/or demolition activities
shall be suspended when average winds speeds
exceed 20 miles per hour.
3. Temporary wind breaks (e.g., fences) shall be
installed on the windward (generally the north /
northwest) of actively disturbed areas of construction.
The wind breaks should have at maximum 50 percent
air porosity.
4. Vegetative ground cover (e_g_, fast -germinating
native grass seed) shall be planted in disturbed areas
as soon as possible and watered appropriately until
vegetation is established.
5 Simultaneous occurrence of excavation, grading, and
ground -disturbing construction activities in the same
area at any one time shall be limited and/or phased to
reduce the amount of disturbed surfaces at any one
time.
City of Palo Alto
Public Works
Department in
coordination with its
construction
contractors
Planning and
Community
Environment
Department
Prior to
issuance of
grading permits
and during
construction
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6. All trucks and equipment, including their tires, shall
be washed off prior to leaving the site.
7. Site access to a distance of 100 feet from the paved
road, or as much as feas ble, shall be treated with a
compacted layer of wood chips, mulch, gravel, or other
cover as feasible to reduce track -out.
8. Minimize the idling time for diesel -powered
construction equipment to two minutes provided such
idling restrictions are consistent with manufacturer's
equipment specifications.
2. Construction equipment restrictions. The City shall apply
the following construction equipment restrictions to the
proposed project:
1. Electric -powered and liquefied or compressed natural
gas equipment shall be employed instead of diesel
powered equipment to the maximum extent feasible.
2. All construction equipment with a rated power -output
of 25 horsepower or greater shall meet U.S. EPA and
GARB Tier IV Final Emission Standards for particulate
matter. This may be achieved via the use of equipment
with engines that have been certified to meet Tier IV
emission standards, or through the use of equipment
that has been retrofitted with a CARB-verified diesel
emission control strategy (e.g., oxidation catalyst,
particulate filter) capable of reducing exhaust PM
emissions to levels that meet Tier IV standards.
3. Prepare Construction Risk Reduction Plan. Prior to the
start of construction activity, the City and/or its contractor
shall prepare a Construction Risk Reduction Plan for the
project which:
1. Identifies the final planned construction phasing
schedule and anticipated equipment operations.
2. Estimates the proposed project's construction
emissions based on the final phasing and equipment
plan. Any emission update shall be performed using the
latest -recommended emissions estimator model
recommended by the BAAQMD or other standard,
acceptable methodology (e.g., contractor -specific fleet
emission factors and estimates of equipment operating
hours).
3. Models the potential diesel particulate matter and
total PM2.5 concentrations resulting from refined
emissions estimates. Any modeling shall be performed
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using an accepted screening or refined dispersion -
model recommended for use by the BAAQMD. The
modeling shall focus on discrete, residential receptors
located at and near the proposed project site.
4. Estimates potential adverse health effects associated
with exposure to DPM. Risk estimates shall follow the
latest recommendations of the BAAQMD. The goal of
the risk estimation shall be to identify the receptor(s) or
areas of receptors where carcinogenic and non -
carcinogenic risk thresholds may be exceeded. If risks
are exceeded, the plan shall identify feas ble on- and
off -site measures to reduce risks to levels below
BAAQMD thresholds. On -site measures may include
the BAAQMD "Additional Construction Measures" and
construction equipment restrictions included in
Mitigation Measure 5-1, as well as phasing / activity
restrictions. Off -site measures may include coordinating
with all impacted receptors to replace and upgrade
existing HVAC systems to provide high-performance
panel filters capable of reducing potential modeled
outdoor PM2.5 concentrations / risks to levels that are
below BAAQMD thresholds.
4. Implement Off -Site Mitigation. In -lieu of preparing the
Construction Risk Reduction Plan identified above, the
City may, prior to the start of construction activities,
coordinate directly with impacted residential receptors to
replace and upgrade existing residential HVAC systems
with a high-performance panel filter with a rated minimum
efficiency reporting value (MERV) for particles in the range
of 0.3 to 1.0 pm of 70% (presumed to be a minimum
MERV-14), or equivalent system upgrade. This level of
control would reduce risks to levels below current
BAAQMD thresholds. Based on the results of the
modeling conducted for the EIR, the City shall coordinate
with residential receptors located in the area bound by
Park Boulevard to the north, Ash Street to the south,
Sheridan Avenue to the east, and Sherman Avenue to the
west.
BIOLOGICAL RESOURCES
Impact 6-1: Potential Impacts on Nesting
Birds. The proposed PSB project is
intended to improve the natural environment
on the project site with an extensive array of
coordinated new landscaping and trees.
Mitigation 6-1. To avoid impacts to nesting birds and
violation of State and federal laws pertaining to birds, all
construction -related activities (including but not limited to
mobilization and staging, clearing, grubbing, vegetation
removal, fence installation, demolition, and grading) should
City of Palo Alto
Public Works
Department in
coordination with its
construction
Director of
Planning and
Community
Environment
Department
Prior to
issuance of
construction
related permits
(including
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However, 38 existing trees are proposed to
be removed. Without a proactive mitigation
procedure in place, project construction
could inadvertently result in the removal of
trees containing nests or eggs of migratory
birds, raptors, or bird species during the
nesting season, which would be considered
an "unlawful take" under the Federal
Migratory Bird Treaty Act and USFWS
provisions protecting migratory and nesting
birds (see Regulatory Setting above).
occur outside the avian nesting season (that is, prior to
February 1 or after August 31). If construction and
construction noise occurs within the avian nesting season
(from February 1 to August 31), all suitable habitats
located within the project's area of disturbance, including
staging and storage areas plus a 150 -foot buffer around
these areas, shall be thoroughly surveyed, as feas ble, for
the presence of active nests by a qualified biologist no
more than five days before commencement of any site
disturbance activities and equipment mobilization. If
project activities are delayed by more than five days, an
additional nesting bird survey shall be performed. Active
nesting is present if a bird is sitting in a nest, a nest has
eggs or chicks in it, or adults are observed carrying food to
the nest. The results of the surveys shall be documented.
If it is determined that birds are actively nesting within the
survey area, the additional procedures below shall apply.
Conversely, if the survey area is found to be absent of
nesting birds, the additional procedures shall not be
required.
Additional Procedures. If pre -construction nesting bird
surveys result in the location of active nests, no site
disturbance and mobilization of heavy equipment
(including but not limited to equipment staging, fence
installation, clearing, grubbing, vegetation removal, fence
installation, demolition, and grading) shall take place within
150 feet of nests, or as determined by a qualified biologist,
until the chicks have fledged. Monitoring shall be required
to insure compliance with the MBTA and relevant
California Fish and Game Code requirements. Monitoring
dates and findin s shall be documented.
contractors and
biologist
demolition,
grading, and
building
permits) and
during
construction
Impact 6-2: Removal of Protected and
Street Trees. Because 6 protected trees
and 5 street trees (those within street rights-
of -way) are proposed to be removed as part
of the proposed PSB project, Palo Alto
Municipal Code Title 8 (Trees and
Vegetation) Chapters 8.04 and 8.10 would
apply to the project to require on -site tree
replacement or off -site replacement and
mitigation in accordance with the standards
in the City's Tree Technical Manual (Section
8.10.050(d)(2)). Without adequate
replacement or other miti ation as set forth
Mitigation 6-2. -Prior to removal of the protected trees and
street trees, the applicant shall obtain a tree removal
permit issued by the City of Palo Alto Urban Forestry
Division for the removal of any and all protected,
designated, or street trees (referred to collectively as
"Regulated Trees"). In all cases, replacement trees would
be required as a condition of the tree removal permit, and
the project applicant must demonstrate to the satisfaction
of the City that there is no alternative that could preserve
the tree(s) on -site. The project applicant must provide an
evaluation and summary for any Regulated Tree (the
collective term for any protected, designated, or street
tree proposed to be removed.
City of Palo Alto
Public Works
Department in
coordination with its
construction
contractor and the
City's arborist
City of Palo Alto
Planning and
Community
Environment
Department in
coordination
Prior to removal
of any
protected trees
or street trees;
during the
planting and
every two years
thereafter until
trees are
capable of
surviving
without further
maintenance
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in the Tree Technical Manual, the project
would be inconsistent with the Municipal
Code tree protection provisions.
The applicant shall be required, in accordance with the
Tree Protection and Management Regulations (PAMC
8.10) and Tree Technical Manual (PAMC 8.10-130), to
replace the tree canopy for the six (6) protected trees and
the five (5) street trees, in accordance with the tree canopy
formula identified in the Tree Technical Manual (TTM,
320). If the tree canopy cannot be replaced on -site, the
canopy shall be replaced off -site as close to the project
site as feas ble. If trees are being replaced off -site, the
applicant must submit a Tree Planting Plan to the Urban
Forestry Division and obtain the Urban Forestry Division's
approval of the plan prior to issuance of a building permit.
The Tree Planting Plan must include:
• The canopy calculation for trees removed and the
number of trees planned to replace them, consistent
with the formula identified in the Tree Technical
Manual
• The specific location where the new trees would be
planted with specific baseline information about that
proposed site (e.g., surrounding vegetation or
development)
• The species of trees to be planted
• Specific planting details (e.g_, size of sapling, size of
containers, irrigation plan)
• Success criteria
• Monitoring and maintenance schedule
Replacement tree planting will be monitored by a qualified
arborist_ To verify the success of replacement trees,
monitoring shall occur for two years after initial planting.
After the two-year period, the arborist will determine if the
trees are capable of surviving without further maintenance.
CULTURAL AND HISTORIC RESOURCES
Impact 7-1: Potential Disturbance of
Archaeological or Paleontological
Resources. Project construction (e.g.,
excavation for underground parking and
Mitigation 7-1. In the event of the unanticipated discovery
of subsurface archaeological or paleontological resources
during earth -moving operations, the following measures
are recommended to reduce potentially significant impacts
City of Palo Alto
Public Works
Department in
coordination with its
Planning and
Community
Environment
Department
Prior to and
during ground -
disturbing
activities
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utilities) could disturb existing unrecorded
sensitive archaeological or paleontological
resources at the PSB project site.
on these resources to a less -than -significant level:
• Conduct Archaeological/ Paleontological Sensitivity
Training for Construction Personnel. The City shall
retain a qualified professional archaeologist who meets
U.S. Secretary of the Interior's Professional
Qualifications and Standards, and a professionally
qualified paleontologist, to conduct an Archaeological/
Paleontological Sensitivity Training for construction
personnel prior to commencement of excavation
activities. The training session will include a written
handout and will focus on how to identify
archaeological and paleontological resources that may
be encountered during earth -moving activities,
including the procedures to be followed in such an
event, the duties of archaeological and paleontological
monitors, and the general steps a qualified
professional archaeologist or paleontologist would
follow in conducting a salvage investigation if one is
necessary.
• Cease Ground -Disturbing Activities and Implement
Treatment Plan if Archaeological Resources Are
Encountered. In the event that archaeological
resources are unearthed during ground -disturbing
activities, the ground -disturbing activities shall be
halted or diverted away from the vicinity of the find so
that the find can be evaluated. A buffer area of at least
50 feet shall be established around the find, where
construction activities will not be allowed to continue
until a qualified archaeologist has examined the newly
discovered artifact(s) and has evaluated the area of
the find. Work shall be allowed to continue outside the
buffer area.
All archaeological resources unearthed by project
construction activities shall be evaluated by a qualified
professional archaeologist, who meets the U.S. Secretary
of the Interior's Professional Qualifications and Standards.
Should the newly discovered artifacts be determined to be
prehistoric, Native American Tribes/Individuals shall be
contacted and consulted, and Native American
construction monitoring should be initiated. The City shall
coordinate with the archaeologist to develop an
appropriate treatment plan for the resources. The plan
may include implementation of archaeological data
construction
contractors and
qualified
archaeologist,
qualified
paleontologist and/or
Native American
Tribal monitor
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recovery excavations to address treatment of the
resources, along with subsequent laboratory processing
and analysis.
■ Conduct Periodic Archaeological Resources Spot
Checks During Grading and Earth -Moving Activities in
All Sediments. The City shall retain a qualified
professional archaeologist who meets the U.S.
Secretary of the Interior's Professional Qualifications
and Standards, to conduct periodic Archaeological
Spot Checks beginning at depths below two (2) feet to
determine if construction excavations have exposed,
or have a high probability of exposing, archaeological
resources. After the initial Archaeological Spot Check,
further periodic checks shall be conducted at the
discretion of the qualified archaeologist.
If the qualified archaeologist determines that construction
excavations have exposed, or have a high probability of
exposing, archaeological artifacts, construction monitoring
for archaeological resources will be required. The City
shall retain a qualified archaeological monitor, who meets
the qualifications set forth by the U.S. Secretary of the
Interior's Professional Qualifications and Standards, who
will work under the guidance and direction of a
professional archaeologist. The archaeological monitor
shall be present during all construction excavations (e.g.,
grading, trenching, or clearing/grubbing) into non -fill
sediments. Multiple earth -moving construction activities
may require multiple archaeological monitors.
The frequency of monitoring shall be based on the rate of
excavation and grading activities, proximity to known
archaeological resources, the materials being excavated
(native versus artificial fill soils), the depth of excavation,
and if found, the abundance and type of archaeological
resources encountered. Full-time monitoring can be
reduced to part-time inspections if determined adequate by
the project archaeologist.
• If subsurface paleontological resources are
encountered, excavation shall halt in the vicinity of the
resources and a qualified paleontologist shall evaluate
the resource and its stratigraphic context. The monitor
shall be empowered to temporarily halt or redirect
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construction activities to ensure avoidance of adverse
impacts to paleontological resources_ During
monitoring, if potentially significant paleontological
resources are found, "standard" samples shall be
collected and processed by the qualified paleontologist
to recover micro vertebrate fossils If significant fossils
are found and collected, they shall be prepared to a
reasonable point of identification. Excess sediment or
matrix shall be removed from the specimens to reduce
the bulk and cost of storage.
Itemized catalogs of material collected and identified shall
be provided to a museum repository with the specimens_
Significant fossils collected during this work, along with the
itemized inventory of these specimens, shall be deposited
in a museum repository for permanent curation and
storage_ A report documenting the results of the
monitoring and salvage activities, and the significance of
the fossils, if any, shall be prepared_ The report and
inventory, when submitted to the lead agency, shall signify
the completion of the program to mitigate impacts on
paleontological resources.
Impact 7-2: Unanticipated Discovery of
Tribal Cultural Resources. Project
construction activities (e_g_, excavation)
could disturb as yet unidentified and/or
unrecorded tribal cultural resources,
including poss ble human remains.
Mitigation 7-2. In the event that cultural resources of
Native American origin are identified during construction,
all earth -disturbing work within the vicinity of the find must
be temporarily suspended or redirected until an
archaeologist has evaluated the nature and significance of
the find and an appropriate Native American
representative, based on the nature of the find, is
consulted. If the City determines that the resource is a
tribal cultural resource and thus significant under CEQA, a
mitigation plan shall be prepared and implemented in
accordance with State guidelines and in consultation with
Native American groups_ The plan would include
avoidance of the resource or, if avoidance of the resource
is infeas ble, the plan would outline the appropriate
treatment of the resource in coordination with the
archaeologist and the appropriate Native American tribal
representative.
City of Palo Alto
Public Works
Department in
coordination with its
construction
contractors, qualified
archaeologist, and
Native American
Representative
Planning and
Community
Environment
Department
During ground -
disturbing
activities
GEOLOGY AND SOILS
Impact 8-1: Geotechnical Hazards
Associated with Project Excavation and
Grading. The project's proposed excavation
Mitigation 8-1. As recommended by the project's
preliminary geotechnical investigation, prior to City
issuance of grading permits for individual project
City of Palo Alto
Public Works
Department in
City of Palo Alto
Planning and
Community
Prior to
issuance of
constructed
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and grading activities have the potential to
create conditions that would potentially
compromise the safety or stability of
proposed project improvements_ The
preliminary site -specific geotechnical
investigation (Romig Engineers, May 2016)
made initial assessments of these
conditions, but a construction -level
geotechnical investigation will be needed to
adequately address all grading and
excavation activities on the proposed Public
Safety Building and California Avenue
Parking Garage (PSB project) site_ Without
such a detailed study --and without the
associated supervision of an engineering
geologist or geotechnical engineer during
project grading and construction --the safety
and long-term stability of existing and
proposed project improvements cannot be
assured.
construction components, the City shall be required to
retain a registered engineering geologist or geotechnical
engineer to prepare detailed, construction -level
geotechnical investigations to guide the construction of all
project grading and excavation activities. The detailed,
construction -level geotechnical investigations shall be
performed for each of the structures proposed for the
development site. Subsurface conditions shall be explored
and laboratory tests conducted on selected soil samples to
establish parameters for the design of excavations,
foundations, shoring, and waterproofing.
Recommendations from the investigations shall be
incorporated into all plans for project grading, excavation,
soil support (both temporary and long-term), and utility
construction, to the satisfaction of the City Engineer_
The detailed, construction -level investigations, relevant
recommendations, and all associated project grading,
excavation and foundation plans, shall be subject to review
and approval by an independent engineering geologist or
geotechnical engineer retained by the City Engineer_ In
addition, the project civil engineer shall certify to the City
Engineer (e.g., through plan submittal for City review) that
all relevant provisions of the investigations have been
incorporated into the grading, excavation and construction
plans, and all earthwork and site preparation shall be
performed under the direct supervision of a registered
engineering geologist or geotechnical engineer.
coordination with its
geologist/
geotechnical
engineer and civil
engineer
Environment
Department
related permits
and during
grading and
construction
HAZARDS AND HAZARDOUS MATERIALS
Impact 10-1: Potential Project -Related
Exposure to Existing Soil or Groundwater
Contamination. Project -related excavation
and construction activities could expose on-
site construction personnel, employees, and
members of the public to existing soil and
groundwater contamination_
Mitigation 10-1. Recommendations included in the Phase
II ESA (Stantec, June 8, 2017) shall be implemented,
based on construction -level project plans when more
specific and precise design and construction activities are
formulated. The Phase II ESA recommends additional
assessment of local and regional groundwater conditions
in advance of dewatering activities, combined with, as
necessary, evaluation of pertinent and cost-effective water
management strategies, including preparation of Site
Management Plans. Likewise, the project must comply
with the City's standard dewatering requirements_ This
assessment and mitigation process shall be subject to
review and approval by the City Engineer_
City of Palo Alto
Public Works
Department in
coordination with its
construction
contractors and
engineer
Planning and
Community
Environment
Department
Prior to
issuance of
grading permits
and during
grading and
construction
NOISE
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Impact 13-1: Project Construction Noise.
Mitigation 13-1. To reduce potential noise levels
City of Palo Alto
City of Palo Alto
Prior to
Project construction would include site
associated construction of the proposed project, the City
Public Works
Planning and
issuance of
preparation, excavation and grading, utility
and/or it's designated contractors, contractor's
Department in
Community
construction
trenching, construction of a new parking
representatives, or other appropriate personnel shall:
coordination with its
Environment
related
garage and public safety building, and
application of architectural coatings. The
noise levels generated by project
• Restrict work hours/equipment noise. All work shall be
subject to the construction noise and time limits
construction
contractors and
qualified acoustical
Department
(demolition,
grading,
building)
construction would be in excess of 10 dB
above ambient conditions at sensitive
receptor locations for several hours a day for
a period of approximately 16 to 21 months.
contained in City Municipal Code Chapter 9.10.
Construction activities (including deliveries) shall only
occur during the following time periods:
— 8 AM to 6 PM Monday through Friday; and
— 9 AM to 6 PM on Saturday
consultant
permits and
during
construction
related
activities
Construction activities shall be prohibited on Sundays and
holidays. The City and/or its contractor shall post a sign at
all entrances to the construction site informing contractors,
subcontractors, construction workers, etc. of these
requirements in accordance with Section 9.10.060(c). The
sign shall also provide a name (or title) and phone number
for an appropriate on -site and City representative to
contact to submit a noise complaint.
• Construction equipment care, siting, and design
measures. The following construction equipment care,
siting, and design measures shall apply during
construction activities:
— Heavy equipment engines shall be covered and
exhaust pipes shall include a muffler in good
working condition. Pneumatic tools shall include a
noise suppression device on the compressed air
exhaust.
— All stationary noise -generating equipment such as
pumps, compressors, and welding machines shall
be shielded and located as far from sensitive
receptor locations as practical. At a minimum, such
shielding shall consist of a three -sided sound
enclosure (with a full or partial roof) that provides for
proper ventilation, equipment operation, and
effective noise control. The enclosure should be
designed to achieve a 10 to 15 dB reduction in
stationary equipment noise levels. The design of the
enclosure shall be reviewed by a qualified
acoustical consultant prior to installation to ensure
the enclosure will achieve a minimum 10 dB
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reduction in stationary equipment noise levels.
— The City shall connect to existing electrical service
at the site to avoid the use of stationary, diesel- or
other alternatively -fueled power generators.
— No radios or other amplified sound devices shall be
audible beyond the property line of the construction
site.
• Construction traffic. Construction truck traffic, including
soil hauling, equipment deliveries, potential concrete
deliveries, and other vendor deliveries shall follow
designated delivery routes prepared for the project,
which are anticipated to include travel on Oregon
Expressway and Birch Road.
• Construct/Install Temporary Noise Barrier: The City
shall install and maintain throughout the duration of all
site preparation, excavation, foundation construction,
and building construction activities, one or more
physical noise barriers capable of achieving a
minimum reduction in predicted construction noise
levels of 15.5 dB. Potential barrier options would
include:
— A concrete, wood, or other barrier installed at -grade
(or mounted to structures located at -grade, such as
K -Rail) along the project property line. Such a
wall/barrier shall consist of material that have a
minimum rated transmission loss value of 25.5 dB
(or equivalent rating), and shall contain no gaps in
the structure through which noise may pass.
— Commercially available acoustic panels or other
products such as acoustic barrier blankets installed
along the project property line, building envelope or,
if feasible and necessary, at or near sensitive
residential receptor areas.
— Any combination of noise barriers and commercial
products capable of achieving a 15.5 dB reduction
in construction noise levels at sensitive receptor
locations.
— Prior to the start of the project, the City may prepare
an acoustical analysis that reflects the final site
plan, construction activities, equipment use and
duration, and refines potential construction noise
reductions required for the project.
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The final type, placement, and design of the project's
temporary noise barrier(s) shall be reviewed by a qualified
acoustical consultant prior to installation to ensure proper
function and a minimum attenuation of 15.5 dBs in
construction noise levels.
• Prepare Project Construction Noise Control Plan. Prior
to the start of construction activity, the City or its
contractor shall prepare a Construction Noise
Complaint Plan for the project which:
— Identifies the name and/or title and contact
information (including phone number and email) of
the Contractor and City -representatives responsible
for addressing construction -noise related issues.
— Contains a detailed construction schedule and
predicted noise levels associated with construction
activities.
— Includes procedures describing how the
construction contractor will receive, respond, and
resolve to construction noise complaints. At a
minimum, upon receipt of a noise complaint, the
Contractor and/or City representative described in
the first sub -bullet above shall identify the noise
source generating the complaint, determine the
cause of the complaint, and take steps to resolve
the complaint.
• Prepare Construction Noise Monitoring Plan. Prior to
the start of construction, the City or its contractor shall
prepare a Construction Noise Monitoring Plan which
identifies:
— Construction activities, hours of operation, and
predicted construction noise levels; and
— Construction noise monitoring locations, duration,
and frequency.
The intent of the Construction Noise Monitoring Plan is to
document updated ambient noise levels, monitor
construction noise levels, and verify compliance with the
noise reduction requirements in mitigation measure 13-1. If
monitoring indicates temporary noise barriers are not
achieving a minimum 15.5 dB reduction in construction
noise levels or otherwise indicates construction noise is
Page 12
MMRP — Exhibit A to PSB EIR Resolution
MONITORING
VERIFICATION
IDENTIFIED IMPACT
RELATED MITIGATION MEASURE
(Performance Criteria)
Implementation
Entity
Monitoring and
Verification
Entity
Timing
Requirements
Signature
Date
resulting a 10 dB increase in noise levels above ambient
conditions, the City shall increase the height, size (length
or width), density, and/or amount of noise barriers installed
such that attenuation requirements are achieved. The
Construction Noise Monitoring Plan may be combined with
and/or incorporated into the Construction Noise Complaint
Plan described above.
Impact 13-2: Project Groundborne
Vibration Levels. Project construction
activities could generate percept ble
groundborne vibration at adjacent buildings,
including residential buildings, for a period of
approximately 8 months.
Mitigation 13-2. To reduce potential groundborne
vibration levels associated with construction of the
proposed project, the City and/or it's designated
contractors, contractor's representatives, or other
appropriate personnel shall:
• Prohibit Vibratory Equipment. The City shall prohibit
the use of large vibratory rollers (small plate
compactors are acceptable) and v bratory pile driving
equipment during construction. Any deep foundation
piers or caissons shall be auger drilled.
• Provide Notice to Adjacent Property Owners /
Occupants. Five (5) days advanced written notice shall
be provided to adjacent property owners and building
occupants before commencing all drilling and
significant earthmoving activities within 65 feet of
adjacent buildings. The notice shall provide the name
(or title) and contact information (including phone
number and email) of the Contractor and City -
representatives responsible for addressing
construction vibration -related concerns.
• Prepare Vibration Mitigation Plan. Prior to the start of
construction activity, the City or its contractor shall
prepare a Construction Vibration Response Plan for
the project which:
— Identifies the name and/or title and contact
information (including phone number and email) of
the Contractor and City -representatives responsible
for addressing construction vibration -related issues.
— Contains a detailed schedule of drilling and
substantial earth moving activities expected to occur
within 65 feet of adjacent buildings.
— Includes procedures describing how the
construction contractor will receive, respond, and
resolve to construction vibration complaints. At a
City of Palo Alto
Public Works
Department in
coordination with its
construction
contractors
City of Palo Alto
Planning and
Community
Environment
Department
Prior to
issuance of
construction
related
(demolition,
grading,
building)
permits and
during
construction
activities
Page 13
MMRP — Exhibit A to PSB EIR Resolution
MONITORING
VERIFICATION
IDENTIFIED IMPACT
RELATED MITIGATION MEASURE
(Performance Criteria)
Implementation
Entity
Monitoring and
Verification
Entity
Timing
Requirements
Signature
Date
minimum, upon receipt of a vibration complaint, the
Contractor and/or City representative described in
the first sub -bullet above shall identify the vibration
source generating the complaint, determine the
cause of the complaint, and take steps to resolve
the complaint by reducing groundborne vibration
levels to less than 75 VdB and 0.04 in/sec PPV.
Such measures may include the use of non -impact
drivers, use of rubber -tired equipment instead of
track equipment, or other measures that limit
annoyance from groundborne vibration levels.
Impact 13-3: Project Operational Noise.
Noise generated by the parking garage
ventilation fans and the public safety building
generator, fire pump, and heating and air
conditioning equipment may exceed
standards contained in the City Municipal
Code unless shielding or other means of
attenuation is provided.
Mitigation 13-3. To reduce potential stationary source
noise levels associated with the operation of the proposed
project, the City and/or it's designated contractors,
contractor's representatives, or other appropriate
personnel shall:
• Site equipment away from residential areas. Garage
ventilation fans and public safety building generators,
fire pumps, and heating and air conditioning equipment
shall be located outside of setbacks and screened
from view from residential areas.
• Enclose and/or Shield Stationary Noise -Generating
Equipment. The City shall enclose, shield, baffle, or
otherwise attenuate noise generated from garage
ventilation fans and public safety building generators,
fire pumps, and heating and air conditioning
equipment. The attenuation achieved through such
enclosure, shielding, and/or baffling shall be sufficient
to comply with Section 9.10.050(a) of the Municipal
Code.
• Prepare Acoustical Study. In accordance with
Chapters 9.10 and 18.23 of the Municipal Code, the
City shall have an acoustical analysis prepared by a
licensed acoustical engineer that demonstrates:
— The proposed parking garage's generator would
comply with the requirements of the City's Noise
Ordinance (Section 9.10.050, as excepted).
— The proposed parking garage's ventilation fans
would not result in a calculated Ldn of 63.0 at
sensitive residential receptor locations.
City of Palo Alto
Public Works
Department in
coordination with its
construction
contractors and
licensed acoustical
engineer
City of Palo Alto
Planning and
Community
Environment
Department
Prior to
issuance of
permits for
noise
generating
equipment and
prior to
issuance of a
certificate of
occupancy
Page 14
MMRP — Exhibit A to PSB EIR Resolution
MONITORING
VERIFICATION
IDENTIFIED IMPACT
RELATED MITIGATION MEASURE
Implementation
Monitoring and
Timing
Signature
Date
(Performance Criteria)
Entity
Verification
Requirements
Entity
— The proposed Public Safety Building fire pump,
back-up generator, and heating and air conditioning
equipment would comply with the requirements of
the City's Noise Ordinance (Section 9.10.050, as
excepted) and would not result in a calculated
increase of more than 3.0 dB Ldn at sensitive
receptor locations.
The acoustical analysis shall be based on the final project
design, reflect the actual equipment type and location at
the project site, and the actual noise enclosure, shielding,
or other attenuation measures included in the final project
design. If the acoustical study demonstrates the noise
levels from these sources would be at or within 5 dB less
than the Noise Ordinance limits, the City shall demonstrate
through monitoring that the equipment complies with the
anticipated noise levels.
Page 15
MMRP — Exhibit A to PSB EIR Resolution
4 "A,
Attachment B
NOT YET APPROVED
Ordinance No.
Ordinance of the Council of the City of Palo Alto Amending Palo Alto Municipal Code
(PAMC) Title 18 (Zoning), Chapter 18.28 (Special Purpose (PF, OS and AC) Districts),
Sections 18.28.050, 18.28.060 and 18.28.090 to Revise the Public Facilities (PF) Zone
Parking and Development Standards to Allow Council Approval of Exceptions to PF
Development Standards, Including Setback Lines Imposed By a Special Setback Map, and
Required Parking Location for City Parking Facilities in the Downtown and California
Avenue Business District and for Essential Services Buildings, and Make Other Clerical or
Technical Corrections
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1. Section 18.28.050 (Site Development Standards), subsection (a) and Table 2, of
Chapter 18.28 (Special Purpose (PF, OS and AC) Districts) of Title 18 (Zoning) is amended to read as
follows:
18.28.050 Site Development Standards
(a) Development Standards
Table 2
Special Purpose District Site Development Standards
Minimum Site Specifications
Site Area (acres)
Site Width (ft)
Site Depth (ft)
Minimum Setbacks (ft)
Front Setback
Rear Setback
Interior Side Setback
Street Side Setback
Maximum Floor Area Ratio
Site Coverage and Impervious
Coverage
Maximum Site Coverage
PF
10
AC
5
250
250
Setback lines imposed by a special setback
map pursuant to Chapter 20.08 of this code
shall apply
_(2)
_(2)
_(2)
_(2)
1:1(3)
30%(3)
30
30
30
30
See Table 3
30
30
15
24
10%
Subject to Regulations
in Chapter or Section:
Section 18.28.060(e)
Section 18.28.060(e)
Section 18.28.060(e)
Section 18.28.060(e),
Chapter 20.08
Section 18.28.060(e'
Section 18.28.050(b)
18.28.060(e)
Section 18.28.060(e)
Page 1
NOT YET APPROVED
Additional Site Area permitted
covered by impervious ground
surfaces
Maximum Impervious Coverage
Height Restrictions
Maximum Height (ft)
Maximum Height within 150 feet of
a residential district (ft)
50
35
Maximum Number of Stories
Daylight Plane for site lines
abutting a residential district
Initial height (ft)
Slope
Residential Density
10
1:2
See Table
3(4)
25
2
10%('0
35
1 unit/acre
:-)ection 18.28.050(b)
18.28.070(m)
Section 18.28.060(e)
Section 18.28.060(a)
(1) For cemetery uses, all markers of graves shall be flush with grade level, and shall be considered
impervious area under this requirement.
