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HomeMy WebLinkAbout2018-09-10 City Council Agenda PacketCITY OL PALO ALTO REVISED City Council Monday, September 10, 201 8 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. PUBLI C COMMENT Members of the public may speak to agendized items; up to three minutes per speaker, to be determined by the presiding officer. If you wish to address the Council on any issue that is on this agenda, please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item. You are not required to give your name on the speaker card in order to speak to the Council, but it is very helpful. Public comment may be addressed to the full City Council via email at City.Council@citvofpaloalto.orq. TI ME ESTI MATES 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. HEART NGS REQUI RED BY LAW Applicants and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and up to three minutes for concluding remarks after other members of the public have spoken. Call to Order Special Orders of the Day 5:00-5:15 PM 1. Proclamation Declaring the Month of September Emergency Preparedness Month Study Session 5:15-6:15 PM 2. Update From State Legislative Lobbyists on State Legislation 3. 980 Middlefield Road [18PLN-00129]: Request for Prescreening of a Proposal to Amend the Existing Planned Community (PC) 2152 Zoning in Order to Change the Allowed use From Mortuary to a Private Club or Similar use (STAFF REQUESTS THIS ITEM BE CONTINUED TO OCTOBER 1, 2018) 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. Agenda Changes, Additions and Deletions City Manager Comments 6:15-6:25 PM Oral Communications 6:25-6:40 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 6:40-6:45 PM 4. Approval of Action Minutes for the August 20, 2018 Council Meeting Consent Calendar 6:45-6:50 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 5. Adoption of a Resolution Authorizing the Bay Area Water Supply and Conservation Agency to Negotiate With the City and County of San Francisco to Amend the 2009 Water Supply Agreement 6. QUASI-JUDICIAL. 567 Maybell: Recommendation by the Palo Alto Historical Association for a new Street Name for a new 16 -unit Subdivision, (Tract No. 10434). Environmental Assessment: Section 15061(b)(3) not Subject to California Environmental Quality Act (CEQA). Zoning Districts: Two-family Residential (R-2) and Low Density Multiple -family Residence RM-15 7. Approval of an Agreement With Santa Clara Valley Water District, in the Amount of $227,000, for Concrete Channel Lining Repair Along Matadero Creek; and Approval of a $227,000 Water Fund Operating Budget Amendment MEMO 8. Policy and Services Committee Recommendation to Adopt an Ordinance Adding Sections 2.30.620 Through 2.30.690 to Title 2 of the Administrative Code to Establish Criteria and Procedures for Protecting Personal Privacy When Considering the Acquisition and use of Surveillance Technologies, and Provide for Ongoing Monitoring and Reporting 9. Policy and Services Committee Recommendation to Approve the Status Update of the Community Services Department: Fee Schedule Audit 10. SECOND READING: Adoption of an Ordinance to Amend the Contract Between the Board of Administration of the California Public Employees' Retirement System (CaIPERS) and the City of Palo Alto to 2 September 10, 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. Implement the Share of Employer Contribution in Accordance With Section 20516 of the California Government Code (FIRST READING: August 20, 2018 PASSED: 9-0) 11. SECOND READING: Adoption of an Ordinance Adding Chapter 10.62 to Title 10 (Vehicles and Traffic) of the Municipal Code to Regulate Unnecessary Idling of Vehicles (Continued From April 2, 2018 and June 12, 2018) (FIRST READING: July 30, 2018 PASSED: 9-0) 12. SECOND READING: Adoption of an Ordinance Amending Chapter 9.68 (Rental Housing Stabilization) of Title 9 (Public Peace, Morals, and Safety) of the Palo Alto Municipal Code to Require Relocation Assistance for No-fault Eviction for Multifamily Housing Developments Containing 50 or More Rental Units (FIRST READING: August 27, 2018 PASSED 7-1 Tanaka no, Fine Absent) Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 6:50-8:00 PM 13. Approval of Response to the Grand Jury Report on the Affordable Housing Crisis and Discussion of Establishing a Regional Housing Needs Assessment (RHNA) Sub -region 8:00-9:15 PM 14. Colleagues' Memo From Council Members DuBois, Holman, Kou and Wolbach Regarding Strengthening Renter Protection for Palo Alto Residents (Previous Colleagues' Memo Heard on October 16, 2017) Local/State/Federal Legislation Update/Action 9:15-9:30 PM 15. Review and Approval of the Recommended City Positions for the 2018 League of California Cities Resolutions 9:30-10:30 PM MEMO 16. Review and Potential Adoption of Positions on State and Local Measures on the November 6, 2018 Ballot 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. 3 September 10, 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. SUPPLEMENTAL INFORMATION Council and Council Standing Committee Meetings City Council Meeting -Cancellation Sp. Finance Committee Meeting Sp. City Council Meeting - Closed Session Policy and Services Committee Meeting Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Report Conflict of Interest Code Biennial Notice September 3, 2018 September 4, 2018 September 11, 2018 September 11, 2018 City of Palo Alto Investment Activity Report for the Fourth Quarter, Fiscal Year 2018 Palo Alto Fire Department Biannual Performance Report for the Second Half of Fiscal Year 2018 Architectural Review Board, Parks & Recreation Commission, and Planning & Transportation Commission Recruitment Flyer Public Letters to Council Set 1- September 3, 2018 Set 2 -September 10, 2018 4 September 10, 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 (ID # 9505) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 9/10/2018 Summary Title: Proclamation -Emergency Preparedness Month Title: Proclamation Declaring the Month of September Emergency Preparedness Month From: City Manager Lead Department: Office of Emergency Services Attachments: • Emergency Preparedness Month- September City of Palo Alto Page 1 Emergency Preparedness Month — September 2018 WHEREAS, September is National Preparedness month for all hazards: natural disasters, technological and accidental critical incidents, and human -caused threats such as major crime and terrorism; and WHEREAS, the City of Palo Alto wishes to support building resilience in our community and, even though we do not know when or where disasters and emergencies may strike, we do know that we can do more to be prepared for the unexpected; and WHEREAS, many things compete for our attention these days and, while it may seem overwhelming or unimportant to get prepared, we know from experience that taking steps to prepare ahead of time can help you respond better and stay safer during crisis; and WHEREAS, the time and effort you invest now in preparing will help you and your family navigate through and recover quickly from what may come our way at the most unexpected moment. The time to act is now, before the next disaster strikes; and WHEREAS, the City of Palo Alto's Office of Emergency Services (OES) supports our Emergency Services Volunteer (ESV) program which includes Amateur Radio (ham) operators, Block Preparedness Coordinators (which includes Neighborhood Watch crime prevention program), and our Community Emergency Response Team (CERT). There is a role for neighbors, businesses, and non -government organizations in volunteering or otherwise helping to improve our community's resilience. NOW, THEREFORE, I, Liz Kniss, Mayor of the City of Palo Alto on behalf of the City Council do hereby declare the month of September to be Emergency Preparedness Month in the City of Palo Alto, and call upon all citizens of the Palo Alto Community to join together as we support this annual National Preparedness Month sponsored nationally by the Department of Homeland Security and by taking steps to be prepared, starting by visiting www.cityofpaloalto.org/preparedness. Presented: September 10, 2018 Liz Kniss Mayor CITY of City of Palo Alto (ID # 9196) PALO ALT© City Council Staff Report Report Type: Study Session Meeting Date: 9/10/2018 Summary Title: 980 Middlefield Road: Prescreening for PC Amendment Title: 980 Middlefield Road [18PLN-00129]: Request for Prescreening of a Proposal to Amend the Existing Planned Community (PC) 2152 Zoning in Order to Change the Allowed Use From Mortuary to a Private Club or Similar Use with Collaborative Office Workspaces and Areas for Workshops and Special Events. The Study Session Will Give the Council and the Community an Opportunity to Comment on the Applicant's Proposal Prior to Submittal of a Formal Application. Environmental Assessment: Not a Project; any subsequent formal application would be subject to the California Environmental Quality Act (CEQA). Zoning District: PC 2152 From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that Council conduct a preliminary review ("prescreening") and Councilmembers provide informal comments regarding the applicant's request to make changes to the Planned Community (PC) 2152 zoning. In addition, staff seeks Councilmembers' input on the proposed site improvements. Comments provided in the course of a prescreening are not binding on the City or the applicant. Executive Summary The applicant seeks preliminary feedback from the City Council concerning a proposal to amend the PC 2152 zoning for the subject parcel, located at the corner of Middlefield Road and Addison Avenue. The proposal includes changes to the development plan and to the proposed use of the site. The Comprehensive Plan land use designation is multi -family, while the site is currently zoned for use as a mortuary. The applicant proposes interior and exterior alterations to the existing building for its reuse as a private club or similar use that provides co-working/office space, areas for workshops and small City of Palo Alto Page 1 classes, and space for lectures and speaker events, among other uses, as described in further detail in the applicant's project description in Attachment E. The project also includes exterior facade and site design modifications. A prescreening review is required for legislative changes, including PC amendments, prior to application submittal in accordance with Palo Alto Municipal Code (PAMC) Section 18.79.030(A). Prescreenings are intended to solicit early feedback on proposed projects and, like all study sessions, cannot result in any formal action. Background In July 1963, the subject site included three parcels zoned R -3-P, R-3, and R-2, all three of which were rezoned to a Planned Community Zoning (PC 2152) to accommodate the mortuary use. The ordinance outlining the PC 2152 Zoning is included in Attachment B. Permitted uses in this ordinance include "mortuary and necessary related facilities, including off-street parking and employee's residences." Therefore, the proposed use of the site for any primary use other than a mortuary would not be allowed under the existing zoning. In 2014, Council suspended the creation of new planned community districts, but remained open to amendments to previously approved PCs. The project applicant requests Council's preliminary feedback on an amendment to the existing PC Zoning at 980 Middlefield Road. The requirements for PC districts are stated in PAMC Section 18.38. To amend the PC, the Council would need to make the following required findings: (a) The site is so situated, and the use or uses proposed for the site are of such characteristics that the application of general districts or combining districts will not provide sufficient flexibility to allow the proposed development. (b) Development of the site under the provisions of the PC planned community district will result in public benefits not otherwise attainable by application of the regulations of general districts or combining districts. In making the findings required by this section, the planning commission and city council, as appropriate, shall specifically cite the public benefits expected to result from use of the planned community district. (c) The use or uses permitted, and the site development regulations applicable within the district shall be consistent with the Palo Alto Comprehensive Plan, and shall be compatible with existing and potential uses on adjoining sites or within the general vicinity. Project Description A location map of the proposed site is included in Attachment A. The preliminary schematic drawings included in Attachment F communicate a concept plan as is appropriate for this stage of project consideration. As shown in these schematic drawings and noted in the applicant's City of Palo Alto Page 2 project description in Attachment E, the applicant is proposing a modification to the use of the site as well as several modifications to the site design and exterior facades. The applicant's description generally outlines the proposed use of the site as an establishment focused on providing "a vibrant, welcoming space for traditional and non-traditional professionals to collaborate, work, learn, find support, build community, and spend time with their families, friends, and neighbors." Use of facilities would mostly be restricted to members. The three main uses are described as collaboration spaces, classes and workshops, and special events, as described further below. The applicant notes that on average, there would be approximately 150 members/guests utilizing the site at any given time during the day and 125 people using the site in the evening or on the weekend. However, the applicant proposes a maximum concurrent number of people that may use the site at up to 300 people during the day and up to 400 people during the evening or weekend hours. The applicant anticipates four to eight full time employees and ten to twenty part-time employees to manage the facility. The hours of operation would generally be 7:00 a.m. to 7:00 p.m. seven days a week, but the applicant notes that (1) the people using the office space would arrive earlier and/or depart later, and (2) special events and classes may occur outside of those hours. The project description seems to anticipate outdoor events with amplified sound occurring until 9 p.m. Sunday through Thursday, and until 10 p.m. Friday and Saturday. Indoor events are anticipated to last until midnight. Proposed exterior modifications to the building would primarily include the creation of a new drop-off area parallel to Addison Avenue, revisions to the parking area; the addition of a new play area; and revisions to the exterior facades. The interior floor plan would be redesigned to include individual and co -working spaces, classroom areas, a gallery, a small gym, a multipurpose room with a stage, and kitchen areas. Classes and Workshops The applicant states that the facility would host up to 20 classes per day for youth and adults with up to 25 attendees per class. Types of classes could include music classes, visual and/or performing art programs, cooking, professional development, dance, fitness, health/wellness, language or academic/tutoring programs. Participation of classes would require pre -registration and registration fees. Some classes would be open to all members of the public while others would be open to those paying for regular membership of the facility. Collaboration Space The majority of the interior would be redesigned to accommodate co-working/office space with several adjacent conference/meeting room spaces. Approximately 100 people would have access (through membership) to the co -working and other breakout space monthly. The applicant states that, although there would be up to 100 members, they anticipate that no more than 50 people would utilize this collaboration space at any given time throughout the City of Palo Alto Page 3 day because they would arrive and depart at various times. The facility would also offer food and beverage options to members and guests and include spaces that would be ancillary to the office use, including a fitness room, an atrium/lounge area, garden and outdoor space, and a patio area with tables. Special Events The applicant proposes up to ten events per week with up to 75 attendees, no more than 250 times per year, and up to four events per week with more than 75 attendees, no more than 150 times per year. As stated in the project description, the organization would offer membership to the public. The applicant also explains that, as a community benefit, the rental space would: • be made available for non-profit and/or charity events at least twelve times a year; • host free and under -market rate classes, workshops, or other events for the public community at least six times per year; and • host, free of charge, at least ten meetings and/or small gatherings per year for the purpose of community outreach, volunteering, charity or other like uses. The project site currently consists of three parcels. It is anticipated that any formal application would also include a request to merge the three lots. Therefore, the project data on the conceptual plans reflects the area of the resulting merged lot. Surrounding Uses Adjacent zoning and uses include Addison Elementary School on a PF zoned parcel to the South (across Addison Avenue), single-family residential uses to the east in the R-1 zone district (across Middlefield Road), and multi -family residential uses to the north and east on a large parcel zoned PC 2836. Surrounding buildings generally range from one to two stories in height. Discussion Staff has identified the following key considerations for Council, and summarizes each below: A. Conformance with the Comprehensive Plan and Zoning Designation; B. Traffic and Parking; C. Historical Evaluation; and D. Public Comments Conformance with Comprehensive Plan and Zoning Designation The project site is designated multi -family residential on the Comprehensive Plan Land Use Map. The definition in the Land Use and Community Design Element for this designation does not speak to uses other than housing; however, the City's Zoning Code does allow for some additional uses within residential zoned districts either by right or with approval of a City of Palo Alto Page 4 Conditional Use Permit. It should be noted that the City defines community center in Palo Alto Municipal Code (PAMC) Section 18.04.030(34) as "a place, structure, area, or other facility used for and providing religious, fraternal, social and/or recreational programs generally open to the public and designed to accommodate and serve significant segments of the community." Though the applicant likens the proposed use to a community center, it is not clear that the project, as currently proposed, meets the City's definition of a community center. Membership is generally open to the public and the applicant has offered, as a community benefit, use of the site on a limited basis to non-members. However, use of the facilities is generally restricted to paying members, and membership is limited. Therefore, the proposed use may also be considered a private club use, which is permitted in certain districts, but not specifically defined in the municipal code. In addition, a significant portion of the floor plan is dedicated to co -working use, which may not be consistent with either a community center or a private club use. The co - working use and ancillary space is most consistent with the definition of general office use and; therefore, the use would likely be subject to the citywide office/Research and Development cap requirements, which limits the addition of new office space in the City to 50,000 square feet of new space per year. Staff notes that the residential zoning regulations in the City's Zoning Code do allow Community Centers as a conditionally permitted use in any residential district, while private club uses are conditionally permitted only in the RM-40 district. Office uses (other than home occupation) are not permitted in any residential zones. The current PC 2152 Zoning only allows a mortuary use; therefore, an amendment to the PC would be required to accommodate the proposed use. Because the project proponent seeks to amend an existing PC zone, any use may be considered by the City Council. Traffic and Parking There are currently 45 parking spaces provided on the site. The proposed project would reduce the number of on -site parking spaces to 36 spaces. For a private club use, the City's Zoning Code typically requires one space for each four seats, or four person capacity, based on maximum use of all spaces at any one time. Office spaces typically require one space per 250 square feet of gross floor area. The applicant has stated that up to 150 people would be anticipated to use the facilities on average throughout the day, a maximum of 300 people may utilize the space during regular work/school hours, and up to 400 people may utilize the space during evening or weekend hours. The applicant notes that the facility would "encourage walking, biking, rideshare, carpooling, or public transportation for all patrons" and notes that the neighborhood is walkable. The applicant also states that they may utilize off -site lots and shuttles and/or valet parking for large events. However, even with special accommodations for larger events, as currently proposed, it is not clear that the proposed parking would be sufficient to accommodate the day-to-day use at the site. City of Palo Alto Page 5 If there is Council interest in changing the current PC zoning, staff would recommend that as part of any future project, specific parameters be defined for the use of the facility in order to ensure that the number of parking spaces is appropriate for the maximum anticipated number of users at any given time. Staff also notes that the American's with Disabilities Act (ADA) compliant spaces on the plans do not appear to meet the City's municipal code or California Building Code requirements. Therefore, further consideration of the parking layout would also be necessary as part of any formal application. Staff also notes that the proposed size and hours of operations could be impactful to operation of Addison Elementary. Further consideration and coordination with the school would be required as part of any formal application to ensure the proposed operation of the facility would not conflict with school operations. The project also includes changes to the site to create a drop-off area, which would require a new curb cut on Addison Avenue. This drop-off zone would allow transit network companies (e.g. uber, lyft, etc.) or parents with children to drop-off and pick-up passengers without impacting traffic flow on Addison Avenue. Further analysis of pick-ups and drop-offs, in coordination with the City's Transportation Division, would be required as part of any formal application, to ensure that the site is designed appropriately to prevent queueing from impacting local vehicular circulation. The applicant notes that during construction, workers would park on site, and arrival and departure times would be scheduled to avoid school pick-ups and drop-offs. The applicant is also aware of concurrent construction activities occurring at Addison Elementary and anticipates further coordination with Addison Elementary School's contractor to reduce cumulative construction impacts to the neighbors and school. Historical Evaluation The City contracted with Page & Turnbull to prepare a Historic Resource Evaluation (HRE) for the existing buildings on the subject parcels. The HRE prepared for these properties is included in Attachment D. The HRE concludes that the existing mortuary building is eligible for listing in the California Register of Historic Resources (CRHR) under Criterion 3, Architecture/Design, for its "distinctive Midcentury Modern design, as a midcentury property type, and as work of architect Leslie Nichols." As described further in the report Leslie I. Nichols was a prominent local architect best known for designing the Palo Alto City Hall at 1313 Newell Road (now the Palo Alto Art Center). Characteristic Midcentury Modern elements include projecting eaves, cantilevered overhangs, flat roof forms, a vaulted roof form, an articulated primary facade, wood siding, brick veneer, stones used as accent material, and several other features seen on this building. Because the building is found to meet the criteria for eligibility for the California Register of Historic Resources (CRHR), site and building exterior modifications would be required to comply with the Secretary of the Interior's Standards for Rehabilitation (Standards), which would require modifications to the proposed fagade revisions as part of any formal City of Palo Alto Page 6 application. If the plans are not modified for compliance with the Standards, preparation of an environmental analysis analyzing the project's significant impact on a historic resource would be necessary. Public Comment Several public comments were received following noticing of this prescreening application. Some of these comments were provided verbally; written comments are included in Attachment C. One nearby resident wanted to better understand how the site would be used, expressing that they would not be supportive of an office use but may be supportive of a true community center use. This same resident and one additional nearby resident expressed that, in the past, the site has been used for unpermitted events that have generated excessive noise and traffic and impacted parking in the vicinity. Therefore, the neighbors want to better understand the parking and noise impacts of the proposed project. In addition, two members of the public noted that construction is anticipated over the next two years at Addison Elementary and in the adjacent right-of-way. Therefore, if a formal application is approved, construction at 980 Middlefield Road might coincide with construction activities at the elementary school. As part of any formal application, staff would further assess the potential impacts of noise, traffic, and parking associated with construction, especially simultaneous construction with the adjacent elementary school, as well as those impacts associated with the ongoing use of the site. Timeline Following the prescreening review, the applicant will consider Council's comments and determine how they want to proceed. Any formal application would be subject to the Planning and Transportation Commission (PTC) and Council's purview, similar to a zoning code text amendment process. Physical changes to the site are also anticipated to require a recommendation from the Architectural Review Board (ARB) as part of the Architectural Review process and may also require a recommendation from the Historical Resources Board (HRB). Environmental Review The prescreening is a preliminary review process in which Councilmembers may provide comment, but no formal action will be taken. Therefore, no review under the California Environmental Quality Action (CEQA) is required at this time. A full review under CEQA would be initiated with the formal filing of a development application. Attachments: Attachment A: Location Map(PDF) Attachment B: Planned Community (PC) Ordinance 2152 (PDF) City of Palo Alto Page 7 Attachment C: Public Comments (PDF) Attachment D: Historic Resource Evaluation (PDF) Attachment E: Project Description (PDF) Attachment F: Project Plans (DOCX) City of Palo Alto Page 8 Legend Assessment Parcel Historic Site Special Setback abc Known Structures • Tree (TR) Zone Districts Q Project Site chodgki, 2018-05-17 09:09:26 (\\cc-maps\Encompass Wdmin\Persona0Pianning.mdb) This document is a graphic representation only of best available sources. The City of Palo Alto assumes no responsibility for any errors 01989 to 2016 City of Palo Alto (e) ORDIN NCE NO. 2152 ORDINANCE OF THE Ci rUNC1L OF THE CITY OF PALO ALTO AMENDING SECTION 3 02 OF ORDINANCE NO. 1324, THE ZONING ORDINANCE, i.HANCING THE ZONING OF CERTAIN PROPERTY KNOWN AS °180 MIDDLEFIELD ROAD FROM R -3-P, R-3 AND R-2 TO P -C The Council of they City of Palo Alto does ORDAIN as follows: SECTION 1. Section 3,0,, the Zoning Map, of the Zoning Ordinance No, 1324, is hereb'• amended to change a district from R -3-P, R-3 and R-2 to P -C fo- the property at 98O Middlefield Road. SECTION 2. A map descr .bin said affected property and the zonechange contemplated d her by, and a Development Plan under Section 16.07 of the Zoning ►rdinance is affixed hereto, marked EXHIBIT A and by reference m.Lde a part hereof. SECTION 3. The Developrent Plan is approved in accordance with the .following condition;: (a) Permitted Uses (b) The permitted use related facilities employees' res i.den Nature of Deve:lopm Off-street parking dimension, and heig indicated on the a Khali be a mortuary and necessary including off-street parking and es. ?nt : landscaping, building location It shall be substantially as )proved development plan. (c) Signs: Signs shall be lirLted to those signs existing on the premises. (d) Exterior Li sting: Exterior lighting than be designed, constructed, and installed in such a manner as to protect neighboring residential proper :i.es . Development Schedu.e: Construction towar a completion of theentire complex shall begin withit six months from Coun it approval and shall be completed within one year thereafter. 1 4 4. SECTION 4. This ordi3 sauce shall become effective upon the expiration of thirty da:s from its passage. INTRODUCED: July 9;, 1963 July 22, 1963 by Unanimous vote PASSED: ATTEST: ^ t . ::>41 City Cier APPROVED AS TO FORM: i. t y APPROVED /. ann ng L p = tmen AP PROVED : 2 '` 1 A 'i) •' F ,�- 41 7 19"3 From: Kunjan Shah To: Hodgkins. (faire Cc: Tom Hodges Subject: Re: 980 Middlefield Road Question Date: Wednesday, May 09, 2018 1:35:25 PM Attachments: image001.jpg Hi Claire, My boss - Tom Hodges is copied here. Please reach out to him to coordinate when the 980 Middlefield projects starts the Planning entitlement process. Thank you very much for taking the time to explain everything so well! K. Kunjan Shah fs3lHodges 714.864.8186 Experience. Trust. On Tue, May 8, 2018 at 3:20 PM, Hodgkins, Claire <Claire.Hodgkins@cityofpaloalto.org> wrote: Good afternoon Kunjan, I wanted to follow up on an e-mail you had sent to Amy French a few weeks back. I'm not sure if she has already responded to you but this project ended up being assigned to me at intake so I wanted to follow up and make sure you received a complete answer to your question. First, I want to clarify that the current 980 Middlefield Road proposal for a prescreening with Council is not a formal application in that the applicant is currently seeking preliminary feedback from Council and whether there would be any interest from them/the city in considering this proposed project. Council would not make any formal decision on the project they would only provide comments. Based on those comments, the applicant will choose whether to move forward with filing a formal application or not. It's difficult to assess the exact process and how long it may take given that the project may change significantly based on input from Council and the findings of a historic evaluation. However, I think it will likely take up to six months to process any entitlements, and if approved, another month or two to process the building permit so the answer is yes, it is possible that if approved, construction could start within the next two years. The prescreening is on June 11, 2018 so we will know more after we receive comments from Council. I will highlight your concerns as part of my staff report to Council. I will be sure to keep you in the loop if/when a formal application is filed. Feel free to contact me if you have any further questions. Regards, Claire Claire Hodgkins, Associate Planner 250 Hamilton Avenue 1 Palo Alto. CA 94301 0: 650-329-21161E: claire.hodgkinsncityofpaloalto.org French, Amy From: Kunjan Shah <kunjan@fs3h.com> Sent: Tuesday, April 17, 2018 11:48 AM To: French, Amy Subject: 980 Middlefield Road HI Amy, I am the project manager for the PAUSD Addison Elementary School modernization project across the road from 980 Middlefield. The Addison project will start construction on June 4, the 1st day of summer break. We were just informed of the upcoming project at 980 Middlefield and I was writing to get some information on the timeline. Is the pre-screening being conducted for a possible zoning variance? My intent is to try and guage if there is any possibility of construction on this project starting while the 2-yr long project at Addison is underway. If possible, could you please give me a call to discuss? My cell: 510-2999382. Thank you for your help! Kunjan Shah fs3lHodges 510.299.9382 Experience. Trust. 1 French, Amy From: Peter Phillips <pkphillips@gmail.com> Sent: Tuesday, April 17, 2018 10:34 AM To: French, Amy Subject: Project at 980 Middlefield Road Hi Amy, We met a few yrs ago about the Addison Elem remodel project. Recently some signs went up at 980 Middlefield - the previous mortuary. We are about to start construction - June of this year - lasting for approx 2yrs. The work that is planned for 980 Middlefield - will that require construction and if so when is that anticipated? A concern is with two construction projects occurring at the same time that close to one another - the limited parking around will be impacted. Thanks, - Peter From: Peter Phillips To: Hodgkins. aaire Subject: Re: 980 middlefield Road question Date: Thursday, May 10, 2018 10:46:13 AM Hi Claire, Thanks for your response, I was beginning to wonder as I had not heard from Amy. I knew this was in the early stages of planning, I guess we have to tune in on June 11th to figure out what kind of project is being considered. Peter - Peter On Tue, May 8, 2018 at 3:27 PM, Hodgkins, Claire <Claire.Hodgkins@cityofpaloalto.org> wrote: Peter, I wanted to follow up on an e-mail you had sent to Amy French a few weeks back. I'm not sure if she has already responded to you but this project ended up being assigned to me at intake so I wanted to follow up and make sure you received a complete answer to your question. First, I want to clarify that the current 980 Middlefield Road proposal for a prescreening with Council is not a formal application in that the applicant is currently seeking preliminary feedback from Council and whether there would be any interest from them/the city in considering this proposed project. Council would not make any formal decision on the project they would only provide comments. Based on those comments, the applicant will choose whether to move forward with filing a formal application or not. It's difficult to assess the exact process and how long it may take given that the project may change significantly based on input from Council and the findings of a historic evaluation. Currently there is some remodeling planned but the scope of the remodeling could change. Based on current plans, I think it will likely take up to six months to process any entitlements, and if approved, another month or two to process the building permit so it is possible that, if approved, construction could start within the next two years. The prescreening is on June 11, 2018 so we will know more after we receive comments from Council. I will highlight your concerns as part of my staff report to Council. I will be sure to keep you in the loop if/when a formal application is filed. Feel free to contact me if you have any further questions. 1F t„ PALO ALTO Regards, Claire Claire Hodgkins, Associate Planner 250 Hamilton Avenue 1 Palo Alto, CA 94301 0: 650-329-2116 E: claire.hodgkins@cityofpaloalto.org 980 MIDDLEFIELD ROAD AND 637-45 ADDISON AVENUE HISTORIC RESOURCE EVALUATION PALO ALTO, CALIFORNIA [18144] PREPARED FOR: CITY OF PALO ALTO PAGE &TURNBULL imagining change in historic environments through design, research, and technology AUGUST 8, 2018 Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California TABLE OF CONTENTS I. INTRODUCTION METHODOLOGY 2 SUMMARY OF FINDINGS 2 II. CURRENT HISTORIC STATUS 3 NATIONAL REGISTER OF HISTORIC PLACES 3 CALIFORNIA REGISTER OF HISTORICAL RESOURCES 3 CALIFORNIA HISTORICAL RESOURCE STATUS CODE 3 PALO ALTO HISTORIC INVENTORY 3 PALO ALTO HISTORICAL SURVEY UPDATE 4 III. ARCHITECTURAL DESCRIPTION 6 SURROUNDING NEIGHBORHOOD 16 IV. HISTORIC CONTEXT 19 PALO ALTO HISTORY 19 ROLLER HAPGOOD & TINNEY 22 SITE HISTORY: 980 MIDDLEFIELD ROAD AND 637-45 ADDISON AVENUE 25 CONSTRUCTION CHRONOLOGY 31 MIDCENTURYMODERN STYLE 31 ARCHITECT LESLIE I. NICHOLS (1894- 1969) 32 V. EVALUATION 36 CALIFORNIA REGISTER OF HISTORICAL RESOURCES 36 CHARACTER -DEFINING FEATURES 37 INTEGRITY 38 VI. CONCLUSION 40 VIII. REFERENCES CITED 41 PUBLISHED WORKS 41 UNPUBLISHED RECORDS 42 INTERNET SOURCES 42 August 8, 2018 Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California I. INTRODUCTION This Historic Resource Evaluation (HRE) has been prepared at the request of the City of Palo Alto Planning and Community Environment Department for 980 Middlefield Road (APN 120-05-077) and two associated rear lots addressed 637-45 Addison Avenue (APN 120-05-052 and APN 120-05- 076) in Palo Alto, California (Figure 1 to Figure 2).1 The mortuary building at 980 Middlefield Road (the subject building) was designed by prominent local architect Leslie Nichols and constructed in 1951 by the contracting firm Aro & Okerman. 980 Middlefield Road is located at the junction of the University South and Community Center neighborhoods, immediately west of the Middlefield Road and Addison Avenue intersection. The subject building is set on a square lot; a driveway extends along the northwest edge of the lot and provides access to the rear lots. The rear lots contain a 1964 caretaker residence, a garage, a carport, asphalt parking spaces, and a faux turf lawn. RSITY PARK AVENUE 9 1 P. M. 392- M _.. 19 AVENUE 9 W 39 Figure 1: Assessor Block map. 980 Middlefield Road and rear lots 637-45 Addison Avenue, shaded orange. Source: Santa Clara County Assessor. Edited by Page & Turnbull. 1 Based on the 1949 Sanborn Fire Insurance map, the two lots at 637-45 Addison Avenue previously included 635 and 657 Addison Avenue as well. These (developed) lots were merged to two lots addressed 637-45 Addison Avenue at an unknown date. The rear lots will be referenced as 637-45 Addison Avenue throughout this report. August 8, 2018 -1- Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 2. Aerial view of 980 Middlefield Road and rear lots 637-45 Addison Avenue, shaded orange. Source: Google Earth, 2018. Edited by Page & Turnbull. The subject building has not been previously listed, or found eligible for listing, to the National Register of Historic Places (National Register), California Register of Historical Resources (California Register), or local City of Palo Alto Historic Inventory, nor is it located within the boundaries of any recorded historic district. METHODOLOGY This Historic Resource Evaluation provides a summary of previous historical surveys and ratings, a site description, historic context statement, and an evaluation of the property's individual eligibility for listing in the California Register of Historical Resources. Page & Turnbull prepared this report using research collected at various local repositories, including the Palo Alto Rinconada Public Library, Palo Alto Historical Association, City of Palo Alto Building Inspection, Ancestry.com, and various other online sources. Page & Turnbull conducted a site visit in June 2018 to review the existing conditions and to photograph the property in order to prepare the descriptions and assessments included in this report. All photographs were taken by Page & Turnbull in June 2018, unless otherwise noted. SUMMARY OF FINDINGS Upon evaluation of 980 Middlefield Road and 637-45 Addison Avenue, Page & Turnbull finds the mortuary building at 980 Middlefield Road to be eligible for listing in the California Register of Historical Resources under Criterion 3 (Architecture) for its Midcentury Modern design, as a representative midcentury property type, and as a work of architect Leslie Nichols. Thus, the property appears to qualify as a historic resource for the purposes of review under the California Environmental Quality Act (CEQA). The ancillary buildings and landscape features on the two associated parcels at 637-45 Addison Avenue do not contribute to the mortuary's historic significance or eligibility. August 8, 2018 - 2 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California II. CURRENT HISTORIC STATUS The following section examines the national, state, and local historical ratings currently assigned to 980 Middlefield Road and 637-45 Addison Avenue. NATIONAL REGISTER OF HISTORIC PLACES The National Register of Historic Places (National Register) is the nation's most comprehensive inventory of historic resources. The National Register is administered by the National Park Service and includes buildings, structures, sites, objects, and districts that possess historic, architectural, engineering, archaeological, or cultural significance at the national, state, or local level. 980 Middlefield Road and 637-45 Addison Avenue are not currently listed in the National Register of Historic Places individually or as part of a registered historic district. CALIFORNIA REGISTER OF HISTORICAL RESOURCES The California Register of Historical Resources (California Register) is an inventory of significant architectural, archaeological, and historical resources in the State of California. Resources can be listed in the California Register through a number of methods. State Historical Landmarks and National Register -listed properties are automatically listed in the California Register. Properties can also be nominated to the California Register by local governments, private organizations, or citizens. The evaluative criteria used by the California Register for determining eligibility are closely based on those developed by the National Park Service for the National Register of Historic Places. 980 Middlefield Road and 637-45 Addison Avenue are not currently listed in the California Register of Historical Resources individually or as part of a registered historic district. CALIFORNIA HISTORICAL RESOURCE STATUS CODE Properties listed by, or under review by, the State of California Office of Historic Preservation are assigned a California Historical Resource Status Code (Status Code) between "1" and "7" to establish their historical significance in relation to the National Register of Historic Places (National Register or NR) or California Register of Historical Resources (California Register or CR). Properties with a Status Code of "1" or "2" are either eligible for listing in the California Register or the National Register, or are already listed in one or both of the registers. Properties assigned Status Codes of "3" or "4" appear to be eligible for listing in either register, but normally require more research to support this rating. Properties assigned a Status Code of "5" have typically been determined to be locally significant or to have contextual importance. Properties with a Status Code of "6" are not eligible for listing in either register. Finally, a Status Code of "7" means that the resource either has not been evaluated for the National Register or the California Register, or needs reevaluation. 980 Middlefield Road and 637-45 Addison Avenue are not listed in the California Historical Resources Information System (CHRIS) database as of 2012. This means the property has not been formally evaluated using California Historical Resource Status Codes and/or the status code has not been submitted to the California Office of Historic Preservation. PALO ALTO HISTORIC INVENTORY The City of Palo Alto's Historic Inventory, completed in 1979, lists noteworthy examples of the work of important individual designers and architectural eras and traditions as well as structures whose background is associated with important events in the history of the city, state, or nation. The survey that produced the inventory encompassed approximately 500 properties and was largely limited to areas in and near the historic core of Palo Alto. The inventory is organized under the August 8, 2018 -3- Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California following four Categories: • Category 1: An "Exceptional Building" of pre-eminent national or state importance. These buildings are meritorious works of the best architects, outstanding examples of a specific architectural style, or illustrate stylistic development of architecture in the United States. These buildings have had either no exterior modifications or such minor ones that the overall appearance of the building is in its original character. ■ Category 2: A "Major Building" of regional importance. These buildings are meritorious works of the best architects, outstanding examples of an architectural style, or illustrate stylistic development of architecture in the state or region. A major building may have some exterior modifications, but the original character is retained. • Category 3 or 4: A "Contributing Building" which is a good local example of an architectural style and relates to the character of a neighborhood grouping in scale, materials, proportion or other factors. A contributing building may have had extensive or permanent changes made to the original design, such as inappropriate additions, extensive removal of architectural details, or wooden facades resurfaced in asbestos or stucco. 980 Middlefield Road and 637-45 Addison Avenue are not listed in the Palo Alto Historic Inventory under any category.2 PALO ALTO HISTORICAL SURVEY UPDATE Between 1997 and 2000, a comprehensive update to the 1979 Historic Inventory was undertaken by historic preservation firm Dames & Moore. The goal of this update was to identify additional properties in Palo Alto that were eligible to the National Register. This effort began with a reconnaissance survey of approximately 6,600 properties constructed prior to 1947. The reconnaissance survey produced two Study Priority lists. In January 1999, Dames & Moore prepared an interim findings report that listed preliminary evaluations of the National Register and California Register eligibility of Study Priority 1 and 2 properties.3 Approximately 600 properties were identified as Study Priority 1, indicating they appeared individually eligible for listing in the National Register under Criterion C (Architecture). Approximately 2,700 properties were identified as Study Priority 2, representing those properties that did not appear individually eligible to the National Register under Criterion C (including common local building types) but retained high integrity. The reconnaissance survey was followed by an intensive -level survey of all Study Priority 1 properties.4 Historic research was conducted on the owners, architects/builders, and past uses of the Study Priority 1 properties. Research also informed the preparation of historic context statements on topics such as local property types, significant historical themes, and prolific architects and builders, in order to identify any potential significant associations of Study Priority 2 properties. 291 properties were found potentially eligible as individual resources to the National Register and California Register. 1,789 further properties were found potentially eligible to the California Register only. The survey update effort concluded with California Department of Parks and Recreation (DPR) 523 forms prepared for those 291 properties that initially appeared eligible for listing in the National 2 "Palo Alto Historic Buildings Inventory." http://www.pastheritage.org/inventory.html 3 Dames & Moore. "Study Priority 1 and Study Priority 2 Properties: Preliminary Assessments of Eligibility for the National Register or California Register." Prepared for the City of Palo Alto Planning Division. January 1999. 4 Dames & Moore. "Final Survey Report — Palo Alto Historical Survey Update: August 1997 -August 2000." Prepared for the City of Palo Alto Planning Division. February 2001. August 8, 2018 - 4 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Register. Of the 291 properties, 165 were ultimately found to be eligible to the National Register. These DPR 523 forms were submitted to the California Office of Historic Preservation. Because the survey focused on determining National Register eligibility, the project did not finalize the preliminary evaluations regarding potential California Register eligibility. The City of Palo Alto did not formally adopt any findings from the Dames & Moore study. The subject property was not surveyed due to the fact that 980 Middlefield Road was constructed in 1951, the caretaker's residence at 637 Addison Avenue was constructed in 1964 (both after 1947), and the building at 645 Addison Avenue was demolished in 1976. August 8, 2018 - 5 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California III. ARCHITECTURAL DESCRIPTION The following architectural description applies to 980 Middlefield Road, located west of the Middlefield Road and Addison Avenue intersection in the Palo Alto. The separate, yet associated rear lots are described in the "Landscape Features and Outbuildings" section that follows. The 10,000 square -foot subject parcel is situated on flat land. The one-story midcentury building was constructed in 1951 and features an irregular rectilinear plan. The facades, as described in this report, are outlined in the diagram below (Figure 3). The main, double -height volume of the building is capped with a composite shingle -clad gable roof; the remainder of the building features a multi -level flat roof (Figure 4). All roof portions feature overhanging eaves with wood paneled soffits. The building is primarily clad in stucco and wood siding; a portion of the primary facade features sawtooth stone construction. Fenestration includes wood doors, steel -sash wood -frame casement/fixed windows, fixed wood -sash and wood -frame windows, and fixed ribbon windows. Windows retain their original sashes and frames, unless otherwise noted. Windows are casement, unless otherwise noted as fixed. Maa/PAP/ aka 0 cP ° as P¢ o - ay 47j Pa a,P 0 oC so �e Pa ay 1jj�esJ� G�c, a �,S` O e >,ade <>(' P, e J Pby Figure 3: 980 Middlefield Road, facades labeled and colored. Source: Google Maps, 2018. 0 August 8, 2018 - 6 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 4: 980 Middlefield Road, view looking west from the intersection of Middlefield Road and Addison Avenue. Primary (Northeast) Facade The primary (northeast) facade fronts Middlefield Avenue. The far left (south) portion of the northeast facade consists of a recessed, stuccoed, flat roofed volume containing a primary entrance vestibule (Figure 5 to Figure 6). The recessed primary entrance vestibule contains a wood door with three punched lites, set within a wood surround featuring 16 lites set behind geometric wood screens (Figure 7). To the right of the primary entrance is a southeast -facing plane with an open gable clad in v -pattern wood siding (Figure 8 to Figure 9). A wood -carved geometric relief sits within the gable. A wood pergola structure projects above a stone base planter and the lower portion of the plane, which is clad in vertical wood siding (Figure 10). The recessed stuccoed volume and the southeast -facing gabled plane form two sides of a sheltered entrance courtyard, to be discussed in the "Landscape Features" section to follow. The main, double -height portion of the northeast facade features a stone sawtooth wall (Figure 11). Fixed southeast -facing windows are located within the sawtooth fins, above sections of vertical wood siding (Figure 12). At the far right (north) portion of the facade is a geometric wood screen that shields an opaque fixed window (Figure 13). August 8, 2018 - 7 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 5. Recessed stuccoed portion of primary facade with recessed entrance vestibule at image right, view looking southwest. Figure 6: Recessed stuccoed portion of primary facade with recessed entrance vestibule, view looking southwest. Figure 7: Detail of wood door with punched lites, wood surround, 16-lite geometric wood screen Figure 8. Southeast -facing plane of primary facade, view looking northwest. Figure 9: V -pattern wood siding within southeast -facing open gable, with central geometric relief. August 8, 2018 - 8 - Page & Turnbull, Inc. Historic Resource Evaluation Figure 10: Lower portion of southeast -facing plane, clad in vertical wood siding, situated above a stone base planter. Figure 11: Main sawtooth portion of primary facade fronting Middlefield Avenue, view looking southwest. Figure 12: Sawtooth stone wall with fixed windows above wood siding, view looking northwest. 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 13: Geometric wood screen shielding opaque fixed window, view looking southeast. August 8, 2018 - 9 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Northwest Facade The northwest facade faces an asphalt driveway. The main gabled volume sits at the far left (north) portion of the facade and largely mirrors the southeast -facing gabled plane (Figure 14).5 The central portion of the northwest facade features a recessed vestibule with a deeply cantilevered roof. The recessed vestibule contains two wood doors (Figure 15 to Figure 16). The stone construction of the double -height volume partially wraps around into the recessed vestibule. The right (south) portion of the northwest facade contains a wood single door with opaque glazing and a lower vent, two paired steel -sash wood -frame casement windows flanked by fixed lites, and a wood single door (Figure 16 to Figure 17). Figure 14. Northwest facade, view looking south. Figure 15. Stone wall and wood door leading into double -height volume, view looking northeast. Figure 16: Recessed vestibule with cantilevered roof. Partially glazed door and paired casement windows at image right, view looking south. Figure 17. Two casement windows flanked by fixed lites, and wood door at image right, view looking south. Rear (Southwest) Facade The rear facade features recessed planes at the far left (north) and right (south) (Figure 18). The left recessed portion contains a roll -up wood paneled garage door and a northwest -facing plane with a partially glazed wood door (Figure 19). The central portion of the facade contains two paired metal - sash wood -frame windows flanked by fixed lites, a single casement window, a wood door, and colored glass vertical ribbon windows (Figure 20 to Figure 24). The central portion of the facade also features a multi -level flat roof. Twelve fixed clerestory windows sit above the main overhanging 5 The southeast -facing plane features a stone base planter, whereas the stone base of the northwest facade does not contain a planter. August 8, 2018 - 10 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California eave; a third, smaller, wood -paneled volume sits above the clerestory windows. The right recessed portion of the southwest facade features a recessed vestibule containing a wood door with three punched lites (Figure 25). Figure 18: Rear southwest facade, view looking northeast. Figure 19: Roll -up wood paneled garage door and partially glazed wood door, view looking southeast. Figure 20: Two casement windows with outer fixed lites, view looking east. Figure 21: Single casement window, view looking northeast. Figure 22: Wood door, view looking northeast. August 8, 2018 11 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 23: Central portion of southwest facade, view looking northwest. Figure 24: Detail of stained glass vertical ribbon windows. Figure 25: Recessed vestibule at the far right (south) portion of the southwest facade, view looking northeast. Southeast Facade The southeast facade fronts Addison Avenue (Figure 26). The far left (south) section of the facade features a seven-lite wood -sash and wood -frame fixed window above a brick veneer base. A southwest -facing plane contains a tripartite window consisting of a center fixed lite flanked by two metal -sash wood -frame casement windows (Figure 27). The main portion of the southeast facade contains one five -part window consisting of a center fixed lite flanked by metal -sash casements and fixed lites (Figure 28). August 8, 2018 - 12 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 26: Southeast facsade, view looking northwest. Figure 27: Southeast facsade with southwest - facing plane, view looking northeast. Figure 28: Southeast facade, view looking west. Landscape Features and Outbuildings The subject building at 980 Middlefield Road fills much of its square lot. The courtyard located at the building's primary entrance is bounded by partial -height stone walls with built-in wood benches (Figure 29 to Figure 30). A tree bordered with hedges is located within the courtyard (Figure 31 to Figure 32). Narrow lawn areas located at the southeast and northeast facades contain stepping stones, a partial -height stone wall, and varied trees, shrubs, and hedges (Figure 33 to Figure 34, and Figure 28). An asphalt driveway from Middlefield Road runs along the northwest property line, which is bordered by a wood plank fence (Figure 35 to Figure 36). Rose bushes and topiaries are planted along the main portion of the rear southwest facade (Figure 23). The rear lots are addressed 637-45 Addison Avenue (APN 120-05-052 and APN 120-05-076) and contain a rear caretaker's residence, a garage, a carport, parking spaces, and a turf lawn (Figure 37 to Figure 41). The one-story gabled caretaker residence, the flat -roofed garage, and the shed -roofed carport all feature overhanging wood eaves. The caretaker residence and garage are stucco clad and the carport is clad in vertical wood siding. August 8, 2018 - 13 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 29: Partial -height stone wall with wood bench, view looking north. Figure 30: Partial -height stone wall with wood bench, view looking east. Figure 31: Tree and hedge within courtyard, view looking southeast. Figure 32: Tree and hedge within courtyard, view looking east at Middlefield Road and Addison Avenue. Figure 33: Northeast lawn, view looking northwest. Figure 34: Partial -height stone wall, view looking southeast. August 8, 2018 - 14 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 35: Driveway at northwest facade, view looking southwest. Figure 36: Wood plank fence across from the northwest facade, view looking west. Figure 37: Turf lawn at southwest facade of subject building, view looking southwest. Figure 38: Carport at far end of turf lawn, view looking southwest. Figure 39: One-story caretaker residence at 637-45 Addison Avenue (built 1964). August 8, 2018 - 15 - Page & Turnbull, Inc. Historic Resource Evaluation Figure 40: Garage, view looking northwest. Figure 41: Wood plank fence and garage outbuilding, view looking north. SURROUNDING NEIGHBORHOOD 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California The subject property is located at the junction of the University South and Community Center neighborhoods in Palo Alto. The remainder of the subject block is entirely residential, containing one large apartment complex called Webster Wood Apartments (Figure 42 to Figure 45). Constructed in 1978, Webster Wood Apartments consists of approximately two dozen one- and two-story multi- unit buildings. There are 56 units in tota1.6 There are multiple parking areas which include sheltered carports. The subject lot appears to contain two buildings within the Webster Wood Apartments complex that do not date to 1978: 940 Middlefield Road and 664 Charming Avenue (Figure 46 to Figure 47).7 Southeast of the subject property is Addison Elementary at 650 Addison Avenue, built in 1925 in the Spanish Colonial Revival style (Figure 48). The school takes up the full block bounded by Addison Avenue, Middlefield Road, Lincoln Avenue, and Webster Street. Northeast of the subject property are one story bungalows at 953 Middlefield Road (vernacular style, built 1922) and 703 Addison Avenue (Craftsman style, built 1922) (Figure 49 to Figure 50). None of the buildings described above are listed in the Palo Alto Historic Buildings Inventory. 