(2) The minimum front, side, and rear yards in the PF public facilities district shall be equal to the respective
front, side, and rear yards required in the most restrictive abutting district; provided, that no yard
adjoining a street shall be less than 20 feet and that no interior yard shall be less than 10 feet. See
Section 18.28.060(e) for exceptions to these development standards.
(3) Provided that, for parking facilities the maximum floor area ratio and site coverage shall be equal to the
floor area ratio and site coverage established by the most restrictive adjacent district. See Section
18.28.060(e) for exceptions to these development standards.
(4) Including buildings and all impervious ground surfaces, calculated pursuant to the provisions of Section
18.28.070(m).
(5) See _.ec ie-nrSection 18.28.070(r) for specific exceptions to these development standards.
SECTION 2. Section 18.28.060 (Additional PF District Design Requirements) of Chapter 18.28
(Special Purpose (PF, OS and AC) Districts) of Title 18 (Zoning) is amended to add a new subsection (e) to
read as follows:
18.28.060 Additional PF District Design Requirements
The following additional regulations shall apply in the PF district:
(e) Development Standards Exceptions
The City Council may in its discretion modify the development standards in Table 2 of Section
18.28.050 and setback lines established by a special setback map under Chapter 20.08 of Title 20, to
achieve community objectives for the following facilities:
Page 2
NOT YET APPROVED
(i) Parking facilities, including appurtenant structures, within the Downtown and
the California Avenue business district, where the parking facility is the principal
use and is owned or leased, and operated or used, by the City of Palo Alto.
"California Avenue business district" means that area bounded by the following
streets in the city of Palo Alto: Grant Avenue to the south, El Camino Real to the
west, College Avenue to the north, and Park Boulevard to the east.
(ii) Essential Services Buildings as defined in Health and Safety Code section 16007,
as amended, including appurtenant or ancillary structures.
The exceptions shall be included in the review of the project through the applicable
development review process.
SECTION 3. Section 18.28.090(a) (Parking and Loading) of Chapter 18.28 (Special Purpose
(PF, OS and AC) Districts) of Title 18 (Zoning) is amended to read as follows:
18.28.090 Parking and Loading
Off-street parking and loading facilities shall be required for all permitted and conditional uses
in accord with Chapter 18.40. All parking and loading facilities on any site, whether required as
minimums or optionally provided in addition to minimum requirements, shall comply with the
regulations and the design standards established by Chapter 18.42. In addition, parking facilities shall be
subject to the following regulations:
(a) PF District
In the PF district, no required parking space shall be located in the first 10 feet adjoining the
street property line of any required yard. The City Council may waive this requirement for eligible
parking facilities and Essential Services Buildings through the process provided in Section 18.28.060(e).
SECTION 4. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any
reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction,
such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council
hereby declares that it would have passed this Ordinance and each and every section, subsection,
sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any
portion of the ordinance would be subsequently declared invalid or unconstitutional.
SECTION 5. The environmental impacts of this ordinance have been examined and disclosed
pursuant to the provisions of the California Environmental Quality Act of 1970, together with related
state implementation guidelines and regulations (collectively, "CEQA"), under that certain Final
Environmental Impact Report for the City of Palo Alto Public Safety Building and California Avenue
Garage project ("Final EIR") considered and certified by the City Council on , for which
Page 3
NOT YET APPROVED
findings were adopted by Council by Resolution No. , all prior to Council approval of this
ordinance.
SECTION 6. This ordinance shall be effective on the thirty-first date after the date of its
adoption.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
NOT PARTICIPATING:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Planning & Community
Environment
Page 4
Attachment C
DRAFT
ACTION NO. 2018-0X
RECORD OF THE COUNCIL OF THE CITY OF PALO ALTO LAND USE ACTION FOR 350 SHERMAN
AVENUE ARCHITECTURAL REVIEW 17PLN-00257
On June 11, 2018, the Council approved the proposed Public Parking Garage at 350
Sherman Avenue making the following findings, determination and declarations:
SECTION 1. Background. The City Council of the City of Palo Alto ("City Council")
finds, determines, and declares as follows:
A. On June 11, 2018, Council conducted a public hearing to consider:
(1) The Architectural Review application and approval recommendation by the Architectural
Review Board, for the Public Parking Garage at 350 Sherman Avenue,
(2) The Ordinance to amend Public Facilities (PF) development standards and parking and loading
requirements recommended by the Planning and Transportation Commission,
(3) The Final Environmental Impact Report (EIR) published for the Public Safety Building (PSB)
Project (the combined Public Safety Building and Public Parking Garage at 250 Sherman Avenue
and 350 Sherman Avenue, respectively), to respond to comments made on the Draft EIR published
January 8, 2018;
B. The Architectural Review Board (ARB) conducted three public hearings on the Public
Parking Garage project; initially, the ARB reviewed the formal applications for the PSB project
(public parking garage and PSB) in October 2017; the ARB then reviewed the Draft EIR and public
parking garage project in a public hearing on January 18, 2018, and continued the garage review to
March 1, 2018;
C. The Planning and Transportation Commission, on January 31, 2018, reviewed the
Draft EIR and draft PF code amendments, and recommended approval of the Ordinance modifying
development standards and parking and loading standards within the PF zone in the Downtown
and California Avenue business districts for essential services facilities;
D. The ARB reviewed the project in a public hearing on March 1, 2018, reviewed the
architectural review approval findings and draft approval conditions, and recommended approval
of the proposed public parking garage by a vote of 4 to 1.
SECTION 2. Environmental Review. The City of Palo Alto prepared an Environmental
Impact Report (EIR) for the project in accordance with CEQA, which the City Council certified and
made related findings by Resolution No. on June 11, 2018, prior to approval of the
decision that is the subject of the RLUA.
1
SECTION 3. PF Zone Code Amendments. (See Council ordinance ) The
Planning and Transportation Commission recommended modifications to Palo Alto Municipal Code
(PAMC) Chapter 18.28 development and parking and loading standards for city parking structures
and essential services facilities within Public Facilities zoned sites within the Downtown and
California Avenue business districts.
SECTION 4. Architectural Review Findings. The design and architecture of the
proposed project, as conditioned, complies with the Findings for Architectural Review as required
in PAMC Chapter 18.76. The design and architecture of the proposed public parking garage
complies with the Six Findings for Architectural Review set forth in Palo Alto Municipal Code
Chapter 18.76 Section 18.76.020.
AR Findings for Public Parking Garage at 350 Sherman Avenue:
(1) The design is consistent with applicable provisions of the Palo Alto Comprehensive Plan,
Zoning Code, coordinated area plans (including compatibility requirements), and any relevant
design guides. The project is consistent with Finding #1 because:
• With Council adoption of amendments to the Public Facilities development standards for
city parking garage, the project will comply with the land use and development standards
of the PF zone.
• The following policies and programs of the Comprehensive Plan (Plan) are relevant to the
project•
o Policy T-5.6, strongly encourage the use of below -grade or structured parking, and
explore mechanized parking instead of surface parking for new developments of all
types while minimizing negative impacts including on groundwater and landscaping
where feasible,
o Policy T-5.7, require new or redesigned parking lots to optimize pedestrian and
bicycle safety,
o Policy T-5.8, promote vehicle parking areas designed to reduce storm water runoff,
increase compatibility with street trees and add visual interest to streets and other
public locations. Encourage the use of photovoltaic panel or tree canopies in
parking lots or on top of parking structures to provide cover, consistent with the
Urban Forest Master Plan,
o Policy T-5.9, promote safety for pedestrians in City -owned parking lots by adopting
standards for landscaping, signage, walkways and lighting that reduce crime and
ensure a safe and orderly flow of traffic,
o Policy T-5.10, encourage the use of adaptive design strategies in new parking
facilities in order to facilitate reuse in the future if and when conditions warrant,
o Policy N-2.3, enhance the ecological resilience of the urban forest by increasing and
diversifying native species in the public right-of-way, protecting the health of soils
and understory vegetation, encouraging property owners to do the same and
discouraging the planting of invasive species,
2
o Policy N-2.10, preserve and protect Regulated Trees on public and private
property...and related program N2.10.1 continue to require replacement of trees
including street trees lost to new development,
o Policy N-4.12, encourage Low Impact Development (LID) measures to limit the
amount of pavement and impervious surface in new development and increase the
retention, treatment and infiltration of urban stormwater runoff. Include LID
measures in major remodels, public projects and recreation projects where
practical.
o Policy L-1.10, hold new development to the highest development standards in
order to maintain Palo Alto's livability and achieve the highest quality development
with the least impacts,
o Policy L-4.2, encourage street frontages that contribute to retail vitality in all
Centers. Reinforce street corners in a way that enhances the pedestrian realm or
that form corner plazas. Include trees and landscaping,
o Policy L-4.3, ensure all Regional Centers and Multi -Neighborhood Centers provide
centrally located gathering spaces that create a sense of identity and encourage
economic revitalization. Encourage public amenities such as benches, street trees,
kiosks, restrooms and public art,
o Policy L-4.8, maintain the existing scale, character and function of the California
Avenue business district as a shopping, service and office center intermediate in
function and scale between the Downtown and the smaller neighborhood business
areas,
o Policy L-5.2, provide landscaping, trees, sidewalks, pedestrian path and connections
to the citywide bikeway system within Employment Districts,
o Policy L-5.3, design paths and sidewalks to be attractive and comfortable and
consistent with the character of the area where they are located,
o Policy L-6.1, promote high quality design and site planning that is compatible with
surrounding development and public spaces,
o Policy L-6.3, encourage bird -friendly design,
o Policy L-6.6, design buildings to complement streets and public spaces; to promote
personal safety, public health and well-being; and to enhance a sense of
community safety,
o Policy L-6.10, encourage high quality signage that is attractive, energy efficient, and
appropriate for the location, and balances visibility needs with aesthetic needs. (no
signage proposed with this application),
o Policy L-8.2, provide comfortable seating areas and plazas with places for public art,
o Policy L-70, enhance the appearance of streets by expanding and maintaining street
trees,
o Policy L-8.4, create facilities for civic and intellectual life, such as better urban
spaces for civic programs and speakers, cultural, musical and artistic events,
3
o Policy L-8.5, recognize public art ... as a community benefit; encourage the
development of new public and private art and ensure such projects are compatible
with the character and identity of the neighborhood,
o Policy L-8.6, seek potential new sites for art and cultural facilities, public spaces,
open space and community gardens,
o Policy L-9.2, encourage development that creatively integrates parking into the
project, including locating it behind buildings or underground wherever possible, or
by providing for shared use of parking areas. Encourage other alternatives to
surface parking lots that minimize the amount of land devoted to parking while still
maintaining safe streets, street trees, a vibrant local economy and sufficient parking
to meet demand,
o Policy L-9.6, create...publicly accessible, shared outdoor gathering spaces within
walking and biking distance of residential neighborhoods,
o Policy L-9.7 strengthen the identity of important community -wide gateways,
including...entries to commercial districts,
o Policy L-9.8 Incorporate the goals of the Urban Forest Master Plan into the
Comprehensive Plan by reference in order to assure that new land uses recognize
the many benefits of trees in the urban context and foster a healthy and robust
tree canopy throughout the city,
■ Related Program L-9.8.1, establish incentives to encourage native trees and
low water use plantings in new development throughout the city,
o Policy L-9.9, involve the Urban Forester, or appropriate City staff, in development
review,
o Policy L-9.11, design public infrastructure, including paving, signs, utility structures,
parking garages and parking lots, to meet high -quality urban design standards and
embrace technological advances. Look for opportunities to use art and artists in
design of public infrastructure.
■ Related Program L9.11.2 Encourage the use of compact and well -designed
utility elements, such as transformers, switching devices, backflow
preventers and telecommunications infrastructure. Place these elements in
locations that will minimize their visual intrusion.
(2) The project has a unified and coherent design, that:
(2a) creates an internal sense of order and desirable environment for occupants, visitors, and
the general community; The project is consistent with Finding 2(a), given:
• The right-of-way improvements will improve circulation; automobile ingress from/egress
onto Sherman Avenue are compatible with the design concept and functions, and the
location of bicycle racks near Jacaranda, closest to the walkable California Avenue, is
desirable;
• The new facilities and amenities for pedestrians, bicyclists and vehicles are an
improvement from the existing facilities as to safety and convenience;
• Due to its lower pedestrian volumes, Sherman Avenue is the proposed location of the
4
vehicular entry, established through detailed study of traffic movement; and
• A potential future ingress/egress onto Jacaranda has been designed including provision of
structural support allowing for easy conversion of parking spaces to make way for
vehicular passage, should such future access be desirable.
(2b) preserves, respects and integrates existing natural features that contribute positively to
the site and the historic character including historic resources of the area when relevant; The
project is consistent with Finding 2(b), given:
• Trees #26 through #39 are located on Lot C-7 and trees #23, 24, and 25 are located on the
Birch Street median. There is only one Protected Tree on Lot C-7 (tree #35, a coast live
oak); there are two Street Trees within the planter cutouts along Sherman Avenue adjacent
to Lot C-7 (trees #36 and #37).
• Although all existing on -site and street trees will be removed to allow for construction of
the garage, 18 new street trees in 24" to 36" box sizes (with post pavement support system
and necessary soil volume for long-term health and separation for utilities) are proposed
around the perimeter of the building on Sherman, Ash and Birch (plan sheet ARB AM04).
• On Birch Street, four Chinese Elm trees are proposed to meet the priority attributes of
larger deciduous or semi -deciduous shade trees of less than 40 feet height and width to
create a gateway to California Avenue;
• On Sherman Avenue, London Plane and California Sycamore trees are proposed in
alternation (total of nine trees) having a height of less than 50 feet and more open canopy;
• On Ash Street, the narrower form of trees represented by potential species Silver Linden,
Cork Oak and Primrose Tree are proposed to address the south -facing orientation of the
facade (final selection of species by City's Urban Forester); and
• Plan sheet ARB AM05 provides technical details associated with the tree mitigation plan.
(2c) is consistent with the context -based design criteria of the applicable zone district; Finding
2c is not applicable since the PF zone does not impose context based design criteria.
(2d) provides harmonious transitions in scale, mass and character to adjacent land uses and
land use designations; The project is consistent with Finding 2(d), given:
• The materials and architectural forms are intended to be compatible with the mid-century
architecture of the area which includes:
o A four story building on the opposite corner (the County courthouse and jail
building), a mixed use (office -residential) building across Sherman, one- and two-
story commercial buildings fronting California Avenue, and multi -story residential
building(s) across Sherman.
(2e) enhances living conditions on the site and in adjacent residential areas;
• There are no living units proposed on the site; the project is consistent with Finding 2(e),
wherever feasible, with limited lighting proposed facing the multiple family residential
building on Sherman Avenue, and with pedestrian friendly landscaping, lighting and
sidewalks to enhance residents' experience walking to California Avenue.
5
(3) The design is of high aesthetic quality, using high quality, integrated materials and
appropriate construction techniques, and incorporating textures, colors, and other details that
are compatible with and enhance the surrounding area; the project is consistent with Finding 3,
given:
• The materials were selected for durability;
• The new structure's materials and construction techniques are appropriate for the use;
• Colors and textures will be compatible with nearby civic buildings and park landscaping;
• A syncopated, compositional rhythm is achieved via these materials: terra cotta
sunshade, cementitious paneling, modified Portland cement plaster, and board -formed
concrete. The alternating flow of materials will diffuse the sense of an overall volume,
favoring a subtle shifting and overlap of surfaces.
(4) The design is functional, allowing for ease and safety of pedestrian and bicycle traffic and
providing for elements that support the building's necessary operations (e.g. convenient
vehicle access to property and utilities, appropriate arrangement and amount of open space
and integrated signage, if applicable, etc.); the project is consistent with Finding 4, given:
• Ease of wayfinding is one of the garage's key features:
o the primary pedestrian entry on the Birch Street side, a dramatic exterior
staircase, will animate the plaza side of the garage with pedestrian movement to
reinforce the plaza zone. As it opens towards California Avenue, the staircase
acknowledges the garage's civic role in support of the retail environment.
o The secondary pedestrian entrance for the garage is appropriately at Ash Street.
• The landscaped setback on the west side of Birch in front of the parking structure
accommodates seating and shade for individual passive activities
• Ash St. pedestrian through -way has City -standard sidewalk width and raised planters.
• Sherman Avenue, which does not experience as much pedestrian activity, has
appropriately been designed for quiet, passive shaded seating.
• An arcade and deeper setback area is proposed at Jacaranda, to facilitate access to
Jacaranda Lane, with its low pedestrian -use and connection to California Avenue.
• Low-level, focused pedestrian lighting will reinforce the intimate and small-scale
aspects of the plazas/streets, avoid light -pollution, and reinforce the civic character of
the facilities.
(5) The landscape design complements and enhances the building design and its surroundings,
is appropriate to the site's functions, and utilizes to the extent practical, regional indigenous
drought resistant plant material capable of providing desirable habitat that can be
appropriately maintained; the project is consistent with Finding 5, given:
• Each of the four frontages are unique with streetscape improvements tailored to each
street frontage to enhance the experience of coming to and from the garage.
• Selected tree species will thrive in an urban environment, provide appropriate
6
architectural emphasis and scale on each of the three frontages, and have relatively low
maintenance and water requirements.
• Birch Street receives raised planters with integral seating, an area of rain garden
planting, and additional native and shade -tolerant planting below the exterior stair.
• Sherman Avenue receives a wider sidewalk allowing for street trees, rain garden
planters, and benches at the back of walk against the facade of the garage.
• Vine plantings along the Jacaranda facade help green and soften this facade.
• Pole lights and planter mounted landscape lights along Birch Street, Sherman Avenue
and Ash Street frontages, in addition to building mounted lighting, to provide safe and
attractive passage around the perimeter of the parking structure. The pedestrian pole
lights are coordinated with the standard light used on California Avenue.
(6) The project incorporates design principles that achieve sustainability in areas related to
energy efficiency, water conservation, building materials, landscaping, and site planning; the
project is consistent with Finding #6 given:
• Photovoltaic panels are proposed to provide shading, energy efficiency as a key
sustainable feature of the project.
• Suitable street tree planting environments and storm water design features are key
features of the project.
SECTION 5. Architectural Review Approval Granted. Architectural Review Approval
is hereby granted for the Public Parking Garage at 350 Sherman Avenue by the City Council
pursuant to Chapter 18.77 of the Palo Alto Municipal Code.
SECTION 6. Plan Approval.
Public Parking Garage.
The plans for the Public Parking Garage submitted for Building Permit shall be in
substantial conformance with those plans prepared by RussDrulisCusenbery, consisting of 30
pages, received February 14, 2018, except as modified to incorporate the conditions of approval in
Section 7. A copy of these plans is on file in the Department of Planning and Community
Development.
SECTION 7. Conditions of Approval.
Impact Mitigation Measures Required for Both Project Components (250 and 350 Sherman)
• Air Quality Mitigation 5-1. To reduce potential short-term adverse health risks associated
with PM2.5 emissions, including emissions of diesel particulate matter (DPM), generated
during project construction activities, the City and/or it's designated contractors,
contractor's representatives, or other appropriate personnel shall:
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1. Implement BAAQMD-recommended "Additional Construction Measures". The City shall implement the following
BAAQMD recommended additional construction mitigation measures during construction activities: (1) All exposed
surfaces shall be watered at a frequency adequate to maintain minimum soil moisture of 12 percent, to be verified by
lab samples or moisture probe, (2) All excavation, grading, and/or demolition activities shall be suspended when
average winds speeds exceed 20 miles per hour, (3) Temporary wind breaks (e.g., fences) shall be installed on the
windward (generally the north / northwest) of actively disturbed areas of construction. The wind breaks should have at
maximum 50 percent air porosity, (4) Vegetative ground cover (e.g., fast germinating native grass seed) shall be planted
in disturbed areas as soon as possible and watered appropriately until vegetation is established, (5) Simultaneous
occurrence of excavation, grading, and ground -disturbing construction activities in the same area at any one time shall
be limited and/or phased to reduce the amount of disturbed surfaces at any one time, (6) All trucks and equipment,
including their tires, shall be washed off prior to leaving the site, (7) Site access to a distance of 100 feet from the paved
road, or as much as feasible, shall be treated with a compacted layer of wood chips, mulch, gravel, or other cover as
feasible to reduce track -out, (8) Minimize the idling time for diesel powered construction equipment to two minutes
provided such idling restrictions are consistent with manufacturer's equipment specifications.
2. Apply construction equipment restrictions. The City shall apply the following construction equipment restrictions to
the proposed project: (1) Electric -powered and liquefied or compressed natural gas equipment shall be employed
instead of diesel powered equipment to the maximum extent feasible. (2) All construction equipment with a rated
power -output of 25 horsepower or greater shall meet U.S. EPA and CARB Tier IV Final Emission Standards for
particulate matter. This may be achieved via the use of equipment with engines that have been certified to meet Tier IV
emission standards, or through the use of equipment that has been retrofitted with a CARB verified diesel emission
control strategy (e.g., oxidation catalyst, particulate filter) capable of reducing exhaust PM emissions to levels that
meet Tier IV standards.
3. Prepare Construction Risk Reduction Plan. Prior to the start of construction activity, the City and/or its contractor
shall prepare a Construction Risk Reduction Plan for the project which: (1) Identifies the final planned construction
phasing schedule and anticipated equipment operations. (2) Estimates the proposed project's construction emissions
based on the final phasing and equipment plan. Any emission update shall be performed using the latest recommended
emissions estimator model recommended by the BAAQMD or other standard, acceptable methodology (e.g.,
contractor -specific fleet emission factors and estimates of equipment operating hours). (3) Models the potential diesel
particulate matter and total PM2.5 concentrations resulting from refined emissions estimates. Any modeling shall be
performed using an accepted screening or refined dispersion model recommended for use by the BAAQMD. The
modeling shall focus on discrete, residential receptors located at and near the proposed project site. (4) Estimates
potential adverse health effects associated with exposure to DPM. Risk estimates shall follow the latest
recommendations of the BAAQMD. The goal of the risk estimation shall be to identify the receptor(s) or areas of
receptors where carcinogenic and non -carcinogenic risk thresholds may be exceeded. If risks are exceeded, the plan
shall identify feasible on- and off -site measures to reduce risks to levels below BAAQMD thresholds. On -site measures
may include the BAAQMD "Additional Construction Measures" and construction equipment restrictions included in
Mitigation Measure 5-1, as well as phasing / activity restrictions. Off -site measures may include coordinating with all
impacted receptors to replace and upgrade existing HVAC systems to provide high performance panel filters capable of
reducing potential modeled outdoor PM2.5 concentrations / risks to levels that are below BAAQMD thresholds.
4. Implement Off -Site Mitigation. In -lieu of preparing the Construction Risk Reduction Plan identified above, the City
may, prior to the start of construction activities, coordinate directly with impacted residential receptors to replace and
upgrade existing residential HVAC systems with a high-performance panel filter with a rated minimum efficiency
reporting value (MERV) for particles in the range of 0.3 to 1.0 µm of 70% (presumed to be a minimum MERV14), or
equivalent system upgrade. This level of control would reduce risks to levels below current BAAQMD thresholds. Based
on the results of the modeling conducted for the EIR, the City shall coordinate with residential receptors located in the
area bound by Park Boulevard to the north, Ash Street to the south Sheridan Avenue to the east, and Sherman Avenue
to the west.
• Nesting Birds Mitigation 6-1. To avoid impacts to nesting birds and violation of State and
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federal laws pertaining to birds, all construction -related activities (including but not limited
to mobilization and staging, clearing, grubbing, vegetation removal, fence installation,
demolition, and grading) should occur outside the avian nesting season (that is, prior to
February 1 or after August 31).
If construction and construction noise occurs within the avian nesting season (from February 1 to August 31), all
suitable habitats located within the project's area of disturbance, including staging and storage areas plus a 150 -foot
buffer around these areas, shall be thoroughly surveyed, as feasible, for the presence of active nests by a qualified
biologist no more than five days before commencement of any site disturbance activities and equipment mobilization.
If project activities are delayed by more than five days, an additional nesting bird survey shall be performed. Active
nesting is present if a bird is sitting in a nest, a nest has eggs or chicks in it, or adults are observed carrying food to the
nest. The results of the surveys shall be documented. If it is determined that birds are actively nesting within the survey
area, the additional procedures below shall apply. Conversely, if the survey area is found to be absent of nesting birds,
the additional procedures shall not be required.
Additional Procedures. If pre -construction nesting bird surveys result in the location of active nests, no site disturbance
and mobilization of heavy equipment (including but not limited to equipment staging, fence installation, clearing,
grubbing, vegetation removal, fence installation, demolition, and grading) shall take place within 150 feet of nests, or as
determined by a qualified biologist, until the chicks have fledged. Monitoring shall be required to insure compliance
with the MBTA and relevant California Fish and Game Code requirements. Monitoring dates and findings shall be
documented.
• Removal of Trees Mitigation 6-2. Prior to removal of the protected trees and street trees,
the applicant shall obtain a tree removal permit issued by the City of Palo Alto Urban
Forestry Division for the removal of any and all protected, designated, or street trees
(referred to collectively as "Regulated Trees"). In all cases, replacement trees would be
required as a condition of the tree removal permit, and the project applicant must
demonstrate to the satisfaction of the City that there is no alternative that could preserve
the tree(s) on -site.
The project applicant must provide an evaluation and summary for any Regulated Tree (the collective term for any
protected, designated, or street tree) proposed to be removed. The applicant shall be required, in accordance with the
Tree Protection and Management Regulations (PAMC 8.10) and Tree Technical Manual (PAMC 8.10.130), to replace the
tree canopy for the six (6) protected trees, in accordance with the tree canopy formula identified in the Tree Technical
Manual (TTM, 3.20). If the tree canopy cannot be replaced on -site, the canopy shall be replaced off -site as close to the
project site as feasible. If trees are being replaced off -site, the applicant must submit a Tree Planting Plan to the Urban
Forestry Division and obtain the Urban Forestry Division's approval of the plan prior to issuance of a building permit.
The Tree Planting Plan must include:
(a) The canopy calculation for trees removed and the number of trees planned to replace them, consistent with the
formula identified in the Tree Technical Manual.
(b) The specific location where the new trees would be planted with specific baseline information about that proposed
site (e.g., surrounding vegetation or development).
(c) The species of trees to be planted.
(d) Specific planting details (e.g., size of sapling, size of containers, irrigation plan).
(e) Success criteria,
(f) Monitoring and maintenance schedule
(g) Replacement tree planting will be monitored by a qualified arborist.
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To verify the success of replacement trees, monitoring shall occur for two years after initial planting. After the two year
period, the arborist will determine if the trees are capable of surviving without further maintenance.
• Archeo-Paleo Mitigation 7-1. In the event of the unanticipated discovery of subsurface
archaeological or paleontological resources during earth -moving operations, the following
measures are recommended to reduce potentially significant impacts on these resources to
a less -than- significant level:
1. Conduct Archaeological/Paleontological Sensitivity Training for Construction Personnel. The City shall retain a
qualified professional archaeologist who meets U.S. Secretary of the Interior's Professional Qualifications and
Standards, and a professionally qualified paleontologist, to conduct an Archaeological/Paleontological Sensitivity
Training for construction personnel prior to commencement of excavation activities. The training session will include a
written handout and will focus on how to identify archaeological and paleontological resources that may be
encountered during earth -moving activities, including the procedures to be followed in such an event, the duties of
archaeological and paleontological monitors, and the general steps a qualified professional archaeologist or
paleontologist would follow in conducting a salvage investigation if one is necessary.
2. Cease Ground -Disturbing Activities and Implement Treatment Plan if Archaeological Resources Are Encountered. In
the event that archaeological resources are unearthed during ground -disturbing activities, the ground -disturbing
activities shall be halted or diverted away from the vicinity of the find so that the find can be evaluated. A buffer area of
at least 50 feet shall be established around the find, where construction activities will not be allowed to continue until a
qualified archaeologist has examined the newly discovered artifact(s) and has evaluated the area of the find. Work shall
be allowed to continue outside the buffer area. All archaeological resources unearthed by project construction
activities shall be evaluated by a qualified professional archaeologist, who meets the U.S. Secretary of the Interior's
Professional Qualifications and Standards. Should the newly discovered artifacts be determined to be prehistoric,
Native American Tribes/Individuals shall be contacted and consulted, and Native American construction monitoring
should be initiated. The City shall coordinate with the archaeologist to develop an appropriate treatment plan for the
resources. The plan may include implementation of archaeological data recovery excavations to address treatment of
the resources, along with subsequent laboratory processing and analysis.
3. Conduct Periodic Archaeological Resources Spot Checks During Grading and Earth -Moving Activities in All Sediments.
The City shall retain a qualified professional archaeologist who meets the U.S. Secretary of the Interior's Professional
Qualifications and Standards, to conduct periodic Archaeological Spot Checks beginning at depths below two (2) feet to
determine if construction excavations have exposed, or have a high probability of exposing, archaeological resources.
After the initial Archaeological Spot Check, further periodic checks shall be conducted at the discretion of the qualified
archaeologist. If the qualified archaeologist determines that construction excavations have exposed, or have a high
probability of exposing, archaeological artifacts, construction monitoring for archaeological resources will be required.
The City shall retain a qualified archaeological monitor, who meets the qualifications set forth by the U.S. Secretary of
the Interior's Professional Qualifications and Standards, who will work under the guidance and direction of a
professional archaeologist. The archaeological monitor shall be present during all construction excavations (e.g.,
grading, trenching, or clearing/grubbing) into non -fill sediments. Multiple earth -moving construction activities may
require multiple archaeological monitors. The frequency of monitoring shall be based on the rate of excavation and
grading activities, proximity to known archaeological resources, the materials being excavated (native versus artificial
fill soils), the depth of excavation, and if found, the abundance and type of archaeological resources encountered. Full-
time monitoring can be reduced to part-time inspections if determined adequate by the project archaeologist.
If subsurface paleontological resources are encountered, excavation shall halt in the vicinity of the resources and a
qualified paleontologist shall evaluate the resource and its stratigraphic context. The monitor shall be empowered to
temporarily halt or redirect construction activities to ensure avoidance of adverse impacts to paleontological resources.