6 "Webster Wood Apartments." https://www.apartmentfinder.com/California/Palo-Alto- Apartments/ Webster -Wood -Apartments. 7 These buildings are addressed as 940 Middlefield Road and 664 Channing Avenue on Google Maps. Based on Sanborn maps, 664 Channing Avenue dates to at least 1908, and 940 Middlefield Road dates to at least 9149. Sanborn maps indicate that 664 Channing Avenue was addressed 654 Charming Avenue in 1908, 654-56 Channing Avenue in 1924, and 656 Channing Avenue in 1949. 940 Middlefield Road was addressed 936 Middlefield Road in 1949. August 8, 2018 - 16 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 42: Webster Wood Apartments. Figure 43: Webster Wood Apartments. Figure 44: Webster Wood Apartments. Source: Apartments.com Figure 45: Webster Wood Apartments. Source: Apartments.com Figure 46: 940 Middlefield Road. Figure 47: 664 Channing Avenue. August 8, 2018 - 17 - Page dam' Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 48: Addison Elementary School (built 1925), shaded red. Red arrow pointing to 980 Middlefield Road across Addison Avenue. Source: Google Maps, 2018. Figure 49: 953 Middlefield Road (built 1922). Figure 50: 703 Addison Avenue (built 1922). August 8, 2018 - 18 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California IV. HISTORIC CONTEXT PALO ALTO HISTORY The earliest known inhabitants of the current -day location of Palo Alto area were the Ohlone people. The region was colonized by Gaspar de Portola in 1769 as part of the Spanish territory of Alta California. The Spanish and Mexican governments carved the area into large ranchos, and the land that later became Palo Alto belonged to several of these land grants, including Rancho Corte Madera, Rancho Pastoria de las Borregas, Rancho Rincon de San Francisquito, and Rancho Rinconada del Arroyo de San Francisquito.8 The Rancho Rinconada del Arroyo de San Francisquito encompassed more than 2,200 acres and covered all of the original Palo Alto town site. The northern boundary of the rancho was defined by San Francisquito Creek, while the southwestern boundary was located near El Camino Real, and the southeastern boundary lay parallel to the current -day Embarcadero Road.9 These land grants were honored in the cession of California to the United States during the 1840s, but parcels were subdivided and sold throughout the nineteenth century. The earliest township within the current boundaries of Palo Alto was called Mayfield. In 1882, railroad magnate and California politician, Leland Stanford, purchased 1,000 acres adjacent to Mayfield to add to his large estate in northwestern Santa Clara County. Stanford's vast holdings became known as the Palo Alto Stock Farm. After Leland and Jane Stanford's teenage son, Leland Jr., died in 1884, the couple chose to create a university in his honor. The Stanfords wanted a co- educational and non -denominational university, which contrasted with many contemporary institutions.1° On March 9, 1885, the university was founded through an endowment act by the California Assembly and Senate. Using their Stock Farm land, the Stanfords began constructing Leland Stanford Junior University, which ultimately opened in 1891. While the university was in its planning stages, Leland Stanford considered Mayfield an appropriate service town to support the school's operations. However, the Stanfords believed that the university's mission and community would be negatively affected by the presence of alcohol.11 With 13 popular saloons then operating in the town, Mayfield rejected the Stanfords' request to go dry. Seeking an alternative, Stanford decided in 1894 to found the town of Palo Alto with help from his friend Timothy Hopkins of the Southern Pacific Railroad. Hopkins purchased and subdivided 740 acres of the former Rancho Rinconada del Arroyo de San Francisquito.12 Known as both the Hopkins Tract and University Park, the townsite was bounded by the San Francisquito Creek to the north, the railroad tracks and Stanford University campus to the southwest, and Embarcadero Road to the south (Figure 51). 8 "Palo Alto, California," Wikipedia. http://en.wikipedia.org/wiki/Palo_Alto,_California#cite_note-12. 9 Ward Winslow and the Palo Alto Historical Association, Palo Alto: A Centennial History (Palo Alto Historical Association: Palo Alto, CA, 1993), 16-17. 10 "History of Stanford," Stanford University. http://www.stanford.edu/about/history/. 11 "A Flash History of Palo Alto," Quora. http://www.quora.com/How-is-the-historical-city-Mayfield-CA- related-to-Palo-Alto-CA. 12 "Comprehensive Plan," City of Palo Alto, section L-3. August 8, 2018 - 19 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 51. Map of the original Palo Alto townsite. Source: Branner Earth Sciences Library and Map Collections, Stanford University. Following the Stanford's wishes, Palo Alto was founded as a temperance town where no alcohol could be served. A new train stop was created along University Avenue, and the new town flourished around the young university. Palo Alto grew to be much more prosperous than its southeastern neighbor, Mayfield. Many people who were employed at Stanford University chose to move to Palo Alto, which was considered the safer and more desirable alternative of the two towns.13 The residents were mostly middle and working class, with a pocket of Stanford faculty members clustered in the neighborhood named Professorville. The development of a local streetcar in 1906 and the interurban railway to San Jose in 1910 facilitated access to jobs outside the city and to the university campus, encouraging more people to move to Palo Alto.14 Mayfield continued its decline, and its residents voted to become a "dry" town in 1904 —although allowed the Mayfield Brewery to continue operation. However, the town was plagued by financial issues and could not compete with Palo Alto's growth. In July 1925, Mayfield was officially annexed into the city of Palo Alto.15 Palo Alto was one of the first California cities to establish a City Planning Commission (CPC). In 1917, this advisory commission considered zoning matters in order to control new development and design within the city. The CPC's purview included regulations on signage, public landscaping and lighting, and residential development. Palo Alto's regulations on development have resulted in its relatively low density and consistent aesthetic. However, zoning controls in the early part of the twentieth century contributed to racial segregation in the city and the exclusion of certain groups from residential areas. Several neighborhoods were created with race -based covenants, which persisted until this practice was ruled unconstitutional in 1948.16 13 Matt Bowling, "The Meeting on the Corner: The Beginning of Mayfield's End," Palo Alto History.org, http: / /www.paloaltohistory.org/the-beginning-of-mayfields-end.php. 14 Dames & Moore, "Final Survey Report — Palo Alto Historical Survey Update: August 1997 -August 2000," prepared for the City of Palo Alto Planning Division, February 2001, 1-4. 15 "A Flash History of Palo Alto," Quora. 16 Dames & Moore, "Final Survey Report," 1-7. August 8, 2018 - 20 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California The depression of the 1930s impacted the design, construction, and financing of buildings across the nation. In many areas, there was little to no building in the 1930s; however, this was not the case in Palo Alto. While Palo Alto did suffer through the Great Depression, new development did not come to a halt. The United States government assisted in providing housing through several programs in the 1930s. Architectural journals and newspapers showed a substantial amount of construction between 1931 and 1944. 800 buildings (including the subject building) were built between these years, most before 1941.17 The United States' involvement in World War II brought an influx of military personnel and their families to the San Francisco Peninsula. When the war ended, Palo Alto saw rapid growth. Many families who had been stationed on the Peninsula by the military or who worked in associated industries chose to stay. Palo Alto's population more than doubled from 16,774 in 1940 to 33,753 in 1953.18 Stanford University was also a steady attraction for residents and development in the city. The city greatly expanded in the late 1940s and 1950s, as new parcels were annexed to house new offices and light industrial uses (Figure 52). As a result of this development, the city evolved somewhat beyond its "college town" reputation.19 Palo Alto annexed a vast area of mostly undeveloped land west of the Foothill Expressway (Interstate 280) between 1959 and 1968. This area has remained protected open space. Small annexations continued into the 1970s. Palo Alto remains closely tied to Stanford University, its largest employer. The technology industry currently dominates other sectors of business, as is the case with most cities within Silicon Valley. NASA CITY of /\,, PALO yI'O 7998 c. z 0 O P 04, • o▪ 1' 1.400 MK' 1951-1952 ANNUAL REPORT Figure 52. The expansion of Palo Alto from 1894 to 1952. Source: Branner Earth Sciences Library and Map Collections, Stanford University. 17 Dames & Moore Final Survey Report Update pg. 1-9. 18 "Depression, War, and the Population Boom," Palo Alto Medical Foundation- Sutter Health, accessed March 24, 2016, http://www.pamf.org/about/pamfhistory/depression.html. 19 "Comprehensive Plan," section L-4. August 8, 2018 - 21 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California ROLLER HAPGOOD & TINNEY Prior to its closure in 2013, Roller Hapgood & Tinney was one of the oldest family -owned and operated funeral homes on the Peninsula and was the oldest in Palo Alto. The business was established in 1899 by Josiah Roller, a San Francisco -based retired cabinet maker who was often called upon to make coffins. He began working for the Nathaniel Gray Company, one of the largest undertaker establishments in San Francisco. Although promotional material produced throughout the twentieth century claims that Roller Hapgood & Tinney was established in 1899, it appears as though Josiah Roller did not open his own establishment in Palo Alto until 1900.20 The Palo Alto Times reported in January 1900 that Roller, a "well known undertaker," would open undertaking parlors in Palo Alto and would bring his family to Palo Alto to reside.21 There appears to have been some resistance to Roller opening an undertaking parlor in a then -residential portion of Palo Alto. A petition was circulated, and many opposed Roller's plan out of fear that "such an establishment would injure the value of their property."22 Despite the opposition, by August 1900, Roller, "Undertaker and Embalmer," had established an office/residence at 421 Margaret Street, and had opened a mortuary chapel and warerooms at 420 Cowper Street.23 Josiah's funeral home business quickly grew. Some accounts report that his son, Arthur Roller, took over the business in 1906 or 1910, but most report that the transfer occurred in 1912, when Josiah fully retired. In 1913, the Roller Undertaking Company secured a Pierce Arrow limousine, "the first fully equipped automobile hearse on the coast" (Figure 53).24 Arthur appears to have then partnered with Frank A. Hapgood by 1913, when the business was re -named Roller & Hapgood 25 Even with the limousine, Roller & Hapgood continued to offer regular horse-drawn service for those uninterested in motorized transport. Figure 53: New and modern ambulance service (ca.1913). Source: Palo Alto Historical Association. In February 1924, Roller & Hapgood announced plans to construct a funeral home at the southwest corner of Cowper Street and University Avenue.26 The new building was completed by August 1924, at a cost of $35,000. As reported in the Palo Alto Times, "the most attractive feature of the new funeral home is the chapel, with a seating capacity of over 100, where services can be held without removal to a church. The chapel is finished along simple Gothic lines, with stained glass windows 20 Palo Alto Daily News (June 9, 1905). 21 Palo Alto Times (January 23, 1900). 22 Palo Alto Live Oak (February 12, 1900). 23 Palo Alto Times (August 10, 1900). 24 Palo Alto Times (January 11, 1913). 25 "New of 25 Years Ago (from files of the Times)" Palo Alto Times (July 27, 1912). 26 "$20,000 Mortuary to be Built by Local Firm," Palo Alto Times (February 22, 1924). August 8, 2018 - 22 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California and the reverent atmosphere of a church auditorium. A choir loft at the rear provides for the musicians. In addition to the reception rooms, which are attractively furnished in subdued taupe, and the chapel, there are the office and workroom on the main floor, a basement display room for caskets and an apartment upstairs for the use of a caretaker."27 In 1946, Arthur Roller's son Willis, and Frank Hapgood's son Robert, became partners. In February 1949, Tom Kearney, former chief of police in Menlo Park, announced his association with Roller & Hapgood- his role at the company is unknown, and the firm name remained unchanged.28 Following Kearney joining the company, Roller & Hapgood purchased a Redwood City funeral home called Franklin & Crowe in late February 1949 and changed the name to Roller, Hapgood & Lorentzen. Articles of incorporation for Roller Hapgood & Lorentzen, Inc., were filed in Sacramento to engage in the mortuary business. Directors of the new company were Arthur Roller and Frank A. Hapgood of 481 University Avenue, Palo Alto, and Laura Lorentzen of 926 Middlefield Road, Redwood City.29 The mortuary at 481 University Avenue in Palo Alto remained as Roller & Hapgood. The firm Roller, Hapgood & Lorentzen built the White Oaks Chapel in San Carlos in 1949 and the Redwood Chapel in Redwood City, in 1951; Willis Roller (son of Arthur Roller) and Frank Hapgood sold both of these funeral homes in September 1965.30 In 1950, after having occupied the building at 481 University Avenue since 1924, Roller & Hapgood began planning a new, larger mortuary establishment at 980 Middlefield Road (see section to follow under "Site History")31 In 1960, Arthur Roller's other son, Robert, and Robert F. Hapgood's son, Walter, also became partners. In 1970, Roller & Hapgood took on two more partners, Keneth C. Welch and Ernest R. Duranti, who had been employees of the firm since 1953.32 In 1971, a lawsuit asking $375,000 in damages was filed against Roller & Hapgood regarding a payment dispute.33 Also in 1971, a gravediggers strike occurred, closing all but two cemeteries in San Mateo County and requiring funeral homes like Roller & Hapgood to store bodies.34 Embalmers also went on strike in 1971 for a total of 88 days.35 In September 1971, Roller & Hapgood acquired their oldest competitor, Tinney & Sons Funeral Chape1.36 The new combined business was renamed Roller Hapgood & Tinney. The previous Tinney chapel at 555 College Avenue was closed (Figure 54). At the time, Roller & Hapgood was owned by Robert Roller, Ferrell Hapgood (Robert Hapgood's widow), Kenneth Welch, and Ernest Duranti. The Tinney Funeral Home had been started in 1910 by George W. and May E. Tinney. The firm had been operated by their son, Ray Tinney, until 1947, when his widow, Edith, and their son, Raymond, took over. As reported in the Palo Alto Times, "declining patronage and a trend towards simple funerals had left Tinney a less -than -lucrative operation."37 A nationwide trend saw many funeral homes merging because they could no longer afford to operate independently. 27 "New Funeral Home is Completed Here," Palo Alto Times (August 5, 1924). 28 "Ex -MP cop joins Roller & Hapgood," Palo Alto Times (February 3, 1949). 29 "Articles Are Filed in State Capital for New Mortuary," Palo Alto Times (February 23, 1949). 30 "Funeral Homes sold by area undertakers," Palo Alto Times (September 2, 1965). 31 "Roller & Hapgood planning mortuary on Middlefield Road," Palo Alto Times (November 28, 1950). 32 "Roller & Hapgood takes 2 `outsiders' as partners." Palo Alto Times (September 9, 1970). 33 "$375,000 Palo Alto Suit Filed Over Funeral Costs," Palo Alto Times (February 26, 1971). 34 "Plenty of room for body storage during strike, morticians say," Palo Alto Times (June 26, 1971). A second strike occurred later, in 1985. 35 "Embalmers' Strike Settled," San Francisco Chronicle (July 15, 1971). 36 "Roller & Hapgood acquires a competitor," Palo Alto Times (September 8, 1976). Two other remaining local competitors were Bishop-Bronzini-Girouard, 744 San Antonio Road, and Palm O'Dell, 935 Industrial Avenue. 37 Ibid. August 8, 2018 - 23 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California By 1999, Deborah Hapgood, fourth generation of the Hapgood family and great granddaughter of Frank Hapgood, headed the company.38 At the time, the mortuary was still accommodating more than 600 funerals a year and remained the largest funeral home on the Peninsula.39 40 On November 1, 2013, Roller Hapgood & Tinney closed after 114 years of business. At time of Roller Hapgood & Tinney's closure, only one remaining funeral home operated in Palo Alto, at Alta Mesa Cemetery (est. 2010, located at 695 Arastradero Road). Earlier local competitors Bishop Jordan/Bishop-Bronzini-Girouard/Palo Alto Chapel (constructed in 1961, located at 744 San Antonio Road) and Palm O'Dell (constructed in 1960, located at 935 Industrial Avenue) had already closed (Figure 55 to Figure 56).41 According to Ward Winslow, author of Palo Alto: A Centennial History, the shuttering of Palo Alto's third -oldest business left only three local businesses more than 100 years old: Thoits Insurance (1890); Dahl Plumbing (1897); and Mills the Florist (1903). Figure 54: 555 College Avenue (built 1958). Source: Palo Alto Historical Association (no date). Figure 55: 744 San Antonio Road, Palo Alto (built 1961). Source: 744-750 San Antonio Road Environmental Impact Report (March 2017). Figure 56: 935 Industrial Avenue, Palo Alto (built 1960). Source: Google Street View, 2017. 38 "100 Years Caring For Yours- the Funeral Business in Palo Alto," PAHA (October 3, 1999). 39 Emily Richmond, "Changing views about death over funeral homes' 100 years," Palo Alto Daily News (October 1, 1999). 4° Melinda Sacks, "Death in the family," Palo Alto Weekly (November 6, 1991) 21. 41 744 San Antonio Road is slated for demolition as part of a proposed hotel development. 935 Industrial Avenue is vacant. August 8, 2018 - 24 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California SITE HISTORY: 980 MIDDLEFIELD ROAD AND 637-45 ADDISON AVENUE The subject property was first depicted on the 1901 Sanborn Fire Insurance Map, when the block was only minimally developed with a few single-family homes (Figure 57). By 1904, additional homes had been developed at the southern half of the block, and by 1908, the northern half of the block began to be developed, as well (Figure 58 and Figure 59). The 1924 and 1949 Sanborn maps reflect the full development of the subject block, with the exception of the subject site itself (Figure 60 and Figure 61). MIDDLEFIELD ROAD Figure 57: 1901 Sanborn Map depicting the subject block; approximate location of future subject property shaded. Source: Digital Sanborn Maps, San Francisco Public Library. Edited by Page & Turnbull. August 8, 2018 - 25 - Page & Turnbull, Inc. Historic Resource Evaluation MIDDLEFIELD 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California ROAD Figure 58: 1904 Sanborn Map depicting the subject block; approximate location of future subject property shaded. Source: Digital Sanborn Maps, San Francisco Public Library. Edited by Page & Turnbull. w • 3 MIDDLEFIELD $ W EBSTER 9 1 Imo; Figure 59: 1908 Sanborn Map depicting the subject block; approximate location of future subject property shaded. Source: Digital Sanborn Maps, San Francisco Public Library. Edited by Page & Turnbull. August 8, 2018 - 26 - Page & Turnbull, Inc. Historic Resource Evaluation i LM 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California 0 21 MIDDLEFIELD POAD El'0�a [ IR X J. -.44q", • 2 .F°[ 342 lU'L 12 in ,pP 0 ` 2E3 `- . Q • 1 tl I4. +K - - - WEBSTER 1 243 Figure 60: 1924 Sanborn Map depicting the subject block; approximate location of future subject property shaded. Source: Digital Sanborn Maps, San Francisco Public Library. Edited by Page & Turnbull. 1 irk I 91 1— MIDDLEFIELD .... il ,ID I _.., ri 1=1 E Y R 3 n rj— .,, P^ © rE k : Ti tl WEBSTER 1 - ROAD 243 Figure 61: December 1949 Sanborn Map depicting the subject block; approximate location of future subject property shaded. Source: Digital Sanborn Maps, San Francisco Public Library. Edited by Page & Turnbull. August 8, 2018 _27_ Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California In 1950, a permit for a $100,000 building was issued for the new Roller & Hapgood mortuary, designed by local architect Leslie I. Nichols to be more than double the size of the firm's previous building at 481 University Avenue.42 In February 1951, construction of the subject building at 980 Middlefield Road commenced at the previously undeveloped corner lot at Middlefield Road and Addison Avenue. An architectural drawing published in the Palo Alto Times just prior to the building's grand opening depicts the building with the same footprint it has today; a rear garage (since expanded) is also depicted (Figure 62). The building officially opened to the public on December 1, 1951. An advertisement for the mortuary read: "We have chosen this location away from the congested downtown area, in quiet surroundings, yet readily accessible, as it is on a main thoroughfare...On entering the building, one is greeted with a quiet garden -like atmosphere created by an indoor patio. The chapel carries out the same feeling. There is also a smaller drawing -room chapel for families desiring private services. Every effort has been made in planning to provide for the comfort and convenience of the families we serve. The entire building has the most modern facilities, is air-conditioned and spacious. Immediately adjoining is a fifty -car parking lot."43 As of late December 1951, the landscaping and paving of a parking lot were not yet complete, but they appear to have been completed shortly thereafter (Figure 63).44 The new building was constructed to accommodate as many as 300 funeral guests. The large chapel, with a vaulted ceiling and exposed beams, sat 180 guests. The stone accent wall of the chapel was sourced from a calcium carbonate quarry near Santa Cruz.45 Figure 62: Drawing of subject building upon its grand opening, view from Middlefield Road and Addison Avenue. Source: Daily Palo Alto Times (November 29, 1951). 42 "Roller & Hapgood planning mortuary on Middlefield Road," Palo Alto Times (November 28, 1950). 43 "An Addition of Beauty and Dignity," Daily Palo Alto Times (November 29, 1951). 44 "New Mortuary," San Jose Mercury News (December 27, 1951). 45 "Roller Hapgood Tinney," http://www.shoppaloalto.com/rollerhapgoodtinney/?listing.action=about August 8, 2018 - 28 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Figure 63: Subject building, recently after opening, view from Middlefield Road and Addison Avenue looking west. Source: San Jose Mercury News (December 27, 1951). In 1964, a rear caretaker's residence addressed 637 Addison Avenue was constructed at the far west corner of the property. A three -stall carport at the southwest property of 637 Addison Avenue was constructed at an unknown date. A second garage was constructed next to the 1951 garage; the two garages were joined at an unknown date after 1976. In 1976, a residential building at 645 Addison Avenue was demolished to make way for additional parking spaces to the southwest of the mortuary building. The Palo Alto Architectural Review Board approved the demolition on November 2, 1976. The request read: "Remove building, add 8 parking spaces, fence and landscaping...the dwelling to be removed is uninhabitable and the changes will be an improvement to the site."46 By 1980, the area southwest of the subject building (currently a turf field) appears to have been fully paved. The subject building itself at 980 Middlefield Road appears to have remained unaltered. An article published in 1981 in the Peninsula Times Tribune describes the building interior with "the wide entrance hallway framed on one side by an expanse of glass, affording a view of a school across the street, where life is very much in progress."47 Advertisements and published photographs featuring the subject building reflect no apparent exterior additions or alterations (Figure 64 to Figure 65). Roller Hapgood & Tinney closed in 2010, and in 2013, the subject property was sold to Marissa Mayer.48 46 Palo Alto Planning Department Files (NA (93-ARB-19)). 47 "Helping the Living to Carry On," Peninsula Times Tribune (May 11, 1981). 48 "Yahoo CEO buys funeral home," Palo Alto Daily Post (October 29, 2013). August 8, 2018 - 29 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California ROLLER & HAPGOOD & TINNEY FUNERAL DIRECTORS 980 MIDDLEFIELD ROAD PALO ALTO, CA 94301 (415) 328-1360 _v,,zjijk r'• f Ack 6.