During monitoring, if potentially significant paleontological resources are found, "standard" samples shall be collected
and processed by the qualified paleontologist to recover micro vertebrate fossils. If significant fossils are found and
collected, they shall be prepared to a reasonable point of identification. Excess sediment or matrix shall be removed
from the specimens to reduce the bulk and cost of storage. Itemized catalogs of material collected and identified shall
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be provided to a museum repository with the specimens. Significant fossils collected during this work, along with the
itemized inventory of these specimens, shall be deposited in a museum repository for permanent curation and storage.
A report documenting the results of the monitoring and salvage activities, and the significance of the fossils, if any, shall
be prepared. The report and inventory, when submitted to the lead agency, shall signify the completion of the program
to mitigate impacts on paleontological resources.
• Tribal Mitigation 7-2. In the event that cultural resources of Native American origin
are identified during construction, all earth -disturbing work within the vicinity of the find
must be temporarily suspended or redirected until an archaeologist has evaluated the
nature and significance of the find and an appropriate Native American representative,
based on the nature of the find, is consulted.
If the City determines that the resource is a tribal cultural resource and thus significant under CEQA, a mitigation plan
shall be prepared and implemented in accordance with State guidelines and in consultation with Native American
groups. The plan would include avoidance of the resource or, if avoidance of the resource is infeasible, the plan would
outline the appropriate treatment of the resource in coordination with the archaeologist and the appropriate Native
American tribal representative.
• Geotech Mitigation 8-1. As recommended by the project's preliminary geotechnical
investigation, prior to City issuance of grading permits for individual project construction
components, the City shall be required to retain a registered engineering geologist or
geotechnical engineer to prepare detailed, construction -level geotechnical investigations to
guide the construction of all project grading and excavation activities.
The detailed, construction -level geotechnical investigations shall be performed for each of the structures proposed for
the development site. Subsurface conditions shall be explored and laboratory tests conducted on selected soil samples
to establish parameters for the design of excavations, foundations, shoring, and waterproofing. Recommendations
from the investigations shall be incorporated into all plans for project grading, excavation, soil support (both temporary
and long-term), and utility construction, to the satisfaction of the City Engineer. The detailed, construction -level
investigations, relevant recommendations, and all associated project grading, excavation and foundation plans, shall be
subject to review and approval by an independent engineering geologist or geotechnical engineer retained by the City
Engineer. In addition, the project civil engineer shall certify to the City Engineer (e.g., through plan submittal for City
review) that all relevant provisions of the investigations have been incorporated into the grading, excavation and
construction plans, and all earthwork and site preparation shall be performed under the direct supervision of a
registered engineering geologist or geotechnical engineer.
• Contamination Mitigation 10-1. Recommendations included in the Phase II ESA
(Stantec, June 8, 2017) shall be implemented, based on construction level project plans
when more specific and precise design and construction activities are formulated. The
Phase 11 ESA recommends additional assessment of local and regional groundwater
conditions in advance of dewatering activities, combined with, as necessary, evaluation of
pertinent and cost effective water management strategies, including preparation of Site
Management Plans. Likewise, the project must comply with the City's standard dewatering
requirements. This assessment and mitigation process shall be subject to review and
approval by the City Engineer.
• Noise Mitigation 13-1. To reduce potential noise levels associated construction of the
proposed project, the City and/or it's designated contractors, contractor's representatives,
or other appropriate personnel shall:
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Restrict work hours/equipment noise. All work shall be subject to the construction noise and time limits contained in
City Municipal Code Chapter 9.10. Construction activities (including deliveries) shall only occur during the following
time periods: — 8 AM to 6 PM Monday through Friday; and — 9 AM to 6 PM on Saturday. Construction activities shall be
prohibited on Sundays and holidays. The City and/or its contractor shall post a sign at all entrances to the construction
site informing contractors, subcontractors, construction workers, etc. of these requirements in accordance with Section
9.10.060(c). The sign shall also provide a name (or title) and phone number for an appropriate on -site and City
representative to contact to submit a noise complaint.
Construction equipment care, siting, and design measures. The following construction equipment care, siting, and
design measures shall apply during construction activities: — Heavy equipment engines shall be covered and exhaust
pipes shall include a muffler in good working condition. Pneumatic tools shall include a noise suppression device on the
compressed air exhaust. — All stationary noise -generating equipment such as pumps, compressors, and welding
machines shall be shielded and located as far from sensitive receptor locations as practical. At a minimum, such
shielding shall consist of a three -sided sound enclosure (with a full or partial roof) that provides for proper ventilation,
equipment operation, and effective noise control. The enclosure should be designed to achieve a 10 to 15 dB reduction
in stationary equipment noise levels. The design of the enclosure shall be reviewed by a qualified acoustical consultant
prior to installation to ensure the enclosure will achieve a minimum 10 dB reduction in stationary equipment noise
levels. — The City shall connect to existing electrical service at the site to avoid the use of stationary, diesel- or other
alternatively -fueled power generators. — No radios or other amplified sound devices shall be audible beyond the
property line of the construction site.
Construction traffic. Construction truck traffic, including soil hauling, equipment deliveries, potential concrete
deliveries, and other vendor deliveries shall follow designated delivery routes prepared for the project, which are
anticipated to include travel on Oregon Expressway and Birch Road.
Construct/Install Temporary Noise Barrier: The City shall install and maintain throughout the duration of all site
preparation, excavation, foundation construction, and building construction activities, one or more physical noise
barriers capable of achieving a minimum reduction in predicted construction noise levels of 15.5 dB. Potential barrier
options would include: — A concrete, wood, or other barrier installed at -grade (or mounted to structures located at -
grade, such as KRail) along the project property line. Such a wall/barrier shall consist of material that have a minimum
rated transmission loss value of 25.5 dB (or equivalent rating), and shall contain no gaps in the structure through which
noise may pass. — Commercially available acoustic panels or other products such as acoustic barrier blankets installed
along the project property line, building envelope or, if feasible and necessary, at or near sensitive residential receptor
areas. — Any combination of noise barriers and commercial products capable of achieving a 15.5 dB reduction in
construction noise levels at sensitive receptor locations. — Prior to the start of the project, the City may prepare an
acoustical analysis that reflects the final site plan, construction activities, equipment use and duration, and refines
potential construction noise reductions required for the project. The final type, placement, and design of the project's
temporary noise barrier(s) shall be reviewed by a qualified acoustical consultant prior to installation to ensure proper
function and a minimum attenuation of 15.5 dBs in construction noise levels.
Prepare Project Construction Noise Control Plan. Prior to the start of construction activity, the City or its contractor shall
prepare a Construction Noise Complaint Plan for the project which: — Identifies the name and/or title and contact
information (including phone number and email) of the Contractor and City -representatives responsible for addressing
construction -noise related issues. Contains a detailed construction schedule and predicted noise levels associated with
construction activities. — Includes procedures describing how the construction contractor will receive, respond, and
resolve to construction noise complaints. At a minimum, upon receipt of a noise complaint, the Contractor and/or City
representative described in the first sub -bullet above shall identify the noise source generating the complaint,
determine the cause of the complaint, and take steps to resolve the complaint.
Prepare Construction Noise Monitoring Plan. Prior to the start of construction, the City or its contractor shall prepare a
Construction Noise Monitoring Plan which identifies: — Construction activities, hours of operation, and predicted
construction noise levels; and — Construction noise monitoring locations, duration, and frequency. The intent of the
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Construction Noise Monitoring Plan is to document updated ambient noise levels, monitor construction noise levels,
and verify compliance with the noise reduction requirements in mitigation measure 13-1. If monitoring indicates
temporary noise barriers are not achieving a minimum 15.5 dB reduction in construction noise levels or otherwise
indicates construction noise is resulting a 10 dB increase in noise levels above ambient conditions, the City shall
increase the height, size (length or width), density, and/or amount of noise barriers installed such that attenuation
requirements are achieved. The Construction Noise Monitoring Plan may be combined with and/or incorporated into
the Construction Noise Complaint Plan described above.
• Vibrations Mitigation 13-2. To reduce potential groundborne vibration levels
associated with construction of the proposed project, the City and/or it's designated
contractors, contractor's representatives, or other appropriate personnel shall:
Prohibit Vibratory Equipment. The City shall prohibit the use of large vibratory rollers (small plate compactors are
acceptable) and vibratory pile driving equipment during construction. Any deep foundation piers or caissons shall be
auger drilled.
Provide Notice to Adjacent Property Owners/Occupants. Five (5) days advanced written notice shall be provided to
adjacent property owners and building occupants before commencing all drilling and significant earthmoving activities
within 65 feet of adjacent buildings. The notice shall provide the name (or title) and contact information (including
phone number and email) of the Contractor and City representatives responsible for addressing construction vibration -
related concerns.
Prepare Vibration Mitigation Plan. Prior to the start of construction activity, the City or its contractor shall prepare a
Construction Vibration Response Plan for the project which: — Identifies the name and/or title and contact information
(including phone number and email) of the Contractor and City -representatives responsible for addressing construction
vibration -related issues. — Contains a detailed schedule of drilling and substantial earth moving activities expected to
occur within 65 feet of adjacent buildings. — Includes procedures describing how the construction contractor will
receive, respond, and resolve to construction vibration complaints. At a minimum, upon receipt of a vibration
complaint, the Contractor and/or City representative described in the first sub -bullet above shall identify the vibration
source generating the complaint, determine the cause of the complaint, and take steps to resolve the complaint by
reducing groundborne vibration levels to less than 75 VdB and 0.04 in/sec PPV. Such measures may include the use of
nonimpact drivers, use of rubber -tired equipment instead of track equipment, or other measures that limit annoyance
from groundborne vibration levels.
Operational Noise Mitigation 13-3. To reduce potential stationary source noise levels associated
with the operation of the proposed project, the City and/or its designated contractors, contractor's
representatives, or other appropriate personnel shall:
Site equipment away from residential areas. Garage ventilation fans and public safety building generators, fire pumps,
and heating and air conditioning equipment shall be located outside of setbacks and screened from view from
residential areas.
Enclose and/or Shield Stationary Noise Generating Equipment. The City shall enclose, shield, baffle, or otherwise
attenuate noise generated from garage ventilation fans and public safety building generators, fire pumps, and heating
and air conditioning equipment. The attenuation achieved through such enclosure, shielding, and/or baffling shall be
sufficient to comply with Section 9.10.050(a) of the Municipal Code, which is estimated to be 78.2 dBA.
Prepare Acoustical Study. In accordance with Chapters 9.10 and 18.23 of the Municipal Code, the City shall have an
acoustical analysis prepared by a licensed acoustical engineer that demonstrates: — The proposed parking garage's
generator would comply with the requirements of the City's Noise Ordinance (Section 9.10.050, as excepted). — The
proposed parking garages ventilation fans would not result in a calculated Ldn of 63.0 at sensitive residential receptor
locations. — The proposed public safety building fire pump, back-up generator, and heating and air conditioning
equipment would comply with the requirements of the City's Noise Ordinance (Section 9.10.050, as excepted) and
would not result in a calculated increase of more than 3.0 dB Ldn at sensitive receptor locations. The acoustical analysis
shall be based on the final project design, reflect the actual equipment type and location at the project site, and the
actual noise enclosure, shielding, or other attenuation measures included in the final project design. If the acoustical
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study demonstrates the noise levels from these sources would be at or within 5 dB less than the Noise Ordinance limits,
the City shall demonstrate through monitoring that the equipment complies with the anticipated noise levels.
Approval Conditions for Parking Garage at 350 Sherman Avenue
Planning
1. The project shall be in substantial conformance with the approved plans and related documents received February
14, 2018, except as modified to incorporate these conditions of approval.
2. The Conditions of Approval document shall be printed on all plans submitted for building permits related to this
project.
3. All future signage for this site shall be submitted for Architectural Review.
4. The City Council shall consider relocation of the transformer if possible to preserve the open area at the corner for
seating and other amenities as in the original plan.
5. The project approval shall be valid for a period of one year from the original date of approval. In the event a
building permit(s), if applicable, is not secured for the project within the time limit specified above, the AR
approval shall expire and be of no further force or effect. Application for extension of this entitlement may be
made prior to the one year expiration.
Transportation
1. DRIVEWAY WIDTH: The width of the driveway approach on the Sherman Avenue frontage shall match the
width of the connecting driveway within the garage. Plans show the driveway approach approximately ten feet
wider than the driveway in the garage, potentially aligning approaching motorists with walkways flanking
either side of the driveway.
2. MEDIAN SHORTENING: Civil site plans do not show any alterations to the existing Birch Street median on
the north side of the Birch Street and Sherdian Avenue intersection. As part of this project, the median shall be
shortened to provide a continuous accessible path of travel within the marked crosswalk at this intersection.
3. STREET LIGHTING: Ensure adequate roadway lighting is provided at the intersection of Birch Street and
Sheridan Avenue resulting from the required median shortening on the north side of the intersection. With the
shortened median, it appears an existing street light pole and twin luminaire assembly will need to be
removed. Replace the lighting in -kind or evaluate the adequacy of remaining illumination to determine if
replacement lighting is warranted based on roadway illumination standards for intersections within
commercial areas.
4. PARKING WAYFINDING & GARAGE SIGNAGE: Clearance bars, garage identity signage, legal signage, and
any other signage unrelated to parking regulatory signage associated with the CAMUTCD should match the
city's Downtown parking wayfinding signage appearance and style. If, at a future date, a district -wide parking
wayfinding program is implemented for the California Avenue area which differs in appearance from the style
of the Downtown parking wayfinding signs, these signs can be easily replaced.
Building
The following comments are required to be addressed prior to any future related permit application such
as a Building Permit, Excavation and Grading Permit, Certificate of Compliance, Street Work Permit,
Encroachment Permit, etc.:
1. Buildings with two or more stories above grade plane are required to be equipped throughout with
an automatic sprinkler system installed in accordance with CBC Section 903.3.1.1.
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2. For new Non -Residential construction of any size, CALGreen Mandatory + Tier 2 requirements are
required per PAMC 16.14.080. A completed Green Building Checklist "GB -1 Non -Residential
Mandatory Plus Tier 2" sheet is required for the building permit submittal package.
3. City of Palo Alto has adopted CALGreen Mandatory +Tier 2 for new construction and requires that
12% to the total parking spaces shall be low -emitting, fuel -efficient and carpool/van pool vehicles.
(CALGreen A5.106.1.2)
4. The Palo Alto Municipal Code, PAMC section 16.14.130 requires new non-residential structures to
provide Conduit Only, EVSE-Ready Outlet, or EVSE installed for at least 25% of parking spaces, among
which at least 5% (and no fewer than one) shall be EVSE Installed. In addition, where EV spaces
have been provided, the EV charging spaces shall comply with CBC 11B-228.3.2 and Table 11B-
228.3.2.1 for the minimum number of accessible EV spaces. The accessible EV charging spaces shall
comply with the technical requirements of CBC 11B-812.
5. The review and approval of this project does not include any other items of construction other than
those written in the ARB project review application included with the project plans and documents under
this review. If the plans include items or elements of construction that are not included in the written
description, it or they may not have been known to have been a part of the intended review and have not,
unless otherwise specifically called out in the approval, been reviewed.
Public Works Engineering
The following comments are required to be addressed prior to any future related permit application such as a
Building Permit, Excavation and Grading Permit, Certificate of Compliance, Street Work Permit, Encroachment
Permit, etc.:
1. STORM WATER TREATMENT: This project shall comply with the storm water regulations contained in provision
C.3 of the NPDES municipal storm water discharge permit issued by the San Francisco Bay Regional Water Quality
Control Board (and incorporated into Palo Alto Municipal Code Chapter 16.11). These regulations apply to land
development projects that create or replace 10,000 square feet or more of impervious surface, and restaurants,
retail gasoline outlets, auto service facilities, and uncovered parking lots that create and/or replace 5,000 square
feet or more of impervious surface. In order to address the potential permanent impacts of the project on storm
water quality, the applicant shall incorporate into the project a set of permanent site design measures, source
controls, and treatment controls that serve to protect storm water quality, subject to the approval of the Public
Works Department. The applicant shall identify, size, design and incorporate permanent storm water pollution
prevention measures (preferably landscape -based treatment controls such as bioswales, filter strips, and
permeable pavement rather than mechanical devices that require long-term maintenance) to treat the runoff from
a "water quality storm" specified in PAMC Chapter 16.11 prior to discharge to the municipal storm drain system.
Effective February 10, 2011, regulated projects, must contract with a qualified third -party reviewer during the
Building permit process to certify that the proposed permanent storm water pollution prevention measures
comply with the requirements of Palo Alto Municipal Code Chapter 16.11. The certification form, 2 copies of
approved storm water treatment plan, and a description of Maintenance Task and Schedule must be received by
the City from the third -party reviewer prior to Building or Grading permit issuance. Within 45 days of the
installation of the required storm water treatment measures and prior to the issuance of an occupancy permit
for the building, third -party reviewer shall also submit to the City a certification for approval that the project's
permanent measures were constructed and installed in accordance to the approved permit drawings.
2. BASEMENT DRAINAGE: Due to high groundwater throughout much of the City and Public Works prohibiting the
pumping and discharging of groundwater, perforated pipe drainage systems at the exterior of the basement walls
or under the slab are not allowed for this site. A drainage system is, however, required for all exterior basement -
level spaces, such as lightwells, patios or stairwells. This system consists of a sump, a sump pump, a backflow
preventer, and a closed pipe from the pump to a dissipation device onsite at least 10 feet from the property line,
such as a bubbler box in a landscaped area, so that water can percolate into the soil and/or sheet flow across the
site. The device must not allow stagnant water that could become mosquito habitat. Additionally, the plans must
show that exterior basement -level spaces are at least 7-3/4" below any adjacent windowsills or doorsills to
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minimize the potential for flooding the basement. Public Works recommends a waterproofing consultant be
retained to design and inspect the vapor barrier and waterproofing systems for the basement.
3. BASEMENT SHORING: Shoring for the basement excavation, including tiebacks, must not extend onto adjacent
private property or into the City right-of-way without having first obtained written permission from the private
property owners and/or an encroachment permit from Public Works.
4. DEWATERING: Proposed basement/underground garage excavation may require dewatering during
construction. Public Works only allows groundwater drawdown well dewatering. Open pit groundwater
dewatering is disallowed. Dewatering is only allowed from April 1 through October 31 due to inadequate capacity
in our storm drain system. The geotechnical report for this site must list the highest anticipated groundwater level;
if the proposed project will encounter groundwater, the applicant must provide all required dewatering submittals
for Public Works review and approval prior to grading permit issuance. Public Works has dewatering submittal
requirements and guidelines available at the Development Center and on our website:
http://www.cityofpa loa lto.org/gov/depts/pwd/forms_a nd_perm its.asp
5. IMPERVIOUS SURFACE AREA: The project will be creating or replacing 500 square feet or more of impervious
surface. Accordingly, the applicant shall provide calculations of the existing and proposed impervious surface areas
with the building permit application. The Impervious Area Worksheet for Land Developments form and instructions
are available at the Development Center or on our website.
6. PAVEMENT: Sherman and Birch were recently resurfaced -- these streets are under a moratorium. Any cutting
into the pavement will trigger additional pavement requirements. Add the following note to the Site Plan:
"Applicant and contractor will be responsible for resurfacing portions of Sherman, Birch and/or Park based the
roadway surface condition after project completion and limits of trench work. At a minimum pavement resurfacing
of the full width of the street along the project frontage may be required." Plot and label the area to be resurfaced
as hatched on the site plan.
7. STORMWATER MAINTENANCE AGREEMENT: The applicant shall designate a party to maintain the control
measures for the life of the improvements and must enter into a maintenance agreement with the City to
guarantee the ongoing maintenance of the permanent C.3 storm water discharge compliance measures. The
maintenance agreement shall be executed prior to Building or Grading permit issuance. The City will inspect the
treatment measures yearly.
8. GRADING & EXCAVATION PERMIT: An application for a grading & excavation permit must be submitted to Public
Works when applying for a building permit. The application and guidelines are available at the Development Center
and on our website.
9. STORM WATER POLLUTION PREVENTION: The City's full-sized "Pollution Prevention - It's Part of the Plan" sheet
must be included in the plan set. The sheet is available here:
http://www.cityofpaloalto.org/civicax/filebank/documents/2732
Fire Department
1. Install a NFPA 13 Fire Sprinkler, NFPA 14 Standpipe, NFPA 20 Fire Pump, NFPA 24 Underground Fire Service and
NFPA 72 Fire Alarm System. Fire pump is required to be located in a 1 hour fire rated room.
2. PV panel layout shall comply with the 2016 CBC section 503.2.1 # 2 & # 3.2-3.3.
3. The building is required to have an Emergency Responder Radio System installed per the 2016 CA Fire Code section
510 unless the property owner submits an evaluation report stating the system is not required.
4. The elevator must be sized to accommodate a gurney and two medical personnel.
Public Works Recycling
1. Allow space for the collection and storage of trash, recycling, and compost in the garage.
16
Utilities WGW
The following comments are required to be addressed prior to any future related permit application such as a Building
Permit, Excavation and Grading Permit, Certificate of Compliance, Street Work Permit, Encroachment Permit, etc.:
1. Update plans per WGW site plan red -lines and resubmit to other departments for review; no resubmittal to
WGW required unless utilities are impacted.
2. The applicant shall submit a completed water -gas -wastewater service connection application — load sheet per
unit for City of Palo Alto Utilities. The applicant must provide all the information requested for utility service
demands (water in fixture units/g.p.m., gas in b.t.u.p.h, and sewer in fixture units/g.p.d.). The applicant shall
provide the new total loads
3. The applicant shall submit improvement plans for utility construction. The plans must show the size and
location of all underground utilities within the development and the public right of way.
4. The applicant shall submit improvement plans for utility construction. The plans must show the size and
location of all underground utilities within the development and the public right of way including meters,
backflow preventers, fire service requirements, sewer mains, sewer cleanouts, sewer lift stations and any
other required utilities. Plans for new wastewater lateral need to include new wastewater pipe profiles
showing existing potentially conflicting utilities especially storm drain pipes electric and communication duct
banks. Existing duct banks need to be daylighted by potholing to the bottom of the duct bank to verify cross
section prior to plan approval and starting lateral installation. Plans for new storm drain mains and laterals
need to include profiles showing existing potential conflicts with sewer, water and gas.
5. The applicant shall be responsible for 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.
6. The gas service, meters, and meter location must meet WGW standards and requirements
7. An approved reduced pressure principle assembly (RPPA backflow preventer device) is required for all existing
and new water connections from Palo Alto Utilities to comply with requirements of California administrative
code, title 17, sections 7583 through 7605 inclusive. The RPPA shall be installed on the owner's property and
directly behind the water meter within 5 feet of the property line. RPPA's for domestic service shall be lead
free. Show the location of the RPPA on the plans.
8. An approved reduced pressure detector assembly is required for the new water connection for the fire system
to comply with requirements of California administrative code, title 17, sections 7583 through 7605 inclusive.
Reduced pressure detector assemblies shall be installed on the owner's property adjacent to the property line,
within 5' of the property line. Show the location of the reduced pressure detector assembly on the plans.
9. The applicant shall pay the capacity fees and connection fees associated with new utility service/s or added
demand on existing services. The approved relocation of services, meters, hydrants, or other facilities will be
performed at the cost of the person/entity requesting the relocation.
17
10. Each unit or place of business shall have its own water and gas meter shown on the plans. Each parcel shall
have its own water service, gas service and sewer lateral connection shown on the plans.
11. All existing water and wastewater services that will not be reused shall be abandoned at the main per WGW
utilities procedures.
12. 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. New water, gas
or wastewater services/meters may not be installed within 10' or existing trees. Maintain 10' between new
trees and new water, gas and wastewater services/mains/meters.
13. All utility installations shall be in accordance with the City of Palo Alto current utility standards for water, gas
& wastewater.
Utilities Electrical
1. Main electric panel shall be at grade and outdoor. The proposed design shall have the location of the main
electric panel.
2. The proposed building is two stories deep which might require long tie -back to reinforce the shoring walls.
Applicant shall work with Electric Utility prior to driving these tie -backs onto Jacaranda and part of Sherman
and Birch to avoid hitting the high voltage electric conduits. Applicant shall pot hole where close to these
conduits and electric equipment.
4. No tree drip -line near electric equipment (including conduits).
6. The point of electric power connection to feed the new building at 350 Sherman is one of the following: MH
1610 (manhole 1610), Vault 1609, LB3470 or SW 3469
8. The point of connection for fiber is a communication box near transformer 5264.
Public Works Water Quality (Stormwater Management)
1. A covered area for a dumpster would be preferable; the area shall be adequately sized for all waste streams and
designed with grading or a berm system to prevent water run-on and runoff from the area. PAMC 16.09.180(b)(10)
Dumpsters for New and Remodeled Facilities [if trash area is shown, indicate that the shown area must meet these
requirements as well as the Zero Waste sizing requirements]
2. Submit and follow the "Pollution Prevention — It's Part of the Plan" construction BMP sheet during life of project with
the building permit set.
Before building permit approval, address these:
1. Use rain capture device at the demonstration garden and include description in interpretative signage.
2. Highly consider using rain chains or similar along vines and other walls/building corners.
3. Storm drain/drop inlets
• Inlets should be labeled with a 'Flows to Adobe Creek' message.
4. Stormwater treatment measures
• Consider using low -maintenance permeable pavers in the plaza to be part of the demonstration area.
Appropriate specs must be followed.
• Installation vendor specs should be followed, though vendor specs should be reviewed by Parks Maintenance
Staff before installation. Add this bullet as a note to the building plans.
18
• Clear, detailed maintenance agreement must be drafted and agreed upon by all City staff in pertinent
Departments (Public Works, Parks) before occupancy approval. Contact Pam Boyle Rodriguez, Stormwater
Program Manager, at (650) 329-2421 to facilitate this agreement.
• Must meet all Bay Regional Municipal Regional Stormwater Permit requirements.
• Refer to the Santa Clara Valley Urban Runoff Pollution Prevention Program C.3 Handbook (download here:
http://scvurppp-w2k.com/c3_handbook.shtml) for details
• Staff from Stormwater Program (Watershed Protection Division) may be present during installation of
stormwater treatment measures. Contact Pam Boyle Rodriguez, Stormwater Program Manager, at (650) 329-
2421 before installation. Add this bullet as a note to building plans on Stormwater Treatment (C.3) Plan.
• Install an interpretive sign regarding stormwater treatment and pollution prevention. Contact Pam Boyle
Rodriguez, Stormwater Program Manager, at (650) 329-2421 regarding this text.
5. Bay -friendly Guidelines (rescapeca.org)
• Do not use chemicals fertilizers, pesticides, herbicides or commercial soil amendment. Use Organic Materials
Review Institute (OMRI) materials and compost. Refer to the Bay -Friendly Landscape Guidelines:
http://www.stopwaste.org/resource/brochures/bay-friendly-landscape-guidelines-sustainable-practices-
landscape-professional for guidance. Add this bullet as a note to the building plans.
• Avoid compacting soil in areas that will be unpaved. Add this bullet as a note to the building plans. Add this
bullet as a note to the building plans.
6. Stormwater quality protection
• Trash and recycling containers must be covered to prohibit fly -away trash and having rainwater enter the
containers.
• Drain downspouts to landscaping (outward from building as needed).
• Drain HVAC fluids from roofs and other areas to landscaping.
• Establish a street sweeping maintenance plan in open parking lots. Contact Pam Boyle Rodriguez, Stormwater
Program Manager, at (650) 329-2421 regarding this plan.
The following comments are required to be addressed prior to any future related permit application such as a Building
Permit, Excavation and Grading Permit, Certificate of Compliance, Street Work Permit, Encroachment Permit, etc.:
1. PAMC 16.09.170, 16.09.040 Discharge of Groundwater
Prior approval shall be obtained from the city engineer or designee to discharge water pumped from construction sites
to the storm drain. The city engineer or designee may require gravity settling and filtration upon a determination that
either or both would improve the water quality of the discharge. Contaminated ground water or water that exceeds
state or federal requirements for discharge to navigable waters may not be discharged to the storm drain. Such water
may be discharged to the sewer, provided that the discharge limits contained in Palo Alto Municipal Code
(16.09.040(m)) are not exceeded and the approval of the superintendent is obtained prior to discharge. The City shall
be compensated for any costs it incurs in authorizing such discharge, at the rate set forth in the Municipal Fee
Schedule.
2. PAMC 16.09.055 Unpolluted Water
Unpolluted water shall not be discharged through direct or indirect connection to the sanitary sewer system. And
PAMC 16.09.175 (b) General prohibitions and practices Exterior (outdoor) drains may be connected to the sanitary
sewer system only if the area in which the drain is located is covered or protected from rainwater run-on by berms
and/or grading, and appropriate wastewater treatment approved by the Superintendent is provided. For additional
information regarding loading docks, see section 16.09.175(k)
3. PAMC 16.09.180(b)(14) Architectural Copper
On and after January 1, 2003, copper metal roofing, copper metal gutters, copper metal down spouts, and copper
granule containing asphalt shingles shall not be permitted for use on any residential, commercial or industrial building
19
for which a building permit is required. Copper flashing for use under tiles or slates and small copper ornaments are
exempt from this prohibition. Replacement roofing, gutters and downspouts on historic structures are exempt,
provided that the roofing material used shall be prepatinated at the factory. For the purposes of this exemption, the
definition of "historic" shall be limited to structures designated as Category 1 or Category 2 buildings in the current
edition of the Palo Alto Historical and Architectural Resources Report and Inventory.
4. PAMC 16.09.175(k) (2) Loading Docks
(i) Loading dock drains to the storm drain system may be allowed if equipped with a fail-safe valve or equivalent device
that is kept closed during the non -rainy season and during periods of loading dock operation.
(ii) Where chemicals, hazardous materials, grease, oil, or waste products are handled or used within the loading dock
area, a drain to the storm drain system shall not be allowed. A drain to the sanitary sewer system may be allowed if
equipped with a fail-safe valve or equivalent device that is kept closed during the non -rainy season and during periods
of loading dock operation. The area in which the drain is located shall be covered or protected from rainwater run-on
by berms and/or grading. Appropriate wastewater treatment approved by the Superintendent shall be provided for all
rainwater contacting the loading dock site.
5. PAMC 16.09.180(b)(5) Condensate from HVAC
Condensate lines shall not be connected or allowed to drain to the storm drain system.
6. PAMC 16.09.180(b)(b) Copper Piping
Copper, copper alloys, lead and lead alloys, including brass, shall not be used in sewer lines, connectors, or seals coming
in contact with sewage except for domestic waste sink traps and short lengths of associated connecting pipes where
alternate materials are not practical. The plans must specify that copper piping will not be used for wastewater
plumbing.
7. PAMC 16.09.175(a) Floor Drains
Interior (indoor) floor drains to the sanitary sewer system may not be placed in areas where hazardous materials,
hazardous wastes, industrial wastes, industrial process water, lubricating fluids, vehicle fluids or vehicle equipment
cleaning wastewater are used or stored, unless secondary containment is provided for all such materials and
equipment
8. 16.09.180(12) Mercury Switches
Mercury switches shall not be installed in sewer or storm drain sumps.
SECTION 8. 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 its actual
attorney's 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.
SECTION 9. Term of Approval. Architectural Review Approval. The approval shall be
valid for one year from the original date of approval, pursuant to Palo Alto Municipal Code Section
18.77.090.