* •. ...nI►. PROUDLY SERVING THE PENINSULA SINCE 1899 Figure 65: Subject building in 1991. Source: Palo Alto Weekly (November 6, 1991). August 8, 2018 Figure 64: Advertisement for Roller Hapgood & Tinney. Source: Peninsula Times Tribune (February 28, 1993). -30- Page e& Turnbull, Inc. Historic Resource Evaluation CONSTRUCTION CHRONOLOGY 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California The following table and narrative provides a timeline of construction activity at 980 Middlefield Road/637-45 Addison Avenue based on building permit applications filed with the City of Palo Alto Building Inspection Division, records provided by the Palo Alto Planning Department, and historic newspaper articles.49 Research did not uncover any original building permits. The only known exterior alteration of the mortuary building at 980 Middlefield Road is a reroofing project in 2011. Physical observation did not indicate unpermitted alterations. Date Permit # Scope of Work 7/22/1963 NA (76-ZC-14) Change of zoning from R -3-P, R-3 and R-2 to P -C 7/16/1976 NA Building removal (645 Addison Avenue) and screen fence for Roller & Hapgood. Plans by John W. Cole, Architect. 1/29/1993 NA (93-ARB-19) Architectural Review Board approval of new fence at rear cottage (caretaker residence) 8//12/2011 11-2108 Replace redwood shake roof with black composition shingle roof MIDCENTURY MODERN STYLE The following information is excerpted from the City of San Francisco's San Francisco Modern Architecture and Landscape Design, 1935-1970, Historic Context Statement (2011). The information below is not San Francisco -specific, but rather, describes general characteristics of the Mid -Century Modern style (1945-1965) which can be applied to buildings in Palo Alto. Midcentury Modern is a term used to describe an expressive, often exuberant style that emerged in the decades following World War II. Influenced by the International Style and the Second Bay Tradition, Midcentury Modern was a casual, more organic and expressive style, and was readily applied to a wide range of property types. Custom -designed houses, residential tract developments, churches, and commercial buildings incorporated Midcentury Modern design. Extant Midcentury Modern storefronts reflect the post-war innovations and changes in American retailing in the post- war era. Midcentury Modern is the most common Modern style built in the San Francisco Bay Area from 1945-1965. The style incorporates an array of design elements including cantilevered overhangs, projecting eaves, canted windows, projecting boxes that enframe the upper stories, stucco siding, the use of bright or contrasting colors, spandrel glass, large expanses of windows, flat or shed roof forms, stacked brick veneer, asymmetrical facades, and occasionally vertical wood siding. Historic references or revival influences are notably absent from the Midcentury Modern style. The term Midcentury Modern was generated by the public rather than scholars.so General character defining features: 49 Note that permits were not collected at Palo Alto Building Inspection for 637-45 Addison Avenue. However, the Palo Alto Planning Department did provide relevant documents on file for 637-45 Addison Avenue. 50 The Riverside Modernism Context Statement provides a similar definition for the sub -style it refers to as "Mid -Century" Modern design. Recent Modern Age context statements developed by Pasadena, San Diego, and Fresno, California, have defined region -specific versions of Midcentury Modern design. Fresno and San Diego deemed their regional versions the Contemporary Style, while Pasadena defined its Midcentury Modern style as the postwar iteration of the International Style. August 8, 2018 - 31 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California • Projecting eaves and exposed rafters • Cantilevered overhangs • Flat, shed or low-pitched gable roof forms • Vaulted roofs and overhangs • Articulated primary facades • Stucco, wood (often vertical), or corrugated siding • Stacked Roman brick or stone often used as accent material • Expressed post and beam construction • Strong right angles and simple cubic forms • Projecting vertical elements • Large steel- or wood -framed windows • Canted windows • Painted finish is often stained, earth tone, or brightly colored • Projecting boxes that enframe the upper stories • Atrium or courtyard entryways • Overhanging trellises, sunshades, and pergolas Character -defining features specific to commercial and institutional buildings: • Spandrel glass • Stacked roman brick veneer • Integrated planters • Angled or deeply recessed vestibules • Terrazzo paving • Projecting vertical elements • Metal awnings or canopies (zigzag, corrugated metal, or sheet metal) • Small geometric tiles set in geometric patterns • Slightly projecting vertical mullions • Jalousie windows, particularly at the transom • Base mounted signage or "advertising front" lettering • Textile block screens or metal sheathing.51 980 Middlefield Road features numerous character -defining features of the Midcentury Modern style listed above, including: projecting eaves, cantilevered overhangs, flat roof forms, a vaulted roof form (chapel interior, not pictured in this report), an articulated primary facade, wood siding, brick veneer, stone used as accent material, strong right angles and simple cubic forms, projecting vertical elements, large windows, painted stained finishes, atrium (interior, though not pictured in this report), courtyard, overhanging pergola, integrated planter, and deeply recessed vestibules. ARCHITECT LESLIE I. NICHOLS (1894- 1969) Leslie Nichols, a Chicago native, earned his bachelor's and master's degrees in Architecture at Cornell University. Upon graduating in 1920, Nichols began practicing with the firm Gordon and Kaelber in Rochester, New York. While at Gordon and Kaelber, Nichols studied classical Beaux Arts traditions and modern trends in hospital and apartment building construction. In 1924, Nichols formed a New York City -based partnership with his father-in-law, Arthur Gibb. Together, they 51 Mary Brown, San Francisco Planning Department, San Francisco Modern Architecture and Landscape Design, 1935- 1970, Historic Context Statement, Final Draft (12 January 2011) 189. August 8, 2018 - 32 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California contributed to the design of the Holland Tunnel. While working in New York, Nichols won an architectural competition to design a tuberculosis hospital. Nichols moved to Palo Alto in 1932 and opened an architectural office the following year. He moved to Atherton in the late 1930s and resided at 369 Atherton Avenue. He worked throughout the Midpeninsula region and primarily designed residences, churches, and commercial buildings. He built over 36 houses, several of which are located on Webster Street, Hamilton Avenue, and Forest Avenue in Palo Alto. His residences ranged in style from French Eclectic/Italian Renaissance Revival (419 Maple Street), to Colonial Revival (39 Crescent Drive). In the early 1940s, Nichols "undertook a program of special work with the U.S. [A]rmy engineers...doing designing and postwar planning for a construction industry. In that work he spent considerable time in the development of kitchens and planned storage."52 After World War II, Nichols successfully made the transition to modernism. His best-known work of the period is the 1953 Palo Alto City Hall (now the Palo Alto Art Center) across the street from Rinconada Park, which was based on the design of Modern Ranch style houses. When designing the Palo Alto City Hall building at 1313 Newell Road, Nichols intended for the redwood and brick exterior and shake roof to harmonize with the surrounding residential neighborhood. His plans provided for off-street parking and buried utility lines. Other amenities included a lunchroom, council chambers with seating for 132, and a drive-in utility payment window.53 Interestingly, Nichols' designs between 1955 and 1969 often included a touch of Japanese influence. This can be seen at the subject building (use of crane motif at the interior, use of wood screen at exterior), and at Nichols' own Atherton home. Nichols appears to have worked both independently and with partners. In 1946, he partnered with contractor Ross White and formed the architect -contractor firm of Nichols -White, Inc. The pair constructed the commercial building at 145 Addison Avenue in 1946.54 Ca. 1955, he was Principal of Leslie I. Nichols, Architect.55 Nichols served on the Atherton Planning Commission until 1968 and was a member of the San Mateo County Planning Commission for 25 years, until 1964. He was a fellow of the American Institute of Architects and won several architectural awards prior to his retirement in 1967. Nichols was referenced in the 2002 City Council report (CMR 272:02) for the Art Center and Rinconada Library expansion as an architect of demonstrated importance.56 The Palo Alto Historical Association regards Nichols as a widely -acclaimed architect. He is also discussed as an architect of note in the Final Survey Report for the Palo Alto Historical Survey Update by Michael Corbett and Denise Bradley of Dames & Moore (February 2001).57 In addition to his professional accomplishments, Nichols was a founder of the Palo Alto Club, a charter member of the Fellowship Forum of Menlo Park, a member of the Palo Alto Rotary Club, a member and president of the American Fuchsia Society and American Badminton Club, an active member of Palo Alto Camera Club, and a member of the Christian Science Church.58 Nichols died in 1967. 52 "Nichols, Ross, will discuss home planning," Palo Alto Times January 26, 1945). 53 "The three incarnations of 1313 Newell Road," The Tall Tree (October 2016) 3. 54 "Architect firm is putting up its own building," Palo Alto Times January 4, 1946). 55 "Leslie I. Nichols," PCAD. http://pcad.lib.washington.edu/person/5922/ 56 http://www.cityofpaloalto.org/civicax/filebank/documents/5031 57 https://www.cityofpaloalto.org/civicax/filebank/documents/61623 58 "Leslie Nichols, noted architect in Midpeninsula, succumbs at 75," Palo Alto Times (December 17, 1969). August 8, 2018 - 33 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Leslie I. Nichols' known commissions include, but are not limited to: Residential 39 Crescent Drive, Palo Alto (1925-27) 419 Maple, Palo Alto (1928-29)59 1407 Hamilton Avenue, Palo Alto (1933) 553 Center Street, Palo Alto (1934) 1045 Alma Street, Palo Alto (1934) 1230 Hamilton Avenue, Palo Alto (1934) 215 Lowell Avenue, Palo Alto (1935) 470 Santa Rita Avenue, Palo Alto (1935) 570 Chaucer Street, Palo Alto (1934-35) 123 Island Drive, Palo Alto (1935) 2150 Cowper Street, Palo Alto (1936) 2164 Webster Street, Palo Alto (1936) 2020 Webster Street, Palo Alto (1936) 1436 Emerson Street, Palo Alto (1936) 1448 Emerson Street, Palo Alto (1936) 1452 Emerson Street, Palo Alto (1936) 1464 Emerson Street, Palo Alto 91936) 2440 Bryant Street, Palo Alto (1936) 2044 Webster Street, Palo Alto (1936) 2430 South Court, Palo Alto (1936) 2420 Bryant Street, Palo Alto (1936) 2176 Webster Street, Palo Alto (1936) 450 Nevada Street, Palo Alto (1936) 436 Santa Rita Avenue, Palo Alto (1936) 1664 Emerson Street, Palo Alto (1937) 1910 Webster Street, Palo Alto (1937) 450 Santa Rita Avenue, Palo Alto (1937) 220 Churchill Avenue, Palo Alto (1940, demolished) 1331 Hamilton Avenue, Palo Alto (1940, demolished) 1729 Cowper Street, Palo Alto (1941) 532 Emerson Street, Palo Alto (1941) 215 Lowell Avenue, Palo Alto (1945)60 1115 Forest Avenue, Palo Alto (1945, demolished) 511 Alma Street, Palo Alto (1946) 545 Bryant Street, Palo Alto (1946) 1431 Waverly Street, Palo Alto (1953)61 369 Atherton Avenue, Atherton (unknown, demolished) Commercial 240 University Avenue, Palo Alto (1936) 616 University Avenue, Palo Alto (1938) 541 Bryant Street, Palo Alto (1946) 59 Nichols designed 419 Maple remotely, from New York City. Birge Clark was the on -site architect. The home was commissioned by Nichols' Palo Alto -based parents. 60 Garage and laundry additions only. 61 "Gamble, Edwin and Elizabeth L. House," PCAD. http://pcad.lib.washington.edu/building/16676/. Note that 1431 Waverly Street, known as the Gamble House, was constructed ca.1908 by Charles Kaiser Sumner and Henry Mather Greene. Nichols is responsible only for a later porch alteration in 1953. August 8, 2018 - 34 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California 145 Addison Avenue, Palo Alto (1946) 330-44 California Avenue, Palo Alto (1946) 643 Emerson Street, Palo Alto (1947) J.C. Penney's (now, Walgreens) at 300-312 University Avenue, Palo Alto (1948) Roller and Hapgood Mortuary at 980 Middlefield Road (1951)62 Ecclesiastic First Presbyterian Church, Menlo Park (1950) First Presbyterian Church at 1140 Cowper Street, Palo Alto (1955-57) Christian Science Church at 401 University Avenue, Los Altos (unknown) Congregational Church (now, Peach United Church) at 900 High Street, Santa Cruz (unknown) Institutional Palo Alto City Hall (now, Palo Alto Art Center) at 1313 Newell Road (1953) Fire Station 6 at 700 Oak Grove, Menlo Park (1953, demolished) Fire Station 1 at 300 Middlefield Road, Menlo Park (1955) Fire Station 2 at 2290 University Avenue, East Palo Alto (1956) Recreational 1899 Park Boulevard, Palo Alto (1952) Lawn Bowling Club House, Palo Alto (1954)G3 62 Note the mortuary was not associated with any particular religion, and operated as a business. 63 Peter Danner, "A Timeline of the Palo Alto Lawn Bowls Club," https://www.palbc.org/history/. Nichols' design has since been substantially added on to. August 8, 2018 - 35 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California V. EVALUATION CALIFORNIA REGISTER OF HISTORICAL RESOURCES The California Register of Historical Resources (California Register) is an inventory of significant architectural, archaeological, and historical resources in the State of California. Resources can be listed in the California Register through a number of methods. State Historical Landmarks and National Register -listed properties are automatically listed in the California Register. Properties can also be nominated to the California Register by local governments, private organizations, or citizens. The California Register of Historical Resources follows nearly identical guidelines to those used by the National Register, but identifies the Criteria for Evaluation numerically. In order for a property to be eligible for listing in the California Register, it must be found significant under one or more of the following criteria. • Criterion 1 (Events): Resources that are associated with events that have made a significant contribution to the broad patterns of local or regional history, or the cultural heritage of California or the United States. ■ Criterion 2 (Persons): Resources that are associated with the lives of persons important to local, California, or national history. • Criterion 3 (Architecture): Resources that embody the distinctive characteristics of a type, period, region, or method of construction, or represent the work of a master, or possess high artistic values. • Criterion 4 (Information Potential): Resources or sites that have yielded or have the potential to yield information important to the prehistory or history of the local area, California, or the nation. The following section examines the eligibility of 980 Middlefield Road/637-45 Addison Avenue for listing in the California Register. Criterion 1 (Events) 980 Middlefield Road/637-45 Addison Avenue does not appear to be individually significant under Criterion 1 in association with historical events important to the history of Palo Alto, the state of California, or the United States. The primary mortuary building at 980 Middlefield Road was constructed in 1951, many decades after Palo Alto's incorporation in 1894. The subject property was the last portion of the subject block to be developed. Although Roller Hapgood was a very prominent and long-standing local business in Palo Alto, the subject property itself does not fully represent the company's legacy. Roller Hapgood (initially Roller Undertaking Company and later, Roller Hapgood & Tinney) operated out of at least three previous sites before its relocation to 980 Middlefield Road. Further, the firm was not the only business of its kind in Palo Alto; competitors Bishop Jordan/Bishop-Bronzini-Girouard, Palm O'Dell, and Alta Mesa offered similar services to the Palo Alto community. As a result, the subject property at 980 Middlefield Road/637-45 Addison Avenue does not appear individually significant under Criterion 1. Criterion 2 (Persons) The subject property at 980 Middlefield Road/637-45 Addison Avenue was owned and operated by four generations of the Roller and Hapgood families, as well as multiple members of the Tinney family. The property did not experience turnover in ownership prior until 2013, when it was purchased by Marissa Mayer. Although the generational legacy of the Roller Hapgood, and Tinney families is notable, no individuals stand out as having made important contributions to local, state, or August 8, 2018 - 36 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California national history such that the subject property would be eligible for individual significance under Criterion 2. As a result, the subject property at 980 Middlefield Road/637-45 Addison Avenue does not appear individually significant under Criterion 2. Criterion 3 (Architecture/Design) 980 Middlefield Road was constructed in 1951 by prominent local architect Leslie I. Nichols in the Midcentury Modern style. Leslie Nichols, best known for designing the Palo Alto City Hall at 1313 Newell Road (now the Palo Alto Art Center), completed dozens of commissions throughout the San Francisco Peninsula. He is an accomplished architect of local importance. 980 Middlefield Road features many characteristic Midcentury Modern elements, including projecting eaves, cantilevered overhangs, flat roof forms, a vaulted roof form, an articulated primary facade, wood siding, brick veneer, stone used as accent material, strong right angles and simple cubic forms, projecting vertical elements, large windows, painted stained finishes, atrium, courtyard, overhanging pergola, integrated planter, and deeply recessed vestibules. The subject building does not appear to have undergone exterior alterations. As a property type, the subject building exhibits key characteristics of midcentury mortuary buildings, including an indoor -outdoor connection and interaction with natural environment (courtyard, atrium, and lawns), straightforward use of materials, and exaggerated roof form. A rear garage at 645 Addison Avenue was constructed in 1951 and was later attached to a second garage, constructed at an unknown date prior to 1976. A rear caretaker's residence at 637 Addison Avenue was constructed in 1964. A three -stall carport at 637 Addison Avenue was constructed at an unknown date prior to 1976. The architect/builder of the rear caretaker's residence and garages is unknown. These outbuildings and carport structure do not appear to contribute to the property's significance. 980 Middlefield Road is significant for its distinctive Midcentury Modern design, as a representative midcentury property type, and as a work of architect Leslie Nichols. Thus, the subject building at 980 Middlefield Road does appear to be eligible for individual listing in the California Register under Criterion 3. Criterion 4 (Information Potential) The "potential to yield information important to the prehistory or history of California" typically relates to archeological resources, rather than built resources. Evaluation of 980 Middlefield Road/637-45 Addison Avenue under Criterion 4 (Information Potential) is beyond the scope of this report. This evaluation does not address whether the building would qualify as a contributor to a potential historic district. A cursory inspection of the surrounding area does not reveal a high concentration of buildings that would warrant further study. CHARACTER -DEFINING FEATURES For a property to be eligible for national or state designation under one of the significance criteria, the essential physical elements (or character -defining features) that enable the property to convey its historic identity must be evident. To be eligible, a property must clearly contain enough of those characteristics, and these features must also retain a sufficient degree of integrity. Characteristics can be expressed in terms such as form, proportion, structure, plan, style, or materials. As an individually significant historic resource under Criterion 3 with a period of significance of 1951 (date of construction), the character -defining features of 980 Middlefield Road include: August 8, 2018 - 37 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California • Form and massing • Stucco cladding, wood siding, brick veneer, and stone exterior • Gable and flat roof forms • Sawtooth chapel wall • Fenestration o Wood doors throughout (some with punched lites) o Geometric wood screens at primary facade o Fixed sawtooth windows at primary facade o Large fixed windows at southeast facade o Fixed ribbon windows and clerestory windows at southwest facade o Fixed/casement paired windows throughout • Courtyard at primary entrance with partial -height stone walls and built-in benches • All Midcentury Modern elements, including: projecting eaves, cantilevered overhangs, flat roof forms, a vaulted roof form, an articulated primary facade, wood siding, brick veneer, stone used as accent material, strong right angles and simple cubic forms, projecting vertical elements, large windows, painted stained finishes, atrium, courtyard, overhanging pergola, integrated planter, and deeply recessed vestibules • Landscape Features o Lawns at northeast and southeast, facades o Driveway at northwest facade INTEGRITY In order to qualify for listing in any local, state, or national historic register, a property or landscape must possess significance under at least one evaluative criterion as described above and retain integrity. Integrity is defined by the California Office of Historic Preservation as "the authenticity of an historical resource's physical identity by the survival of certain characteristics that existing during the resource's period of significance," or more simply defined as "the ability of a property to convey its significance."64 In order to evaluate whether 980 Middlefield Road retains sufficient integrity to convey its historic significance, Page & Turnbull used established integrity standards outlined by the National Register Bulletin: How to Apply the National Register Criteria for Evaluation. Seven variables, or aspects, that define integrity are used to evaluate a resource's integrity —location, design, setting, materials, workmanship, feeling and association. A property must stand up under most or all of these aspects in order to retain overall integrity. If a property does not retain integrity, it can no longer convey its significance and is therefore not eligible for listing in local, state, or national registers. The seven aspects that define integrity are defined as follows: Location is the place where the historic property was constructed. Design is the combination of elements that create the form, plans, space, structure and style of the property. Setting addresses the physical environment of the historic property inclusive of the landscape and spatial relationships of the building(s). 64 California Office of Historic Preservation, Technical Assistance Series No. 7: How to Nominate a Resource to the California Register of Historical Resources (Sacramento: California Office of State Publishing, 4 September 2001) 11. August 8, 2018 - 38 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California Materials refer to the physical elements that were combined or deposited during a particular period of time and in a particular pattern of configuration to form the historic property. Workmanship is the physical evidence of the crafts of a particular culture or people during any given period in history. Feeling is the property's expression of the aesthetic or historic sense of a particular period of time. Association is the direct link between an important historic event or person and a historic property. Location: 980 Middlefield Road retains integrity of location because the building does not appear to have been moved since its construction. Setting: 980 Middlefield Road retains integrity of setting because the property and the surrounding neighborhood have maintained original spatial relationships between the buildings and streets. The buildings on Middlefield Road across from the subject property remain strictly residential in use, and Addison Elementary School appears largely as it was in 1951. Although much of the subject block itself was demolished to accommodate the Webster Wood Apartments complex, this does not appear to have removed integrity of setting for 980 Middlefield Road, nor has the construction of the rear caretaker's residence at 637 Addison Avenue or the demolition of the building 645 Addison Avenue. Design: 980 Middlefield Road retains integrity of design. Physical evidence, building permit records, and historic photographs indicate the building has been very minimally altered. The building retains all of its character -defining features. Materials: 980 Middlefield Road retains integrity of materials. The 1993 removal of redwood shingles at the gable roofed portion does not compromise the building's integrity of design. Workmanship: 980 Middlefield Road retains integrity of workmanship. All original features of the building have been retained. The physical evidence of the craft and technology used in constructing the building are still evident. Feeling: 980 Middlefield Road retains integrity of feeling. The building still conveys its identity as an architect -designed midcentury mortuary building. The subject building's overall aesthetic and historic sense has been retained. Association: 980 Middlefield Road retains integrity of association, as the building retains its identity in community memory as a long-standing mortuary in Palo Alto. Overall, 980 Middlefield Road retains integrity. August 8, 2018 - 39 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California VI. CONCLUSION The mortuary building at 980 Middlefield Road was constructed in 1951 west of the intersection of Middlefield Road and Addison Avenue. The building is eligible for individual listing in the California Register under Criterion 3 for its distinctive Midcentury Modern design, as a representative midcentury property type, and as a work of architect Leslie Nichols. The building retains integrity. Thus, 980 Middlefield Road appears to qualify as a historic resource for the purposes of review under the California Environmental Quality Act (CEQA). Two associated rear lots addressed 637-45 Addison Avenue do not contribute to the mortuary's significance or integrity. August 8, 2018 - 40 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California VIII. REFERENCES CITED PUBLISHED WORKS "100 Years Caring For Yours- the Funeral Business in Palo Alto." PAHA. October 3, 1999. "$20,000 Mortuary to be Built by Local Firm." Palo Alto Times. February 22, 1924. "$375,000 Palo Alto Suit Filed Over Funeral Costs." Palo Alto Times. February 26, 1971. "An Addition of Beauty and Dignity." Daily Palo Alto Times. November 29, 1951. "Architect firm is putting up its own building." Palo Alto Times. January 4, 1946. "Articles Are Filed in State Capital for New Mortuary." Palo Alto Times. February 23, 1949. Brown, Mary. San Francisco Planning Department, San Francisco Modern Architecture and Landscape Design, 1935-1970, Historic Context Statement, Final Draft. January 12, 2011. California Office of Historic Preservation. Technical Assistant Series No. 7, How to Nominate a Resource to the California Register of Historic Resources. Sacramento: California Office of State Publishing, 4 September 2001. Dremann, Sue. "Palo Alto's oldest funeral home closes amid high land values, changing times." Palo Alto Meekly. November 1, 2013. "Embalmers' Strike Settled." San Francisco Chronicle. July 15, 1971. "Ex -MP cop joins Roller & Hapgood." Palo Alto Times. February 3, 1949. Gordon, Jeremy. "Mayer paid $11 million for Roller & Hapgood." Palo Alto Daily Post. November 8, 2013. "Helping the Living to Carry On." Peninsula Times Tribune. May 11, 1981. "Leslie Nichols, noted architect in Midpeninsula, succumbs at 75." Palo Alto Times. December 17, 1969. "New Funeral Home is Completed Here." Palo Alto Times. August 5, 1924. "New Mortuary." San Jose Mercury News. December 27, 1951. "New of 25 Years Ago (from files of the Times)." Palo Alto Times. July 27, 1912. "Plenty of room for body storage during strike, morticians say." Palo Alto Times. June 26, 1971. Richmond, Emily "Changing views about death over funeral homes' 100 years." Palo Alto Daily News. October 1, 1999. "Roller & Hapgood acquires a competitor." Palo Alto Times. September 8, 1976. "Roller & Hapgood planning mortuary on Middlefield Road." Palo Alto Times. November 28, 1950. August 8, 2018 - 41 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California "Roller & Hapgood takes 2 `outsiders' as partners." Palo Alto Times. September 9, 1970. Sacks, Melinda. "Death in the family." Palo Alto Weekly. November 6, 1991. "The three incarnations of 1313 Newell Road." The Tall Tree. October 2016. Ward, Winslow and the Palo Alto Historical Association. Palo Alto: A Centennial History. Palo Alto Historical Association: Palo Alto, CA, 1993. "Yahoo CEO buys funeral home." Palo Alto Daily Post. October 29, 2013. UNPUBLISHED RECORDS Brown, Mary. San Francisco Planning Department, San Francisco Modern Architecture and Landscape Design, 1935-1970, Historic Context Statement, Final Draft. January 12, 2011. City of Palo Alto Building Inspection office. Building permits. "Comprehensive Plan." City of Palo Alto. Revised 2007. Dames & Moore. "Final Survey Report — Palo Alto Historical Survey Update: August 1997 -August 2000." Prepared for the City of Palo Alto Planning Division. February 2001. Dames & Moore. "Study Priority 1 and Study Priority 2 Properties: Preliminary Assessments of Eligibility for the National Register or California Register." Prepared for the City of Palo Alto Planning Division. January 1999. Palo Alto Historical Association (Research notes and Property file collection, untitled news clippings from Palo Alto Daily News, Palo Alto Times, and Palo Alto Live Oak). Palo Alto Planning Department Files (NA (93-ARB-19)). INTERNET SOURCES "A Flash History of Palo Alto." Quora. http://www.quora.com/How-is-the-historical-city-Mayfield- CA-related-to-Palo-Alto-CA. Bowling, Matt. "The Meeting on the Corner: The Beginning of Mayfield's End." Palo Alto History.org. http://www.paloaltohistory.com/the-beginning-of-mayfiedds-end.php. Danner, Peter. "A Timeline of the Palo Alto Lawn Bowls Club," https://www.palbc.org/history/. "Depression, War, and the Population Boom." Palo Alto Medical Foundation- Sutter Health. http://www.pamf.org/about/pamfhistory/depression.html. "Gamble, Edwin and Elizabeth L. House," PCAD. http://pcad.lib.washington.edu/building/16676/. "History of Stanford." Stanford University. http://www.stanford.edu/about/history/. August 8, 2018 - 42 - Page & Turnbull, Inc. Historic Resource Evaluation 980 Middlefield Road and 637-45 Addison Avenue Palo Alto, California "Leslie I. Nichols," PCAD. http://pcad.lib.washington.edu/person/5922/ "Old Palo Alto." www.paloaltoonline.com/news/2009/01/19/old-palo-alto "Palo Alto, California." Wikipedia. http://en.wikipedia.org/wild/Palo_Alto,_California#cite_note- 12. "Palo Alto Historic Buildings Inventory." http://www.pastheritage.org/inventory.html "Roller Hapgood Tinney." http: / /www. shoppaloalto.com/rollerhapgoodtinney/?listing.action=about Sanborn Fire Insurance Company Maps. http://archive.org. United States federal census records. Ancestry.com. www.ancestry.com. "Webster Wood Apartments." https://www.apartmentfinder.com/California/Palo-Alto- Apartments /Web ster-Wood-Apartments. August 8, 2018 - 43 - Page & Turnbull, Inc. www.page-turnbull.com ARCHITECTURE PLANNING & RESEARCH PRESERVATION TECHNOLOGY 417 S. Hill Street, Suite 211 Los Angeles, California 90013 213.221.1200 / 213.221.1209 fax 2401 C Street, Suite B Sacramento, California 95816 916.930.9903 / 916.930.9904 fax 417 Montgomery Street, 8th Floor San Francisco, CA 94104 415.362.5154 / 415.362.5560 fax The Corner House on Addison 980 Middlefield Road Introduction to the facility: The Corner House on Addison would be home to various classes, workshops, special events and collaborative spaces. The mission of the facility would be to provide a vibrant, welcoming space for traditional and non-traditional professionals to collaborate, work, learn, find support, build community, and spend time with their families, friends, and neighbors. Most specifically, the establishment would focus on providing a supportive place for working women, especially mothers, as they seek to balance their work and family lives. While not excluding any groups or individuals, the majority of programming will be of interest to mothers, children and families. The Corner House will concentrate on the welfare and success of our (female/mother) workforce, while supporting women's (and men's) desire to be an active, present, and productive parent. The organization would provide space, time, and energy to support professionals on their path to self -defined success while raising thriving families. The facility would meet the goals of the Palo Alto community by repurposing land and/existing buildings to address these important needs of our community. The facility design itself will include various multipurpose rooms (that can function as classrooms or meeting spaces), a kitchen, administrative spaces, a fitness room, playground, atrium, patio and garden. We anticipate that the facility would offer light food and beverage service (a coffee bar in the morning, a lunch buffet around lunchtime, etc.) and some specialty retail (for example, logo wear or materials needed for classes). Programming: To achieve its goals, the facility would offer to house or host these types of programming and uses: • Flexible collaboration spaces, such as coworking tables and desks, conference rooms, and presentation spaces • Workshops, classes, and lectures for all ages, including cultural, art, musical education, literary, visual and/or performing arts, culinary arts, professional development, and health/wellness • Special events such as speaker series, small performances, networking events, and family bonding experiences • Specific family -oriented programming such as tutoring, lifelong learning programs, support groups, and more • Light food and beverage service to support community building: coffee bar, lunch buffet, snacks, tea time, catering for events. • Venue rental for private and special events such as non -profits, alumni associations and more • An accepting and accommodating setting for nursing mothers • A concentration on well-rounded health, wellness, and fitness • Collaborative groups and programming aimed at furthering the professional development of working women • Networking and relationship building among the community • Safe and thoughtfully designed workspace accommodations for non-traditional working parents (such as freelancers, writers/artists, entrepreneurs, consultants, or those in remote roles) to thrive professionally Public Benefits: • Providing professional women and their families with access to previously unavailable resources that are of inherent value to the community at large 1 • Making available free or affordable rental space for non-profit and/or charity events at least 12 times per year* • Hosting various free or undermarket rate classes, workshops or other events for the public community at least six times per year* • Offering to host, free of charge, at least 10 meetings and/or small gathering per calendar year for the purpose of community outreach, volunteering, charity or other like use cases Daily & Monthly Use: Classes and workshops: On a daily basis the facility would hold classes and workshops for youth and adults that may include music, visual and/or performing art programs, cooking, professional development, dance, fitness, health/wellness, language and academic/tutoring programs. These programs will be scheduled to control the influx and egress from the building and the property. The facility anticipates producing an estimated: • 10-20 classes per day • An average of 5-25 students each • We anticipate that for each student in the class, there will be an adult that likely stays on the premises -- either participating in a parent -participation class or taking advantage of the facility's amenities. • Variable: depending on schedule, time of year, interest, etc. Collaboration spaces: Normal use of the facility will also include parents or individuals utilizing collaboration spaces (such as coworking tables and conference rooms) to work, read, write, reflect, seek support from mentors or peers, network with others in the community, and share ideas. We anticipate that many of those utilizing the collaboration spaces are guardians or partners of participants in classes and workshops. Others may be mothers/parents that require a welcoming space to tend to a young child (such as a nursing infant) while also conducting calls or tending to other personal or professional needs. The facility anticipates: • Approximately 100 patrons with access to collaboration spaces on a monthly basis utilizing this space at different windows of time and for different lengths of times. • We anticipate no more than 50 patrons with accessing these collaboration spaces at one time. • We do not expect these patrons to arrive, gather or depart en mass. Special Events: The facility anticipates other special events or programs to occur irregularly. The facility hopes to produce or host: • Approximately 250 small events, with less than 75 attendees and no more than 10 per week. • Approximately 150 large events with more than 75 attendees, no more than 4 per week. • Special Events will not ever exceed Code Standards for the building, or 400 attendees, whichever is less. An example of a small event might be a special guest hosting a group discussion on child rearing practices or diversity in the workplace. An example of a large event might be a family bonding experience such as an indoor picnic or a charity fundraiser. 2 Other Patrons of the Facility: Guests and members may also enjoy utilizing the following spaces on a daily basis: • Coffee bar and light buffet lunch • Health and wellness room • Garden and outdoor play space • Patio • Atrium We anticipate that these spaces will be used for varying intervals of time throughout the day. Food & Beverage: • The facility will offer light food and beverage options to members and guests on a normal day. • Special events may require catering services. Fitness Space: • The facility would like to incorporate a room within its design specifically focused on health and wellness to support and encourage an active lifestyle. • The room will be used for things like: meditation, pilates, yoga, stretching, wellness seminars. • This room would include up to 10 pieces of exercise equipment, including treadmills, stationary bikes or like machines. Comparison to prior use of the property : Our Proposed Use Previous Funeral Home Use Daily Minimum Concurrent Maximum Concurrent Expected Average Minimum Concurrent Maximum Concurrent Expected Average During Work/School Hours 50 300 150 30 500 200 During Evening or Weekend Hours 25 400 125 30 500 200 Prior use of the facility: • Mortuary Weekly use: • Multiple services per week, often multiple per day, with tens to hundreds of mourners Supporting Data: The National Funeral Directors Association published in January 2018 that the NFDA-member Firm Caseload (i.e., number of decedents cared for) ranged normally from 1-1000/per year [a median of 500.2]. o 58.4% reporting near 150 per year or less (assumed average of 12.5 per month or 2.88 per week) o 46.1% reporting 151-1000 or more (median/average of 575.5 per year or assumed average of 47.9 per month or 11.06 per week). With no formula to assess the average number of mourners at a funeral, conversations with Funeral Homes concluded that attendance numbers normally reflect age of the deceased and involvement in the community and can range from 10-600 people. The prior owners of this property noted at sale that they could hold multiple funerals a day and expected tens to hundreds of attendees on a normal day. 3 In comparison, 2.8-11 funerals per week with tens to hundreds of mourners gathering en mass is presumed to have been a greater strain on noise and traffic due to a private event than the facilities newly suggested model and use. Employees: In order to run smooth and successful operations of the facility and the programming, the facility plans to employ: • 4-8 full-time employees. o Full time positions may be: Director, Programs Manager, Facilities Manager, Teacher/Children's Coordinator, IT Manager, HR Manager, and Kitchen Manager. • 10-20 part-time, internship or contract employees in an effort to offer flexibility and optionality for working parents, students, and others. o Part-time, internship or contract positions positions or departments may be: receptionist, teachers, children's programming, security, accounting, janitorial, marketing, landscaping and grounds, food service, and special programs/events. o For special events, food service and other staffing as required based on size. Hours of Operation: • The hours of operation will be 7:00 a.m. to 7:00 p.m. seven days a week. • Those with access to the collaboration spaces may arrive or depart earlier or later than normal business operation hours. • Some special events and classes may occur outside of regular operation hours. • All outdoor events with amplified sound shall cease operations no later than 9:00 p.m. Sunday -Thursday and 10:00 p.m Friday and Saturday. • All indoor events shall cease operations no later than 12:00 a.m., with clean-up no later than 1:00 a.m. Public Access & Membership: • As with children's classes, adult classes, workshops and speaker events throughout both many public and private facilities in the area, The Corner House would require participants to register and submit appropriate registration fees. o Registration will help to ensure safety and security for young children and mothers, to control the influx of guests and traffic flow, as well as meet the financial requirements to operate and meet the cost of overhead. • The majority of classes, workshops and many special events will be available for registration to all members of the community. • Some programs and workspaces will be available to members only as the organization aims to create an established, supportive community of regular attendees encouraging mentor-mentee relationships and peer -to -peer dynamics. As with Lucie Stern Community Center and other Palo Alto Community Centers, as well as like facilities such as the JCC, Women's Center, and Hanahaus reservation for picnic spaces and facility rentals are subject to availability, application approval, and to specific cost and conditions. Parking/Traffic Considerations: • The property will be able to accomodate 36 cars in the lot for self -park. • We will have 25 bike parking spaces. • A designated curbed in drop-off and pick-up area to reduce disruptions of traffic flow on Addison. • Special events may require valet parking in the facility's lot in order to accommodate additional vehicles. • Large events may require the facility or the host (if external) to accommodate driving guests at offsite lots, offer shuttles or rideshare credits to attendees in order to best manage parking. 4 The facility will encourage walking, biking, rideshare, carpooling or public transportation for all patrons. The neighborhood is a walkable and the organization expects that this will be a preferred option for many residents utilizing the facility. Rideshares and public transportation are readily available and close in proximity. Construction activities (Noise & traffic): We are sensitive to the fact that having two construction projects next to one another with some level of concurrent schedule imposes some challenges. In order to mitigate those complexities, we will work closely with the city and Addison Elementary contractor as needed to review, agree upon and implement the following: Trade Parking and Arrival Time We will encourage all trades to carpool as much as possible to reduce total number of vehicles on site for daily forces. Additionally, our site allows for all trade parking to be within site limits, therefore not impacting street parking. As for arrival times, though work cannot begin until 8am, we would require tradespersons to arrive by 7:30 to work around child drop-off and school hours. Work Hours and Departure Work hours would be 8am-6pm daily with site departure after 3:30pm, allowing for school pick up. Deliveries and Staging We will work with the city on traffic control plans on when large material drop offs are needed, so we can have the trucks delivered in a timely matter, and will coordinate deliveries with Addison Elementary so we do not have multiple at one time. Optimally, we will be able to have trucks arrive early to the site before morning drop off occurs as to not interfere with children and their parents. If that is not possible, we would schedule material deliveries around critical school hours. All materials will be staged within site fence limits. Construction Noise A majority of our work is internal to the current structure and therefore, our work can be sequenced to maintain the exterior envelope as long as possible to minimize noise. We will also have screened fencing around site throughout project and can install absorptive materials to inside of fence as needed once we move to exterior work in order to lessen impact on surrounding areas. Parcel(s) Consideration/Design: Facility is pursuing a certificate of compliance to merge the three lots as part of any formal application. 5 Attachment F Project Plans Hardcopies of project plans are provided to Councilmembers. These plans are available to the public online and by visiting the Planning and Community Environmental Department on the 5th floor of City Hall at 250 Hamilton Avenue. Directions to review Project plans online: 1. Go to: http://bit.ly/PaloAltoPlanningProjects 2. Scroll down the center of the page and click "View pending projects" 3. Scroll to find "980 Middlefield" and click the address link 4. On this project specific webpage you will find a link to the project plans and other important information Direct Link to Project Webpage: https://tinyurl.com/980-Middlefield CITY OF PALO ALTO CITY OF PALO ALTO OFFICE OF THE CITY CLERK September 10, 2018 The Honorable City Council Attention: Finance Committee Palo Alto, California Approval of Action Minutes for the August 20 2018 Council Meeting Staff is requesting Council review and approve the attached Action Minutes. ATTACHMENTS: • Attachment A: 08-20-18 DRAFT Action Minutes (DOCX) Department Head: Beth Minor, City Clerk Page 2 r � CITY OF PALO ALTO CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Regular Meeting August 20, 2018 The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:38 P.M. Present: DuBois, Filseth; Fine arrived at 7:38 P.M., Holman, Kniss, Kou, Scharff, Tanaka, Wolbach Participating remotely: Tanaka participating from Percolata 16F, Maple Plaza, Nanhai Road, Nanshan, Shenzhen 518052, China Absent: Agenda Changes, Additions and Deletions None. Consent Calendar Council Member Tanaka registered a no vote on Agenda Item Number 1 - Approval of Contract Number C18171695 With Kone, Inc.... MOTION: Vice Mayor Filseth moved, seconded by Council Member Scharff to approve Agenda Item Numbers 1-4, 6. 1. Approval of Contract Number C18171695 With Kone, Inc. in an Amount Not -to -Exceed $687,760 for the Modernization of the two Elevators Located at the Cowper/Webster, Lot J, Parking Garage, Funded in the Capital Improvement Project PF-18000. 2. Approval of Mitigation Measures Minimizing Risk of Wildfires From Overhead Electrical Lines Within the Foothills Area West of Highway 280. 3. Policy and Services Committee Recommendation to Accept the Auditor's Office Quarterly Report as of March 31, 2018. 4. Policy and Services Committee Recommendation to Accept the ERP Planning: Information Technology and Data Governance Audit. Page 1 of 5 DRAFT ACTION MINUTES 6. Approval of Amendment Number 5 to the Palo Alto -Stanford Fire Protection Agreement With the Board of Trustees of the Leland Stanford Junior University Extending the Term to June 30, 2018 for an Additional fee of $6,773,624. MOTION FOR AGENDA ITEM NUMBER 1 PASSED: 7-1 Tanaka no, Fine absent MOTION FOR AGENDA ITEM NUMBERS 2-4, 6: 8-0 Fine absent Action Items 5. Adoption of a Resolution Supporting the Objective of the State Water Resources Control Board's Bay Delta Plan and a Negotiated Voluntary Settlement of Water Issues on the Tuolumne River. MOTION: Council Member Scharff moved, seconded by Vice Mayor Filseth to support the State Water Resources Control Board's Bay Delta Plan to have 40 percent of natural water in the Central Valley to enter the Delta from February to June and associated Southern Delta salinity objectives; and send a letter expressing this policy position to Bay Area Water Supply and Conservation Agency (BAWSCA), California State Water Resources Control Board, San Francisco Public Utilities Commission (SFPUC), and other stakeholders Staff believes should receive the letter. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace in the Motion, "have 40 percent of natural water in the Central Valley" with "have 30-50 percent of natural water in the San Joaquin Valley." INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace "natural water" with "unimpaired flow." MOTION AS AMENDED RESTATED: Council Member Scharff moved, seconded by Vice Mayor Filseth to support the State Water Resources Control Board's Bay Delta Plan to have 30-50 percent of unimpaired flow in the San Joaquin Valley to enter the Delta from February to June and associated Southern Delta salinity objectives; and send a letter expressing this policy position to Bay Area Water Supply and Conservation Agency (BAWSCA), California State Water Resources Control Board, San Francisco Public Utilities Commission (SFPUC), and other stakeholders Staff believes should receive the letter. MOTION AS AMENDED PASSED: 9-0 Page 2 of 5 City Council Meeting Draft Action Minutes: 8/20/18 DRAFT ACTION MINUTES At this time Council heard Agenda Item Numbers 8-10. 8. Approval of Agreements Between the City of Palo Alto and the Board of Trustees of the Leland Stanford Junior University: 1) Agreement for Fire Protection Services to Stanford University for the Period July 1, 2018 - June 30, 2023; and 2) Settlement Agreement for Overpayment Claim by Stanford University Regarding Fire Protection Services. MOTION: Council Member Scharff moved, seconded by Council Member Wolbach to approve: A. The settlement of a claim by Stanford University for prior overpayment ("Settlement Agreement"), through payment by the City to Stanford University in the amount of $5.5 million and credit for termination of prior agreement apparatus value; and B. The Palo Alto -Stanford Fire Protection Agreement for the provision of Fire Protection Services by the City to the Stanford University campus ("Agreement for Services") for the period of July 1, 2018 to June 30, 2023, to automatically renew to June 30, 2028 unless terminated by either party. MOTION PASSED: 9-0 9. Approval of Employment Agreement With Edward Shikada as City Manager. MOTION: Mayor Kniss moved, seconded by Council Member Kou to approve an employment agreement with Edward Shikada providing for his employment as City Manager for the City of Palo Alto effective December 20, 2018 or the date of retirement of current City Manager James R. Keene, Jr., whichever is sooner. MOTION SEPARATED FOR THE PURPOSE OF VOTING MOTION1: Mayor Kniss moved, seconded by Council Member Kou to approve Edward Shikada as City Manager for the City of Palo Alto effective December 20, 2018 or the date of retirement of current City Manager James R. Keene, Jr., whichever is sooner. MOTION1 PASSED: 9-0 MOTION2: Mayor Kniss moved, seconded by Council Member Fine to approve an employment agreement with Edward Shikada. Page 3 of 5 City Council Meeting Draft Action Minutes: 8/20/18 DRAFT ACTION MINUTES SUBSTITUTE MOTION: Council Member Tanaka moved, seconded by Council Member XX to approve an employment agreement with Edward Shikada, separating compensation into a salary component and a potential performance bonus component. SUBSTITUTE MOTION FAILED DUE TO THE LACK OF A SECOND MOTION2 PASSED: 8-1 Tanaka no 10. Adoption of: (1) a Resolution 9789 Entitled, "Resolution of the Council of the City of Palo Alto of Intent;" and (2) an Ordinance to Amend the Contract Between the Board of Administration of the California Public Employees' Retirement System (CaIPERS) and the City of Palo Alto to Implement the Share of Employer Contribution in Accordance With Section 20516 of the California Government Code and the Compensation Plan Between the City of Palo Alto and the Management and Professional Personnel and Council Appointees. MOTION: Mayor Kniss moved, seconded by Council Member Wolbach to: A. Adopt a Resolution of Intention of the Council of the City of Palo Alto stating its intent to amend the contract between the California Public Employees' Retirement System (CaIPERS) and the City of Palo Alto in order to implement the pension cost share provision in accordance with California Government Code section 20516 and the Compensation Plan between the City of Palo Alto and the Management and Professional Personnel (MGMT) employee group; and B. Adopt, on first reading, an Ordinance amending the City's contract with CaIPERS. This Ordinance will return to the Council on second reading in accordance with state law. MOTION PASSED: 9-0 Agenda Item Number 11- Review and Comment on the Letter Sent to the Santa Clara County Board of Supervisors... removed from the Agenda. 7. PUBLIC HEARING/QUASI-JUDICIAL: Consideration of the Appeal of the Planning and Community Environment Director's Decision to Approve the Architectural Review Application for 620 Emerson Street (17PLN-00331) to Allow Demolition of an Existing Single Story Building and Construction of a new Two-story 4,063 Square Foot Commercial Building for the Expansion of Nobu Restaurant. The Project Includes Replacement of Three On -site Parking Spaces With Five In -lieu Spaces in the Downtown Parking Assessment District. Environmental Assessment: Exempt From the Provisions of the California Page 4 of 5 City Council Meeting Draft Action Minutes: 8/20/18 DRAFT ACTION MINUTES Environmental Quality Act (CEQA) per Guideline Section 15303 (New Construction) Zoning District: CD-C(GF)(P) (Downtown Commercial) (Continued From June 4, 2018). Public Hearing opened at 10:32 P.M. Public Hearing closed at 10:55 P.M. MOTION: Council Member Fine moved, seconded by Council Member Scharff to adopt a Record of Land Use Action, thereby denying the appeal, upholding the Director's approval of an Architectural Review application and finding the proposed project exempt from review under the California Environmental Quality Act. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, "direct Staff to ensure appropriate protections are in place during construction to protect adjacent properties, with special focus on historic tile on the property to the South." (New Part C) INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to remove from the Motion Part C, "with special focus on historic tile on the property to the South." MOTION AS AMENDED RESTATED: Council Member Fine moved, seconded by Council Member Scharff to: A. Adopt a Record of Land Use Action, thereby denying the appeal, upholding the Director's approval of an Architectural Review application; B. Find the proposed Project exempt from review under the California Environmental Quality Act; and C. Direct Staff to ensure appropriate protections are in place during construction to protect adjacent properties. MOTION AS AMENDED PASSED: 8-1 Kou no 11. Rcvicw and Commcnt on thc Lcttcr Scnt to thc Santa Clara County Board of Supervisors Rega State/Federal Legislation Update/Action None. Adjournment: The meeting was adjourned at 11:39 P.M. Page 5 of 5 City Council Meeting Draft Action Minutes: 8/20/18 CITY OF PALO ALTO City of Palo Alto (ID # 9477) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/10/2018 Summary Title: Resolution Authorizing BAWSCA to Negotiate Title: Adoption of a Resolution Authorizing the Bay Area Water Supply and Conservation Agency to Negotiate with the City and County of San Francisco to Amend the 2009 Water Supply Agreement From: City Manager Lead Department: Utilities Recommended Motion Staff recommends that the City Council consider the following motion: Adopt a resolution authorizing the Bay Area Water Supply and Conservation Agency (BAWSCA) to negotiate with the City and County of San Francisco to amend the Water Supply Agreement (WSA). Recommendation Staff recommends that the City Council adopt a resolution authorizing BAWSCA to negotiate with the City and County of San Francisco to amend the WSA. Executive Summary The WSA is an agreement for San Francisco to supply water from its Hetch Hetchy water system to the BAWSCA-member wholesale customers. Delegating to the BAWSCA Board the authority to negotiate with the City and County of San Francisco to amend the WSA will allow BAWSCA to negotiate amendments related to discrete but important items. Delegation of this authority was specifically anticipated in the WSA, but must be authorized by the adoption of a resolution by a majority of BAWSCA members. This resolution confers no authority on BAWSCA to enter into a contract with San Francisco or to make any commitments legally binding on the City of Palo Alto (City). Background BAWSCA is a special district formed in 2003 as authorized by the California legislature (see Water Code Section 81300 et seq.). The California Legislature concluded at that time that City of Palo Alto Page 1 residents in Alameda, San Mateo and Santa Clara counties that rely upon the water from the San Francisco Regional Water System (Regional Water System) have no right to vote in elections in the City and County of San Francisco and were not represented on the San Francisco commission that oversees the operation of the Regional Water System. One of the resulting laws, Assembly Bill 2058, enabled the creation of BAWSCA to represent cities, districts and public utilities that distribute water in portions of the Bay Area served by the Regional Water System (wholesale customers). BAWSCA provides regional water supply planning, resource development, and conservation program services. Its goals are to ensure the member agencies get a reliable supply of high quality water at a fair price. The City purchases water from the Regional Water System and is one of the 26 members of BAWSCA, also known as the "Wholesale Customers. The City is represented on the BAWSCA Board of Directors. BAWSCA replaced the previous unincorporated association of Wholesale Customers called the Bay Area Water Users Association (BAWUA). In 1977, BAWUA was successful via a lawsuit in affirming that the Wholesale Customers should not receive a higher rate increase relative to San Francisco retail customers. Additionally, the City brought a lawsuit against San Francisco which resulted in the negotiation and adoption of a master water sales contract between San Francisco and Wholesale Customers in 1984, to ensure Wholesale Customers pay no more in water rates than their fair share of the wholesale water system. This 1984 agreement was the predecessor to the WSA of 2009, an agreement among the 26 Wholesale Customers, including the City of Palo Alto, and the City and County of San Francisco. In 2009, the City approved the WSA between San Francisco and the Wholesale Customers (CMR:252:09). In 2013, the City approved Amendment No. 1 to the WSA, which prohibited changes to Hetch Hetchy Reservoir unless there is an amendment to the WSA (Staff Report 3578). Additionally, in 2014, the City Council approved a resolution authorizing BAWSCA to initiate, defend and settle arbitration related to the WSA to protect Palo Alto's financial interests (Resolution Number 9445). Under the WSA, contract administration is delegated to BAWSCA. When the prior agreement, the 1984 Master Contract and Settlement Agreement (1984 Agreement) was negotiated, there was no durable, representative organization that could be delegated responsibility to act as agent for contract administration on behalf of the Wholesale Customers. BAWSCA's predecessor BAWUA, was at that point simply an unincorporated association, governed entirely by city and water agency staff. For that reason, the 1984 Agreement provided for initiation of arbitration as well as a variety of administrative decisions to be made by five "Suburban Representatives" -- agencies to be chosen by all BAWUA members or, absent a selection, the five largest agencies. Annually, through the term of the 1984 Agreement, the Suburban Representatives were required to make such administrative decisions and, several times, to initiate arbitration. With BAWSCA's formation in 2003 and the adoption of the new WSA in 2009, the Wholesale Customers now have an agency in place that can attend to the many technical but important City of Palo Alto Page 2 matters related to the contract administration, which continue to require oversight and decisions each year. The WSA specifically assigned a number of administrative tasks to BAWSCA, most of which were previously handled by the Suburban Representatives. Discussion At this time, some sections of the WSA require amendment to address substantive and important issues that have arisen during implementation of the Agreement; however, these amendments do not diverge from the existing policies and spirit of the WSA. The WSA specifically assigned a number of administrative tasks to BAWSCA; any of the contemplated amendments fall within the authority delegated to BAWSCA in the WSA. Through initial discussions, the amendments have been narrowed to eight discrete items. Since one potential amendment addresses the allocation of water during a drought and another the extension of San Francisco's decision related to San Jose and Santa Clara, BAWSCA determined that it is prudent to obtain authorization from the members to negotiate all of the amendments currently at issue. The requested delegation of authority will allow BAWSCA to negotiate amendments related to eight discrete but important items. The following items are of interest to San Francisco: 1) the process for reviewing the Wholesale Capital Fund; 2) the wholesale debt -coverage ratio for the rate -setting process; 3) the extension of the Water System Improvement Program (WSIP) completion date; and 4) the description of the Regional Groundwater Storage and Recovery Project that is being built by San Francisco as part of the Water System Improvement Program. Additionally, the following four items are of interest to BAWSCA: 1) BAWSCA's oversight role over the San Francisco Public Utility Commission's (SFPUC) 10 -year Capital Improvement Program; 2) the procedure to divide available water between the SFPUC and its Wholesale Customers during droughts; 3) extension of the deadline for a decision by San Francisco to make San Jose and Santa Clara permanent customers of the Regional Water System and extend increased water supply to the other permanent Wholesale Customers; and 4) resolution of disputed SFPUC Regional Water System asset classifications. BAWSCA will keep water management representatives (staff from each agency that attends monthly BAWSCA water management meetings) informed about negotiation positions and developments. Throughout the process staff will have multiple opportunities to confirm BAWSCA's positions or recommend new ones. The final negotiated amendments to the WSA will be subject to council approval. Resource Impact There is no impact to the FY2019 budget associated with the adoption of a resolution authorizing BAWSCA to negotiate with the City and County of San Francisco to amend the WSA. City of Palo Alto Page 3 Policy Implications The adoption of the proposed resolution supports the 2018 Utilities Strategic Plan which calls for managing our finances optimally and using resources efficiently to meet our customers' service priorities. Environmental Review Council's adoption of the proposed resolution does not meet the definition of a project, under Public Resources Code section 21065, therefore California Environmental Quality Act (CEQA) review is not required. Attachments: • Attachment A: Resolution of the Council of the City of Palo Alto Authorizing BAWSCA to negotiate with the City and County of San Francisco to Amend the Water Supply Agreement City of Palo Alto Page 4 Attachment A Resolution No. Resolution of the Council of the City of Palo Alto Authorizing the Bay Area Water Supply And Conservation Agency to Negotiate with the City and County of San Francisco to Amend the 2009 Water Supply Agreement RECITALS A. In April 2003, the City of Palo Alto (City) and other water suppliers in Alameda, San Mateo and Santa Clara counties established the Bay Area Water Supply and Conservation Agency (BAWSCA) as authorized by Water Code Section 81300 et seq. pursuant to State legislation enacted in 2002 (AB 2058). B. The City is represented on the BAWSCA Board of Directors. C. The City Council has previously approved the 2009 Water Supply Agreement between the City and County of San Francisco and Wholesale Customers in Alameda County, San Mateo County and Santa Clara County (Agreement). D. BAWSCA has proposed to serve as the representative of its members in discussions and negotiations with San Francisco leading toward the resolution of a number of discrete, but important amendments to address substantive issues that have arisen during implementation of the Agreement. E. BAWSCA has the capabilities required to serve in this capacity by virtue of Agency staff and consultants in relevant disciplines including civil engineering, water supply planning, finance, economics, accounting, and law. F. BAWSCA's CEO/General Manager has met with the City's representatives to update them on the matters at issue in this negotiation. The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The City Council appoints BAWSCA as its authorized representative in discussions and negotiations with San Francisco to amend the Agreement to address issues arising from implementation of the Agreement. SECTION 2. BAWSCA, through its CEO/General Manager, shall confer with and keep the City informed on the status of these discussions and negotiations. SECTION 3. This appointment shall continue unless and until revoked by the City Council. SECTION 4. This resolution confers no authority on BAWSCA to enter into a contract with San Francisco or to make any commitments legally binding on the City. The authority to enter into any contracts is expressly reserved to the City Council. 1 140709 jb 6055077 Attachment A SECTION 5. Council's adoption of this resolution does not meet the definition of a project, under Public Resources Code 21065, therefore California Environmental Quality Act review is not required. INTRODUCED AND PASSED: September 10, 2018 AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Assistant City Attorney City Manager Utilities General Manager Director of Administrative Services 2 140709 jb 6055077 CITY OF PALO ALTO City of Palo Alto (ID # 9500) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/10/2018 Summary Title: 567 Maybell Avenue: New Street Name for New Subdivision Title: QUASI-JUDICIAL. 567 Maybell: Recommendation by the Palo Alto Historical Association for a new Street Name for a new 16 -Unit Subdivision. (Tract No. 10434). Environmental Assessment: Section 15061(b)(3) not Subject to CEQA. Zoning Districts: Two -Family Residential (R-2) and Low Density Multiple -Family Residence RM-15 From: City Manager Lead Department: Planning and Community Environment Recommendation: Staff recommends that the City Council accept the recommended street name "Orchard Court" for the Tract No. 10434 "Tao Village". Background: The Planning and Transportation Commission (PTC) reviewed the Tentative Map in a public hearing on May 25, 2016 (Staff Report: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?BIobID=52513) and recommended approval to the City Council. On June 28, 2017 (Staff Report: http://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?BIobID=52772), the City Council reviewed the map in a public hearing and approved the Tentative Map with conditions of approval. The action of the City Council was based on its findings that the proposed subdivision will have no significant environmental impact and is in conformance with all state and local laws and regulations, and applicable Comprehensive Plan Elements in effect at that time. A related Architectural Review application was recommended for approval by the Architectural Review Board on July 20, 2017 (Staff Report: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?BIobID=58722) and the effective approval by the Director of Planning and Community Environment was on August 24, 2017. One design change made during the architectural review process led to the requirement for an access easement on the Final Map that was not included in the Tentative Map, described below. City of Palo Alto Page 1 The City Council adopted the Final Map on consent at its February 26, 2018 meeting (Staff Report: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?BIobID=63526). Following the approval of the Final Map, it was discovered that a street name had not been proposed for the private street within the subdivision. Following Resolution No. 5739 of the City Council regarding the naming of streets, the Palo Alto Historical Association (PAHA) is responsible for suggestions of appropriate historical names. The names suggested by the Historical Association shall be reviewed by the Communications Division and the approved name shall be submitted to the City Council under the consent calendar for consideration. Discussion: On July 9, 2018, the PAHA recommended Orchard Court for the new street name for the subdivision. See Attachment A for the letter from the PAHA and see Attachment B for the map of the subdivision. The City's Police Department (Communications Division) reviewed the proposed name and supported the recommendation. The site of the proposed subdivision and the adjacent Juana Briones Park were once part of an apricot orchard. The subdivision site was the last commercial orchard in Palo Alto. Other alternative street names considered included Perry Court and Parkhouse Court. Environmental Review (If Applicable): The proposed street name request is exempt from the California Environmental Quality Act (CEQA), which applies only to project which has the potential for causing significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA (Section 15061(b)(3). The naming of a street will not have the potential to significantly impact the environment. Attachments: • Attachment A: PAHA Recommendation Letter July 2018 • Attachment B- Street Name Exhibit City of Palo Alto Page 2 Pate Alto Pisterirai ssuciation P.O. BOX 193 PALO ALTO, CALIFORNIA 94302 July 9, 2018 Sheldon Ah Sing, Contract Planner City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 The Palo Alto Historical Association board has agreed to support the Landmarks and Streets Committee's recommendation for the new street in the Barron Park neighborhood. The Committee has researched and solicited suggestions from members of the neighborhood, and is recommending the name "ORCHARD Court". The proposed subdivision into which this new street will extend, as well as the adjacent Juana Briones Park, were part of a former apricot orchard. As you may know, the "Valley of Hearts Delight" celebrates the Santa Clara Valley's past as the fruit bowl of America. While most of Palo Alto was not part of this history, the lands in southwest Palo Alto, including Barron Park, were part of this legacy. Doug Graham, the Barron Park historian, supports this suggested name, pointing out that this property was the last commercial orchard in Palo Alto. Other names that received consideration included "Perry Court" and "Parkhouse Court". Perry is the name of the donkey who was the model for the donkey in the movie "Shrek". Perry lives in Bol Park. Parkhouse court was suggested to honor our recently deceased archive volunteer Jack Parkhouse. I have added the name "Court" to each of these names. I am not sure if our responsibilities in recommending street names requires us to suggest a label such as court or place. For the Palo Alto Historical Association, Steven Staiger Historian and Chair, Landmarks and Streets Committee ABEL AVENUE 10' STREET DEDICATION ' co 11 o CD I "] ui ZJ� N WI "; Q II CID JI J� W I I r 0 ri Ir- 30.00=,-,- r\ 11 N28'48'00"E 326.39' L6 M cti N 0i co NOTES 1. ALL DISTANCES AND DIMENSIONS ARE IN FEET AND DECIMALS THEREOF. 2. THE DISTINCTIVE BORDER LINE INDICATES THE BOUNDARY OF THE LAND SUBDIVIDED BY THIS MAP AND CONTAINS AN AREA OF 2.466 ACRES (GROSS), MORE OR LESS, AND 2.391 ACRES (NET), MORE OR LESS. 3. SEE SHEETS 4 AND 5 FOR PROPOSED EASEMENTS. 4. EASEMENT LINES WITHOUT BEARINGS ARE PERPENDICULAR TO OR PARALLEL WITH PROXIMATE EASEMENT AND/OR LOT LINES. BASIS OF BEARINGS THE BEARING N28'48'E OF THE SOUTHEASTERLY LINE OF MAYBELL AVENUE, AS INFERRED FROM THE MAP OF "MAYBELL TRACT", FILED FOR RECORD ON JUNE 19, 1905 IN BOOK K OF MAPS AT PAGES 88 AND 89, RECORDS OF SANTA CLARA COUNTY, WAS TAKEN AS THE BASIS OF BEARINGS FOR THIS MAP. 89.00' LOT 1 6,185 S.F.± N61'12'00"W 89.00' LOT 2 6,000 S.F.± N61'12'00"W CV .4- N co 89.00' LOT 3 6,000 S.F.± N6112'00"W N c0 c0 89.00' LOT 4 6,000 S.F.± N61'12'00"W iv r: co 00 n 89.00' LOT 5 6,000 S.F.± 79.00' (0 co N co N61'13'40"W 306.85' 54.46' '0) 0 LOT 10 N 0 P 6,002 S.F.± N Z 54.46' 0 m 32.43'wr o O 0 0 N co N z LOT 9 6,008 S.F.± N61'12'00"W 100.93' N28'48'00"E 54.46' in LOT 11 0 6,003 S.F.± 54.46' LEGEND O 0 • E.V.A.E. P.A.E. P.I.E.E. P.S.D.E. P.S.S.E. P.U.E. (R) N28'48'00"E 54.46' LOT 12 do 6,005 S.F.± 54.46' SET 2-1/2" BRASS DISC WITH PUNCH MARK AND STAMPED "LS 6868" SET 3/4" IRON PIPE, TAGGED "LS 6868" FOUND IRON PIPE, AS NOTED DISTINCTIVE BORDER LINE EASEMENT LINE LOT LINE CENTER LINE 11E EMERGENCY VEHICLE ACCESS EASEMENT PRIVATE ACCESS EASEMENT PRIVATE INGRESS AND EGRESS EASEMENT PRIVATE STORM DRAIN EASEMENT PRIVATE SANITARY SEWER EASEMENT PUBLIC UTILITY EASEMENT RADIAL BEARING N28'48'00"E 54.47' LOT 13 0 6,008 S.F.± 54.47' ORCHARD COURT N F 9'_ N L5 t L4 co co LOT 14 z 5,000 S.F.± N) J N61 30'03"W (R) 1,7(21--4 LOT 8 6,001 S.F.± N6112'00"W 111.64' 39.46' J 13. 3.5' 1 N28'48'00"E 95.75' 62.69' n LOT 6 6,003 S.F.± rn 62.69' N61'12'00"W 296.85' 264.43' N28'48'00"E N6112'00"W 336.85' 48.95' LOT 7 6,002 S.F.± N 0 N N28'48'00"E N61'12'00"W In N 0i c0 N61'13'40"W TRACT NO. 10434 TAO VILLAGE BEING A 16 LOT SUBDIVISION FOR SINGLE FAMILY RESIDENCES CONSISTING OF 5 SHEETS *************************************************************************** BEING ALL OF THE LANDS DESCRIBED IN THAT CERTAIN GRANT DEED, RECORDED APRIL 25, 2014 AS DOCUMENT NO. 22578014, OFFICIAL RECORDS OF SANTA CLARA COUNTY. SITUATED ENTIRELY WITHIN THE CITY OF PALO ALTO, SANTA CLARA COUNTY, CALIFORNIA ********************************************************************** SCALE: 1" = 40' DATE: NOVEMBER 2017 �Bkf FOUND 3/4" IRON PIPE PER ROS 334 M 23 a, 0) 0i 27' C 1n .5' 69.24' i 1 89.93' LOT 15 5,682 S.F.± co N61'12'00"W 10 76.55 LOT 16 6,000 S.F.± 7' 0 I ''- o OINP 0 "")CO M 01 72.42' N28'48'00"E 339.54' 1 246.67' UNE TABLE NO. BEARING LENGTH L1 N28'48'00"E 7.13' L2 N08'48'00"E 28.93' L3 N28'48'00"E 25.71' L4 N6112'00"W 22.97' L5 N6112'00"W 40.99' L6 N6113' 40.1N 10.00' L7 N6112'00"W 1 10.00' L13 N28'48'00"E 13.00' L14 N6112'00"W 20.00' CURVE TABLE NO. RADIUS DELTA LENGTH ci 10.00' 90'00'00" 15.71' C2 27.50' 90'00'00" 43.20' C3 163.50' 018'03" 0.86' C4 136.50' 20'00'00" 47.65' C5 150.00' 20'00'00" 52.36' C6 163.50' 20'00'00" 57.07' C7 213.50' 20'00'00" 74.53' C8 200.00' 20'00'00" 69.81' C9 186.50' 20'00'00" 65.10' CLEMO AVENUE (FORMERLY PARK AVENUE) N28'48'00"E ENGINEERS -SURVEYORS -PLANNERS 1730 NORTH FIRST STREET. SUITE 600 SAN JOSE. CALIFORNIA 95112 ARASTRADERO BKF NO. 20126144-51 0 20 40 80 rte ---tom ( SCALE IN FEET ) SHEET 3 OF 5 CITY OF PALO ALTO City of Palo Alto (ID # 9454) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/10/2018 Summary Title: Contract for Repair of the Concrete Liner on Matadero Creek Title: Approval of an Agreement with Santa Clara Valley Water District, in the Amount of $227,000, for Concrete Channel Lining Repair Along Matadero Creek; and Approval of a $227,000 Water Fund Operating Budget Amendment From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council: 1) Approve an agreement with Santa Clara Valley Water District (SCVWD) to fund the replacement of a damaged concrete lining at Matadero Creek in an amount not to exceed $227,000. 2) Amend the Fiscal Year 2019 Budget Appropriation Ordinance for the Water Fund by: a. Increasing the Water Fund Operating Budget by $227,000; and b. Decreasing the Water Fund Operations Reserve by $227,000. Background In mid -May of 2014 a major water main break occurred on an 8 inch pipe on the bridge abutment on the southeast bank of Matadero Creek. The water from the break eroded away the dirt on the backside of the creek liner leaving a large void. After repairing the pipe City crews filled the void behind the wall. Typically an excavation would be filled with compacted sand and base rock, however, in this case the excavation was filled with concrete slurry in attempt to fill voids behind the wall and to avoid damaging the concrete liner. Despite the effort to avoid damaging the liner, the liner began developing cracks shortly after the repair. The main concern with the cracks was that they would lead to erosion behind the liner that would further damage the liner and lead to undermining of the bridge footings for West Bayshore Road. The City and SCVWD attempted to coordinate a repair in October of 2014 under an existing permit issued to the SCVWD for sediment removal. Due to impending rain the permit expired City of Palo Alto Page 1 prior to the work being completed. On July 9, 2015 the City received a letter from the SCVWD requesting cooperation in the repair of concrete lining. Since that letter was received, the City has been working on an agreement with SCVWD to repair the liner. Between May and July 2018 the parties negotiated the terms of the attached agreement, under which SCVWD will administer, design and construct the Matadero Creek lining repair project and the City will fund associated project costs. Discussion During the negotiations, SCVWD issued a request for bids to repair the concrete liner and remove sediment from the Matadero Creek channel, along with a request for bids on unrelated erosion repair work on San Tomas Aquino Creek in San Jose and Campbell. SCVWD opted to bid the Matadero Creek liner repair and sediment removal tasks together as a cost -saving measure, because both tasks require that the creek be dammed and water pumped around the work area. SCVWD will be responsible for costs of the Matadero Creek sediment removal work, which is not part of the attached agreement. SCVWD issued the combined bid and received three responses. The bid price range was between $1,570,750 and $3,798,000. On July 10, SCVWD recommended that the bid of $1,570,750 submitted by PMK Contractors be declared as the lowest responsible bidder and awarded the contract. The City's share, covering the Matadero Creek lining repair work only, is $227,000, as shown in Exhibit B to the attached agreement. Resource Impact During the FY 2019 budgeting process staff did not receive a cost estimate or timeline for the liner repair from SCVWD. As a result, staff did not request for additional funding in the FY 2019 operating budget. Staff recommends an appropriation of $227,000 in the FY 2019 Water Fund operating budget and offset by a reduction in the Water Fund operations reserve. Timeline SCVWD's construction work is anticipated to be completed in the fall of 2018 before rain season begins. Policy Implications Authorization of this agreement does not represent any change to existing policy. Environmental Review The City is a responsible agency for this project under the California Environmental Quality Act (CEQA). SCVWD is the lead agency and will perform the Matadero Creek lining repair project City of Palo Alto Page 2 according to SCVWD's Stream Maintenance Program Environmental Impact Report and in accordance with any associated permits. Any additional permitting and environmental review, if needed, will be secured by SCVWD. Attachments: • Attachment A: Agreement by and between the City of Palo Alto and the Santa Clara Valley Water District for Concrete Channel Lining Repair along Matadero Creek West of Highway 101 City of Palo Alto Page 3 ATTACHMENT A AGREEMENT BY AND BETWEEN THE CITY OF PALO ALTO AND THE SANTA CLARA VALLEY WATER DISTRICT FOR CONCRETE CHANNEL LINING REPAIR ALONG MATADERO CREEK WEST OF HIGHWAY 101 THIS AGREEMENT (hereinafter "Agreement") is made and entered into as of September 10, 2018 ("Effective Date"), by and between the CITY OF PALO ALTO (hereinafter "City"), a California chartered municipal corporation, and the SANTA CLARA VALLEY WATER DISTRICT (hereinafter "District"), a special district of the State of California. City and District may be referred to individually as a "Party" or collectively as the "Parties" or the "Parties to this Agreement." RECITALS A. The City is the sole owner of the portion of Matadero Creek immediately west of and under West Bayshore Road ("City Property"), as more particularly shown on Exhibit A, Matadero Creek: Location Map, attached hereto and incorporated herein. B. The State of California owns the portion of Matadero Creek immediately east of West Bayshore Road and under Highway 101 ("State Property") as more particularly shown on Exhibit A, Matadero Creek: Location Map. The State of California issued Encroachment Permit No. 471-E-764764 to the District in 1971 to construct and maintain a concrete lining for the creek channel, (the "Concrete Lining") under Highway 101 on State Property. C. The City issued an encroachment permit dated February 22, 1971 for temporary construction access on the north and south sides of the portion of City Property immediately west of West Bayshore Road. The City granted an easement to the District on November 8, 1971 for the District's construction of the Concrete Lining on the same City Property. Neither the easement nor the encroachment permit provided for the Concrete Lining construction under West Bayshore bridge. D. In 1973 the District constructed the Concrete Lining extending, in part, from East Bayshore Road to Greer Road. E. On May 10-12, 2014, as part of a water main leak repair on top of the south bank of Matadero Creek, west of West Bayshore Road, the City pumped concrete slurry to backfill a void behind the District's Concrete Lining. On May 29, 2014, the City identified cracks in portions of the Concrete Lining extending under, east and west of the West Bayshore Road bridge, and reported it to the District. F. The condition of the Concrete Lining at this location is believed, by both City and District, to need repairs to maintain appropriate and necessary bank stability (the "Project", as described more fully in Section 1). The City and District agree to cooperate to repair the Concrete Lining, with the District administering, designing and constructing the Project and the City funding the Project's reasonable associated costs, as described more fully in Sections 3 and 5 and Exhibit B, Estimate of Project Costs. 6055042 ATTACHMENT A G. On July 10, 2018, the District awarded a $1,650,750 construction contract to PMK Contractors, LLC, to rebuild the Concrete Lining at Matadero Creek, and to complete two additional and unrelated channel rehabilitation projects on San Tomas Aquino Creek. The Matadero Creek Channel Lining Project repair costs total $413,289; of which $186,289 will be paid by the District, and $227,000 will be paid by the City. H. In order to avoid the costs, risks, and uncertainties of any litigation, the Parties also agree that this Agreement represents a full and complete settlement and compromise of any claims that the District may have regarding City's conduct described in Recital E. NOW THEREFORE, in consideration of their mutual promises and agreements, and subject to the terms, conditions and provisions hereinafter set forth, the Parties agree as follows: AGREEMENT 1. DESCRIPTION OF THE PROJECT 1.1 Proiect Site. The Project Site shall consist of approximately 100 linear feet of the District's Concrete Lining, east, west and under West Bayshore Road along Matadero Creek on the south bank as shown more particularly on Exhibit A, Matadero Creek: Location Map. 1.2 Project Scope. 