20
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS: ATTEST: APPROVED:
City Clerk Director of Planning and
Community Environment
APPROVED AS TO FORM:
Senior Asst. City Attorney
PLANS AND DRAWINGS REFERENCED:
Public Parking Garage at 350 Sherman Avenue
Those plans prepared by RossDrulisCusenbery entitled ARB Submittal City of Palo Alto California
Ave Parking Garage 350 Sherman Ave, consisting of 36 pages, and received February 14, 2018.
21
Attachment D -
Location Map: 350 Sherman Avenue
Proposed Public Parking Garage
ATTACHMENT E
Hardcopy plans and EIR provided to Council Members and Libraries only
Project plans and the Draft Environmental Impact Report can be reviewed at
https://www.cityofpa loa lto.org/gov/depts/pwd/i of rastructu re_pla n/
psb_and_cal_ave_garage.asp
and on Palo Alto Building Eye at this location:
https://paloalto.buildingeye.com/planning
Attachment F
Summary: PSB Project EIR Potential Impact Topics and Mitigated Impacts
The potential impacts below discussed in the Draft EIR and Final EIR chapters are mitigated to
"less than significant" levels.
Air Quality: The potential impacts from project construction emissions and construction
health risks are identified in Section 5.3.6 of the Draft EIR. Mitigation Measure 5-1 is for the use
of BAAQMD-recommended "Additional Construction Measures", construction equipment
restrictions, and preparation of a Construction Risk Reduction Plan before construction activity
commences OR implementation of off -site mitigation.
Biological Resources: The potential impacts on nesting birds (from removal of 38 trees)
discussed in Section 6.3.2 of the Draft EIR. Mitigation Measure 6-1 calls for a survey and for
construction to occur outside the avian nesting season (that is, prior to February 1 or after
August 31), with additional monitoring by a qualified biologist. Mitigation Measure 6-2
addresses the replacement of trees consistent with City of Palo Alto Tree Protection and
Management Regulations (PAMC 8.10), the Tree Technical Manual (PAMC 8.10.130), and the
protocols and standards of the Urban Forestry Division. The measure notes that, if the tree
canopy cannot be replaced on -site, the canopy shall be replaced off -site as close to the project
site as feasible. Tree removal permit is required, and if trees are being replaced off -site, a Tree
Planting Plan is required prior to issuance of a building permit and replacement trees are to be
monitored by a qualified arborist for two years after initial planting.
Cultural and Historic Resources: The potential disturbance of (as -yet undiscovered)
archaeological or paleontological resources by construction (e.g., excavation for underground
parking and utilities) and unanticipated discovery of tribal cultural resources are discussed in
Sections 7.3.2 of the Draft EIR. Mitigation Measure 7-1 requires retention of a qualified
professional archaeologist and a professionally qualified paleontologist, sensitivity training for
construction personnel prior to commencement of excavation activities, cessation of ground -
disturbing activities upon any discovery, implementation of a treatment plan by a qualified
professional archaeologist, conducting spot checks, monitoring excavation activities, and
collection and preparation of paleontological resources by a qualified paleontologist.
Mitigation measure 7-2 includes measures to protect as -yet undiscovered tribal cultural
resources, including evaluation by a qualified archaeologist, consultation with an appropriate
Native American representative, and implementing a mitigation plan.
Geology and Soils: The Project's proposed excavation and grading activities potential
impacts with respect to safety or stability (geotechnical hazards) are discussed in Section 8.3.3
of the Draft EIR. A construction -level geotechnical investigation is noted as needed to
adequately address all grading and excavation activities along with supervision by an
engineering geologist or geotechnical engineer during Project grading and construction.
Mitigation Measure 8-1 includes measures to ensure the safety and stability of all Project
improvements, including the structures and associated infrastructure.
Hazards and Hazardous Materials: The potential Project -related exposure to existing
soil or groundwater contamination is discussed in Section 10.3.3 of the Draft EIR. The Mitigation
Measure 10-1 includes measures to ensure that the Project would not result in soil or
groundwater contamination.
Noise: Project construction noise is discussed in Section 13.3.2 of the Draft EIR. Noise
would be from site preparation, excavation and grading, utility trenching, construction of a new
parking garage and public safety building, and application of architectural coatings would be in
excess of 10 dB above ambient conditions at sensitive receptor locations for several hours a day
for a period of approximately 16 to 21 months. Mitigation Measure 13-1 mandates that
specific noise control measures be included in contract specifications, such as work hour and
construction noise restrictions; construction equipment care, siting, and design measures;
temporary noise barriers; a Construction Noise Control Plan; and a Construction Noise
Monitoring Plan.
Project Ground -borne Vibration Levels: Project construction activities that could
generate perceptible ground -borne vibration are discussed in Section 13.3.2 of the Draft EIR.
Perceptible ground -borne vibration at adjacent buildings, including residential buildings for a
period of approximately 8 months would be mitigated with implementation of Mitigation
Measure 13-2, which mandates that specific ground -borne vibration control measures be
included in contract specifications, such as vibratory equipment prohibitions, notice to adjacent
property owners and occupants, and a Construction Vibration Mitigation Plan.
Project Operational Noise: The impact from noise generated by the parking garage
ventilation fans and the Public Safety Building generator, fire pump, and heating and air
conditioning equipment and shielding or other means of attenuation is discussed in Section
13.3.2 of the Draft EIR. Mitigation Measure 13-3 mandates that specific operational noise
control measures be included in contract specifications, such as the siting of noise -generating
equipment away from residential areas; enclosing and shielding noise -generating equipment;
and a subsequent acoustical analysis based on the final project design.
4 "A,
Attachment G
Summary of PTC and ARB Reviews and Document Links
Links to the PTC and ARB staff reports, meeting videos and excerpt minutes are provided below.
The ARB and PTC members' comments on the Draft EIR and responses thereto are included in
the Final EIR.
PTC
The Planning and Transportation Commission (PTC) had provided initial comments on the PSB
and public parking garage project during an EIR scoping session on April 12, 2017. Links to the
EIR Scoping Meeting documents are below:
• PTC staff report: https://www.cityofpaloalto.org/civicax/filebank/documents/56874
• Meeting minutes: https://www.cityofpaloalto.org/civicax/filebank/documents/58174
• Video: http://midpenmedia.org/planning-transportation-commission-46/
The PTC provided comments on the Draft EIR and recommended Council approval of the PF
zone changes on January 31, 2018. The PTC staff report is found at this link:
https://www.cityofpaloalto.org/civicax/filebank/documents/63061. The January 31st meeting
action minutes are found at this link:
https://www.cityofpaloalto.org/civicax/filebank/documents/64142. The video of the January
31st meeting is found at this link: http://midpenmedia.org/planning-transportation-
commission-63/.
ARB
On March 1, 2018, the ARB recommended approval (by a 4-1 vote) of the public parking garage,
with findings for approval contained in the attached RLUA. The staff report link is here:
https://www.cityofpaloalto.org/civicax/filebank/documents/63696. The staff report contains
excerpted minutes of the January 18, 2018 ARB parking garage review. The link to video is here:
http://midpenmedia.org/architectural-review-board-74-2-2/. A link to the ARB meeting
minutes is here: https://www.cityofpaloalto.org/civicax/filebank/documents/64586. The ARB
approved these minutes on May 3, 2018. The ARB added a condition of approval (COA for
Planning #4) so that Council would relocate the transformer (if possible) to preserve the open
area at the corner for seating and other amenities as in the original plan.
January 18, 2018 ARB
The ARB reviewed the Draft EIR and provided comments, and the revised public parking garage
plans, and continued its review. The staff report link is found here:
https://www.cityofpaloalto.org/civicax/filebank/documents/62876. The staff report contains
excerpt ARB minutes of the October 19, 2017 PSB and garage review. The link to the meeting
video is here: http://midpenmedia.org/architectural-review-board-73-2-2-2/.
October 19, 2017 ARB
The ARB's first formal hearing on the combined PSB and public parking garage project in fall
2017 resulted in a continuance. The staff report link is here:
https://www.cityofpaloalto.org/civicax/filebank/documents/61817. The link to video is here:
http://midpenmedia.org/architectural-review-board-72/.
ARB and HRB Preliminary Reviews
The Historic Resources Board (HRB) and ARB conducted preliminary reviews of the PSB and
public parking garage project on May 25, 2017 and June 1, 2017, respectively. Because the
parking garage site is next to a site identified as eligible for listing on the California Register of
Historic Resources, the parking garage project was presented to the Historic Resources Board in
a study session format. The HRB staff report is viewable here:
http://www.cityofpaloalto.org/civicax/filebank/documents/57906. The HRB meeting video is
viewable here: http://midpenmedia.org/historic-resources-board-37/. The June 1, 2017: ARB
staff report link is here: http://www.cityofpaloalto.org/civicax/filebank/documents/58034. The
ARB preliminary review video link is here: http://midpenmedia.org/architectural-review-board-
63/. Excerpt minutes for the two preliminary reviews were attached to the October 19, 2017
ARB report.
ARB February 15, 2018 Downtown Garage Review
As noted, the Draft EIR addressed the PF zone changes that are necessary for both the PSB
Project and the new Downtown Garage. A separate Draft EIR has been prepared and published
(on May 18, 2018) for the Downtown Garage; a link to the DEIR is found at the Public Works'
webpage for the Downtown Garage project, found at this link:
https://www.cityofpaloalto.org/gov/depts/pwd/infrastructure plan/new downtown garage.a
sp. The ARB's first formal review of the Downtown Garage was held mid -February; the ARB
continued the Downtown Garage project review to a date uncertain. Revised plans submitted
May 7, 2018 will be presented on June 21, 2018 to the ARB. The link to the February 15th ARB
staff report is here: https://www.cityofpaloalto.org/civicax/filebank/documents/63384. The
video link is here: http://midpenmedia.org/architectural-review-board-75/. Draft meeting
minutes are at this link: https://www.cityofpaloalto.org/civicax/filebank/documents/64585.
The ARB approved these minutes on May 3, 2018.
CITY OF
PALO
ALTO
City of Palo Alto (ID # 9341)
City Council Staff Report
Report Type: Action Items
Meeting Date: 6/11/2018
Summary Title: Initiative Measure to Reduce Office/R&D Cumulative Cap in
Comprehensive Plan
Title: Accept the City Clerk's Report Certifying the Sufficiency of the Initiative
Petition to Amend the Comprehensive Plan and Zoning Code to Reduce the
Maximum Allowable New Office and R&D Development from 1.7 Million
Square Feet to 850,000 Square Feet, Subject to Specified Exemptions; and
Adopt a Resolution Placing the Initiative Petition on the November 2018
Ballot, or Adopt the Petition as an Ordinance Without Alteration, or Provide
Other Direction to Staff
From: City Manager
Lead Department: City Clerk
Recommendation
Staff recommends that Council:
1. Accept the City Clerk's Certificate of Sufficiency (Attachment A) of the Initiative Petition
to Reduce the Office/R&D Development Cap ("Initiative Measure") (Attachment B); and
2. Approve an ordinance (on first reading) amending the Comprehensive Plan and Title 18
(Zoning) of the Palo Alto Municipal Code, as proposed by the Initiative Measure, reduce
the cumulative cap on office/R&D development to 850,000 square feet, and direct staff
to place the ordinance on a future Council agenda for final adoption (second reading) by
August 10, 2018; or
3. Direct staff to return at a later meeting with a resolution calling for an election to submit
the Initiative Measure to the voters at the next General Municipal Election to be held on
November 6, 2018; or
4. Provide other direction to Staff with respect to the Initiative Measure, including
whether to prepare a City -sponsored ballot measure.
Background
On April 20, 2018, three Palo Alto residents submitted a notice of intent to circulate an initiative
petition and explaining that the initiative, if adopted, would amend Palo Alto's Comprehensive
Plan and the Palo Alto Municipal Code to reduce the current citywide cap on new square feet of
City of Palo Alto Page 1
office/R&D development by 50 percent (from the current cap of 1.7 million square feet to a
new cap of 850,000 square feet), with certain exemptions, and to require voter approval to
increase the new cap or add exemptions. The full text of the initiative is attached to this report
as Attachment A.
On May 22, 2018, the initiative sponsors submitted the petition with signatures to the City
Clerk. On June 3, 2018, the Santa Clara County Registrar of Voters completed examination and
verification of the signatures and determined that sufficient signatures were submitted to
qualify the initiative for the ballot.
Discussion
Comprehensive Plan's Existing Development Cap
The City's 1998 Comprehensive Plan included a cap on non-residential development of 3.2
million square feet in "monitored areas" of the City (Policy L-8). From the time of that plan's
adoption to 2014, approximately 1.5 million square feet of the development capacity was
utilized, leaving 1.7 million square feet available.
On November 13, 2017, the City Council adopted the current Comprehensive Plan (entitled
"Comprehensive Plan 2030") which updated the overall cap on non-residential development
contained in the City's 1998 Comprehensive Plan. The current plan updated this cap to 1.7
million square feet, reflecting the square footage remaining unallocated and undeveloped in
2015 of the original 3.2 million square feet. In doing so, the current plan also made two
changes: it applied the cap to the entire city, excluding only the Stanford University Medical
Center (SUMC) area, and it focused the cap on office/R&D uses so that for the first time,
conversion of retail or warehouse space to office use counts as new office space under the cap.
(Policy L-1.9)
Summary of Initiative Measure
The proposed initiative would amend Policy L-1.9 in the City's Comprehensive Plan as well as
descriptive text and implementation programs. The initiative would also insert regulatory
language into the City's Municipal Code (Zoning Ordinance). Each of these changes is briefly
described below. Please see the attached initiative (Attachment A) for the specific text.
Comprehensive Plan Amendments
• The initiative would amend Policy L-1.10 in the Land Use & Community Design Element
to reduce the 1.7 million square foot cap on new office/R&D development to 850,000
square feet, to eliminate a requirement for annual monitoring, to state that no
additional exemptions are allowed beyond those already provided for medical,
governmental, and institutional uses, and to state that the new cap may not be repealed
or increased without a vote of the people until after December 31, 2030.
City of Palo Alto Page 2
• The initiative would delete Program L1.10.1 in the Land Use & Community Design
Element, which contains a requirement to reevaluate the cap on new Office/R&D square
footage when the amount of square footage reaches 67 percent of the allowed amount
and to concurrently consider removal or changes to the cap and/or the amount of
development permitted under the City's zoning ordinance.
• The initiative would amend the text of the Land Use & Community Design Element to
describe the initiative.
• The initiative would amend Programs B1.1.1 and B7.2.1 in the Business & Economics
Element to provide for consistency with modified Policy L-1.10.
• The initiative would amend the Implementation Table in the Implementation chapter of
the plan to reflect the changes to implementation programs in the Land Use &
Community Design and Business & Economics Elements.
Municipal Code Amendments
• The proposed initiative would also add a new section 18.40.200 to the Municipal Code
capping new square feet of office/R&D development consistent with the modified cap
proposed in Land Use & Community Design Element Policy L-1.10. This section would
also prohibit amendments or repeal of the new section until after December 31, 2030.
Impacts of Initiative Measure
There are a variety of factors that will influence office development in Palo Alto beyond the
regulatory framework established by Council or through initiative. Regional demand for office
growth and employment, housing affordability, cost of living and commute times are some
considerations that will influence growth locally. While engaging regional organizations and
participation in conversations to address regional housing and transportation challenges, the
City has also implemented local programs to reduce single occupancy trips and vehicle miles
traveled. Recent housing -related ordinances and ongoing policy initiatives are efforts that
recognize a need to increase housing production based on current and planned land use
development set forth in the recently adopted Comprehensive Plan.
When preparing the Comprehensive Plan, several growth scenarios were studied, including
scenario 5, which contemplated approximately 810,000 square feet of office development. An
economic analysis was prepared that evaluated fiscal impacts to the city based on the different
scenarios. The Council ultimately favored a blended scenario that anticipates more office
development than scenario 5, however, some may find this analysis informative in their
consideration of the impact of the proposed initiative; this document is available online:
https://www.cityofpaloalto.org/civicax/filebank/documents/65394.
City of Palo Alto Page 3
Additional economic study may be warranted to make more informed decisions, but no such
analysis is available at this time. However, there is other information that may be useful.
As noted above, the initiative would limit office/R&D development to 850,000 square feet
starting with a January 2015 baseline and extending to a December 2030 horizon; this
represents a 16 -year period. Coincidentally, the city has 16 years' worth of office/R&D data
extending from 2001 to 2017. Attachment C provides a table that summarizes this data and is
divided into the three geographic areas subject to the annual office limit cap (Downtown,
California Avenue area, and along El Camino Real); the Stanford Research Park; and, a column
that reflects other commercial areas not included in the previous categories.
The data shows that the amount of office development has been inconsistent over the past 16
years. During times where housing production was more robust, the city saw big changes in the
amount of office/R&D space converted to housing units and other land uses. Conversely, office
development has also seen periods of rapid growth.
Office/R&D development in areas subject to the annual office limit will be constrained to
50,000 square feet a year'. Lots in these areas tend to be smaller and are not likely to include
large office development. East Meadow and East/West Bayshore could accommodate larger
office development. It is also an area of the city that has seen the greatest net reduction in
previously constructed office space. Stanford Research Park, based on current development
standards, has approximately 850,000 square feet of office/R&D development potential as of
July 2017, but over the past 16 years has averaged approximately 13,000 square feet of net
new office development a year. Much of Stanford's office/R&D development has redeveloped
existing office space and added only incremental net new floor area over time.
Over the past 16 years, when deducting office/R&D space converted to housing or other non -
office uses, the city has seen about 240,000 square feet of net new office development.
Decision -makers will want to consider the extent to which office/R&D deductions can be relied
upon in the future. The largest conversions occurred in 2006 when Sun Microsystems was
converted to the Oshmann Family Jewish Community Center (^'390 KSF) and in 2014 with the
demolition of the former Facebook headquarters (^'323 KSF). The data in Attachment C shows
that many years between 2001 and 2017 have resulted in some net reduction of office space.
A couple other data points worth noting is that between 2001 and 2014, the city had a net
increase in office/R&D of approximately 106,000 square feet, but between 2015 and 2017 had
approximately 134,000 square feet of net new office/R&D development. Within the geographic
boundaries of the recently adopted annual office limit, an average of 40,500 net new
office/R&D floor area was added each year over the past 16 years.
Based on the limited economic analysis available for this initiative and other challenges related
to regional and national influences on office development in the city, it is difficult to assess the
1 The City's ordinance allows unused office floor area to carry over for one year, which may result in more than
50,000 square feet of office development in some years.
City of Palo Alto Page 4
potential impact to the city with the passage of the subject initiative or an alternative measure,
if directed by Council. If one accepts that past trends and market fluctuations represent a
reasonable barometer for future office/R&D growth — and that the city will continue to see over
350,000 square feet of office/R&D conversions over the next 16 years, conclusions can be made
that suggest the initiative would not have a significant impact to the city.
If, however, there are fewer office/R&D conversions or if the Stanford Research Park sees
increased development over the next 16 years, the 850,000 square foot limit could be reached
near or before the 2030 planning horizon. Professional economists could provide the Council
with office/R&D development projections or a tailored analysis to Palo Alto. If Council is
interested in this type of information, Council should direct staff to obtain it. A funding source
would need to be identified.
Council's Options
The Council's options under the City Charter are to either adopt the measure as written,
without change, or place the measure on the ballot for the next general municipal election
(that is no sooner than 88 days from the date of the Clerk's Certificate of Sufficiency). The next
general municipal election more than 88 days from the date of certification is the election on
November 6, 2018. The last day to place a matter on the ballot is August 10, 2018. The Council
may request further information related to the initiative's impacts, including fiscal impacts, but
there would be no extension of time to determine whether to adopt or place the measure on
the ballot.
Under the Charter, the Council also has the option to submit to the voters an alternative or
competing ballot measure that amends the proposed initiative. The Charter provides that if
both the initiative and the City's measure are passed by a majority of voters, the City's measure
would amend the initiative measure. The proposed initiative includes a provision that states
that to the extent both measures are approved by a majority of voters, the measure receiving
the greater number of votes would prevail. Further research will be needed to ascertain the
effect if multiple measures related to office/R&D development in Palo Alto are approved by the
voters, and ultimately, this issue may be resolved in court.
Conclusion
Sponsors of the initiative have obtained sufficient voter signatures to qualify the measure for
placement on the ballot at the next general municipal election on November 6, 2018. The
Council's choices are to adopt the measure or to place it on the ballot, which it must do by
August 10, 2018. Council may also direct staff to prepare an alternative measure for placement
on the ballot. Council action to place such a measure on the ballot would also need to occur no
later than August 10, 2018.
City of Palo Alto Page 5
Environmental Review
The potential actions in response to a voter -sponsored initiative are not a project under the
California Environmental Quality Act (CEQA).
Attachments:
• Attachment A: Certificate of Sufficiency of Initiative Petition
• Attachment B: Initiative Measure entitled "Palo Alto Reduced Office R&D Development
Cap Initiative"
• Attachment C: Office Development From 2001 - 2017
City of Palo Alto Page 6
County of Santa Clara
Registrar of Voters
1555 Berger Drive, Bldg. 2
San Jose, CA 95112
Mailing Address: P.O. Box 611360, San Jose, CA 95161-1360
(408) 299 -VOTE (8683) 866 -430 -VOTE (8683) FAX: (408) 998-7314
www.sccvote.org
June 3, 2018
Ms. Beth Minor, City Clerk
City of Palo Alto
250 Hamilton Ave.
Palo Alto, CA 94301
RE: Palo Alto Office RID CAP
Dear City Clerk Minor:
The petition submitted to our office on May 23, 2018 contained a raw count of 3,102 signatures.
Pursuant to your request and based on six percentum of the number of regsiered.voters at the
last general municipal election for the City of Palo Alto, the petition needs 2,407 valid signatures
to pass.
Your jurisdiction requested that the Registrar of Voters' Office conduct a full count of signature
verification in an attempt to reach 2,407 valid signatures.The Registrar of Voters' Office verified
the necessary number of signatures filed in accordance with Elections Code Section 9115.
The signature verification resulted in the verification of 2,695 signatures of the 3,102 signatures
submitted, with 2,430 signatures found valid.
Please contact us to make arrangemensts to pickup your petition. If you have any questions
concerning this matter, please feel free to contact our office at (408) 282-3009.
Sincerely,
Julia Saenz, Elections Process Supervisor II
Voter Registration Division
County of Santa Clara
Attachments: Clerk's Certificate to Initiative Petition
Petition Result Breakdown Report
Statistics Summary Report
Statistics Detail Report
Board of Supervisors: Mike Wasserman, George Shirakawa, Dave Cortese. Ken Yeager, Liz Kniss
County Executive: Jeffrey V. Smith
Santa Clara County
Registrar of Voters
CLERK'S CERTIFICATE TO INITIATIVE PETITION
I, SHANNON BUSHEY, Registrar of Voters of the County of Santa Clara, State of
California, hereby certify:
That the "City of Palo Alto Reduced Office/R&D Development Cap" Initiative
measure has been filed with this office on May 23, 2018.
That said petition consists of 102 sections;
That each section contains signatures purporting to be the signatures of qualified
electors of this county;
That attached to this petition at the time it was filed was an affidavit purporting to be the
affidavit of the person who solicited the signatures, and containing the dates between
which the purported qualified electors signed this petition;
That the affiant stated his or her own qualification, that he or she had solicited the
signatures upon that section, that all of the signatures were made in his or her
presence, and that to the best of his or her knowledge and belief each signature to that
section was the genuine signature of the person whose name it purports to be;
That after the proponent filed this petition I verified the required number of signatures by
examining the records of registration in this county, current and in effect at the
respective purportive dates of such of signing, to determine what number of qualified
electors signed the petition, and from that examination I have determined the following
facts regarding this petition:
1. Number of unverified signatures filed by proponent 3,102
2. Number of signatures verified 2,695
a. Number of signatures found SUFFICIENT 2,430
b. Number of signatures found NOT SUFFICIENT 265
1. NOT SUFFICIENT because DUPLICATE 31
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal this 3rd day of June, 2018.
Shannon Bushey
Registra of Voters
By:
Deputy
JOBD83
Petition Result Breakdown
JobD83 City of Palo Alto Office RID Cap
JobD83 City of Palo Alto Reduced Office/R&D Development Cap Initiative
Signatures Required
Raw Count
Sample Size
Sigs Checked
Sigs Not Checked
Sigs Valid
Sigs Invalid
Duplicated
Non -duplicate Invalids
2407
3,102
3,102
2,695
407
2,430
265
31
234
Percent of Sigs
Checked
90.2 %
9.8 %
1.0 %
9.0 %
Percent of
Sample Size
13.1 %
78.3 %
8.5 %
1.0 %
7.5 %
RESULT ABBR RESULT DESCRIPTION
Approved
NotReg
OutOfDist
Duplicate
RegLate
RegDiffAdd
Cantldntfy
NoResAdd
NoSig
PrintedSig
SigNoMatch
NotCompBySignr
Inv
[STATISTICS SUMMARY
Approved
Not Registered
Out of District
Signed more than once
Registered Late
Registered at a Different Address
Cannot Identify
No Residence Address Given
No Signature
Printed Signature
Signatures Don't Match
Not Completed by Signer
Invalid -See Doc
Pages Processed
Total Checked
Uncorrected Valid
Duplicate Adjustment
Estimated Valid
Value % Raw % Reg
102
2695
2430
0
2430
2,430
121
10
31
6
52
2
14
22
3
2
90.2 %
4.5 %
0.4 %
1.2 %
0.2 %
1.9 %
0.1 %
0.5 %
0.0 %
0.0 %
0.8 %
0.1 %
0.1 %
100.0 %
86.9 % 112.0 %
78.3 % 101.0 %
78.3 % 101.0 %
Min Required (95%): 2286.7
Min Required to pass
Based on Sample (110%): 2647.7
PCMR012 - Petition Result Breakdown
Printed: 5/31/2018 9:18:21AM
Page 1 of 1
Petition Abbr: IJobD63 City of Palo Alto Office RID Cap
Petition Name:
JobD83 City of Palo Alto Reduced Office/R&D Development Cap Initiative
Status: In Process
District:
City of Palo Alto
Details
Statistics Summar)
Statistics Detail
Survey Questionions
Value
of Raw
of Req
Pages Processed
102
Total Checked
2655
86.9%
0
Uncorrected Valid
2430 i
78.3%
0
Duplicate Adjustment
0
Estimated Valid
2430
78.3%
0
Minimum Required (95%)
Minimum Required to Pass
Based on Sample (110%)
0
0
Time Mgrrrt
Refresh Statistics
Petition Abbe: IJlobdE3 City of Palo Alto Office RID Cap
Petition Name:
JobdE3 City of Palo Alto Reduced Office/R&D Development Cap Initiative
Status: In Process
District:
City of Palo Alto
Detsiis
Values
Statistics Summary
FS-tatistics
1
Survey Questions
Raw
Sample
NurnofSigs
Num Not Checked:
Calculations
3102 Sigs Found Valid in Sample: 2430
3102 Silts Withdrawn: 0
2695 Dup Sigs Found: 31
407 Other Invalid; 234
Silts Found Not Valid in Sample: 265
Percent Of Valk' W Number Found Valid/Number in Sample 78.3%
Uncorrected Total Valid = Raw Count" Percent of Valid 2430
Duplicate Signature Factor = Raw Count/Sample Size 1
Dup Sig Weight = Dup Sig Factor " (Dup Sig Factor - 1 ) 0
Dup Sig Adjustment = Dup Sig Weight" Number of Dup Sigs 0
Total Valid Based on the Sample
Uncorrected Total Valid - Dup Sig ,djustrnent 2430
Results
Total Valid Based on the Sample
Required Valid
Minimum Required (95%)
Minimum Valid Required to Pass based an Sample (110%)
2430
0
0
0
Tim* M gmt
To the Honorable City Clerk of the City of Palo Alto: We, the undersigned, registered and
qualified voters of the City of Palo Alto, hereby propose an initiative measure to amend the City
of Palo Alto's 2030 Comprehensive Plan and the Municipal Code. We petition you to submit
this measure to the City Council of the City of Palo Alto for adoption of the measure outright, or
for submission of the measure to the voters of the City of Palo Alto at the earliest general or
special election for which it qualifies.
The measure provides as follows:
PALO ALTO REDUCED OFFICE/R&D DEVELOPMENT CAP INITIATIVE
The people of the City of Palo Alto do ordain as follows:
SECTION 1: PURPOSE, EFFECT, AND FINDINGS
A. Purpose: The purpose of the Palo Alto Reduced Office/R&D Development Cap Initiative
("Initiative") is to return office/R&D growth throughout the City to its long-term
historical trend, by (1) reducing the current cap on new office and R&D (research and
development) development by fifty percent, with specified exemptions, and (2) requiring
voter approval to increase the Initiative's cap or to add further exemptions to the cap.
The Initiative is essential to preserve livability, an innovative economy, and the quality of
life in the City of Palo Alto.
B. Effect: This Initiative amends the City of Palo Alto Comprehensive Plan 2030 (the
"2030 Comprehensive Plan") to reduce the citywide cap of 1.7 million new square feet of
office/R&D development by fifty percent to 850,000 square feet. Medical office uses in
the Stanford University Medical Center vicinity, and other medical, governmental, and
institutional uses, continue to be exempted from the cap; no other exemptions are
allowed. The cap does not apply to new housing in the City.
This Initiative also amends the Palo Alto Municipal Code to include the same
requirement of an 850,000 square -foot cap.
The Charter of the City of Palo Alto provides that any ordinance adopted by the electors
cannot be repealed or amended, except by a vote of the people, unless the ordinance
provides otherwise. Consistent with the City Charter, this Initiative specifies that (1)
through December 31, 2030, voter approval is required to increase the Initiative's cap or
to add further exemptions to the cap, but (2) the City Council may reduce the Initiative's
cap without a vote of the people.
C. Findings: The people of the City of Palo Alto find that this Initiative promotes and
protects the health, safety, welfare, and quality of life of City residents, based on the
following specific findings:
Page 1 of 8
hZ:0IWV OZWV91
1. Palo Alto's Current Cap on New Office/R&D Development Is Excessive:
From 1989 to 2014, Palo Alto added approximately 1.5 million square feet of
non-residential development, as monitored by the City. The recently adopted
2030 Comprehensive Plan, which is the primary tool to guide future development
in the City, would allow an additional 1.7 million square feet of office/R&D
development. This Initiative reduces that amount by setting a new cumulative cap
on new office/R&D development that could occur in the City. The Initiative's
cumulative cap of 850,000 new square feet is in line with the average annual
square feet of non-residential development that has occurred since the City's
monitoring began. Importantly, the Initiative does not prevent the City from
adopting or enforcing annual caps on new office/R&D development provided
that the cumulative total cap is not exceeded.
2. Palo Alto Cannot Tolerate More Traffic: According to the City's own study,
there are already about three jobs in the City for every employed resident. As a
result, the City has one of the highest commuter ratios in the nation for cities with
populations of more than fifty thousand. Excessive new office!R&D development
in Palo Alto —as the recently adopted 2030 Comprehensive Plan allows will
lead to even more jobs, and thus exacerbate traffic congestion and parking
shortages in the City. Two-thirds of City residents cite these issues as major
concerns.