1.2.1 The Project involves, as described more particularly in Exhibit B, Estimate of Project Costs, the administration, design and construction of repairs to the District's Concrete Lining covering a length of approximately 60 feet, including: (a) saw cutting and removing cracked concrete panels; (b) removal of any interfering concrete slurry from the water line repair activity, the extent of which is not known; (c) replacement of any soil that was lost behind the concrete panels, the extent of which is not known, and (d) construction of new concrete panels on the Project Site. The Project will require flows in Matadero Creek to be diverted around the work area. 1.2.2 Any repairs or damage related to District's Concrete Lining not identified in Exhibit B, Estimate of Project Costs will be addressed as described in Section 5.1. 2. TERM The term of this Agreement shall commence upon the Effective Date and terminate upon completion of the Project, or no later than three (3) years from the Effective Date, whichever is shorter. 3. DISTRICT, CITY OBLIGATIONS 2 AGREEMENT RE: MATADERO CREEK SCVWD - CITY OF PALO ALTO ATTACHMENT A 3.1 District shall perform the following: 3.1.1 Administer, design, and construct the Project, including coordination with appropriate local, state, federal, and regulatory agencies, regarding securing any necessary permits or approvals for the Project. 3.1.2 District, as Lead Agency under the California Environmental Quality Act ("CEQA"), will perform the Project under District's Stream Maintenance Program ("SMP") Environmental Impact Report and permits, if authorized by appropriate regulatory agencies, or, alternatively or in addition, obtain necessary environmental clearances and permits to perform the Project. 3.1.3 In the event regulatory agencies determine that the SMP is not appropriate or does not otherwise provide sufficient authorization to perform the Project, District shall use its best efforts to seek and obtain additional required permits and approvals from regulatory agencies in time for the District to timely complete the work. 3.1.4 District shall proceed in a timely manner to initiate and complete the Project. District will use its best efforts to complete the Project prior to June 30, 2019. If District and City determine this schedule cannot be met, the Parties agree to make reasonable efforts to negotiate a revised schedule for performance and execute an amendment to this Agreement. If the Parties cannot agree on a revised schedule of performance, then the Agreement may be terminated in accordance with Section 7 of this Agreement. 3.1.5 District shall inform Oscar Godinez, Manager for Maintenance Operations in the City's Public Works Department, and Anthony Meneses, Utilities Supervisor, one month before starting construction work on the Project. District shall perform its work related to the Project in a manner as to minimize interference with City's operations, infrastructure, and other public works projects, including the City's Matadero Creek Pump Station Project, which the City expects to be complete by August 2018. 3.2 City shall perform the following: 3.2.1 Act promptly to issue an encroachment permit, if deemed necessary by City, for District's contractor to perform and complete the Project in a timely manner, and for the District's future use, maintenance and inspection of the Project. 3.2.2 Ensure its obligations are met as Responsible Agency under CEQA. 4. PROJECT MANAGER 3 AGREEMENT RE: MATADERO CREEK SCVWD - CITY OF PALO ALTO ATTACHMENT A 4.1.1 For District. The designated project manager for District for the duration of the Project is Devin Mody. District's project manager shall have the necessary authority to direct technical and professional work within the scope of the Agreement and shall serve as the principal point of contact with City. 4.1.2 For City. The designated project manager for City for the duration of the Project is Anthony Meneses, Utilities Supervisor, who shall serve as the principal point of contact with District. 4.1.3 Changes. Either Party may change its project manager at any time and shall provide the other Party with written notice of the change. 5. PROJECT COST, INVOICES 5.1 Not -to -Exceed Project Cost. City agrees to compensate District for its actual, reasonable and documented costs associated with administration, design and construction of the Project ("Project Costs") in a total amount not -to -exceed two hundred twenty-seven thousand dollars ($227,000), as more particularly described in Exhibit B, Estimate of Project Costs. 5.2 Any Project Costs not identified in Exhibit B, Estimate of Project Costs, which exceed the total estimated amount, will be negotiated separately by the Parties and any mutually agreed upon costs will be memorialized by the Parties as a written amendment to this Agreement. 5.3 Invoices. In order to request payment from City, District agrees to submit invoices to City describing the services and/or equipment related to the Project and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates and reimbursable expenses). The invoice shall also identify the percentage completion of each task. The information in the District's invoices shall be subject to verification by City. District agrees to submit invoices to the City's Project Manager at the address specified in Section 9 below. City will generally process payment to District no later than 45 days after receipt of District's complete invoices, along with any supporting documentation. 5.4 Audit. District will perrnit City to audit, at a reasonable time during the term of the Agreement and for three (3) years after, and District will maintain District's records pertaining to the matters covered by the Agreement. 5.5 Release and Settlement. In consideration for City's payment of Project Costs to which District is entitled to under this Agreement, all claims by and between the Parties related to the incidents described in Recital E above shall be considered fully and completely compromised and settled, without the admission of fault or liability by any Party, and each Party agrees to waive and release, in favor of the 4 AGREEMENT RE: MATADERO CREEK SCVWD - CITY OF PALO ALTO ATTACHMENT A other Party and all employees, directors, agents, contractors, and representatives of the other Party, all claims, demands, causes of action, rights, damages, costs, expenses, compensation and legal entitlements of any kind or nature (including attorney fees) arising out of or connected with the incidents described in Recital E above, and to accept the duties and liabilities stated in this Agreement in full accord and satisfaction thereof. 6. INDEMNIFICATION, INSURANCE 6.1 Indemnification. In lieu of and notwithstanding the pro rata risk allocation, which might otherwise be imposed between the Parties pursuant to California Government Code Section 895.6, the Parties agree that all losses or liabilities incurred by a Party shall not be shared pro rata but, instead, District and City agree that, pursuant to California Government Code Section 895.4, each Party ("Indemnifying Party") shall fully indemnify, defend and hold the other Party ("Indemnified Party"), their officers, board members, employees, and agents, harmless from any claim, expense or cost. damage or liability, including that imposed for injury (as defined in Government Code Section 810.8) occurring by reason of the negligent acts or omissions or willful misconduct of the Indemnifying Party, its officers, employees, or agents, under or in connection with or arising out of any work, authority, or jurisdiction delegated to such other party under this Agreement. 6.2 Insurance. District and its consultant(s) or contractor(s), if any, performing the work, will secure and maintain in full force and effect, at all times during Project execution and until Project completion, bodily injury insurance, property damage insurance and contractual liability worker compensation and auto coverage in forms and limits of liability acceptable to both District and City, naming District and City and their respective officers, employees, and agents as additional insured from and against all damages and claims, loss or liability, cost or expense arising out of or in any way connected with the Project. District is self -insured and can meet any required obligations through self-insurance. 6.3 Survival. The rights, duties, and obligations of the Parties as set forth in Section 6 of this Agreement will survive termination and expiration of this Agreement. 7. TERMINATION 7.1 The Parties' June 4, 2018 Agreement for Concrete Channel Lining Repair Along Matadero Creek West of Highway 101 is hereby terminated as of August 20, 2018, with neither Party having incurred any reimbursable costs associated with that agreement. 7.2 Either District or City may, upon thirty (30) days' written notice, with or without cause, suspend or terminate this Agreement. 5 AGREEMENT RE: MATADERO CREEK SCVWD - CITY OF PALO ALTO ATTACHMENT A 7.3 Upon such suspension or termination of the Agreement, District will be paid for actual costs associated with the Project incurred and non -cancelable on or before the effective date of the suspension or termination. 8. ADDITIONAL PROVISIONS 8.1 Recitals. The Recitals set forth above are hereby incorporated in and made a part of this Agreement by this reference. 8.2 Waiver. A Party's waiver of any term, condition, covenant, or breach of any term, condition or covenant shall not be construed as a waiver of any other term, condition, or covenant or breach of any other term, condition, or covenant. 8.3 Integration. This Agreement contains the entire Agreement between District and City relating to Project. Any prior agreements, promises, negotiations, or representations not expressly set forth in this Agreement are of no force or effect. 8.4 Compliance with Applicable Law. District and its consultants and/or contractors will comply with all laws applicable to the administration, design and construction of the Project. Except as expressly set forth herein, District will secure all permits and licenses, pay all charges and fees and give all notices required by law in connection with the Project. 8.5 Severability. If any term, condition or covenant of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions of this Agreement shall be valid and binding on District and City. 8.6 Choice of Law. This Agreement shall be governed and construed in accordance with the laws of the State of California. 8.7 Counterparts. This Agreement may be executed in counterparts and will be binding as executed. 8.8 Amendment. All changes or extensions to this must be in writing in the form of an amendment approved by both Parties. 8.9 No Third Party Beneficiaries. This Agreement is entered into only for the benefit of the Parties executing this Agreement and not for the benefit of any other individual, entity, or person_ 8.10 Labor Compliance. The District's consultants and/or contractors, if any, shall comply with State Labor Codes, including working hours, prevailing wage requirements and certified payroll records. 6 AGREEMENT RE: MATADERO CREEK SCVWD - CITY OF PALO ALTO ATTACHMENT A 8.10.1 The District shall ensure that District's consultants and/or contractors, if any, shall comply with California Labor Code Section 1810, et seq. which provides that work performed by employees of contractors in excess of 8 hours per day, and 40 hours during any one week, must be compensated as overtime, at not less than 1 V2 times the basic rate of pay. 8.10.2 Payroll Records. The District shall ensure that District's contractors, if any, shall comply with California Labor Code Section 1776 which requires certified payroll records be maintained with the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by him or her in connection with this Agreement. The payroll records shall be made available for inspection as provided in Califomia Labor Code Section 1776. 8.10.3 Apprentices. The District shall ensure that District's contractors, if any, shall comply with California Labor Code Section 1777.5 regarding apprentices. 9. NOTICES All correspondence relating to the Project, including all notices required by the terms of this Agreement may be delivered by first class mail addressed to the appropriate Party at the following addresses: To DISTRICT: Santa Clara Valley Water District 5750 Almaden Expressway San Jose, CA 95118 Attn: Devin Mody, Engineering Unit Manager To CITY: City of Palo Alto Utilities Department 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Ed Shikada, Utilities General Manager With Copies Attention to: City Attorney's Office Attn: Amy Bartell, Assistant City Attorney (Remainder of page intentionally left blank; signatures follow on next page) 7 AGREEMENT RE: MATADERO CREEK SCVWD - CITY OF PALO ALTO ATTACHMENT A IN WITNESS WHEREOF, the Parties have executed the AGREEMENT the day and year set forth above. CITY: CITY OF Palo Alto a California chartered municipal corporation By: Date: City Manager APPROVED AS TO FORM: By: Date: Assistant City Attomey ATTEST: By: Date: City Clerk DISTRICT: SANTA CLARA VALLEY WATER DISTRICT a special district By: Chief Executive Officer APPROVED AS TO FORM: By: Brian Hopper Senior Assistant District Counsel Date: Date �/%o 8 AGREEMENT RE: MATADERO CREEK SCVWD - CITY OF PALO ALTO 5 GIS themes are for illustration and general analysis purposes only and are not accurate to surveying or engineering standards. Information is not guaranteed to be accurate, current, or complete and use of this information is your responsibility. AGREEMENT RE.MATADERO CREEK SCVWD - CITY OF PALO ALTO Exhibit 8: Estimate of Project Costs Exhib't B Estim ate of Project Costs Santa Clara Valley Water District , 5750 Almaden Expwy ., San Jose, CA 95118 Matadero Creek Bank Repair under West Bayshore Road ENGINEER'S ITEMS QUANTITIES ESTIMATE UNIT PRICE AMOUNT BID BOND. CASH OR CERTIFIED CHECK ACCOMPANYING BID 1 Compliance with Environment Permits 1 NTE $ 5,000 .00 $ 5,000.00 2 Mobilization & Demobilization, Demolition & Disposal 1 LS $ 23,000.00 $ 23,000.00 3 Control of Water 1 LS $ 60,169.80 $ 60,169.80 4 Saw cut Removal, and Disposal of Channel Bank Concrete Lining 160 SY $ 82.00 $ 13,120.00 5 Channel Excavation, Bank Cubic Yard (BCY) 75 BCY $ 185.00 $ 13,875 .00 6 Import M aterials (Compacted Cubic Yard) 75 CCY $ 50 .00 $ 3,750 .00 7 Embankment Reconstruction, (CCY) 75 CCY $ 237 .00 $ 17,775 .00 8 Reconstruction of Concret Lining 36 CY $ 1,100 .00 $ 39,600.00 SECTION A SUBTOTAL TOTAL BID: $176,289.80 Contingency 10% $17,628 .98 SCVWD Staff Cost $33,081.30 TOTAL: $227,000 V 1N3WHDVlly 10 AGREEMENT RE. MATADERO CREEK SCVWD - CITY OF PALO ALTO CITY OF PALO ALTO City of Palo Alto (ID # 8834) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/10/2018 Summary Title: Surveillance Technology Ordinance Title: Policy and Services Committee Recommendation to Adopt an Ordinance Adding Sections 2.30.620 - 2.30.690 to Title 2 of the Administrative Code to Establish Criteria and Procedures for Protecting Personal Privacy When Considering the Acquisition and Use of Surveillance Technologies, and Provide for Ongoing Monitoring and Reporting From: City Manager Lead Department: City Manager Recommendation The Policy & Services Committee recommends City Council adopt an ordinance adding Sections 2.30.620 — 2.30.690 to Title 2 of the Municipal Code (Attachment B) to establish criteria and procedures for protecting personal privacy when considering the acquisition and use of surveillance technologies by the City, and providing for ongoing monitoring and reporting. Background In April 2016, Councilmembers Wolbach, Berman and Scharff presented a Colleagues Memo to City Council proposing the adoption of a City Policy or Ordinance to increase transparency and oversight in the acquisition and deployment of surveillance technologies (Attachment A). At the April 25, 2016 Council Meeting, Council voted to refer this Colleagues Memo to the Policy and Services Committee to discuss and potentially make recommendations to Council, with a focus on technology that collects personally identifiable information. In December 2016, City staff presented to the Policy and Services Committee research and in depth information on current surveillance technologies used within the City and outlined some methods other governmental agencies are using to balance transparency, innovation and public safety through the pursuit of smart city strategies. The Committee instructed staff to return to Policy and Services Committee with a potential Ordinance that would establish department policies and practices in order to reinforce the protection of individual privacy. Subsequently, in June 2017, staff returned to the Policy and Services Committee with proposed tenets to form the framework for an Ordinance to protect personal privacy in the use of surveillance technologies by the City. The Committee recommended (3-0, Wolbach, Kniss, and City of Palo Alto Page 1 Kou in favor, DuBois absent) City Council approval of an Ordinance based on the tenets presented. Discussion Personally Identifiable Information as defined by the U.S. Department of Labor is, "any representation of information that permits the identity of an individual to whom the information applies to be reasonably inferred by either direct or indirect means." As new technologies emerge the City seeks to reaffirm the commitment to the privacy rights of its community members by establishing an Ordinance that will increase City Council oversight and transparency in the purchase and use of surveillance technologies. City Staff have reviewed the landscape of laws and policies in place regarding surveillance technologies purchased and used by government agencies, and sought feedback from stakeholders. This led to the comprehensive information provided to the Policy & Services Committee in December 2016 and July 2017. Given this, based on staff's proposal the Policy and Services Committee recommends an Ordinance that addresses technologies of concern today while also allowing for inclusion of new surveillance technologies that may be developed in the future. This approach establishes reporting and approval processes that can increase transparency without compromising public safety, limiting local control, or requiring additional resources. Summary of the Recommended Ordinance: Definition of Surveillance Technology: The breadth of what is defined in the Ordinance as surveillance technology will dictate the frequency of requests to Council and resources required to comply with reporting and approval tenets. The recommended Ordinance reflects a measured approach as a starting point from which to build: "Surveillance Technology" means any device or system primarily designed and actually used or intended to be used to collect and retain audio, electronic, visual, location, or similar information constituting personally identifiable information associated with any specific individual or group of specific individuals, for the purpose of tracking, monitoring or analysis associated with that individual or group of individuals. Examples of surveillance technology include, but are not limited to, drones with cameras or monitoring capabilities, automated license plate readers, closed-circuit cameras/televisions, cell -site simulators, biometrics -identification technology, and facial - recognition technology. In addition to public safety, staff expects that technology applications for transportation and smart city purposes may meet the above definition. Through existing policies and procedures (1-63 and 1-64) staff evaluates prospective purchases and contracted services for potential data security and information privacy impacts. The attached ordinance anticipates the need for Council adoption of surveillance policies for each type of surveillance technology. Building on City of Palo Alto Page 2 these existing practices, staff will advance applications for City Council review and approval where the potential for collecting personally identifiable information has been determined to exist. Explicit Council Authorization: Any purchase or contractual agreement for use of surveillance technology, no matter the cost, would require prior City Council authorization. This ensures that even low-cost technology is given thorough review prior to the City purchase or deploying. Public Oversight: Staff reports requesting authorization will be placed on the Council agenda to ensure public awareness and Council oversight. The City Manager in consultation with the Mayor will determine whether to place the item on the Action or Consent Agenda, with consideration for the significance of the technology and competing demands on Council's time. Reports will at a minimum include: • a detailed description of the technology with an explanation of how it works and what information it captures; • statutory and/or regulatory rules governing use of the technology; • measures that will be taken to protect private information; • how data will be managed and retained; and, • existing and/or recommended City administrative policies and procedures regarding use of the technology and the information it produces. Transparency and Ongoing Oversight: To continue oversight of the City's use of surveillance technology after the initial authorization, the City Manager will annually submit a report to the City Council. This is proposed to occur within the first quarter of each calendar year, with the report to include: • identification of applicable technologies and date of City Council authorization; • department(s) utilizing the technology; • frequency of deployment during the year; and, • purpose and outcome of the deployments. This report will be made easily accessible via the City's website to reinforce transparency. Staff anticipates that the annual report will be a summary description of technologies in use and statistical report on deployments. This report would avoid divulging potentially sensitive incident or investigatory details. In addition to reporting on the use of surveillance technology, the annual report will provide a regular opportunity to review the effectiveness of the Ordinance and consider amendments as may be desirable. Attachments: • Attachment A: Colleagues Memo 4-25-16 • Attachment B: Surveillance ORD April 2018 0140191 • Attachment C: Policy and Services Committee Action Minutes June 13, 2017 • Attachment D: Surveillance Technologies Staff Report #8180 June 13, 2017 City of Palo Alto Page 3 Attachment A City of Palo Alto CITY OF PALO COLLEAGUES MEMO ALTO DATE: April 25, 2016 TO: City Council Members FROM: Council Member Berman, Vice Mayor Scharff, Council Member Schmid, Council Member Wolbach SUBJECT: COLLEAGUES MEMO: DEVELOPING CITY POLICY ON ACQUISITION, USE, AND SAFEGUARDS FOR SURVEILLANCE AND INFORMATION -GATHERING TECHNOLOGIES SUMMARY In order to maintain public trust, ensure protection of privacy, and provide clarity for city staff, Palo Alto should proactively adopt an ordinance establishing a general policy governing consideration, adoption, and use of surveillance and information -gathering technologies by city departments, contractors, or partners. RECOMMENDATION We recommend the City Council refer this memo to the Policy and Services Committee to discuss (supported by appropriate staff) creation of an ordinance or other policy governing surveillance and information -gathering technology. Such an ordinance would establish a standard operating procedure (SOP) to be utilized prior to adoption or re -purposing of any technology for potential surveillance applications by City departments, contractors, or partners, as well as prior to seeking funding for such technologies. In addition, the ordinance would require annual reporting on uses of such technologies by the City. Policy and Services should consider the following: 1. Whether and when public hearings and other community engagement are appropriate prior to adoption of surveillance technology by the City, contractor, or partner; 2. The mechanism for Council approval prior to adoption of, re -purposing of, or seeking funding for surveillance technology; 3. Information, such as a Surveillance Impact Report or statement in a City Manager's Report, to be prepared by staff prior to approval which would include information on operations and management; data use; data minimization and limitation; secure data storage and transmission; data access; data retention; data sharing; handling of Public Records Act requests and any individualized policy recommendations; 4. The requirements of federal, state and local laws, regulations and programs that protect and/or regulate gathering, access, retention and use of personally identifiable information and surveillance technology (such as HIPPA, PCII, PII, VISA, VMS, PRA and April 25, 2016 (ID # 6876) Page 1 of 4 Records Retention). The Committee should survey the existing field of regulation as part of its preparation for developing new regulations; 5. Measures to accommodate community interests in smart city initiatives and other innovations, data -gathering to support planning efforts and other policy development, use of technology to facilitate access to City services and programs, security of persons and property, and cost efficiency, to strike the right balance for Palo Alto; 6. Information sharing between jurisdictions; and 7. What type of oversight, evaluation, auditing, or enforcement are appropriate. For further discussion of possible components, see the model ordinance by the American Civil Liberties Union (Attachment A, pages 22-25) and recommendations by the International Association of Chiefs of Police (Attachment B, pages 3-7). BACKDGROUND Technology Examples of technology with surveillance applications include but are not limited to: automated license plate readers (ALPRs), image and video recording, audio recording, unmanned aerial vehicles (aka "drones"), voice recognition, facial recognition, gait analysis, location tracking, automated social media monitoring, cell phone interceptors / cell phone tower emulators (international mobile subscriber identity catchers "IMSI", e.g. Stingrays), electronic communication surveillance (e.g. internet and phone interception), hacking, and data mining. Palo Alto Palo Alto currently uses audio recording, cameras in police vehicles, body -worn cameras for police officers, and received one ALPR through a County grant. The Council also recently (October 5, 2015) approved a contract to deploy low resolution cameras to count pedestrian and bicycle traffic (the City Manager added a privacy clause to the contract). For video recording in particular, Palo Alto has a staff -written policy that was revised as recently as January 2015. (See Attachment E). Other Cities Other municipalities around the state (see Attachment C) and country have adopted various other technologies, often without notification to the public or elected officials, and without robust policies governing data protection, data access, and data retention. Boston, it was recently revealed, collected ALPR data (tracking residents' locations) which was stored online and accessible by the public. Alameda, CA, recently adopted a policy for Stingrays which was transparent, and well received by privacy advocates and the community as a good example. County Santa Clara County recently rejected adoption of Stingray cell phone interceptors after concerns raised by Supervisor Joe Simitian, in particular due to concerns about transparency. (See attachment D). Santa Clara County is currently considering an ordinance governing surveillance technology use by county agencies. April 25, 2016 (ID # 6876) Page 2 of 4 State In 2015, Governor Jerry Brown signed several bills regarding privacy and modern technology. Two by Senator Jerry Hill deal with ALPRs (SB 34) and cell phone interceptors (SB 741). SB 178 by Senators Mark Leno and Joel Anderson requires a warrant prior to searching cell phones, emails, etc. AB 856 by Assemblymember Ian Calderon restricts use of drones over private property. AB 1116 by Assemblymember Mike Gatto restricts uses of voice recordings by private companies. Federal The Northern California Regional Intelligence Center (aka NCRIC or Fusion Center) in San Francisco links local surveillance with federal, raising concerns for residents about how data collected by local agencies will be shared with federal agencies. Federal intelligence, military, and law enforcement have been the subject of much controversy regarding surveillance technology - the nature, adoption, use, security, and legal