3. Housing Prices Are Already Too High: Lack of affordable housing is another
major concem for City residents. And one of the primary causes of rising home
prices is rapid business expansion with the associated escalation of land prices.
Palo Alto cannot stand to have its affordable housing crisis deepened by the rapid
growth in office/R&D development and jobs that could occur under the recently
adopted 2030 Comprehensive Plan.
4. Economic Prosperity Could Be Threatened by Excessive Growth. One
marker of Palo Alto's success as a center of Silicon Valley's innovation economy
has been the extraordinary mobility of its professional workers. The 2030
Comprehensive Plan recognizes that "employers, businesses and neighborhoods
share many values and concems, including traffic and parking issues and
preserving Palo Alto's livability." Placing a moderate cumulative limit on
office R&D growth will support the City's unique mobility of local businesses
and workers, while at the same time allowing a reasonable amount of growth over
the period of the 2030 Comprehensive Plan.
SECTION 2: CITY OF PALO ALTO 2030 COMPREHENSIVE PLAN AMENDMENTS
This Initiative hereby amends the Land Use and Community Design Element of the 2030
Comprehensive Plan, as amended through April 20, 2018 ("Submittal Date"). Text to be
inserted in the 2030 Comprehensive Plan is indicated in bold type, and text to be deleted is
indicated in strikctlreugh type. Non -bolded text currently appears in the 2030 Comprehensive
Plan. Except as expressly provided below, the language adopted and readopted in the following
amendments may be repealed or amended (as by, for example, increasing the cap or by adding
Page 2 of 8
additional exemptions) only by a vote of the people through December 31, 2030.
A. Policy L-1.10 on page 37, under the heading "GROWTH MANAGEMENT AND
MONITORING," is hereby readopted with the following changes:
Cap new square feet of office/R&D development
citywide at 850,000 square feet, exempting medical office uses in the Stanford
University Medical Center (SUMC) vicinity. Use January 1, 2015 as the baseline and
monitor development towards the cap on an annual basis.
Continue to exempt medical,
governmental and institutional uses from the cap on office:'R&D development; no other
exemptions are allowed.
Through December 31, 2030, this Policy L-1.10 may not be amended or repealed
except by a vote of the people, provided, however, that the Palo Alto City Council
may reduce the citywide cap of 850,000 new square feet of office/R&D development
without a vote of the people.
B. Program L1.10.1 on page 37, following Policy L-1.10, is deleted in its entirety as follows:
titld . e Jana.... 2015 h 67 p t „f�he allowed e f otage e e� e ce3 en , -O
1 1 39 000 e f et Concurrent y con. der removal o etential changes. to the eap
SECTION 3: 2030 COMPREHENSIVE PLAN CONFORMING AMENDMENTS
In light of the 2030 Comprehensive Plan amendments set forth above in Section 2 of this
Initiative, the 2030 Comprehensive Plan is hereby further amended as set forth below in order to
promote internal consistency among the various provisions of the 2030 Comprehensive Plan.
Text to be inserted in the 2030 Comprehensive Plan is indicated in bold type, and text to be
deleted is indicated in strikethreugh type. Non -bolded text currently appears in the 2030
Comprehensive Plan and is not changed or readopted by this Initiative. The language adopted in
the following amendments may be further amended as appropriate without a vote of the people,
during the course of further updates and revisions to the 2030 Comprehensive Plan, provided that
such amendments do not conflict with Policy L-1.10.
A. The text on page 20, under the heading "GROWTH MANAGEMENT," is amended as
follows:
The pace of non-residential growth and development in Palo Alto has been moderated by
a citywide cap on non-residential development first adopted by the City Council in 1989.
, This Plan
presents an updated cumulative growth management and monitoring system, as
approved by the voters in the Palo Alto Reduced Office/R&D Development Cap
Page 3 of 8
Initiative. This system moderates the overall amount of new office/R&D development
to enhance Palo Alto's livability.
This updated approach uses 2015 as the baseline from which to monitor new
development and establishes a cumulative, citywide cap on officeR&D uses, including
conversions of existing square footage to office/R&D space.
B. Program B1.1.1 on page 196 is amended as follows:
Implement and periodically amend an Economic Development Policy to guide business
development in the City in a manner consistent with Policy L-1.10.
C. Program B7.2.1 on page 200 is amended as follows:
Review policies and regulations guiding development at Stanford Research Park and
revise them as needed to allow improved responsiveness to changing market conditions
in a manner consistent with Policy L-1.10.
D. The following rows of the Implementation Table on pages 214, 266, and 268 are
amended as follows:
Program #
Program Text
Lead
Department
or Agency
Priority
(SINI'L/IP/R)°
Anticipated
Level of
Effort
($'$$/$$$)
L1.10.1
..he .he ..t e f e
.. ....::vim== �.r
entitled-si b, 2015
rea hes 67Y" reen t oft ll d
.+.i..wa v a......bv, va 7 r �vvv
squam-feet,-C-oneuffently-eensidef
by the City', d
Planning &
C�
f vironment
Depai4nient
M
S
B.1.1
Implement and periodically amend
an Economic Development Policy
to guide business development in
the City in a manner consistent
with Policy L-1.10.
Office of
Economic
Development
R
$
Page 4 of 8
B7.2.1
Review policies and regulations
guiding development at Stanford
Planning &
Community
M
$$
Research Park and revise them as
needed to allow improved
responsiveness to changing market
conditions in a manner consistent
with Policy L-1.10.
Environment
Department
SECTION 4: PALO ALTO MUNICIPAL CODE AMENDMENTS
This Initiative hereby amends the Palo Alto Municipal Code ("Municipal Code"). Text to be
inserted in the Municipal Code is indicated in bold type. Except as expressly provided below,
the language adopted in the following amendments may be repealed or amended only by a vote
of the people through December 31, 2030.
A. A new Section 18.40.200 (Growth Management) is added to Chapter 18.40 (General
Standards) of Title 18 (Zoning) of the Municipal Code to read as follows:
18.40.200 Growth Management
This section 18.40.200 adopts the citywide cap on office/R&D development that
appears in Policy L-1.10 of the City of Palo Alto Comprehensive Plan 2030 pursuant
to the Palo Alto Reduced Office/R&D Development Cap Initiative:
Cap new square feet of office/R&D development citywide at 850,000 square
feet, exempting medical office uses in the Stanford University Medical Center
(SUFIC) vicinity. Use January 1, 2015 as the baseline and monitor
development towards the cap on an annual basis. Continue to exempt
medical, governmental and institutional uses from the cap on office/R&D
development; no other exemptions are allowed.
Notwithstanding anything in this Municipal Code or any other City ordinance or
resolution to the contrary, the City shall not approve any non-exempt office/R&D
development that would exceed this cap, or add further exemptions to the cap,
except to the extent permitted by the Palo Alto Reduced Office/R&D Development
Cap Initiative.
Through December 31, 2030, this Section 18.40.200 may not be amended or repealed
except by a vote of the people, provided, however, that the Palo Alto City Council
may reduce the citywide cap of 850,000 new square feet of office/R&D development
without a vote of the people.
SECTION 5: EXEMPTIONS FOR CERTAIN PROJECTS
A. This Initiative shall not apply to or prohibit any development project or ongoing activity
that has obtained, as of the Effective Date of this Initiative, a vested right pursuant to
State law.
Page 5 of 8
B. The provisions of this Initiative shall not apply to the extent, but only to the extent, that
they would violate the Constitution or laws of the United States or the State of California.
C. The City Council is authorized to grant exceptions to the voter approval requirements in
Policy L-1.10 where necessary to comply with state or federal law governing the
provision of housing, including but not limited to affordable housing requirements. This
exception applies only if the City Council first makes each of the following findings
based on substantial evidence in the record with respect to a proposed mixed -use housing
project including office/R&D uses that are subject to the cap set by this Palo Alto
Reduced Office/R&D Development Cap Initiative: (1) a specific provision of state or
federal law requires the City to accommodate the housing that will be permitted by the
exception; (2) the exception permits no more office/R&D development than that
necessary to comply with the specific provision of state or federal law; and (3) it is not
feasible for the City to require modifications to the office/R&D component of the
proposed project in a way that would allow the City to satisfy the specific state or federal
law without exceeding the cap set by this Palo Alto Reduced Office 'R&D Development
Cap Initiative.
SECTION 6: IMPLEMENTATION
A. Effective Date: "Effective Date" means the date that the Palo Alto Reduced Office/R&D
Development Cap Initiative became effective. Upon the Effective Date of this Initiative,
the provisions of Section 4 are hereby inserted in the City of Palo Alto Municipal Code as
an amendment thereof, and the provisions of Sections 2 and 3 are hereby inserted in the
City of Palo Alto Comprehensive Plan 2030, as an amendment thereof; except that if
state or local law limits the number of Comprehensive Plan amendments in any given
year and those amendments have already been utilized in the year in which the Initiative
becomes effective, this 2030 Comprehensive Plan amendment shall be the first
amendment inserted in the City of Palo Alto Comprehensive Plan 2030 on January 1 of
the following year. Upon the Effective Date of this Initiative, any provisions of the City
of Palo Alto Zoning Code or any other City of Palo Alto ordinance or resolution that are
inconsistent with the 2030 Comprehensive Plan and Municipal Code amendments
adopted by this Initiative shall not be enforced in a manner inconsistent with this
Initiative.
B. Interim Amendments: The City of Palo Alto Comprehensive Plan 2030 in effect on the
Submittal Date and the 2030 Comprehensive Plan as amended by this Initiative comprise
an integrated, internally consistent, and compatible statement of policies for the City of
Palo Alto. To ensure that nothing in this Initiative would prevent the 2030
Comprehensive Plan from being an integrated, internally consistent, and compatible
statement of the policies of the City, and to ensure that the actions of the voters in
enacting this Initiative are given effect, any amendment to the 2030 Comprehensive Plan
that is adopted between the Submittal Date and the date that the 2030 Comprehensive
Plan is amended by this Initiative shall, to the extent that such interim -enacted provision
is inconsistent with the 2030 Comprehensive Plan provisions readopted and amended by
this Initiative, be amended as soon as possible to ensure consistency between the
Page 6 of 8
provisions readopted and amended by this Initiative and other provisions of the 2030
Comprehensive Plan. Likewise, any amendment to the Palo Alto Municipal Code that is
adopted between the Submittal Date and the date that the Municipal Code is amended by
this Initiative shall, to the extent that such interim -enacted provision is inconsistent with
the Municipal Code provision adopted by this Initiative, be amended as soon as possible
to ensure consistency between the provisions adopted by this Initiative and other
provisions of the Municipal Code.
C. Other City Plan, Ordinances, and Policies: The City of Palo Alto is hereby authorized
and directed to amend the City of Palo Alto Comprehensive Plan 2030, all area plans,
specific plans, the City of Palo Alto Zoning Code, Land Use Map, and Zoning Map, and
other ordinances and policies affected by this Initiative as soon as possible as necessary
to ensure consistency between the provisions adopted in this Initiative and other sections
of the 2030 Comprehensive Plan, all area plans, specific plans, the Zoning Code, the
Zoning Map, and other City ordinances and policies.
D. Reorganization: The 2030 Comprehensive Plan and the Municipal Code may be
reorganized or readopted in different format, and individual provisions may be
renumbered or reordered, in the course of ongoing updates of the 2030 Comprehensive
Plan and the Municipal Code, provided that the provisions of Section 2 of this Initiative
shall remain in the 2030 Comprehensive Plan and the provisions of Section 4 of this
Initiative shall remain in the Municipal Code, unless earlier repealed or amended by the
voters of the City.
E. Implementing Ordinances: The City Council is authorized, after a duly noticed public
hearing, to adopt implementing ordinances, guidelines, rules, and/or regulations, as
necessary, to further the purposes of this Initiative.
F. Enforcement and Defense of Initiative: The City Council shall take all steps reasonably
necessary to enforce this Initiative and to defend it against any challenge to its validity.
SECTION 7: EFFECT OF COMPETING OR ALTERNATIVE MEASURE ON THE
SAME BALLOT
This Initiative sets a citywide cap of 850,000 new square feet of office/R&D development using
January 1, 2015 as the baseline, with specified exemptions, and requires voter approval to
increase or repeal the cap or add further exemptions to the cap through December 31, 2030. By
voting for this Initiative, the voters expressly declare their intent that any other measure that
appears on the same ballot as this Initiative and addresses a citywide cap on office/R&D
development, shall be deemed to conflict with this Initiative. Because of this conflict, if this
Initiative and any such other City of Palo Alto measure receive a majority of votes by the voters
voting thereon at the same election, then, to the extent allowed by state law and any legally valid
provisions of the City's City Charter, the measure receiving the most votes in favor shall prevail
and no provision of the other measure shall take effect. For the purposes of this Section 7, any
other voter -sponsored measure that appears on the same ballot as this Initiative and purports to
amend any provision of this Initiative shall be deemed to directly conflict with this entire
Initiative.
Page 7 of 8
SECTION 8: SEVERABILITY AND INTERPRETATION
This Initiative shall be broadly construed in order to achieve its purpose.
This Initiative shall be interpreted so as to be consistent with all applicable Federal, State, and
City laws, rules, and regulations. If any section, subsection, paragraph, subparagraph, sentence,
clause, phrase, part, or portion of this Initiative is held to be invalid or unconstitutional by a final
judgment of a court of competent jurisdiction, such decision shall not affect the validity of the
remaining portions of this Initiative. The voters hereby declare that this Initiative and each
section, subsection, paragraph, subparagraph, sentence, clause, phrase, part, or portion thereof
would have been adopted or passed even if one or more sections, subsections, paragraphs,
subparagraphs, sentences, clauses, phrases, parts, or portions were declared invalid or
unconstitutional. If any provision of this Initiative is held invalid as applied to any person or
circumstance, such invalidity shall not affect any application of this Initiative that can be given
effect without the invalid application.
Any singular term shall include the plural and any plural term shall include the singular. The
title and captions of the various sections in this Initiative are for convenience and organization
only, and are not intended to be referred to in construing the provisions of this Initiative.
SECTION 9: AMENDMENT OR REPEAL
Except as otherwise provided herein, this Initiative may be amended or repealed only by the
voters of the City of Palo Alto.
Page 8 of 8
Office and Research and Development Floor Area From 2001 - 2017
CALENDAR YEAR
CalAve
Downtown
El Camino Real
SRP
Other Areas
TOTAL/YEAR
2001
2,980
42,720
22,600
115,000
-
183,300
2002
1,510
8,998
-
32,433
1,191
44,132
2003
-
-
-
511
492
1,003
2004
-
-
-
3,687
-
3,687
2005
28,180
56,760
6,185
100,000
(106,897)
84,228
2006
6,996
30,119
-
5,700
(391,852)
(349,037)
2007
3,240
-
-
-
(15,442)
(12,202)
2008
-
10,535
-
-
(66,000)
(55,465)
2009
1,754
30,372
-
-
-
32,126
2010
60,273
-
33,979
-
-
94,252
2011
-
15,286
-
61,745
5,690
82,721
2012
23,127
48,356
-
138,998
(162)
210,319
2013
18,871
72,347
-
11,571
(40,565)
62,224
2014
32,576
14,908
-
(322,860)
-
(275,376)
2015
29,672
(9,720)
-
47,141
-
67,093
2016
37,931
517
2,932
-
-
41,380
2017
-
12,889
(150)
12,613
-
25,352
TOTAL/AREA
247,110
334,087
65,546
206,539
(613,545)
239,737
CITY OF
PALO
ALTO
City of Palo Alto (ID # 9342)
City Council Staff Report
Report Type: Action Items
Meeting Date: 6/11/2018
Summary Title: Health Care Costs Initiative Measure
Title: Accept the City Clerk's Report Certifying the Sufficiency of an Initiative
Petition to Limit Health Care Costs that Hospitals and Medical Clinics May
Charge; and Adopt a Resolution Placing the Initiative Petition on the
November 2018 Ballot, or Adopt the Petition as an Ordinance Without
Alteration, or Provide Other Direction to Staff
From: City Manager
Lead Department: City Clerk
Recommendation
Staff recommends that Council:
1. Accept the City Clerk's Certificate of Sufficiency (Attachment A) of the Initiative
Petition to Impose Limits on Costs that Hospitals and Clinics May Charge in Palo
Alto ("Initiative Measure") (Attachment B); and
2. Approve an ordinance (on first reading) amending Title 5 of the Palo Alto
Municipal Code to establish regulations related to health care costs, as proposed
by the Initiative Measure, and direct staff to place the ordinance on a future
Council agenda for final adoption (second reading) by August 10, 2018; or
3. Direct staff to return at a later meeting with a resolution calling for an election to
submit the Initiative Measure to the voters at the next General Municipal Election
to be held on November 6, 2018; or
4. Provide other direction to Staff with respect to the Initiative Measure.
Background
Around the beginning of this year, nearly identical initiative measures were submitted in
five Bay Area cities — Palo Alto, Redwood City, Pleasanton, Livermore and Emeryville —
where Stanford Hospital and affiliated clinics are located. The initiative measures are
City of Palo Alto Page 1
spearheaded by the Service Employees International Union ("SEIU"), and seek to cap
the amount that hospitals and medical clinics (not limited to Stanford) in the city may
charge payers of patient services (e.g., patients, insurers, and other private entities).
In Palo Alto, as provided for in the City Charter, the initiative sponsors published a
notice of intent to circulate the initiative petition in a newspaper of general circulation,
and submitted the notice of intent and the text of the proposed ordinance to the City
Clerk on January 9, 2018. These are the only procedural requirements prior to
circulating the petition for signatures under the City Charter. (Charter, Art. VI, Sec. 2.)
On May 22, 2018, the initiative sponsors submitted the petition with signatures to the
City Clerk. On June 3, 2018, the Santa Clara County Registrar of Voters completed
examination and verification of the signatures and determined that sufficient signatures
were submitted to qualify the initiative for the ballot.
Once an initiative measure is determined to qualify through the City's Clerk's issuance
of a Certificate of Sufficiency, the Council has two options under the City Charter —
either adopt the measure as written, without change, or place the measure on the
ballot for the next general municipal election (that is no sooner than 88 days from the
date of the Clerk's Certificate of Sufficiency). Because the Clerk's Certificate of
Sufficiency is dated June 7, 2018, the next general municipal election more than 88
days from the date of certification is the election on November 6, 2018. The last day to
place a matter on the ballot is August 10, 2018. The Council may request further
information related to the initiative's impacts, including fiscal impacts, but there would
be no extension of time to determine whether to adopt or place the measure on the
November 2018 ballot.
Initiative Measure
• Pricing Limits: The Initiative Measure would cap the amount that hospitals and
medical clinics in Palo Alto can charge private payers, including individual patients,
insurers, and other entities. The amount (referred to as the "acceptable payment
amount") would be capped at 115 percent of the sum of the "reasonable cost of
direct patient care for a particular patient" and the "pro rata health care quality
improvement cost". These terms are defined in the Initiative Measure. The
"reasonable cost of direct patient care" would include estimated salaries and
benefits of identified personnel categories, excluding managerial and administrative
positions. "Health care quality improvement costs" would be limited to those costs
paid by a hospital or clinic to "maintain, access or exchange electronic health
information; support health information technologies; train non -managerial
personnel engaged in direct patient care; and provide patient -centered education
and counseling." Health care providers could petition the City to include other costs
as allowable recoverable costs by demonstrating that the cost was spent on patient
services and activities "designed to improve health quality and increase the
City of Palo Alto Page 2
likelihood of desired health outcomes in ways that are capable of being objectively
measured and producing verifiable results and achievements."
• Annual Rebates: The Initiative Measure would require each hospital and medical
clinic to calculate for each patient the "reasonable cost of direct patient care for a
particular patient" and the "pro rata health care quality improvement cost" no later
than 150 days from the end of each fiscal year for the prior fiscal year, and if the
amount actually billed or paid for the patient's services exceeds the "acceptable
payment amount", reduce the billing or issue a rebate with interest, no later than
180 days from the end of the fiscal year. Failure to meet this timeframe would
result in fines.
• City Responsibility to Implement, Administer and Enforce: The Initiative
Measure would require the City's Administrative Services Department ("ASD") to
implement, administer and enforce the regulatory program, and require the City to
appropriate sufficient funds for ASD to execute these responsibilities. These new
responsibilities include the following:
- Fines. ASD would need to issue notices of violation and receive payment of
fines.
Recordkeeping. ASD would need to receive and maintain records from
hospitals and medical clinics (a) identifying the reasonable cost of direct
patient care for each patient each fiscal year, and (b) describing each
instance a required rebate or reduction was not timely issued. Records would
be submitted at least annually. ASD would be required to annually publish
information on rebates, reductions and fines.
Petitions to include additional "health care quality improvement
costs" As described above, ASD would evaluate and make determinations
on petitions by hospitals and clinics to include a cost not specified in the
Initiative Measure as an eligible "health care quality improvement cost". The
hospital or clinic would need to demonstrate to ASD's satisfaction, that the
cost was actually paid and spent on certain activities to improve health
quality and outcomes.
Impacts on Palo Alto
City of Palo Alto Page 3
The Initiative Measure would impose limits on the amount that hospitals and medical
clinics in Palo Alto could charge, and require the City of Palo Alto to assume and fund a
number of new responsibilities related to health care pricing regulation.
At this time, the City does not have expertise or experience in the regulation of health
care costs or health care generally. If the measure were to pass and become effective,
the City would need to establish and identify funding for an administrative structure to
implement and enforce the new law. The City does not currently have on staff
personnel who would be able to implement this program. The Administrative Services
Department that the Initiative Measure tasks with implementation, administration and
enforcement currently performs functions related to the budget, investments,
purchasing and contract administration, real estate and property management,
warehouse, print shop and revenue collections. Because this type of program has not
been adopted at the local level, it is unclear how much it would cost and the feasibility
of implementation by the effective date of the ordinance. The City has been reducing
staffing levels since 2010 and currently has 33 full time equivalent (FTE) positions fewer
than before the great recession in FY 2009 (nearly 65 less in the General Fund). In
addition, the Finance Committee recommended to the City Council that it direct staff to
reduce the General Fund Operating Budget by an additional $4 million dollars by the
end of this calendar year; this will most likely lead to further reductions in staff.
Beyond the fiscal impacts to the City organization, which costs would ultimately be
borne by City taxpayers, there could well be impacts associated with the potential loss
of health care providers that may relocate out of Palo Alto due to the unique
requirements and limitations that would not apply in adjoining cities like Menlo Park and
Mountain View. Staff is not at this time able to fully account for and analyze the
potential for this kind of exodus. In the letter from Stanford Health Care, attached to
this report as Attachment C, they state that based on preliminary estimates the
implementation of the initiative would result in a 20-24% reduction in revenue, which is
much greater than its margin. To the extent that this type of result would apply to
other providers, and the uncertainty inherent in navigating this new system, it is
possible, if not likely, that a fair number of providers would elect to relocate their
practices. The City has not performed an economic impact study, but direct and
indirect revenue impacts are very likely if these providers were to relocate. The type of
revenues potentially impacted would be unsecured property tax, sales and use tax and
transient occupancy tax (hotel tax).
The medical sector, along with the high technology sector, is a significant part of Palo
Alto's vibrant economy. Stanford University Medical Center (SUMC), which includes the
Stanford University School of Medicine, the Stanford University Clinic, Stanford
University Hospital and Lucile Salter Packard Children's Hospital, currently employs
approximately 10,000 people and is one of the largest concentrations of health care
services in the Bay Area. SUMC is one of three Business Employment Districts identified
in the Comprehensive Plan's Land Use and Community Design Element (the others are
Stanford Research Park and East Bayshore and San Antonio Road/Bayshore Corridor).
City of Palo Alto Page 4
As described in the Comprehensive Plan, "These districts provide thousands of local
jobs, establish a customer base for many other Palo Alto businesses and generate tax
revenues for the city. Because each plays a central role in maintaining the fiscal health
of the City, it is important to support their long-term viability and ability to respond to
changing global economic conditions." (Comprehensive Plan 2030, p. 194.)
If the Initiative Measure passes and becomes effective, there would likely be a number
of direct impacts on Palo Alto residents, which staff cannot fully quantify at this time.
Residents who use affected medical providers could experience a decrease in their
health care costs. If these service providers left Palo Alto, however, those cost
reductions would not occur andcity residents would need to travel further to obtain
medical services.
Status of Initiative in Other Cities
As of the date of this report, the initiative measure has only qualified for the ballot in
Palo Alto. City staff understands that the initiative petition and signatures were
submitted to the City of Livermore last week and are in the process of being evaluated
to determine if the initiative has qualified, and signature gathering efforts are underway
in Redwood City.
The City of Emeryville filed a pre -election challenge to the initiative there based on the
alleged invalidity of the initiative on preemption and due process grounds. In that
litigation, Emeryville also filed a motion for a temporary stay seeking a declaration from
the court that its City Attorney is not required to prepare a ballot title and summary
prior to signature gathering (a ministerial duty under the general state law that does
not apply in Palo Alto) pending a court determination on the legality of the initiative.
The hearing on the City of Emeryville's motion for a stay is scheduled for June 21, 2018
in the Alameda County Superior Court.
In contrast to Emeryville and the other affected cities, Palo Alto's initiative process is
guided by its Charter, not the California Elections Code. The Elections Code requires
the City Attorney to provide a ballot title and summary prior to the circulation of the
petition for signatures. The Palo Alto Charter does not include this process. As noted
above, after submittal of the notice of intent to circulate an initiative petition, Palo Alto
initiative sponsors may begin gathering signatures, which they have done.
Legal Concerns
The Initiative Measure raises significant issues as to its legal validity based on federal
and state law preemption. Health care pricing and reimbursement are complex areas of
regulation that are addressed by several federal and state laws. Cities cannot regulate
by local ordinance in those areas that the state has fully occupied either expressly or
impliedly, or where the local ordinance would conflict with state law.
City of Palo Alto Page 5
These legal concerns are described in greater detail in the Stanford Health Care and
Stanford University letters dated June 1, 2018 (Attachment C) and June 6, 2018
(Attachment D), which reflect the arguments also presented in the legal briefs filed by
the City of Emeryville and Amici Curiae in the pending litigation in Alameda County on
the similar Emeryville initiative measure. In addition to preemption, those documents
also raise legal concerns about the initiatives' violating due process as unconstitutionally
vague and by preventing providers from realizing a fair and just return on their
investment.
The legality of an initiative measure can be challenged at multiple points in the process,
both pre -election and post -election if the measure passes.
Conclusion
Sponsors of the Initiative Measure have obtained sufficient voter signatures to qualify
the measure for placement on the ballot at the next general municipal election on
November 6, 2018. The Council's choices are to adopt the measure or to place it on
the ballot, which it must do by August 10, 2018.
Stanford Health Center has stated its intent to file a pre -election challenge to the Palo
Alto measure. Stanford, together with other hospitals, has already filed an amici curiae
brief in the Emeryville litigation in support of that City.
Environmental Review
The potential actions in response to a voter -sponsored initiative are not a project under
the California Environmental Quality Act (CEQA).
Attachments:
• Attachment A: Healthcare Cert
• Health Care Initiative
• Attachment C - Letter to Molly Stump from Sarah DiBoise re Palo Alto Accountable and
Affordable Health Care Initiative - 06-01-2018
• Attachment D - Letter to Molly Stump re Legal Challenge - 06-06-2018
City of Palo Alto Page 6
County of Santa Clara
Registrar of voters
1555 Berger Drive, Bldg. 2
San Jose. CA 95112
Mailing Address: P.O. Box 611360. San Jose. CA 95161-1360
(408) 299 -VOTE (8683) 866 -430 -VOTE. (8683) FAX: (408) 998-7314
www.sccvote.org
June 3, 2018
Ms. Beth Minor, City Clerk
City of Palo Alto
250 Hamilton Ave.
Palo Alto, CA 94301
RE: Limit Overpricing Healthcare
Dear City Clerk Minor:
The petition submitted to our office on May 23, 2018 contained a raw count -e3,541 signatures.
Pursuant to your request and based on six percentum of the number of regsiered voters at the
last general municipal election for the City of Palo Alto, the petition needs petition needs 2,407
valid signatures to pass.
Your jurisdiction requested that the Registrar of Voters' Office conduct a full count of signature
verification in an attempt to reach 2,407 valid signatures.The Registrar of Voters' Office verified
the necessary number of signatures filed in accordance with Elections Code Section 9115.
The signature verification resulted in the verification of 2,825 signatures of the 3,541 signatures
submitted, with 2,430 signatures found valid.
Please contact us to make arrangemensts to pickup your petition. If you have any questions
concerning this matter, please feel free to contact our office at (408) 282-3009.
Sincerely,
,Julia Saenz, Elections Process Supervisor 11
Voter Registration Division
County of Santa Clara
Attachments: Clerk's Certificate to Initiative Petition
Petition Result Breakdown Report
Statistics Summary Report
Statistics Detail Report
Board of Supervisors: Mike Wasserman. George Shirakawa. Dave Cortese, Ken Yeager. Liz Kniss
County Executive: Jeffrey V. Smith
8
Santa Clara County
Registrar of Voters
CLERK'S CERTIFICATE TO INITIATIVE PETITION
I, SHANNON BUSHEY, Registrar of Voters of the County of Santa Clara, State of
California, hereby certify:
That the "City of Palo Alto Accountable and Affordable Health Care" Initiative
measure has been filed with this office on May 23, 2018.
That said petition consists of 534 sections;
That each section contains signatures purporting to be the signatures of qualified
electors of this county;
That attached to this petition at the time it was filed was an affidavit purporting to be the
affidavit of the person who solicited the signatures, and containing the dates between
which the purported qualified electors signed this petition;
That the affiant stated his or her own qualification, that he or she had solicited the
signatures upon that section, that all of the signatures were made in his or her
presence, and that to the best of his or her knowledge and belief each signature to that
section was the genuine signature of the person whose name it purports to be;
That after the proponent filed this petition I verified the required number of signatures by
examining the records of registration in this county, current and in effect at the
respective purportive dates of such of signing, to determine what number of qualified
electors signed the petition, and from that examination I have determined the following
facts regarding this petition:
1. Number of unverified signatures filed by proponent 3,541
2. Number of signatures verified 2,825
a. Number of signatures found SUFFICIENT 2,430
b. Number of signatures found NOT SUFFICIENT 395
1. NOT SUFFICIENT because DUPLICATE 32
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal this 3rd day of June, 2018.
Shannon Bushey
Registrar of
By:
Deputy
JOBD84
Petition Result Breakdown
JobD84 City of Palo Alto Health Care
JobD84 City of Palo Alto Accountable and Affordable Health Care Initiative
Signatures Required 2407
Raw Count 3,541
Sample Size 3,541 Percent of Sigs Percent of
Checked Sample Size
Sigs Checked 2,825
Sigs Not Checked 716 20.2 %
Sigs Valid 2,430 86.0 % 68.6 %
Sigs Invalid 395 14.0 % 11.2 %
Duplicated 32 1.0 % 0.9 %
Non -duplicate Invalids 363 13.0 % 10.3 %
RESULT ABBR RESULT DESCRIPTION
Approved Approved 2,430 86.0 %
NotReg Not Registered 216 7.6 %
OutOfDist Out of District 20 0.7 %
Duplicate Signed more than once 32 1.1 %
RegLate Registered Late 14 0.5 %
RegDiffAdd Registered at a Different Address 70 2.5 %
NoResAdd No Residence Address Given 2 0.1 %
NoSig No Signature 1 0.0 %
PrintedSig Printed Signature 2 0.1 %
SigNoMatch Signatures Don't Match 38 1.3 %
IiFATISTICS;SUMMARY
Pages Processed
Total Checked
Uncorrected Valid
Duplicate Adjustment
Estimated Valid
Value % Raw % Reg
534 100.0 %
2825 79.8 % 117.4 %
2430 68.6 % 100.9 % Min Required (95%): 2286.7
0 Min Required to pass
2430 68.6 % 100.9 % Based on Sample (110%): 2647.7
Printed: 5/31/2018 11:00:50AM
Page 1 of 1
Petition Abbr:
Petition N arrie:
Status:
D istrict:
JobDB1 City of Palo Alto Health Care
JobDB1 City of Palo Alto Accountable and Affordable Health Care Initiative
[In Process
City of Palo Alto
Deta ils
Values
Statistics Su mmary
Statistics Detail
Survey Questions
Raw
Sample
Num ofSigs
Num Not Checked:
Calculations
3541 Silts Found Valid in Sample: 2430
3541 Silts Withdrawn: 0
2825 Dup Silts Found: 32
716 Other Invalid: 363
Silts Found NotValid in Sample: 395
Percent Of Valid = Number Found Valid/Number in Sample
Uncorrected Total Valid = Raw Count* Percent ofValid
Duplicate Signature Factor = Raw CauntiSampie Size
Dup Sig Weight = Dup Sig Factor * (Dup Sig Factor - 1
Dup Sig Adjustment = Dup Sig ; Weight * Number of Dup Sig n
Total Valid Based on the Sample =
Uncorrected Total Valid - Dup Sig Adjustment
Results
68.6%
2430
1
0
0
24;30
Total Valid Based on the Sample
Required Valid
Minimum Required (95%)
Minimum Valid Required to Pass based on Sample (110%)
2429
2407
2286.135
26477
Time M g rrrt
Petition Abbr: IJobD City of Palo Alto Health Care
Petition Name::
Status:
[J i trict:
Details
JobD8i City of Palo Alto Accountable andAfordable Health Care Initiative
In Process
City of Palo Alto
Statistics. Su rnmarr
Statistics Detail
Survey Qu tic ns
Ti fM qmt
Value
Z of Raw
Z of Req
Pages Processed
534
166.6%
Total Checked
2825
79_8%
117.4
Uncorrected Valid
2430
66.6%
166.9
Duplicate Adjustment
0
Estimated Valid
2466
66.6%
loom
Minimum Required (95Z)
Minimum Required to Pass
Based on Sample (110Z)
2286.65
2847.7
Refresh Statistics
County of Santa Clara
Registrar of Voters
1555 Berger Drive. Bldg. 2
San Jose. CA 95112
Mailing Address: P.O. Box 611360, San Jose, CA 95161-1360
(408) 299 -VOTE (8683) 866 -430 -VOTE (8683) FAX: (408) 998-7314
www.sccvote.org
June 3, 2018
Ms. Beth Minor, City Clerk
City of Palo Alto
250 Hamilton Ave.
Palo Alto, CA 94301
RE: Limit Overpricing Healthcare
Dear City Clerk Minor,
The petition submitted to our office on May 23, 2018 contained a raw count of 3.541 signatures.
Pursuant to your request and based on six percentum of the number of regsiered voters at the
last general municipal election for the City of Palo Alta, the petition needs petition needs 2,407
valid signatures to pass.
Your jurisdiction requested that the Registrar of Voters' Office conduct a full count of signature
verification in an attempt to reach 2,407 valid signatures. The Registrar of Voters' Office verified
the necessary number of signatures filed in accordance with Elections Code Section 9115.
The signature verification resulted in the verification of 2,825 signatures of the 3,541 signatures
submitted, with 2,430 signatures found valid.
Please contact us to make arrangemensts to pickup your petition. If you have any questions
concerning this matter, please feel free to contact our office at (408) 282-3009.
Sincerely,
Julia Saenz, Elections Process Supervisor II
Voter Registration Division
County of Santa Clara
Attachments: Clerk's Certificate to Initiative Petition
Petition Result Breakdown Report
Statistics Summary Report
Statistics Detail Report
Board of Supervisors: Mike Wasserman, George Shirakawa, Dave Cortese, Ken Yeager, Liz Kniss
County Executive: Jeffrey V. Smith
AFFIDAVIT OF PUBLICATION
IN THE
DAILY POST
385 Forest Avenue, Palo Alto, California 94301
(650)328-7700
IN THE
SUPERIOR COURT
OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SANTA CLARA
No. AD #66677
Notice of Intent to Circulate Petition
STATE OF CALIFORNIA
SS
COUNTY OF SANTA CLARA
I, the undersigned, state that I am, and at all times herein mentioned was, a
citizen of the United States of America, over the age of eighteen years, and not a
party to or interested in the above entitled matter, that I was at and during all said
times and still am the principle clerk of the publisher of the Daily Post in said
County of Santa Clara, State of California; that said is and was at all times herein
mentioned a newspaper of general circulation as that term is defined by Section
6000 and 6020 of the Government Code of the State of California; that said was
adjudged as such by Superior Court of the County of Santa Clara, State of
California, under date of February 27, 2017, Case Number 17CV305056; that the
notice of which the annexed is a true printed copy, was set not smaller than
nonpareil and was preceded with words printed in black -face type not smaller
than nonpareil, describing and expressing in general terms, the purport and
character of the notice intended to be given; that said notice was published and
printed in said newspaper on the following dates, to wit:
January 5, 2018
January 5, 2018
DATE OF FIRST PUBLICATION IN THE DAILY POST
I declare under penalty of perjury that the foregoing is true and correct.
Executed on
January 5, 2018
at Palo Alto, California
Signed
NOTICE OF INTENT TO CIRCULATE PETITION
(Palo Alto City Charter Article VI. § 2)
NOTICE OF INTENT TO CIRCULATE PETITION
Notice is hereby given of the intention of the persons whose names appear
hereon to circulate an initiative petition within the city of Palo Alto for the
purpose of imposing reasonable limits on prices that healthcare providers may
charge and encouraging further investment in healthcare quality improvements.
A statement of the reasons of the proposed action as contemplated
in the petition is as follows:
The People of Palo Alto wish to limit overpricing in health care while
incentivizing real quality improvement Too often, health systems leverage
their market power and prestigious reputations to charge consumers prices
that are many times higher than the cost of treatment. And, too often, these
very same providers preform poorly on quality metrics like Hospital Acquired
Conditions (HACs). This initiative will ensure providers use consumer dollars
on direct patient care instead of ancillary expenses, like executive salaries,
landscaping, and facility expansion.
Currently, some healthcare providers charge as much as 600% above cost
for patient care. These overcharges are passed on to consumers in the form
of higher premiums, co -pays, and other out-of-pocket expenses. By limiting
healthcare charges to 115' of the cost of treatment and quality improvement,
this initiative will reduce patients' overall healthcare spending — and ensure
that a significant portion of revenues are used to improve the quality of care
through measures such as better staffing ratios, equipment, and patient care
protocols.
�VI A.kcP_L9
NAME OF PROPONENT
PROPONENT'S SIGNATURE
1/3/2-0r-8
DATE
F )day, January 5, 2018 Daily Post 27
ENTERTAINMENT
Live music tonight
ANGELICA'S BELL THEATER
& BISTRO — Vocalist Juls and
friends: "Latin Rhythms and originals,"
8:30 p.m. $17-$29. 863 Main St.,
Redwood City. (650) 365-3226, www.
angelicasllc.com.
CLUB FOX — Gamma featuring
Davey Pattison, The Butlers, 8 p.m.
$25. 2223 Broadway, Redwood City.
(877) 435-9849, www.clubfoxrwc.
com.
SAVANNA JAZZ — Pascal Bokar
Band and special guest, 8 p.m. 1189
Laurel St., San Carlos. (415) 624-
4549, www.savannajazz.com.
BISCUITS AND BLUES — JJ
Thames, 7:30 p.m. and 10 p.m. $24.
401 Mason St., San Francisco.
(415) 292-2583, www.
biscuitsandblues.com.
BRICK AND MORTAR
MUSIC HALL — Direct
Collapse, Wander, The
Culling, Supplement, 8 p.m.
$8. 1710 Mission St., San
Francisco. (415) 800-8782,
brickandmortarmusic.com.
THE CHAPEL
— David Bowie
birthday bash with
The First Church
of the Sacred
Silversexual,
9 p.m. $25-$40.777 Valencia St., San
Francisco (415) 551-5157, www.
thechapelsf.com.
GREAT AMERICAN MUSIC HALL
— Reid Genauer and Folks, Colonel
and The Mermaids, 9 p.m. $21. 859
O'Farrell SL, San Francisco. www.
slimspresents.com.
THE INDEPENDENT — Long
Beach Dub Allstars, Bumt, DJ Sep,
9 p.m. $25. 628 Divisadero St., San
Francisco. (415) 771-1421.
SFJAZZ — Savion Glover and
Marcus Gilmore, 7:30 p.m. 535-595.
201 Franklin St., San Francisco. (866)
920-5299. www.sfjazzorg.
SUM'S — ONOFF, State Line
Empire, Zed, Featherwitch, 9
p.m. $18.333 11th St., San
Francisco. (415) 255-0333,
www.slimspresents.com.
,� DAVID BOWIE'S birthday will
• I be celebrated tonight at The
c 1' Chapel in San Francisco.
YOUR ONE -STOP TRAVEL CENTER!
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FIGONE TRAVEL GROUP
1495 Laurel Street, San Carlos, CA 94070
(650) 595-7750 www.cruisernarketplace.com
5575 - BBB '+ Next to Trader Toes
P 100109-70
NOTICE OF INTENT TO CIRCULATE PETITION
(Palo Alto City Charter Article VI. § 2)
{IS .t: cxx OUI
col :fteil frAie'cu,ii (1 Picr9l:ty,:t;il ,(4,4v22 r.
NOTICE OF INTENT TO CIRCULATE PETITION
Notice is hereby given of the intention of the persons whose names appear
hereon to circulate an initiative petition within the city of Palo Alto for the
purpose of imposing reasonable limits on prices that healthcare providers may
charge and encouraging further investment in healthcare quality improvements,
A statement of the reasons of the proposed action as contemplated
in the petition Is as follows:
The People of Palo Alto wish to limit overpricing in health care while
inccntivizing real quality improvement. Too often, health systems leverage
their market power and prestigious reputations to charge consumers prices
that are many times higher than the cost of treatment. And, too often. these
very same providers preform poorly on quality metrics like Hospital Acquired
Conditions (HACs). This initiative will ensure providers use consumer dollars
on direct patient care instead of ancillary expenses. like executive salaries,
landscaping, and facility expansion.
Currently, some healthcare providers charge as much as 600% above cost
for patient care. These overcharges are passed on to consumers in the form
of higher premiums, co -pays, and other out-of-pocket expenses. By limiting
healthcare charges to 115% of the cost of treatment and quality improvement,
this initiative will reduce patients' overall healthcare spending — and ensure
that a significant portion of revenues are used to improve the quality of care
through measures such as better staffing ratios, equipment, and patient care
protocols. ..
r1- gk;Ps9
NAME OF PROPONENT
PROPONENTS SIGNATURE
1/3/2-0R3
DATE
iiere
443
NOTICE OF INTENT TO CIRCULATE PETITION
(Palo Alto City Charter Article l7. § 2)
NOTICE OF INTENT TO CIRCULATE PETITION
Notice is hereby given of the intention of the persons whose names appear hereon to circulate an
initiative petition within the city of Palo Alto for the purpose of imposing reasonable limits on
prices that healthcare providers may charge and encouraging further investment in healthcare
quality improvements.
A statement of the reasons of the proposed action as contemplated in the petition is as
follows:
The People of Palo Alto wish to limit overpricing in health care while incentivizing real quality
improvement. Too often, health systems leverage their market power and prestigious reputations
to charge consumers prices that are many times higher than the cost of treatment. And, too often,
these very same providers perform poorly on quality metrics like Hospital Acquired Conditions
(HACs). This initiative will ensure providers use consumer dollars on direct patient care instead
of ancillary expenses, like executive salaries, landscaping, and facility expansion.
Currently, some healthcare providers charge as much as 600% above cost for patient care. These
overcharges are passed on to consumers in the form of higher premiums, co -pays, and other out-
of-pocket expenses. By limiting healthcare charges to 115% of the cost of treatment and quality
improvement, this initiative will reduce patients' overall healthcare spending -- and ensure that a
significant portion of revenues are used to improve the quality of care through measures such as
better staffing ratios, equipment, and patient care protocols.
ELI 4k L9
NAME OF PROPONENT
PROPONENT'S SIGNATURE
1/3/2-01?3
DATE
6l:INd 6-NVfel
PALO ALTO ACCOUNTABLE AND AFFORDABLE HEALTH CARE INITIATIVE
SECTION 1. Chapter 5.40 is added to Title 5 of the Palo Alto Municipal Code, governing
Health and Sanitation, to read:
Sec. 5.40.010 Purpose and intent.
It is the purpose and intent of this Chapter to provide for the orderly regulation of hospitals and
other health facilities, as defined in this Chapter, in the interests of the public health, safety and
welfare, by providing certain minimum standards and regulations regarding their operation. The
prices charged to patients and other payers have far-reaching effects on consumers purchasing
health care services and insurance, as well as taxpayers supporting public health and welfare
programs. Investments in quality of care improvements can benefit patients and caregivers, and
ultimately result in lower overall health care costs. For these reasons, and because neither the
State nor federal governments have yet done so, this Chapter seeks to impose reasonable limits
on prices that hospitals and other health facilities may charge and encourages further investment
in health care quality improvements.
Sec. 5.40.020 Definitions.
For purposes of this Chapter the following terms have the following meanings:
(a) "Acceptable payment amount" means an amount equal to 115 percent of the sum of
the reasonable cost of direct patient care for a particular patient and the pro rata health
care quality improvement cost, or such amount determined by the Administrative
Services Department pursuant to Section 5.40.030(d).
(b) "Amount reasonably estimated to be paid" means the payment amount specified by
agreement between the hospital, medical clinic, or other provider, and the payer, or, in
the absence of such an agreement, the amount of the bill or invoice for services.
(c) "Health care quality improvement costs" means costs a hospital, medical clinic, or
other provider pays that are necessary to: maintain, access or exchange electronic health
information; support health information technologies; train non -managerial personnel
engaged in direct patient care; and provide patient -centered education and counseling.
Additional costs may qualify as health care quality improvement costs, as authorized
pursuant to Section 5.40.030(c).
(d) "Hospital" means a hospital within the meaning of subdivision (a) of Section 1250 of
the California Health and Safety Code, but does not include: (1) any children's hospital
identified in Section 10727 of the California Welfare and Institutions Code; (2) public
hospitals, as defined in paragraph (25) of subdivision (a) of Section 14105.98 of the
California Welfare and Institutions Code; or (3) hospitals operated by or licensed to the
United States Department of Veterans Affairs.
p.l
Palo Alto Accountable and Affordable Health Care Initiative 10 30 2017
(e) "Medical clinic" means a clinic within the definition of Section 1200 of the California
Health and Safety Code, but does not include: (1) a chronic dialysis clinic, as defined by
Section 1204(b)(2) of the California Health and Safety Code; (2) a clinic that provides
services exclusively to children or operates under the license of a children's hospital
identified in Section 10727 of the California Welfare and Institutions Code; (3)
community clinics or free clinics, as defined by Sections 1204(a)(1)(A) and (B) of the
California Health and Safety Code; (4) clinics that primarily provide reproductive health
care services, as defined in Section 6215.1 of the California Government Code, or family
planning services, as defined by Section 14503 of the California Welfare and Institutions
Code; (5) a clinic that is licensed to a county, a city, a city and county, the State of
California, the University of California, a local health care district, a local health
authority, or any other political subdivision of the state; or (6) a clinic operated by or
licensed to the United States Department of Veterans Affairs.
(f) "Other provider" means any provider organization within the meaning of subdivision
(0 of Section 1375.4 of the California Health and Safety Code, any risk -bearing
organization within the meaning of subdivision (g) of Section 1375.4 of the California
Health and Safety Code, and any outpatient setting within the meaning of Section 1248 of
the California Health and Safety Code. Provided, however, that "other provider" shall
not include: (1) a chronic dialysis clinic, as defined by Section 1204(b)(2) of the
California Health and Safety Code; (2) an organization that provides services exclusively
to children or operates under the license of a children's hospital identified in Section
10727 of the California Welfare and Institutions Code; (3) community clinics or free
clinics, as defined by Sections 1204(a)(1)(A) and (B) of the California Health and Safety
Code; (4) clinics that primarily provide reproductive health care services, as defined in
Section 6215.1 of the California Government Code, or family planning services, as
defined by Section 14503 of the California Welfare and Institutions Code; (5) an
organization owned by, operated by, or licensed to a county, a city, a city and county, the
State of California, the University of California, a local health care district, a local health
authority, or any other political subdivision of the state; or (6) an organization owned by,
operated by or licensed to the United States Department of Veterans Affairs.
(g) "Payer" means the person or persons who paid or are financially responsible for
payments for services provided to a particular patient, and may include the patient or
other individuals, primary insurers, secondary insurers, and other entities, provided that
the term does not include Medicare or any other federal, state, county, city, or other local
government payer.
(h) "Pro rata health care quality improvement cost" means the total health care quality
improvement costs paid by a hospital, medical clinic, or other provider in a fiscal year,
divided by the total number of patients treated by that hospital, medical clinic, or other
provider in the same fiscal year.
(i) "Reasonable cost of direct patient care" means the cost of providing care to a patient
in a fiscal year, as provided for in Section 5.40.030(b)(1).
P2
Palo Alto Accountable and Affordable Health Care Initiative 10 30'2017
Sec. 5.40.030 Pricing limitations and rebates.
All hospitals, medical clinics, and other providers shall comply with the following requirements:
(a) Commencing January 1, 2019, a hospital, medical clinic, or other provider shall
annually issue a rebate and a reduction in billed amount to a payer for all money paid or
billed for services provided to a patient in excess of the acceptable payment amount for
those services, as follows:
(1) No later than 150 days after the end of its fiscal year, a hospital, medical
clinic, or other provider shall calculate its health care quality improvement costs
and pro rata health care quality improvement cost for the most recently completed
fiscal year.
(2) No later than 150 days after the end of its fiscal year, a hospital, medical
clinic, or other provider shall compile the following information for each patient
to whom it provided care in the most recently completed fiscal year:
(i) patient;
(ii) total amount received from each payer or payers for health care
services provided in the fiscal year, or, if payment has not been made in
full, the amount reasonably estimated to be paid by that payer or those
payers for health care services provided in the fiscal year;
(iii) reasonable cost of direct patient care provided in the fiscal year;
(iv) acceptable payment amount for the fiscal year; and
(v) the amount, if any, by which the total amount identified pursuant to
subparagraph (ii) exceeds the acceptable payment amount.
(3) No later than 180 days after the end of its fiscal year, a hospital, medical
clinic, or other provider shall (i) issue a rebate of any amount paid, as described
by subdivision (a)(2)(ii), in excess of the acceptable payment amount, and (ii) for
any amount that has not been paid and for which the amount reasonably estimated
to be paid exceeds the acceptable payment amount, as described by subdivision
(a)(2)(ii), reduce the invoice to the acceptable payment amount and reissue the
invoice to the payer.
(4) Where a rebate must be paid or an amount billed but not yet paid must be
reduced pursuant to this section, and more than one payer is responsible, the
hospital, medical clinic, or other provider shall divide and distribute the total
required rebate or reduction in billed amounts among the payers consistent with
the payers' relative obligations to pay for the services. The hospital, medical
clinic, or other provider shall issue the rebate together with interest thereon at the
rate of interest specified in subdivision (b) of Section 3289 of the California Civil
p.3 Palo Alto Accountable and Affordable Health Care Initiative 10 30'2017
Code, which shall accrue from the date the hospital, medical clinic, or other
provider received payment.
(5) Where, in any fiscal year, the rebate the hospital, medical clinic, or other
provider must issue to a single payer is less than twenty dollars ($20), the
hospital, medical clinic, or other provider need not issue that rebate.
(6) In the event a hospital, medical clinic, or other provider is required to issue a
rebate or reduction in amount billed under this section, no later than 180 days
after the end of its fiscal year the hospital, medical clinic, or other provider shall
pay a fine to the Administrative Services Department for each patient for whom a
rebate or reduction is required in the following amounts:
(i) If rebates or reductions are owed by a hospital, medical clinic, or other
provider for services provided to 50 patients or fewer in the fiscal year, an
amount equal to five percent of the required rebate or reduction, provided
that the fine for each rebate or reduction shall be at least one hundred
dollars ($100), but shall not exceed one thousand dollars ($1,000) per
rebate or reduction.
(ii) If rebates or reductions are owed by a hospital, medical clinic, or other
provider for services provided to more than 50 patients in the fiscal year,
an amount equal to 10 percent of the required rebate or reduction,
provided that the fine for each rebate or reduction shall be at least one
hundred dollars ($100), but shall not exceed one thousand dollars ($1,000)
per rebate or reduction.
(7) In the event a hospital, medical clinic, or other provider fails to issue a rebate
or reduction within the time required by paragraph (3), consistent with Municipal
Code Section 1.08.010(d) each subsequent day that the required rebate or
reduction is not issued constitutes a separate violation for which a fine is to be
imposed pursuant to paragraph (6).
(8) Fines collected pursuant to paragraphs (6) and (7) shall be used by the
Administrative Services Department to implement and enforce laws governing
hospitals, medical clinics, and other providers.
(9) Where reimbursement for health care services is subject to the requirements of
Section 1371.31(a) of the California Health and Safety Code, nothing in this
Chapter shall affect the reimbursements required by that Section. Further, (i) the
payments received for health care services that are subject to the reimbursement
requirements of Section 1371.31(a) of the California Health and Safety Code shall
not be included in the total amount received, or the total amount reasonably
estimated to be paid, for the fiscal year pursuant to subdivision (a)(2)(ii), and (ii)
the costs associated with providing health care services that are subject to the
reimbursement requirements of Section 1371.31(a) of the California Health and
p.4 Palo Alto Accountable and Affordable Health Care Initiative 10'30 2017
Safety Code shall not be included in the reasonable cost of direct patient care for
the fiscal year pursuant to subdivision (a)(2)(iii).
(b) (1) No later than 150 days after the end of its fiscal year, every hospital, medical
clinic, or other provider shall provide to the Administrative Services Department
information identifying the reasonable cost of direct patient care for each patient to whom
services were provided in the fiscal year. The reasonable cost of direct patient care shall
be the reasonable costs directly associated with operating a hospital, medical clinic, or
other provider in Palo Alto and providing care to patients in Palo Alto. The reasonable
cost of direct patient care shall include only (i) salaries, wages, and benefits of non-
managerial hospital, medical clinic, or other provider staff, including all personnel who
furnish direct care to patients, regardless of whether the salaries, wages, or benefits are
paid directly by the hospital, medical clinic, or other provider, or indirectly through an
arrangement with an affiliated or unaffiliated third party, including but not limited to a
governing entity, an independent staffing agency, a physician group, or a joint venture
between a hospital, medical clinic, or other provider, and a physician group; (ii) staff
training and development; (iii) pharmaceuticals and supplies; (iv) facility costs, including
rent, maintenance, and utilities; (v) laboratory testing; and (vi) depreciation and
amortization of buildings, leasehold improvements, patient supplies, equipment, and
information systems. For purposes of this paragraph, "non -managerial hospital, medical
clinic, or other provider staff' includes all personnel who furnish direct care to patients,
including doctors, nurses, technicians and trainees, social workers, registered dietitians,
environmental service workers, and non -managerial administrative staff, but excludes
managerial staff such as facility administrators. Categories of costs of direct patient care
may be further prescribed by the department through regulation.
(2) Each hospital, medical clinic, or other provider shall maintain and report to
the Administrative Services Department the information described in paragraph
(1) of this subdivision, the information described in paragraph (1) of subdivision
(a), and information describing every instance during the period covered by the
submission when the rebate or reduction required under subdivision (a) was not
timely issued in full, and the reasons and circumstances therefor. The information
required to be maintained and the report required to be submitted by this
paragraph shall each be independently audited by a certified public accountant in
accordance with the standards of the Accounting Standards Board of the
American Institute of Certified Public Accountants, and shall include the opinion
of that certified public accountant as to whether the information contained in the
report fully and accurately describes, in accordance with generally accepted
accounting principles in the United States, the information required to be
reported.
(3) Each hospital, medical clinic, or other provider shall annually submit the
report required by paragraph (2) of this subdivision on a schedule, in a format,
and on a form prescribed by the Administrative Services Department, provided
p.5
Palo Alto Accountable and Affordable Health Care Initiative 10 30.2017
that the hospital, medical clinic, or other provider shall submit the report no later
than 150 days after the end of its fiscal year.
(4) The chief executive officer or administrator of the hospital, medical clinic, or
other provider shall personally certify under penalty of perjury that he or she is
satisfied, after review, that all information submitted to the department pursuant
to paragraph (2) of this subdivision is accurate and complete.
(5) The Administrative Services Department shall annually publish information
showing the number and aggregate amount of rebates provided, as well as the
number and aggregate amount of fines paid, by each hospital, medical clinic, or
other provider. Any information that must be reported to or by the Department
pursuant to this Chapter shall be made available to the public upon request,
consistent with the requirements of the California Public Records Act and any
other applicable law, including limitations on public disclosure in the interest of
personal privacy.
(c) (1) A hospital, medical clinic, or other provider may petition the Administrative
Services Department at any time for a determination that a cost not specified in Section
5.40.020(c) is a health care quality improvement cost or for a determination that a cost
not specified in Section 5.40.030(b)(1) is a reasonable cost of direct patient care.
(2) The Administrative Services Department may grant a petition concerning
health care quality improvement costs only upon finding that the hospital, medical
clinic, or other provider has demonstrated:
(i) The cost was spent on activities designed to improve health quality and
increase the likelihood of desired health outcomes in ways that are capable
of being objectively measured and of producing verifiable results and
achievements;
(ii) The hospital, medical clinic, or other provider actually paid the cost;
and
(iii) The cost was spent on services offered at the hospital, medical clinic,
or other provider to patients.
(3) The Administrative Services Department may grant a petition concerning
reasonable costs of direct patient care only upon finding that the hospital, medical
clinic, or other provider has demonstrated:
(i) The cost was directly associated with operating a hospital, medical
clinic, or other provider in Palo Alto and providing care to patients in Palo
Alto and is reasonable in light of market rates for similar goods or
services;
(ii) The hospital, medical clinic, or other provider actually paid the cost;
and
p.6 Palo Alto Accountable and Affordable Health Care Initiative 10/30/2017
(iii) The cost was spent on services offered at the hospital, medical clinic,
or other provider to patients.
(4) The Administrative Services Department may permit the hospital, medical
clinic, or other provider to apply a cost incurred in one year equally over a period
not to exceed five years upon finding that the hospital, medical clinic, or other
provider has demonstrated that the cost is reasonably expected to provide health
care quality improvements or support direct patient care during that period.
(d) (1) A hospital, medical clinic, or other provider may petition the Administrative
Services Department at any time for a determination that the acceptable payment amount
defined in Section 5.40.020(a) should be increased with respect that hospital, medical
clinic, or other provider.
(2) The Administrative Services Department may grant such a petition only upon finding
that an acceptable payment amount of 115 percent of the sum of the reasonable cost of
direct patient care and the pro rata health care quality improvement cost would be
confiscatory or otherwise unlawful as applied to that hospital, medical clinic, or other
provider.
(3) If the Administrative Services Department grants a petition pursuant to subdivision
(d)(2), it may adjust the number "115" in Section 5.40.020(a) to the lowest whole number
such that the resultant acceptable payment amount would not be unlawful. The
Administrative Services Department shall not increase the acceptable payment amount to
any amount greater than that minimally necessary under California and federal law. Any
variance granted pursuant to subdivision (d) shall be for a period of one fiscal year,
unless the petitioner demonstrates that a variance is likely to be required for subsequent
fiscal years, in which case the Department may grant a variance for up to five years.
(4) In a petition pursuant to subdivision (d), the burden shall be on the hospital, medical
clinic, or other provider to (i) prove that an acceptable payment amount of 115 percent of
the sum of the reasonable cost of direct patient care for a particular patient and the pro
rata health care quality improvement cost would be unlawful, and (ii) provide the
Administrative Services Department with all information necessary to determine the
lowest acceptable payment amount required by law.
Sec. 5.40.040 Implementation and Enforcement.
(a) The Administrative Services Department shall be authorized to coordinate
implementation and enforcement of this Chapter and shall promulgate appropriate
guidelines, regulations or rules for such purposes consistent with this Chapter. Such
guidelines, regulations or rules shall ensure that implementation of this Chapter is
consistent with the requirement of due process imposed by the California and United
States Constitutions and, as necessary, shall provide guidance concerning the process for
bringing a petition under this Chapter with the goals of minimizing the burden to the
petitioner and increasing the efficiency of the petition review process. Any guidelines,
p.7
Palo Alto Accountable and Affordable Health Care Initiative 10.30 2017
regulations or rules promulgated by the department shall have the force and effect of law.
The City shall appropriate to the Administrative Services Department sufficient funds to
enable the department to implement and enforce this Chapter.
(b) If a determination of a violation has been made, consistent with the requirements of
due process, and except where prohibited by state or federal law, the department may
request that City agencies or departments revoke or suspend any registration certificates,
permits or licenses held or requested by the violator until such time as the violation is
remedied. All City agencies and departments shall cooperate with revocation or
suspension requests from the department. A violation of this Chapter may also be
grounds for denying a hospital, medical clinic, or other provider a business license under
Municipal Code Section 4.04.140(a)(5).
(c) Violation of this Chapter shall be a misdemeanor. The department, the City
Attorney, any person aggrieved by a violation of this Chapter, any entity a member of
which is aggrieved by a violation of this Chapter, or any other person or entity acting on
behalf of the public as provided for under applicable state law, may bring a civil action in
a court of competent jurisdiction against a hospital, medical clinic, or other provider
violating this Chapter, or against the City for de novo review of a determination pursuant
to Section 5.4O.030(c) or (d), and, upon prevailing, shall be entitled to such legal or
equitable relief as may be appropriate including, without limitation, twice the amount of
the required rebate or reduction up to the maximum amount allowable by law and
injunctive relief, and shall be awarded reasonable attorneys' fees and expenses.
Provided, however, that any person or entity enforcing this Chapter on behalf of the
public as provided for under applicable state law shall, upon prevailing, be entitled only
to equitable, injunctive or restitutionary relief, and reasonable attorneys' fees and
expenses. Nothing in this Chapter shall be interpreted as restricting, precluding, or
otherwise limiting a separate or concurrent criminal prosecution under the Municipal
Code or state law. Jeopardy shall not attach as a result of any administrative or civil
enforcement action taken pursuant to this Chapter.
Sec. 5.40.050 Severability.
The provisions of this Chapter are severable. If any provision of this Chapter or its application is
held invalid, that invalidity shall not affect other provisions or applications that can be given
effect without the invalid provision or application.
p.8 Palo Alto Accountable and Affordable Health Care Initiative 10'30'2017
STANFORD
UNIVERSITY
OFFICE OF THE GENERAL. COUNSEL
Sarah J. DiBoise
Chief Hospital Counsel
Molly Stump
City Attorney
Office of the City Attorney
City Hall, 8th Floor
250 Hamilton Avenue
Palo Alto, CA 94301
June 1, 2018
Telephone (650) 723-0380
Facsimile (650) 723-4323
sdiboise@stanford.edu
Re: "Palo Alto Accountable and Affordable Health Care Initiative"
Dear Ms. Stump:
I write on behalf of Stanford Health Care ("Stanford") to express concerns regarding the "Palo
Alto Accountable and Affordable Health Care Initiative" (the "Initiative") that was recently
submitted for certification by individuals affiliated with the Service Employees International
Union — United Healthcare Workers West ("SEIU-UHW"). Stanford believes that the Initiative
is facially invalid and an improper exercise of the initiative power. In fact, the city attorney in
Emeryville, where SEIU-UHW is funding a nearly identical initiative, has filed suit to prevent
that initiative from proceeding for those very reasons. If the Palo Alto city clerk certifies the
sufficiency of the signatures submitted in connection with the Initiative and the city council votes
to place the initiative on the ballot, Stanford intends to challenge the validity of the measure. We
hope that, rather than place the Initiative on the ballot, the City of Palo Alto would join us in that
effort to stop this unconstitutional and otherwise unlawful measure from appearing on the ballot.
However, I write today for a different reason —to request that the City (a) set the Initiative as a
separate agenda item if the clerk certifies the signatures for presentation to the city council, and
(b) order a report addressing the fiscal impact and the impact on the community's ability to
attract and retain business and employment.
The stated purpose of the Initiative is "to impose reasonable limits on prices that hospitals and
other health facilities may charge." Sec. 5.40.010. To do so, the Initiative would require Palo
Alto hospitals, medical clinics, and certain "other providers" to calculate the "reasonable cost of
direct patient care" and the pro -rata "health care quality improvement costs" for each patient, and
caps the amount a provider can recover in reimbursement for care provided to that patient at
115% of the sum of those amounts, which the Initiative defines as the "acceptable payment
amount." Secs. 5.40.020, 5.40.030(a). If a provider collects from or bills the "person or persons
who paid or are financially responsible for payments for services provided to a particular patient"
Building 170, 3' Floor, Main Quad, Post Office Box 20386, Stanford, CA 94305-2038
http://ogc.stanford.edu/
Page 2
an amount greater than the acceptable payment amount over the course of a fiscal year, the
provider must issue that "payer" a rebate (plus interest) or reduction in the amount collected or
billed "in excess of the acceptable payment amount" and pay fines of up to $1,000 per rebate or
reduction, with those fines continuing to accrue if they are not timely paid. Secs. 5.40.030(a)(2)-
(4), (6)-(7). While the Initiative allows providers to petition the City to obtain relief from the
115% cap, such a variance may be granted only when the City's Administrative Services
Department (the "Department") —a city agency that has no experience or expertise as a health
care payer or with health care costs or reimbursement —decides that the Initiative's application
would be "confiscatory or otherwise unlawful." Sec. 5.40.030(d)(2). And, even if it grants a
petition, the Department must evaluate the increase to ensure that it does "not increase the
acceptable payment amount to any amount greater than that minimally necessary under
California and federal law." Sec. 5.40.030(d)(3)
Setting aside for the moment the fact that the Initiative would be, if enacted, unconstitutional, the
billing, rebate, and penalty process set out in the Initiative would place extraordinary burdens on
the City. While the Department must wade into legal determinations when a provider petitions
for relief from the 115% cap as discussed above, the Department must analyze the economics
behind other petitions. Before granting a provider's petition to include in its cost calculations any
health care quality improvement costs not specified by the Initiative, the Department must
evaluate and find that each cost was "spent on activities designed to improve health quality and
increase the likelihood of desired health outcomes in ways that are capable of being objectively
measured and of producing verifiable results and achievements." Sec. 5.40.030(c)(2). Similarly,
before granting a provider's petition to include in its cost calculations any reasonable costs of
care not specified by the Initiative, the Department must evaluate and find that each cost was
"directly associated with operating a hospital, medical clinic, or other provider in Palo Alto and
providing care to patients in Palo Alto and is reasonable in light of market rates for similar goods
or services." Sec. 5.40.030(c)(3). And, if a provider seeks to apply a cost incurred in one year
over a longer period (up to five years), the Department must evaluate and find that "the cost is
reasonably expected to provide health care quality improvements or support direct patient care
during that period." Sec. 5.40.030(c)(4).
The Initiative would require the Department not only to hear and assess provider petitions for
relief from the 115% cap and the restrictions on allowable costs, but also to take on many other
new administrative responsibilities. For example:
• The Department must obtain from every covered provider "information identifying the
reasonable cost of direct patient care for each patient to whom services were provided in
the fiscal year." Sec. 5.40.030(b)(1). Those costs must be calculated according to the
Initiative's determination of which costs are reasonable, on a category -by -category basis.
Id.
• The Department must obtain from every covered provider (i) the information used to
calculate the reasonable cost of direct patient care per patient discussed above; (ii) the
information used to determine whether a rebate or reduction is required after calculating
health care quality improvement costs, amounts received from each payer for a patient,
the reasonable cost of direct patient care, the acceptable payment amount per patient, and
the amount any payments exceed the acceptable payment amount; (iii) "information
10166266.1
Page 3
describing every instance during the period covered by the submission when the rebate or
reduction required ... was not timely issued in full, and the reasons and circumstances
therefor"; and (iv) an opinion by a "certified public accountant as to whether the
information contained in the report fully and accurately describes . . . the information
required to be reported." Sec. 5.40.030(b)(2).
• The Department must establish a schedule, format, and form for accepting the reports
containing the information discussed above. Sec. 5.40.030(b)(3).
• The Department must "annually publish information showing the number and aggregate
amount of rebates provided, as well as the number and aggregate amount of fines paid, by
each hospital, medical clinic, or other provider," and make that information available to
the public upon request after evaluating and taking into account "limitations on the public
disclosure in the interest of personal privacy." Sec. 5.40.030(b)(5). Thus, the City will
also have to assume the significant compliance costs and potential liability under the
Health Insurance Portability and Accountability Act (HIPAA).
Implicit in these provisions is a further responsibility for the City to maintain this vast quantity of
information so that it can evaluate compliance and enforce the Initiative.
The Initiative also requires the City to engage in extensive implementation and enforcement
activities. The Department must "promulgate appropriate guidelines, regulations or rules" for
implementation and enforcement "consistent with" the Initiative, while ensuring that the
implementation is also "consistent with the requirement of due process imposed by the
California and United States Constitutions." Sec. 5.40.040(a). The Depaitiiient must also
"provide guidance concerning the process for bringing a petition . .. with the goals of minimizing
the burden to the petitioner and increasing the efficiency of the petition review process." Id.
Where the Initiative has been violated, the City must revoke or suspend registration certificates,
permits, and licenses held by the violator at the Department's request. Sec. 5.40.040(b). And
while the City may bring a civil action against a provider for violating this chapter, the City may
also be named as a defendant in an action for review of any determinations it makes on a
provider's petition for a variance from the Initiative's terms. Sec. 5.40.040(c).
The Initiative does not identify any source of funding for the City's new responsibilities, which
the City will have to discharge regardless of whether any provider violates the Initiative. Instead,
the Initiative simply directs the City to "appropriate to the Administrative Services Department
sufficient funds to enable the department to implement and enforce" the new law. Sec.
5.40.040(a). And while the Department is charged with collecting any fines that may be paid
under the Initiative, those hypothetical funds are not even ear -marked for the Initiative's
enforcement, but instead are to be used generally "to implement and enforce laws governing
hospitals, medical clinics, and other providers." Sec. 5.40.030(a)(8).
Given the significant administrative burdens the Initiative would place on the City, we request
that the City set the Initiative as a separate item on it is agenda if the city clerk certifies the
signatures submitted in support of the Initiative and order a staff report to address the Initiative's
impact on the City's administrative function. Further, we request that the City refer the Initiative
to the appropriate city agency or agencies for a report addressing the Initiative's fiscal impact
10166266.1
Page 4
and its impact on the community's ability to attract and retain business and employment. See,
e.g., Cal. Elec. Code § 9212(a)(1) & (6); id. § 9215. In that regard, Stanford's preliminary
calculations indicate that implementation of the initiative would result in a 20-25% drop in its
revenues, which is many times greater than Stanford's margin. As a consequence, Stanford
would have to implement cuts to its staffing and benefit levels, facilities, and/or programs to
avoid violating the statute and incurring still greater expenses in the form of fines and interest on
rebates required by the Initiative. Given the dramatic impact on the City and its health care
providers —and, as a necessary consequence, the community and the employers that rely on Palo
Alto's world -class health care providers —we urge the City to refrain from considering whether
the Initiative should be placed on the ballot until the City has received and evaluated the reports
requested here.
Thank you for the opportunity to express Stanford's concerns, and for your attention to this
important matter. Please let me know if you believe that any further information would be of
assistance.
Sincerely,
Sarah J. DiBoise
ArteL-
10166266.1
STANFORD
UNIVERSITY
OFFICE OF THE GENERAL COUNSEL
Debra L. Zumwalt
Vice President and General Counsel
June 6, 2018
Molly Stump
City Attorney
Office of the City Attorney
City Hall, 8th Floor
250 Hamilton Avenue
Palo Alto, CA 94301
Telephone (650) 723-6397
Facsimile (650) 723-4323
zumwalt@stanford.edu
Re: "Palo Alto Accountable and Affordable Health Care Initiative"
Dear Ms. Stump:
I write on behalf of Stanford Health Care ("Stanford") to express concerns
regarding the "Palo Alto Accountable and Affordable Health Care Initiative" (the "Initiative")
recently submitted to the city clerk for certification by individuals affiliated with the Service
Employees International Union — United Healthcare Workers West ("SEIU-UHW"). We believe
that the Initiative is facially invalid and unconstitutional. Moreover, because the proposed
measure "exceed[s] the initiative power," pre -election review is "eminently appropriate." City &
County of San Francisco v. Patterson, 202 Cal. App. 3d 95, 100 (1988). In fact, the city attorney
in Emeryville, where SEIU-UHW is funding a substantively identical initiative, already filed suit
to prevent the initiative from proceeding in that city. The electorate has no more power than the
City Council to enact laws that are preempted by state and federal law. Here, the Initiative
would place Stanford and other Palo Alto health care providers in the impossible situation of
having to choose between complying with either a local ordinance or state and federal laws that
govern the charging and payment of health care. It also intrudes in numerous phases of the
health care field that are fully occupied by state and federal law. On its face, the Initiative would
also violate due process by impairing Stanford's ability to provide technologically -advanced,
high -quality care to all patient populations, including charity care to uninsured patients, and
undermine the policy determinations that California and the federal government have already
made in this area. And, it would create an impermissible burden on the City of Palo Alto by
requiring the Administrative Services Department (the "Department") to act as a de facto court
while attempting to enforce an ordinance that would be unconstitutionally vague. For these
reasons, set forth in more detail below, we respectfully request that the City refrain from placing
the Initiative on the ballot if the city clerk certifies that sufficient signatures have been collected.
The stated purpose of the Initiative is "to impose reasonable limits on prices that
hospitals and other health facilities may charge." Sec. 5.40.010. To do so, the Initiative would
require Palo Alto hospitals, medical clinics, and certain "other providers" to calculate the
"reasonable cost of direct patient care" and the pro -rata "health care quality improvement costs"
10191519.1 Building 170, 3`d Floor, Main Quad, Post Office Box 20386, Stanford, CA 94305-2038
http://www.stanford.edu/dept/legal
Molly Stump
June 6, 2018
Page 2
for each patient, and would cap the amount a provider can recover in reimbursement for care
provided to that patient at 115% of the sum of those amounts, which the Initiative defines as the
"acceptable payment amount." Secs. 5.40.020, 5.40.030(a). If a provider collects from or bills
the "person or persons who paid or are financially responsible for payments for services provided
to a particular patient" an amount greater than the acceptable payment amount over the course of
a fiscal year, the provider must issue that "payer" a rebate (plus interest) or reduction in the
amount collected or billed "in excess of the acceptable payment amount" and pay fines of up to
$1,000 per rebate or reduction, with those fines continuing to accrue if they are not timely paid.
Secs. 5.40.030(a)(2)-(4), (6)-(7). While the Initiative allows providers to petition the City to
obtain relief from the 115% cap, such a variance may be granted only when the Department —a
city agency that has no experience or expertise as a health care payer or with health care costs or
reimbursement —decides that the Initiative's application would be "confiscatory or otherwise
unlawful." Sec. 5.40.030(d)(2).
The Initiative defines "health care quality improvement costs" and the
"reasonable cost of direct patient care" narrowly, and excludes categories of costs that are critical
to the care Stanford provides to the public, including but not limited to administrative,
management, and technology costs, and salary and benefit costs for positions associated with
those functions. Secs. 5.40.020(c), 5.40.030(b)(1). The Initiative even excludes costs that
Stanford is required by state law to incur, including for various managerial staff critical to the
provision of care. See, e.g., Cal. Code of Regs., tit. 22, §§ 70211(b) (nursing service
administrator), 70225(c) (surgical service manager), 70425(e) (burn center manager), 70465(b)
(coronary care service manager), 70485(b) (intensive care newborn nursery service oversight),
70243(f) (director of clinical laboratory service). Nor do the permissible costs account for the
emergency care that providers are legally required to provide uninsured patients regardless of
their ability to pay. The Initiative allows providers to petition for costs "not specified" in section
5.40.030(b)(1) to be designated as health care quality improvement costs or reasonable costs of
direct patient care, but the costs eligible for such a variance are limited to costs "spent on
services offered at the hospital, medical clinic, or other provider," which is impermissibly
narrow, particularly when read in light of the express restrictions in section 5.40.030(b)(1). See
Sec. 5.40.030(c)(2)(iii), (3)(iii). And the procedures for petitioning for relief from the 115% cap
are poorly defined and would impose significant costs on both providers and the city
government. See Sec. 5.40.030(d).
Under preemption principles, a city's authority to enact and enforce local laws
like the Initiative is limited by state and federal law. A city can neither invade an area already
occupied by state or federal laws nor pass legislation that conflicts with state or federal law. Cal.
Const. Art. XI, § 7 ("A county or city may make and enforce within its limits all local, police,
sanitary, and other ordinances and regulations not in conflict with general laws."); U.S. Const.
Art. VI, cl. 2 (Supremacy Clause); Hillsborough County, Fla. v. Automated Med. Labs., Inc., 471
U.S. 707, 713 (1985) ("[F]or the purposes of the Supremacy Clause, the constitutionality of local
ordinances is analyzed in the same way as that of statewide laws."). The Initiative raises both
state and federal preemption concerns.
Molly Stump
June 6, 2018
Page 3
First, contrary to the proposed initiative's assertion that "neither the State nor
federal governments have" imposed limits on the prices charged by hospitals and health
facilities, Sec. 5.40.010, extensive federal and state regulations aimed at protecting insurance
beneficiaries and patient access to low-cost and high -quality care are already in place, including
pricing and payment regulations that determine the reasonable costs for particular health care
services. See, e.g., Cal. Med. Ass'n, Inc. v. Aetna U.S. Healthcare of Cal., Inc., 94 Cal. App. 4th
151, 167 (2001) (describing California's "highly -regulated health care finance and delivery
schemes"); Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724, 729 (1985) (recognizing
"extensive" regulation of group health insurance contracts). Together, these regulations leave no
room for individual municipalities to insert their own regulatory schemes restricting health care
pricing and payment.
Second, by setting artificial pricing limitations without regard to pre-existing
contracts between providers and insurers or the applicable "reasonable cost" determinations set
forth in state and federal regulations, the Initiative would make it impossible for providers and
insurers to comply with state and federal regulations while also complying with the initiative's
proposed pricing cap. More broadly, the pricing limitations would also interfere with state and
federal policy determinations that have already been made about how best to balance concerns
about excessive prices against the costs of providing high -quality medical care to insured and
uninsured patients alike.
The body of state and federal health care and insurance laws is vast, but we
include several illustrative examples here:
At the state level, California enacted the Knox -Keene Act to "promote the
delivery and the quality of health and medical care" for people enrolled or subscribed in health
care plans by "[h]elping to ensure the best possible health care for the public at the lowest
possible cost." Cal. Health & Safety Code § 1342. In implementing this legislation, the State
determined that the best way to pursue the legislature's goals was to define the compensation
paid by a health plan to a provider as either the "agreed upon contract rate," the "amount set
forth in [a PPO or POS] enrollee's Evidence of Coverage," or, for non -contracted emergency
services, the "reasonable and customary value for health care services." Cal. Code Regs. tit. 28,
§ 1300.71(a)(3). These reimbursement levels are necessary to "`ensure[] the continued financial
viability of California's health care delivery system."' Bell v. Blue Cross of Cal., 131 Cal. App.
4th 211, 218 (2005) (citation omitted). For example, "[g]iven that the law elsewhere requires
that emergency services and care be provided without regard to a patient's insurance or ability to
pay, the Knox -Keene Act imposes a requirement that health care service plans must reimburse a
provider who has provided emergency services or care to a health care service plan's enrollee"
based on "reasonable and customary" rates. YDMMgmt. Co. v. Sharp Cmty. Med. Group, Inc.,
16 Cal. App. 5th 613, 624-25 (2017). And providers are "entitled to reimbursement from a
health care service plan" at those same rates. Id. at 627. Moreover, by requiring reimbursement
at "reasonable and customary" rates by reference to specific factors, one of which includes the
prices usually charged for such services, the State "established the minimum criteria for
reimbursement." Children's Hosp. Cent. Cal. v. Blue Cross of Cal., 226 Cal. App. 4th 1260,
Molly Stump
June 6, 2018
Page 4
1273 (2014); see also Bell, 131 Cal. App. 4th at 217-18.1 In contrast, the Initiative would
disregard contracted rates entirely, and impose its own rate calculation based on a distinct
determination of what costs are reasonable and what criteria should be considered.
Local efforts such as these that deviate from statewide law are preempted. See
Am. Fin. Servs. Ass 'n v. City of Oakland, 34 Cal. 4th 1239, 1254-56 (2005) (holding city could
not pass more restrictive measure that would ban practice allowed under state law); N. Cal.
Psychiatric Soc y v. City of Berkeley, 178 Cal. App. 3d 90, 105-06 (1986) (holding that where
state placed detailed regulations on when and how controversial psychiatric treatment could be
offered, city could not ban such treatment entirely). In fact, because "regulation of statewide
commercial activities" like health care "command statewide uniformity," courts are particularly
wary of individual cities setting their own standards in "matters of health and medicine," which
"are of statewide concern." N. Cal. Psychiatric Soc'y, 178 Cal. App. 3d at 101, 108. Moreover,
to the extent the proposed initiative prevents health plans and insurers from paying contracted
rates and reasonable and customary value for non -contracted emergency care, it forbids what
state law permits and even requires, and thus would be subject to conflict preemption. See
Coyne v. City & County of S.F., 9 Cal. App. 5th 1215, 1229-30 (2017) (local ordinance requiring
relocation subsidies when a landlord chooses to go out of the rental business subject to conflict
preemption because it prohibited landlords from "exercis[ing] their rights under [California's]
Ellis Act").
At the federal level, the ACA retains a role for "State law" —not local law —in the
oversight of the provider -plan relationship, while preempting all laws that "prevent application
of the" ACA's provisions. 42 U.S.C. § 18041(d). On that front, regulations implemented as part
of the Affordable Care Act have set forth detailed methods to determine appropriate prices for
certain categories of medical care, which are similarly reliant on regularly charged and
negotiated prices as well as the federal government's own determination of what costs and other
considerations should be taken into account. For example, Public Welfare regulations require
group and individual health plans to provide benefits for out -of -network emergency services in
an amount "at least equal to the greatest of three amounts," which in turn are based on contracted
prices for such services when they are provided in -network, the "usual, customary and
reasonable" amount paid for such services, or the amount that would be paid under Medicare. 45
C.F.R. § 147.138(b); see also 42 U.S.C. § 300gg-19a(b)(1)(C)(ii)(I).
Courts have also recognized that ERISA preempts all state or local laws that
"govern[] the payment of benefits" by an ERISA plan, including laws that "directly conflict[]
with ERISA's requirement that plans be administered, and benefits be paid, in accordance with
plan documents." Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 148 (2001). Here, by
limiting the prices that hospitals can charge and that health plans and insurers can pay, the
proposed initiative would conflict with employee benefit plans' ability to pay benefits as
required by plan documents. Notably, ERISA preemption is so broad with respect to the plans
Similarly, California Insurance Code section 10112.82 applies minimum reimbursement criteria to an insurer's
payment for provision of non -contracted care to a beneficiary of a plan not regulated by the Knox -Keene Act. See
also Cal. Ins. Code § 10133.65(c) (setting forth provider rights including limitations on the circumstances in which
rates of payment may be changed from those set forth in contracts between plans and providers).
Molly Stump
June 6, 2018
Page 5
within its scope, such as self -funded payer plans, that it has been found to displace some of the
same California statutes and regulations that would preempt the Initiative in its application to
others, such as Knox -Keene health plans, were it enacted. See, e.g., Lodi Mem'l Hosp. Ass 'n v.
Tiger Lines, LLC, No. 2:15-CV-00319-MCE, 2015 WL 5009093, at *7 (E.D. Cal. Aug. 20,
2015) (concluding that Knox -Keene Act reimbursement requirement did "not extend to a self -
funded ERISA plan"). Thus, to the extent that state law does not preempt the Initiative in some
applications, that is only because federal law preempts those applications of the Initiative. See
Atay v. County of Maui, 842 F.3d 688, 705 (9th Cir. 2016) (finding local regulations preempted
by a mix of state and federal law).
Apart from preemption concerns, we believe the Initiative and its pricing
restrictions would violate due process in at least two respects. First, the Initiative's narrow
definition of costs that can be factored into hospital prices —which excludes, among other things,
the cost of free emergency care hospitals are legally required to provide —would leave hospitals
and other providers unable to subsidize the services they are required to provide without
payment. See Kavanau v. Santa Monica Rent Control Bd., 16 Cal. 4th 761, 771 (1997) (a statute
imposing pricing controls violates due process where it would "deprive investors of a 'fair
return' and thereby become `confiscatory"). Second, due process requires that a regulated party
must be able to petition for variances from pricing restrictions, and that the procedural
mechanism to obtain such variances "must not be prohibitively burdensome." Id. at 772. Here,
however, to obtain relief from the 115% limit, providers must demonstrate that application of the
limit would be "unlawful" and provide sufficient information to demonstrate what a "lowest
acceptable payment" for a particular patient would be, without regard to the fluctuating costs
incurred by a provider for the entirety of its patient base over the fiscal year. These procedures
are too burdensome to allow for meaningful relief. See Birkenfeld v. City of Berkeley, 17 Cal. 3d
129, 172-73 (1976) (striking down rent control law because its procedures were so cumbersome
and time-consuming that landlords could not in reality obtain relief from confiscatory rates).
Finally, the Initiative's variance procedures also raise concerns beyond due
process limits on price controls. First, the Initiative would require the Department to sit as a de
facto court, evaluating the strength of a provider's legal and factual showing for a variance and
determining whether application of the 115% cap would be "confiscatory or otherwise
unlawful." Sec. 85.40.030(d)(2), (3), (4). Asking City officials to make these determinations
would violate bedrock principles of separation of powers by usurping the courts' proper role and
shifting controversial decisions onto an executive body. See Kasler v. Lockyer, 23 Cal. 4th 472,
493 (2000) (cautioning that the "separation of powers doctrine prevents any delegation of power
that would result in the `aggrandizement' or `encroachment' of one branch of power" and that an
"unconstitutional delegation of authority" occurs when the executive or judicial branch is called
on to resolve "fundamental policy issues"). In fact, "a local administrative agency has no
authority under the California Constitution to exercise judicial power." Lockyer v. City &
County of San Francisco, 33 Cal. 4th 1055, 1094 (2004). Second, the Initiative's variance
procedures and definitions lack essential details, rendering them unconstitutionally vague. For
example, it fails to identify the market to be used for comparison in determining whether
additional costs are "reasonable in light of market rates for similar goods or services." It also
fails to identify what burden of proof health care providers would bear in "prov[ing]" application
Molly Stump
June 6, 2018
Page 6
of the cap would be unlawful, or how "necessary information" provided to the Department
would be presented. Moreover, the Initiative lacks sufficient specificity in its definition of "other
providers" to put Palo Alto health care providers on notice of whether they are covered by the
Initiative. See, e.g., Sec. 5.40.020(f) (incorporating Health & Safety Code § 1375.4(0, which
extends to any entity that "delivers, furnishes, or otherwise arranges for or provides health care
services," without accounting for the essential limitations of that definition within that statutory
scheme). Together, these flaws and the burdens imposed on the City will have the effect of
interfering with essential government functions already allocated to the Department.
For all these reasons, the Initiative is facially invalid. Because it is preempted by
state and federal law, the Initiative "exceed[s] the initiative power," making pre -election review
"eminently appropriate." Patterson, 202 Cal. App. 3d at 102 (affirming removal of initiative
from San Francisco ballot where proposed ordinance was preempted and thus "unmistakably
beyond the power of the people to enact"); see also Wiltshire v. Superior Court, 172 Cal. App.
3d 296, 305 (1985) (affirming order precluding initiative from proceeding where it was "beyond
the power of the voters to adopt" because, in part, it ran "aground on the shoals of preemption").
And, because pre -election review on preemption grounds is appropriate, a court would be
authorized to address all of the Initiative's defects. See Citizens for Responsible Behavior v.
Superior Court, 1 Cal. App. 4th 1013, 1024 n.5 (1991) (explaining that if a court is "permitted"
to conduct a pre -election review of one issue, "there is no logical reason why [it] should be
prohibited from reaching all the challenges raised to the measure"). As Emeryville recognized in
filing suit to prevent a substantively identical initiative from proceeding in that city, placing the
Initiative on the ballot notwithstanding the these clear legal deficiencies would only waste public
resources, create divisions in the community, and mislead the public. See also id. at 1023.
Thank you for the opportunity to express Stanford's concerns, and for your
attention to this important matter. Please let me know if you believe that any further information
would be of assistance.
Very truly yours,
Debra Zumwalt 75/A44&4Altatleili\,
CITY OF
PALO
ALTO
City of Palo Alto (ID # 9277)
City Council Staff Report
Report Type: Informational Report Meeting Date: 6/11/2018
Summary Title: Energy Risk Management Report
Title: City of Palo Alto's Energy Risk Management Report for the First Half of
Fiscal Year 2018
From: City Manager
Lead Department: Administrative Services
Recommendation
This is an informational report and no City Council action is required.
Executive Summary
Staff continues to purchase electricity and gas in compliance with the City's Energy Risk
Management Policies, Guidelines, and Procedures. This report is based on market prices and
load and supply data as of December 31, 2017, the end of the first half of Fiscal Year (FY) 2018.
The projected cost of the City's fixed -price electricity purchases is $0.09 million lower than the
market value of that electricity as of December 31, 2017 for the 12 -month period beginning
January 1, 2018. In the first half of FY 2018 (July 1, 2017 through December 31, 2017) the City's
credit exposure to fixed price contracts is minimal. The projected Electric Supply Operations
Reserve is above the FY 2018 minimum guideline reserve level and the projected gas reserve is
also above the FY 2018 guideline reserve level range.
There were no exceptions to the Energy Risk Management Policies, Guidelines, or Procedures
to report during the first half of FY 2018.
Background
The purpose of this report is to inform the Council about the status of the City's energy
portfolio and transactions executed with energy suppliers as of the end of the first half of FY
2018. The City's Energy Risk Management Policy requires that staff report on a quarterly basis
but due to lower trading activity levels the Utility Risk Oversight Coordinating Committee
(UROCC) has approved providing this report on a semi-annual basis to Council on: 1) the City's
energy portfolio; 2) the City's credit and market risk profile; 3) portfolio performance; and 4)
other key market and risk information.
City of Palo Alto Page 1
The City's Energy Risk Management Policy describes the management organization, authority,
and processes to monitor, measure, and control market risks. "Market risks" include price and
counterparty credit risk. These are risks that the City is exposed to on a regular basis in
procuring electric supplies, and to a lesser extent for gas supplies which are purchased at
market rates via a monthly index price. The energy risk management section is located in the
Treasury Division of the Administrative Services Department. Its role is to monitor and mitigate
these risks.
This first half of FY 2018 energy risk management report contains information on the following:
• Electric Supplies
• Hydroelectricity
• Fixed -Price Forward Electricity Purchases
• Gas Supplies
• Credit Risk
• Electric Forward Mark -to -Market Values
• Electric and Gas Supply Operations Reserves Adequacy
• Exceptions to Energy Risk Management Policies, Guidelines, or Procedures
Discussion
Electric Supplies
In order to serve the City's electric supply demands, the City obtains electricity from:
hydroelectric resources (from Western and Calaveras Hydroelectric Projects); long-term
renewable energy contracts (from landfill gas converted to electricity, wind, and solar projects);
wholesale purchases which are carried out via fixed -priced forward market purchase contracts;
and the electric spot market.
Figure 1 below illustrates the projected sources and expected purchases of electricity supplies
by month for the 36 months from January 1, 2018 to December 31, 2020, in megawatt -hours
(MWh). Sales of surplus energy in the summer months are typical due to the seasonal profile of
the City's generating portfolio as a result of renewable energy power from hydroelectricity,
solar, and wind.
City of Palo Alto Page 2
Figure 1 - Electric Balance
Megawatt Hours
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
■ —
i•i •
cjer
— -- -
%
ti w ti% ti% ti� do do ti do tie ,yo ,yo ,yo ,yo ,yo yo
-20,0V Pic �J QJ p°c QeC �o t' t� C �o c' t� op „c"-�c
-40,000
Wind
Wholesale
"le Western
Solar
Landfill
x r Calaveras
—X—TotaI Load
Hydroelectricity
The cost of hydroelectricity received from Western over the 12 -month period ending December
31, 2017 is lower than the market value of electricity by $5.1 million. Hydroelectric power from
Calaveras was expected to cost $6.7 million (as of December 31, 2017) more than the market
value of electricity. Note that Calaveras provides benefits not reflected in the mark -to -market
(MTM) calculation, including, for example, ancillary services (e.g., the ability to regulate energy
output when the electric grid needs change), and that much of the above -market costs are
related to debt service on the cost of constructing the dam. This debt is due to be retired in
2032, and retirement will substantially improve the value of the project relative to the market
price of electricity.
Fixed -Price Forward Electricity Purchases
The City as of December 31, 2017 has purchased and/or sold fixed -priced supplies of electricity
totaling 103,370 MWh for delivery in FY 2018 with an average price of $35.06 per MWh. The
City contracted for these purchases with three of its approved counterparties: Powerex, Exelon,
and NextEra Energy Resources. The 12 -month MTM value of the City's forward transactions for
wholesale power was $0.09 million at the end of the first half of FY 2018. In other words, the
purchase cost (contract price) for these transactions was lower than the market value as of
December 31, 2017. The City tracks the mark to market value of its forward contracts to
measure the value that would be lost due to a counterparty failing to deliver on its contractual
commitments, forcing the City to purchase replacement electricity in the market. The exposure
City of Palo Alto Page 3
listed above is well within risk management guidelines and presents little risk to the City's
financial outlook.
The figures below represent the electric forward volumes (Figure 2) and MTM positions (Figure
3) for each electric supplier by month of delivery for all forward fixed -price electricity contracts
over the 12 -month period ending December 31, 2018.
Figure 2 - Electric Forward Volumes as of 12/31/17
30,000
20,000
L 10,000
O
= 0
++
I-10,000
� Oti
2 -20,000
-30,000
-40,000
x
M
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-:mow
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o3\oti\ o�\ oy\k�� .'f'
\oti\ 0% 0°)
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.'�"
i Powerex
Exelon
NextEra Energy
Resources
City of Palo Alto Page 4
Gas Supplies
In order to serve the City's natural gas needs, the City purchases gas on the monthly and daily
spot markets. The City purchases all of its forecasted gas needs for the month ahead at a price
based on the published monthly spot market index price for that month. Within the month, the
City's gas operator buys and sells gas to match the City's daily needs if the actual daily usage is
different from the forecasted daily usage. Those daily transactions are made at an average price
based on the published daily spot market index. These costs are passed through directly to
customers using a monthly rate adjustment mechanism, leaving the City with little or no price
risk or counterparty risk exposure for the gas utility.
Credit Risk
Staff monitors and reports on counterparty credit risk based on the major credit rating agencies
(S&P and Moody's) scores, Ameresco has a 0.68 percent Expected Default Frequency (EDF)
which is higher than the recommended EDF level. As May 2018, this has declined to 0.45
percent so there has been an improvement. Staff is continuing to monitor Ameresco's EDF and
will continue to report back to City Council. Table 1 below shows the EDF values for the City's
renewable energy counterparties. Table 2 below shows the EDF values and credit exposure for
the City's electric suppliers. There is virtually no credit exposure to the City's gas suppliers since
the supplies are purchased on a short-term basis.
City of Palo Alto Page 5
Table 1 - Renewable Counterparties Credit Ratings and EDFs as of 12/31/17
Renewable Counterparty
S&P Credit
Rating
Current
Expected
Default
Frequency
Moody's
(EDF)
Implied
Rating
Ameresco
n/a
0.68%
B2
Avangrid (fomerly Iberdrola)
BBB+
0.24%
Aa2
Source: CreditEdge website
Table 2 - Credit Exposure and Expected Default Frequency of Electric Suppliers as of 12/31/17
Electric
Counterparty
Cost of
Transaction
Market
Value of
Transaction
Cost vs. Market to
Market (MTM) Value
S&P
Credit
Rating
Current
Expected
Default
Frequency
Moody's
(EDF)
Implied
Rating
Expected Loss
(MTM x
Expected
Default
Frequency)
Exelon
$ 1,831,232
$ 1,755,823
$
(75,409)
BBB
0.06%
Baa3
$
-
Powerex
272,240
258,136 '
(14,104)
AAA
n/a
n/a
n/a
NextEra
1,520,573
1,598,127
77,554
A-
0.03%
Aa1
23
Totals
$ 3,624,045
$ 3,612,086
$
(11,959)
$
23
Electric Forward Mark -to -Market Values
It is important to note that, for renewable energy companies, Council waived the investment
grade credit rating requirement of Section 2.30.340(d) of the Palo Alto Municipal Code, which
applies to energy companies that do business with the City. In addition, the City does not pay
for renewable energy until it is received, thereby reducing risk.
An EDF of 0.08% or below indicates supplier's current expected default frequency falls within
the investment grade range. An EDF above 0.08% indicates the supplier may have financial
issues that require monitoring.
Electric and Gas Supply Operations Reserves Adequacy
As shown in Table 3 below, the Electric Supply Operations reserve's unaudited balance as of
December 31, 2017 is $13.9 million, which is $2.3 million below the minimum reserve guideline
level. By year end, transfers from the rate stabilization and other reserves are expected to bring
this to the middle of the reserve guideline. This balance is above the immediate 12 -month
credit, hydro, and other risks that have been identified, and are estimated at $3.2 million. The
unaudited Gas Operations reserve balance as of December 31, 2017 is $12.1 million, which is
$5.9 million above the minimum reserve guideline level.
City of Palo Alto Page 6
Table 3 - Electric Supply Operations and Gas Operations Reserve Levels for FY 2018
(Preliminary unaudited figures from City's Financial System)
Fund
Reserve for
Operations
Balance as
of 07/01/2017
($ Millions)
Changes
to the
Reserves
for
Operations
($ Millions)
Unaudited Projected
Reserve for
Operations Balance as
of 12/31/17 *
($ Millions)
FY 2018
Minimum
Guideline
Reserve
Level
($ Millions)
Maximum
Guideline
Reserve
Level
($ Millions)
Electric
$12.9
$1.0
$13.9
$16.2
$32.3
Gas
$13.5
($1.4)
$12.1
$6.2
$12.4
The accounting activity to date reflects what has been booked into the City's financial system. These
figures are preliminary until outside auditors have completed their review and the Comprehensive
Annual Financial Report is produced. There could be significant changes to the supply operation
reserve balances based on year-end adjustments that have not been booked yet.
Exceptions to Energy Risk Management Policies, Guidelines, or Procedures
There were no exceptions to the Energy Risk Management Policies, Guidelines, or Procedures
to report during the first half of FY 2018.
City of Palo Alto Page 7
CITY OF
PALO►
ALTO
CITY ROSTER
Last Updated: August, 2021
CITY INFORMATION:
Discovered: 1769
Incorporated: April 9, 1894
Incorporated as a Charter City: July 1, 1909
Population: 66,649
Housing Units: approximately 27,765
Size: 25.85 square miles
Sister Cities: Palo, Leyte, Philippines 1963 1 Oaxaca, Mexico 1964 1 Enschede, The Netherlands 1980 Linkoping,
Sweden 1987 1 Albi, France 1994 1 Tsuchiura City, Japan 2009 1 Heidelberg, Germany 2017 1 Yangpu,
China 2018
Note: Stanford University is not part of the City of Palo Alto, but Stanford University Medical Center, Stanford Research
Park, and Stanford Shopping Center are included.
CITY COUNCIL MEETING INFORMATION:
When: Regular meetings are held on the first three Mondays of the month, at 6:00 P.M.
Where: Due to the pandemic, meetings are held through Virtual Teleconference via Zoom (online link
here and dial -number: 1 (669) 900-6833). In normal circumstances, meetings are held in the City Council
Chambers, located on the ground floor of City Hall, 250 Hamilton Avenue, Palo Alto, 94301.
Meetings are cablecast live in most cases (and replayed) on Government Channels 26 or 29 and
broadcast via KZSU Radio, 90.1 FM. Recordings of City Council meetings can be accessed at
http://midpenmedia.org/category/government/city-of-palo-alto/. Call the Community Media Center at
650-494-8686 for times of replays.
Agendas are available on the City Webpage (https://cityofpaloalto.org/gov/agendas/default.asp) and
the agendas are posted in King Plaza, in front of City Hall, 250 Hamilton Avenue, Palo Alto, on Thursday
evenings, 11 days prior to Monday Council meetings.
In compliance with the Americans with Disabilities Act (ADA), this document will be provided in other
accessible formats. For information, contact ADA Coordinator, City of Palo Alto, 650-329-2368 (Voice) or
ada@cityofpaloalto.org
11 Page
CITY COUNCIL MEMBER CONTACT INFORMATION
The terms of Mayor and Vice Mayor are for one year and expire at the first City Council meeting in January.
City Council elections are held on the first Tuesday after the first Monday in November, even -numbered years.
Council terms are for four years and Council Member's may serve two consecutive terms.
Your correspondence with the City Council is a public record and is available for public inspection.
Members of the public may address the entire Council via email correspondence to:
city.council@cityofpaloalto.org
NAME ADDRESS/EMAIL PHONE TERM
Vice Mayor
Pat Burt
Alison Cormack
Mayor
Tom DuBois
Eric Filseth
Lydia Kou
Greer Stone
Greg Tanaka
250 Hamilton Ave., 94301 (650) 892-0925 1/1/2021—
Pat.Burt@cityofpaloalto.org 12/31/2024
250 Hamilton Ave., 94301 (650) 329-2480 1/1/2019 -
Alison.Cormack@cityofpaloalto.org 12/31/2022
250 Hamilton Ave., 94301 (415) 377-8455 1/1/2015 —
Tom.DuBois@cityofpaloalto.org 12/31/2022
(Serving second consecutive term)
250 Hamilton Ave., 94301 (650) 329-2162 1/1/2015 —
Eric.Filseth@cityofpaloalto.org 12/31/2022
(Serving second consecutive term)
250 Hamilton Ave., 94301 (650) 308-9893 1/1/2017 —
Lydia.Kou@cityofpaloalto.org 12/31/2024
(Serving second consecutive term)
250 Hamilton Ave., 94301 (650) 575-0405 1/1/2021—
Greer.Stone@cityofpaloalto.org 12/31/2024
250 Hamilton Ave., 94301 (415) 968-9436 1/1/2017 —
Greg.Tanaka@cityofpaloalto.org 12/31/2024
(Serving second consecutive term)
21 Page
CITY SERVICES
For a listing of City services and departmental phone numbers, visit the City's website. For emergency
assistance call 9-1-1.
COUNCIL APPOINTED OFFICERS
City Attorney
Molly Stump
(650) 329-2171
City Auditor (650) 329-2667
Kyle O'Rourke
City Clerk (650) 329-2379
Lesley Milton
City Manager (650) 329-2280
Ed Shikada
EXECUTIVE LEADERSHIP TEAM
Assistant City Manager (650) 329-2403
Vacant
Deputy City Manager
Chantal Cotton Gaines
Administrative Services Director and Chief Financial Officer
Kiely Nose
Chief Communications Officer
Meghan Horrigan-Taylor
Community Services Director
Kristen O'Kane
Emergency Services Director
Kenneth Dueker
Fire Chief
Geoffrey Blackshire
Human Resources Director
Rumi Portillo
Information Technology Director
Darren Numoto
(650) 329-2572
(650) 838-2801
(650) 329-2607
(650) 463-4908
(650) 329-2419
(650) 329-2424
(650) 329-2124
(650) 329-2488
31 Page
Planning and Development Services Director
Jonathan Lait
Police Chief
Robert Jonsen
Public Works Director
Brad Eggleston
Chief Transportation Official
Philip Kamhi
Utilities Director
Dean Batchelor
Library Services Director
Gayathri Kanth
(650) 329-2679
(650) 329-2131
(650) 329-2636
(650) 329-2136
(650) 496-6981
(650) 329-2668
41 Page
BOARD/COMMISSION/COMMITTEE ROSTER
(C) Denotes Chair (VC) Denotes Vice Chair
ARCHITECTURAL REVIEW BOARD (ARB)
Regular meetings are held at 8:30 A.M. on the first and third Thursdays of each month and are
cablecast live in most cases on Government Channels 26 or 29. Terms are for three years. See
Palo Alto Municipal Code (PAMC) Sections 2.16 and 2.21
Staff Liaison: Jodie Gerhardt — Manager of Current Planning (650) 329-2575
Administrative Support: Vinhloc Nguyen —Administrative Associate 1 1 1 (650) 329-2218
Board Email: arb@cityofpaloalto.org
Mailing Address: 250 Hamilton Avenue, Fifth Floor, Palo Alto, CA 94301
Name Phone Appointed Term Ends
Peter Baltay (650) 327-7573 (o) 11/01/2015 12/15/2021
David Hirsch (646) 221-5158 (c) 12/16/2018 12/15/2021
Grace Lee (VC) 09/09/2019 12/15/2023
Alexander Lew 04/07/2008 12/15/2021
Osma Thompson (C) 12/14/2017 12/15/2023
HISTORIC RESOURCES BOARD (HRB)
Regular meetings are held at 8:30 A.M. on the second and fourth Thursdays of each month
and are cablecast live in most cases on Government Channels 26 or 29. Terms are for three
years. See PAMC Chapters 2.16 and 16.49.
Council Liaison: Council Member Alison Cormack
Staff Liaison: Amy French — Chief Planning Official
Administrative Support: Vinhloc Nguyen —Administrative Associate 1 1 1
Board Email: hrb@cityofpaloalto.org
Mailing Address: 250 Hamilton Avenue, Fifth Floor, Palo Alto, CA 94301
(650) 329-2336
(650) 329-2218
Name Phone Appointed Term Ends
David Bower (650) 329-8564 (o) 06/04/2007 12/15/2022
Gogo Heinrich 03/01/2021 12/15/2023
Michael Makinen 10/13/1999 12/15/2023
Christian Pease (VC) 12/16/2019 12/15/2022
Vacant 12/15/2022
Caroline Willis (C) 03/01/2021 12/15/2023
Margaret Wimmer (650) 646-1610 (c) 06/10/2013 12/15/2023
51 Page
HUMAN RELATIONS COMMISSION (HRC)
Regular meetings are held at 6:00 P.M. on the second Thursday of each month and are
cablecast live in most cases on Government Channels 26 or 29. Terms are for three years. See
PAMC Sections 2.16 and 2.22.
Council Liaison: Council Member Greer Stone
Staff Liaison: Minka van der Zwaag — Manager of Human Services
Administrative Support: Mary Constantino — Program Assistant 11
Commission Email: hrc@cityofpaloalto.org
Mailing Address: 4000 Middlefield Road, Room T2, Palo Alto, CA 94301
(650) 463-4953
(650) 463-4906
Name Phone Appointed Term Ends
Adriana Eberle (650) 461-9066 05/10/2021 05/31/2024
Michelle Kraus (650) 218-5540 (c) 05/10/2021 05/31/2024
Patricia Regehr (650) 681-9478 (c) 06/21/2019 05/31/2022
Daryl Savage (650) 463-4906 05/20/2019 05/31/2022
Kaloma Smith (C) (914) 374-4255 (c) 06/01/2018 05/31/2024
PALO ALTO MEDIATION PROGRAM
Created by the Human Relations Commission (HRC) in September 1973 and charged with
facilitating the resolution of rental housing and community disputes. Regular meetings are held
at 7:15 P.M. on the third Thursday of each month.
HRC Liaison: Kaloma Smith — Human Relations Commissioner
Staff Liaison: Minka van der Zwaag — Manager of Human Services, Community Services
(650) 463-4953
PALO ALTO YOUTH COUNCIL
Created by the Human Relations Commission at the direction of City Council in March 1979 and
restructured at the direction of City Council in December 1983. The Youth Council is charged
with representing the issues and concerns of youth to municipal government. Regular meetings
are held at 5:00 P.M. every Tuesday at the Mitchell Park Community Center.
Council Liaison: Council Member Greer Stone
Staff Liaison: Adam Howard — Manager, Community Services (650) 329-2192
61 Page
PARKS AND RECREATION COMMISSION (PRC)
Regular meetings are at 7:00 P.M. on the fourth Tuesday of each month and are cablecast live
in most cases on Government Channels 26 or 29. Terms are for three years. See PAMC Sections
2.16 and 2.25.
Council Liaison: Council Member Lydia Kou
Staff Liaison: Daren Anderson —Assistant Director of Community Services (650) 496-6950
Administrative Support: Catherine Bourquin— Recreation Coordinator (650) 496-6962
Commission Email: parkrec.commission@cityofpaloalto.org
Mailing Address: 1305 Middlefield Road, Unit 1, Palo Alto, CA 94301
Name Phone Appointed Term Ends
Anne Warner Cribbs (C) (415) 264-2067 (c) 12/16/2015 12/15/2021
Jeff Greenfield (VC) (650) 766-0511 (c) 02/13/2017 12/15/2021
Jeff LaMere (650) 714-6571 (c) 02/13/2017 12/15/2022
Amanda Brown (650) 799-4928 (h) 12/14/2020 12/15/2022
David Moss (650) 494-7234 (h) 12/16/2015 12/15/2021
Vacant 12/15/2022
Keith Reckdahl (650) 575-1981 (c) 02/11/2013 12/15/2022
PLANNING AND TRANSPORTATION COMMISSION (PTC)
Regular meetings are held at 6:00 P.M. on the second and last Wednesdays of each month and
are cablecast live in most cases on Government Channels 26 or 29. Terms are for four years.
See PAMC Sections 2.16, 2.20, and 19.04.
Staff Liaison: Rachael Tanner —Assistant Director, Planning & Development Services
(650) 329-2167
Administrative Support: Vinhloc Nguyen —Administrative Associate I I I (650) 329-2218
Commission Email: planning.commission@cityofpaloalto.org
Mailing Address: 250 Hamilton Avenue, Fifth Floor, Palo Alto, CA 94301
Name Phone Appointed Term Ends
Michael Alcheck (650) 260-8451 (c) 07/23/2012 12/15/2021
Bryna Chang (650) 785-2188 (c) 03/22/2021 12/15/2021
Barton Hechtman (C) (408) 482-1785 (c) 12/16/2019 12/15/2023
Ed Lauing (650) 327-8890 (h) 12/16/2016 12/15/2024
Giselle Roohparvar (VC) (650) 733-8728 (c) 12/16/2018 12/15/2022
Doria Summa (650) 858-2920 12/16/2016 12/15/2024
Cari Templeton 12/16/2018 12/15/2022
71 Page
PUBLIC ART COMMISSION (PAC)
Regular meetings are held at 7:00 P.M. on the third Thursday of each month and are cablecast
live in most cases on Government Channels 26 or 29. Terms are for three years. See PAMC
Sections 2.16, 2.18, and 2.26.
Council Liaison: Mayor Tom DuBois
Staff Liaison: Elise DeMarzo —Senior Manager, Community Services (650) 617-3517
Administrative Support: Nadya Chuprina — Program Assistant II (650) 329-2227
Commission Email: pac@cityofpaloalto.org
Mailing Address: 1313 Newell Road, Palo Alto, CA 94303
Name Phone Appointed Term Ends
Loren Gordon (VC) (650) 269-6489 (c) 05/05/2015 05/31/2024
Ben Miyaji (408) 691-1655 (c) 06/10/2013 05/31/2024
Hsinya Shen (650) 888-7052 (c) 06/01/2017 05/31/2023
Nia Taylor (C) (650) 380-5991 (c) 05/01/2014 05/31/2023
Lisa Waltuch (917) 543-3159 (c) 05/10/2021 05/31/2024
STORM WATER MANAGEMENT OVERSIGHT COMMITTEE (SWMOC)
Meetings are held as needed. Terms are for four years. See Palo Alto Resolution 9677.
Staff Liaison: Karin North — Watershed Protection Manager (650) 329-2104
Mailing Address: 250 Hamilton Avenue, Sixth Floor, Palo Alto, CA 94301
Name Phone Appointed Term Ends
David Bower (650) 329-8564 (h) 09/11/2017 05/31/2023
Marilyn Keller (650) 575-6253 (h) 09/11/2017 05/31/2023
Hal Mickelson (C) (650) 868-2938 (c) 09/11/2017 05/31/2025
Dena Mossar (VC) (650) 575-0990 (c) 09/11/2017 05/31/2025
Ron Owes (206) 595-5983 (c) 05/20/2019 05/31/2023
Catherine Perman 05/20/2021 05/31/2025
Bob Wenzlau (650) 248-4467 (c) 09/11/2017 05/31/2025
81 Page
UTILITIES ADVISORY COMMISSION (UAC)
Regular meetings are held at 4:00 P.M. on the first Wednesday of each month and are cablecast
live in most cases on Government Channels 26 or 29. Terms are for three years. See PAMC
Sections 2.16 and 2.23.
Council Liaison: Council Member Eric Filseth
Staff Liaison: Dean Batchelor — Director of Utilities
Administrative Support: Tabatha Boatwright —Administrative Assistant
Commission Email: uac@cityofpaloalto.org
Mailing Address: Third Floor, 250 Hamilton Avenue, Palo Alto, CA 94301
(650) 496-6981
(650) 329-2326
Name Phone Appointed Term Ends
John Bowie (408) 868-8634 (c) 05/10/2021 05/31/2024
Lisa Forssell (C) (410) 310-5422 (c) 06/01/2016 05/31/2023
A.C. Johnston (650) 823-5561 (c) 05/31/2016 05/31/2022
Phil Metz (650) 494-6588 05/10/2021 05/31/2024
Greg Scharff (650) 868-9303 (c) 05/20/2019 05/31/2022
Lauren Segal (VC) 06/01/2017 05/31/2023
Loren Smith (415) 215-7420 (c) 05/20/2019 05/31/2022
EMERGENCY STANDBY COUNCIL
The Standby Emergency Council is composed of former Council Members who have indicated a
willingness to serve in an emergency situation; these individuals are appointed by the City
Council. See PAMC Section 2.12.090.
Name Phone
Bern Beecham
Ladoris Cordell
Peter Drekmeier
Hillary Freeman
Greg Scharff
Greg Schmid
Lanie Wheeler
91 Page
COMMITTEE ASSIGNMENTS
City/School Liaison Committee (CS)
Meets at 8:30 A.M. on the third Thursday of the month.
Staff Liaison: Chantal Cotton -Gaines, Deputy City Manager (650) 329-2572
Vice Mayor Pat Burt (C)
Council Member Greg Tanaka
School Board President Shounak Dharap
School Board Member Jennifer DiBrienza
Don Austin, Superintendent, Palo Alto Unified School District
Council Appointed Officer's Committee (CAO)
Meets on an as needed basis.
Mayor Tom DuBois (C)
Council Member Eric Filseth
Council Member Lydia Kou
Finance Committee (FC)
Meets at 7:00 P.M. on the first and third Tuesdays of the month.
Staff Liaison:
Ed Shikada, City Manager
Kiely Nose, Director Administrative Services/CFO
Vice Mayor Pat Burt
Council Member Alison Cormack (C)
Council Member Eric Filseth
Policy and Services Committee (P&S)
Meets at 7:00 P.M. on the second Tuesday of the month.
(650) 329-2280
(650) 838-2801
Staff Liaison: Chantal Cotton Gaines, Deputy City Manager (650) 329-2403
Council Member Lydia Kou (C)
Council Member Greer Stone
Council Member Greg Tanaka
101 Page
Rail Committee
Meets on an as -needed basis.
Vice Mayor Patrick Burt
Council Member Alison Cormack
Council Member Greg Tanaka
CITY COUNCIL LIAISON ASSIGNMENTS
CITY AND LOCAL
Art Center Foundation Friends of Junior Museum & Zoo
Mayor Tom DuBois Council Member Eric Filseth
Avenidas
Council Member Lydia Kou
Silicon Valley Board of Realtors
Council Member Greg Tanaka
Business Association of California Avenue
(BACA)
Council Member Lydia Kou
Palo Alto Chamber of Commerce
Council Member Greer Stone
Palo Alto Community Child Care
Council Member Alison Cormack
Palo Alto Downtown Business & Professional
Association (BID)
Council Member Eric Filseth
Palo Alto Housing
Vice Mayor Pat Burt
Lytton Gardens
Council Member Greg Tanaka
Neighbors Abroad
Mayor Tom DuBois
Staff Liaison:
Chantal Gaines, Deputy City Manager
(650) 329-2572
Palo Alto/Stanford Citizen Corps Council
Vice Mayor Pat Burt
Council Member Lydia Kou
Youth Liaison
Council Member Greer Stone
111 Page
COUNTY
Bay Area Water Supply & Conservation Agency Santa Clara Valley Water District
(BAWSCA) Board
Council Member Alison Cormack Council Member Greg Tanaka
Joint Recycled Water Committee
Mayor Tom DuBois
Council Member Eric Filseth
Stanford Community Resources Group
Council Member Eric Filseth
Valley Transportation Authority Board
Santa Clara County Cities Association Vice Mayor Pat Burt
Mayor Tom DuBois
Santa Clara County Cities Association,
Legislative Action Committee
Mayor Tom DuBois
Valley Transportation Authority Grand
Boulevard Task Force
Council Member Greg Tanaka
Valley Transportation Authority, Policy
Santa Clara County Emergency Operational Area Advisory Committee
Council Council Member Lydia Kou
Council Member
Palo Alto Transportation Management
Association
Council Member Lydia Kou
121 Page
REGIONAL, STATE AND NATIONAL
Association of Bay Area
Governments (ABAG)
Council Member Greer Stone
Caltrain Policy Maker Committee
Vice Mayor Pat Burt
League of California Cities, Peninsula
Division
Council Member Lydia Kou
Northern California Power Agency (NCPA)
Greg Scharff
Council Member Eric Filseth
Alternate: Dean Batchelor,
Utilities Director (650) 496-6981
Alternate: Debra Lloyd,
Utilities Compliance Manager (650) 329-2369
Alternate: Jon Abendschein,
Assistant Utilities Director (650) 329-2309
Alternate: Heather Dauler,
Senior Resources Planner (650) 329-2214
Santa Cruz 1 Santa Clara Airport Roundtable
Council Member Greer Stone
SFO (San Francisco) Airport Roundtable
Liaison
Council Member Greer Stone
San Francisquito Creek Joint Powers
Authority
Vice Mayor Pat Burt
Council Member Alison Cormack (Alternate)
131 Page
SCHOOL DISTRICTS
Palo Alto Unified School District
School Board elections are held on the first Tuesday after the first Monday in November, in
even -numbered years. School Board terms are for four years. School Board meetings are held
every other Tuesday, no later than 6:30 P.M.
Board of Education
25 Churchill Ave., Palo Alto, CA 94306
(650) 329-3700
pausd.org
Superintendent of Schools: Dr. Donald Austin
Name
Phone Term
Todd Collins (650) 403-2084 11/30/2024
Ken Dauber (Vice President) (650) 906-4340 11/30/2022
Jennifer DiBrienza (917) 501-0930 11/30/2024
Shounak Dharap (President) (650) 575-6484 11/30/2022
Jesse Ladomirak 11/30/2024
Los Altos School District
School Board elections are held on the first Tuesday after the first Monday in November, in
even -numbered years. School Board terms are four years. Regular meetings are held at 7:00
P.M. on the second and fourth Mondays of the month.
201 Covington Road
Los Altos, CA 94024
(650) 947-1150
losaltos.k12.ca.us
141 Page
COUNTY AND STATE GOVERNMENT
Santa Clara County Government
Regular meetings of the Santa Clara Board of Supervisors are held Tuesdays at 9:00 A.M. Palo
Alto is located within the Fifth District. sccgov.org
County Executive
Jeffery V. Smith
70 West Hedding St.
11th Floor
San Jose, CA 95110
(408) 299-5105
Santa Clara County Board of Supervisors
70 West Hedding St.,
10th Floor
San Jose, CA 95110
(408) 299-5001
Term Length 4 years
County Clerk -Recorder
Regina M. Alcomendras
70 West Hedding St.
15t Floor
San Jose, CA 95110
(408) 299-5688
Clerkrecorder@rec.sccgov.org
Name
District
Phone
E -Mail Address
Term
Mike
Wasserman
Cindy Chavez
Otto Lee
Susan Ellenberg
Joe Simitian
President
District 1
District 2
District 3
District 4
(408) 299-5010
(408) 299-5020
(408) 299-5040
District 5 (408) 299-5050
(Palo Alto)
Mike.Wasserman@bos.sccgov.org
Cincly.Chavez@bos.sccgov.org
supervisor.lee@bos.sccgov.org
Susan.Ellenberg@bos.sccgov.org
Joe.Simitian@bos.sccgov.org
December
2022
December
2024
December
2024
December
2022
December
2024
151 Page
California State Government
Governor
Gavin Newsom — Term ends January 6, 2022
Office of the Governor
State Capitol Building, Suite 1173
Sacramento, CA 95814
(916) 445-2841
governor@governor.ca.gov
State Assembly
Palo Alto is located within the 24th Assembly District
Assembly Member Marc Berman (24th District) - Term ends December 2022
Capitol Office
State Assembly
P.O. Box 942849
Sacramento, CA 94249
(916) 319-2024
(916) 319-2124 Fax
assemblymember.berman@assembly.ca.gov
Speaker of the Assembly (63rd District) - Term ends December 2022
Anthony Rendon
State Assembly
State Capitol, P.O. Box 942849
Sacramento, CA 94249
(916) 319-2063
assemblymember.rendon@assembly.ca.gov
District Office
5050 El Camino Real,
Suite 117
Los Altos, CA 94022
(650) 691-2121
(650) 691-2120 Fax
161 Page
State Senate
Palo Alto is located within the 13th Senate District
Senator Josh Becker (13th District) — Term ends December 2024
Capitol Office
State Senate
State Capitol, Room 5035
Sacramento, CA 95814
(916) 651-4013
senator.becker@senate.ca.gov
District Office
1528 South El Camino Real
Suite 303
San Mateo, CA 94402
(650) 212-3313
Senate President Pro-Tempore (24th District) — Term ends December 2024
Maria Elena Durazo
State Senate
State Capitol, Room 205
Sacramento, CA 95814
(916) 651-4024
senator.durazo@senate.ca.gov
171 Page
United States Government
United States Senate
Alex Padilla (D -CA) — Term ends January 2023
Washington D.C. Office
112 Hart Senate Office Building
Washington, DC 20510
(202) 224-3553
(202) 224-2200 Fax
Dianne Feinstein (D -CA) — Term ends January 2025
Washington D.C. Office
331 Hart Senate Office Building
Washington, DC 20510
(202) 224-3841
(202) 224-3954 Fax
feinstein.senate.gov
Local Office
50 United Nations Plaza, Suite 5584
San Francisco, CA 94102
(213) 894-5000
(202) 224-0454 Fax
Local Office
One Post St., Suite 2450
San Francisco, CA 94104
(415) 393-0707
(415) 393-0710 Fax
Unites States Congress
Anna Eshoo (D — 18th Congressional District) — Term ends January 2023
Washington D.C. Office
241 Cannon Building
Washington, DC 20515
(202) 225-8104
(202) 225-8890 Fax
eshoo.house.gov
Local Office
698 Emerson St.
Palo Alto, CA 94301
(650) 323-2984
(650) 323-3498 Fax
Voter Information
Applications for Voter Registration by mail are available from:
County of Santa Clara Registrar of Voters
Department of Elections & Records
PO Box 611360
San Jose, CA 95161
866 -430 -VOTE (8683)
sccvote.org
Office of the City Clerk
City of Palo Alto
250 Hamilton Ave., 7th Floor
Palo Alto, CA 94301
(650) 329-2571
city.clerk@cityofpaloalto.org
cityofpaloalto.org/clerk
181 Page