justification of which have been questioned. DISCUSSION Law enforcement and government depend on the trust of the community. Use of technologies which has the appearance, potential, or effect of violating privacy or civil liberties can diminish community trust in government, particularly when adopted and used without transparency. The City's contracting processes include security and other requirements for data and personal information, and the City has a video management procedure that applies to visual information gathering, such as at sensitive utility infrastructure facilities, public garages, etc. Rapidly evolving surveillance technology raises concerns for the City including, but not limited to: privacy of residents and visitors; chilling effects on expression, research, travel, association, or other rights; misuse of data; data breach (access by unauthorized parties); and adoption, use, or expansion of capabilities without Council oversight. Rather than attempt to predict or react to each piece of emerging technology, the proposed ordinance would proactively establish a high level policy to be followed prior to the City (or contractor or partner) seeking funding, adopting, or re -purposing any specific technology. This standard operating procedure would provide clarity and predictability for City departments, the City Council, and the community. As technology advances in coming years, our Police Department in particular will benefit from the confidence of our community that such technologies will only be adopted and utilized in a transparent and responsible manner with clear oversight by the elected City Council and the public to whom they are accountable. Staff Impact Resources from the following departments will be needed to support a policy discussion in Policy & Services: Information Technology, Police Department, Planning & Community April 25, 2016 (ID # 6876) Page 3 of 4 Environment, Utilities, Public Works, Emergency Services, City Manager's Office, City Clerk's Office and City Attorney's Office. Depending on its breadth and specific requirements, significant staff resources may be needed to administer and maintain any new program. As a result of the evolving landscape of technology and security threads, privacy issues and the value of well -conceived policies are not limited to police and public safety activities alone. Utilities, for example, are increasingly working with data that can be sensitive for customers, and this sensitivity will increase with the roll -out of smart meter and smart grid technologies. Similarly, the capability of traffic and parking technologies to collect granular data presents another opportunity to examine the need for balancing data analytics and privacy priorities, while advancing the City's smart city initiatives. Staff is not suggesting that these issues be overlooked. To the contrary, this may be a topic in which Palo Alto is uniquely positioned to demonstrate leadership in thoughtful stakeholder engagement and policy development. It should be recognized, however, that this effort may be a significant undertaking requiring consummate resources and prioritization to address effectively. April 25, 2016 (ID # 6876) Page 4 of 4 NOT YET APPROVED Ordinance No. Ordinance of the Council of the City of Palo Alto Adding Sections 2.30.620 — 2.30.690 to Title 2 of the Palo Alto Municipal Code to Establish Procedures for the Relating to Surveillance Technology The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings and Recitals. The Council of the City of Palo Alto finds and declares as follows: To promote public trust and ensure protection of privacy, the Palo Alto City Council desires to establish a general policy governing consideration, acquisition and use of technologies by the City, including its contractors and partners, that gather information about specific individuals or groups of individuals; The City also recognizes the value of and wishes to foster Smart City initiatives that enhance City programs and services to citizens and visitors through the use of technology; Accordingly, the City adopts the following ordinance to increase transparency, oversight and accountability in the acquisition and deployment of technologies that collect and retain personally identifiable information of persons not accused of unlawful activity. SECTION 2. PART 6A — SURVEILLANCE AND PRIVACY PROTECTIONS, Sections 2.30.620 — 2.30.690, is added to Chapter 2.30 [Contracts and Purchasing Procedures], of Title 2 [Administrative Code] of the Palo Alto Municipal Code to read as follows: 2.30.620 Title. This Part 6A shall be known as the Surveillance and Privacy Protection Ordinance. 2.30.630 Council Approval Required for Contracts, Agreements, Grant Applications and Donations Involving Surveillance Technology. The Council shall approve each of the following: (a) Applications for grants, acceptance of state or federal funds, or acceptance of in -kind or other donations of Surveillance Technology; (b) Notwithstanding any delegation of authority to award contracts in this Chapter 2.30, contracts of any type and any amount that include acquisition of new Surveillance Technology; (c) Use of Council -approved Surveillance Technology for a purpose, in a manner, or in a location outside the scope of prior Council approval; or (d) Agreements with a non -City entity to acquire, share, or otherwise use Surveillance Technology or the information it provides. 180419 th 0140191 NOT YET APPROVED 2.30.640 Council Approval of Surveillance Use Policy. The Council shall approve a Surveillance Use Policy addressing each activity that it approves that is listed in Section 2.30.630. If no current Surveillance Use Policy covers an approved activity, Council shall adopt a new policy or amend an existing policy to address the new activity. 2.30.650 Information Required. Unless it is not reasonably possible or feasible to do so, before Council approves a new activity listed in Section 2.30.630, the City should make available to the public a Surveillance Evaluation and a proposed Surveillance Use Policy for the proposed activity. 2.30.660 Determination by Council that Benefits Outweigh Costs and Concerns. Before approving any new activity listed in Section 2.30.630, the Council shall assess whether the benefits of the Surveillance Technology outweigh its costs. The Council should consider all relevant factors, including financial and operational impacts, enhancements to services and programs, and impacts on privacy, civil liberties, and civil rights. 2.30.670 Oversight Following Council Approval. Beginning fiscal year 2019 and annually thereafter, the City shall produce and make available to the public an Annual Surveillance Report. The Annual Surveillance Report should be noticed as an informational report to the Council. The Council may calendar the Annual Surveillance Report or any specific technology included in the report for further discussion or action, and may direct that (a) use of the Surveillance Technology be modified or ended; (b) the Surveillance Use Policy be modified; or (c) other steps be taken to address Council and community concerns. 2.30.680 Definitions. The following definitions apply to this Section: (a) "Annual Surveillance Report" means a written report, submitted after the close of the fiscal year and that includes the following information with respect to the prior fiscal year: (1) A description of how each Council -approved Surveillance Technology was used, including whether it captured images, sound, or information regarding members of the public who are not suspected of engaging in unlawful conduct; (2) Whether and how often data acquired through the use of the Surveillance Technology was shared with outside entities, the name of any recipient entity, the types of data disclosed, and the reason for the disclosure; Page 2 of 5 NOT YET APPROVED (3) A summary of any community complaints or concerns about the surveillance technology; (4) Non -privileged and non -confidential information regarding the results of any internal audits, information about violations of the Surveillance Use Policy, and any actions taken in response; (5) Whether the Surveillance Technology has been effective at achieving its identified purpose; (6) The number and nature of Public Records Act requests relating to the Surveillance Technology; (7) Annual costs for the Surveillance Technology and for compliance with this Surveillance and Privacy Protection Ordinance, including personnel and other ongoing costs, and sources of funding; and (8) Other relevant information as determined by the City Manager. The Annual Surveillance Report will not include information that may compromise the integrity or limit the effectiveness of a law enforcement investigation. (b) "Surveillance Evaluation" means written information, including as part of a staff report, including: (1) A description of the Surveillance Technology, including how it works and what information it captures; (2) Information on the proposed purpose, use and benefits of the Surveillance Technology; (3) The location or locations where the Surveillance Technology may be used; (4) Existing federal, state and local laws and regulations applicable to the Surveillance Technology and the information it captures; the potential impacts on civil liberties and privacy; and proposals to mitigate and manage any impacts; (5) The costs for the Surveillance Technology, including acquisition, maintenance, personnel and other costs, and current or potential sources of funding. (c) "Surveillance Technology" means any device or system primarily designed and actually used or intended to be used to collect and retain audio, electronic, visual, location, or similar information associated with any specific individual or group of specific individuals, for the purpose of tracking, monitoring or analysis associated with that individual or group of individuals. Examples of Surveillance Technology include drones with cameras or monitoring capabilities, automated license plate readers, closed-circuit cameras/televisions, cell -site Page 3 of 5 NOT YET APPROVED simulators, biometrics -identification technology and facial -recognition technology. For the purposes of this Ordinance, "Surveillance Technology" does not include: (1) Any technology that collects information exclusively on or regarding City employees or contractors; (2) Standard word-processing software; publicly available databases; and standard message tools and equipment, such as voicemail, email, and text message tools; (3) Information security tools such as web- filtering, virus detection software; (4) Audio and visual recording equipment used exclusively at open and public events, or with the consent of members of the public; (5) Medical devices and equipment used to diagnose, treat, or prevent disease or injury. (d) "Surveillance Use Policy" means a stand-alone policy or a section in a comprehensive policy that is approved by Council and contains: (1) The intended purpose of the Surveillance Technology. (2) Uses that are authorized, any conditions on uses, and uses that are prohibited. (3) The information that can be collected by the Surveillance Technology. (4) The safeguards that protect information from unauthorized access, including, but not limited to, encryption, access -control, and access- oversight mechanisms. (5) The time period for which information collected by the Surveillance Technology will be routinely retained; the process by which the information is regularly deleted after that period lapses; and conditions and procedures for retaining information beyond that period. (6) If and how non -City entities can access or use the information, including conditions and rationales for sharing information, and any obligations imposed on the recipient of the information. (7) A description of compliance procedures, including functions and roles of City officials, internal recordkeeping, measures to monitor for errors or misuse, and corrective procedures that may apply. 2.30.690 No Private Right of Action. This Surveillance and Privacy Protection Ordinance is not intended and shall not be interpreted to create a private right of action for damages or equitable relief on behalf of any person or entity against the City or any of its officers or employees. Page 4 of 5 NOT YET APPROVED SECTION 3. Severability. If any provision, clause, sentence or paragraph of this ordinance, or the application to any person or circumstances, shall be held invalid, such invalidity shall not affect the other provisions of this ordinance which can be given effect without the invalid provision or application and, to this end, the provisions of this ordinance are hereby declared to be severable. SECTION 4. CEQA. This ordinance is exempt from the requirements of the California Environmental Protection Act (CEQA) pursuant to Section 15061(b)(3) of Title 14 of the California Code of Regulations since it can be seen with certainty that there is no possibility the adoption and implementation of this ordinance may have significant effect on the environment. SECTION 5. Effective Date. This ordinance shall be effective on the thirty-first date after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST: APPROVED: City Clerk Mayor APPROVED AS TO FORM: City Manager City Attorney Page 5 of 5 Attachment C CITY OF PALO ALTO POLI CY AND SERVI CES COMM! TTEE ACTION MINUTES Special Meeting Tuesday, June 13, 2017 Chairperson Wolbach called the meeting to order at 6:06 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: Kniss, Kou, Wolbach (Chair) Absent: DuBois Agenda Items 1. Consideration of a City Ordinance Protecting Personal Privacy in the Acquisition and use of Surveillance Technologies by the City. MOTI ON: Chair Wolbach moved, seconded by Vice Mayor Kniss to recommend the City Council adopt an Ordinance establishing criteria and procedures for protecting personal privacy when considering the acquisition and use of surveillance technologies by the City with an emphasis on public privacy, personally identifiable information, including acquisition from any source, data acquisition, data retention and data dissemination. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND THE SECONDER to add to the Motion "and to consider the Staff proposed Ordinance tenets as a basis for the Ordinance." MOTI ON RESTATED: Chair Wolbach moved, seconded by Vice Mayor Kniss to recommend the City Council adopt an Ordinance establishing criteria and procedures for protecting personal privacy when considering the acquisition and use of surveillance technologies by the City with an emphasis on public privacy, personally identifiable information, including acquisition from any source, data acquisition, data retention and data dissemination, and to consider the Staff proposed Ordinance tenets as a basis for the Ordinance. MOTI ON PASSED: 3-0 DuBois absent 2. Recreational and Medical Marijuana: Review and Discussion of State Law Developments and Input to Staff on Next Steps, Including Possible Ordinance Adopting Local Regulations Regarding Commercial Page 1 of 3 Policy and Services Committee Special Meeting Action Minutes 06/13/17 ACTION MINUTES Marijuana Activity, Outdoor Cultivation, and Marijuana Dispensaries. This Action is Exempt Under Section 15061(b)(3) of the California Environmental Quality Act. MOTI ON: Vice Mayor Kniss moved, seconded by Chair Wolbach to recommend the City Council: A. Send a proposed Ordinance and zoning code amendments to the Planning and Transportation Commission for review during the summer; and B. Change the outdoor cultivation sunset provision in the Ordinance from indefinite to 2018; and C. Direct Staff to research maximum delivery size, regulations around delivery vehicle safety and business regulations, and information about sales and/or excise taxes. MOTI ON PASSED: 3-0 DuBois absent The Committee took a break from 7:49 P.M. until 7:56 P.M. 3. Request for Proposals for a Consulting Firm to Assist the City of Palo Alto and Palo Alto Unified School District With Master Planning of the Cubberley Community Center. MOTI ON: Council Member Kou moved, seconded by Vice Mayor Kniss to recommend the City Council direct the Community Services Department to release a Request for Proposals (RFP) for a Consulting Firm to assist the City of Palo Alto and Palo Alto Unified School District with master planning of the Cubberley Community Center, including a negotiated cost sharing agreement. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND THE SECONDER to add to the Motion "and that the negotiation will not cause a delay to the RFP." MOTI ON RESTATED: Council Member Kou moved, seconded by Vice Mayor Kniss to recommend the City Council direct the Community Services Department to release a Request for Proposals for a Consulting Firm to assist the City of Palo Alto and Palo Alto Unified School District with master planning of the Cubberley Community Center, including a negotiated cost Page 2 of 3 Policy and Services Committee Special Meeting Action Minutes 06/13/17 ACTION MINUTES sharing agreement, and that the negotiation will not cause a delay to the RFP. MOTI ON PASSED: 3-0 DuBois absent 4. Staff Recommendation That the Policy and Services Committee Recommend the City Council Accept the Status Update of the Audit for Contract Oversight: Trenching and Installation of Electric Substructure. MOTI ON: Vice Mayor Kniss moved, seconded by Council Member Kou to recommend the City Council accept the Status of Audit Recommendations for the Contract Oversight: Trenching and Installation of Electric Substructure Audit. MOTI ON PASSED: 3-0 DuBois absent 5. Utilities Department: Cross Bore Inspection Contract Audit. MOTI ON: Vice Mayor Kniss, seconded by Chair Wolbach to recommend the City Council accept the Utilities Department: Cross Bore Inspection Contract Audit. MOTI ON PASSED: 3-0 DuBois absent Future Meetings and Agendas ADJOURNMENT: Meeting was adjourned at 9:03 P.M. Page 3 of 3 Policy and Services Committee Special Meeting Action Minutes 06/13/17 Attachment D CITY OF PALO ALTO City of Palo Alto (ID # 8180) Policy and Services Committee Staff Report Report Type: Action Items Meeting Date: 6/13/2017 Summary Title: City Ordinance on Surveillance Technologies Title: Consideration of a City Ordinance Protecting Personal Privacy in the Acquisition and Use of Surveillance Technologies by the City From: City Manager Lead Department: City Manager Recommendation Staff recommends the Policy & Services Committee discuss and recommend City Council adoption of an ordinance establishing criteria and procedures for protecting personal privacy when considering the acquisition and use of surveillance technologies by the City. (Staff will return to Council after the Council break with an actual ordinance, following Council direction and approval on this Action Item). Background In April 2016, Councilmembers Wolbach, Berman and Scharff presented a Colleagues Memo to City Council proposing the adoption of a City Policy or Ordinance to increase transparency and oversight in the acquisition and deployment of surveillance technologies (Attachment A). At the April 25, 2016 Council Meeting, Council voted to refer this Colleagues Memo to the Policy and Services Committee to discuss and potentially make recommendations to Council, with a focus on technology that collects personally identifiable information. In December 2016, City staff presented to the Policy and Services Committee research and in depth information on current surveillance technologies used within the City and outlined some methods other governmental agencies are using to balance transparency, innovation and public safety through the pursuit of smart city strategies. The Committee instructed staff to return to Policy and Services Committee with a potential ordinance that would establish department policies and practices in order to reinforce the protection of individual privacy. (Attachment B) Discussion Personally Identifiable Information as defined by the U.S. Department of Labor is, "any representation of information that permits the identity of an individual to whom the information applies to be reasonably inferred by either direct or indirect means." As new City of Palo Alto Page 1 technologies emerge the City seeks to reaffirm the commitment to the privacy rights of its residents and community members by establishing an ordinance that will increase City Council Oversight and Transparency in the purchase and use of surveillance technologies. City Staff have reviewed the landscape of laws and policies in place regarding surveillance technologies purchased and used by government agencies, and sought feedback from stakeholders. This led to the comprehensive information provided to the Policy & Service Committee in December. Informal feedback on this report indicated that a narrower focus would be preferable as a next step. Given this, staff recommends an ordinance that focuses on the primary technologies of concern today, and allows for the inclusion of new surveillance technologies that may be developed in the future. This approach establishes reporting and approval processes that can increase transparency without compromising public safety, limiting local control, or requiring additional resources. Proposed Ordinance Tenets Defining Surveillance Technology: The breadth of what is considered surveillance technology under the ordinance will dictate the frequency of requests to Council and resources required to comply with reporting and approval tenets. Staff recommends a measured approach as a starting point from which to build. The following definition has been developed by the City Attorney to focus on current technologies and builds in flexibility as new technologies emerge. "Surveillance Technology" means any device or system primarily designed and actually used or intended to be used to collect and retain audio, electronic, visual, location, or similar information associated with any specific individual or group of specific individuals, for the purpose of tracking, monitoring or analysis associated with that individual or group of individuals. Examples of surveillance technology include, but are not limited to, drones with cameras or monitoring capabilities, automated license plate readers, closed-circuit cameras/televisions, cell -site simulators, biometrics -identification technology, and facial -recognition technology. Explicit Council Authorization: Any purchase or contractual agreement for use of surveillance technology, no matter the cost, would require prior City Council authorization. This ensures that even low-cost technology is given thorough review prior to the City purchase or deploying. Public Oversight: Staff reports requesting authorization will be placed on the Council agenda to ensure public awareness and Council oversight. Reports will at a minimum include: • a detailed description of the technology with an explanation of how it works and what information it captures; • statutory and/or regulatory, rules governing use of the technology; City of Palo Alto Page 2 • measures that will be taken to protect private information; • how data will be managed and retained; and, • Existing and/or recommended City administrative policies and procedures regarding use of the technology and the information it produces. Transparency and Ongoing Oversight: To continue oversight of the City's use of surveillance technology after the initial authorization, a report will be submitted to City Council annually. This report will include: • identification of the technology and date of City Council authorization; • department(s) utilizing the technology; • frequency of deployment during the year; and, • purpose and outcome of the deployments. These reports will be made easily accessible to reinforce transparency. Potential Alternatives It should be noted that examples provided by advocates for City Council adoption of an ordinance were significantly more elaborate than the ordinance proposed by staff. The alternatives would likely require significantly greater analysis on a broader and somewhat open-ended range of technologies. Staff also noted that the examples were designed to provide direction to individual departments, which would be more applicability within a county government structure than a council-manager structure. If the Council wished to reinforce direction to individual departments, an administrative policies and procedures format would be more appropriate. Staff recommends that the Committee consider and provide direction on the elements of a proposed ordinance. Staff will use this feedback to return with a drafted ordinance for adoption. Attachments: • Attachment A_ID# 6876 Colleagues Memo • ATTACHMENT 6_12-14-16 P&S Final Action Minutes City of Palo Alto Page 3 City of Palo Alto CITY OF PALO COLLEAGUES MEMO ALTO DATE: April 25, 2016 TO: City Council Members FROM: Council Member Berman, Vice Mayor Scharff, Council Member Schmid, Council Member Wolbach SUBJECT: COLLEAGUES MEMO: DEVELOPING CITY POLICY ON ACQUISITION, USE, AND SAFEGUARDS FOR SURVEILLANCE AND INFORMATION -GATHERING TECHNOLOGIES SUMMARY In order to maintain public trust, ensure protection of privacy, and provide clarity for city staff, Palo Alto should proactively adopt an ordinance establishing a general policy governing consideration, adoption, and use of surveillance and information -gathering technologies by city departments, contractors, or partners. RECOMMENDATION We recommend the City Council refer this memo to the Policy and Services Committee to discuss (supported by appropriate staff) creation of an ordinance or other policy governing surveillance and information -gathering technology. Such an ordinance would establish a standard operating procedure (SOP) to be utilized prior to adoption or re -purposing of any technology for potential surveillance applications by City departments, contractors, or partners, as well as prior to seeking funding for such technologies. In addition, the ordinance would require annual reporting on uses of such technologies by the City. Policy and Services should consider the following: 1. Whether and when public hearings and other community engagement are appropriate prior to adoption of surveillance technology by the City, contractor, or partner; 2. The mechanism for Council approval prior to adoption of, re -purposing of, or seeking funding for surveillance technology; 3. Information, such as a Surveillance Impact Report or statement in a City Manager's Report, to be prepared by staff prior to approval which would include information on operations and management; data use; data minimization and limitation; secure data storage and transmission; data access; data retention; data sharing; handling of Public Records Act requests and any individualized policy recommendations; 4. The requirements of federal, state and local laws, regulations and programs that protect and/or regulate gathering, access, retention and use of personally identifiable information and surveillance technology (such as HIPPA, PCII, PII, VISA, VMS, PRA and April 25, 2016 (ID # 6876) Page 1 of 4 Records Retention). The Committee should survey the existing field of regulation as part of its preparation for developing new regulations; 5. Measures to accommodate community interests in smart city initiatives and other innovations, data -gathering to support planning efforts and other policy development, use of technology to facilitate access to City services and programs, security of persons and property, and cost efficiency, to strike the right balance for Palo Alto; 6. Information sharing between jurisdictions; and 7. What type of oversight, evaluation, auditing, or enforcement are appropriate. For further discussion of possible components, see the model ordinance by the American Civil Liberties Union (Attachment A, pages 22-25) and recommendations by the International Association of Chiefs of Police (Attachment B, pages 3-7). BACKDGROUND Technology Examples of technology with surveillance applications include but are not limited to: automated license plate readers (ALPRs), image and video recording, audio recording, unmanned aerial vehicles (aka "drones"), voice recognition, facial recognition, gait analysis, location tracking, automated social media monitoring, cell phone interceptors / cell phone tower emulators (international mobile subscriber identity catchers "IMSI", e.g. Stingrays), electronic communication surveillance (e.g. internet and phone interception), hacking, and data mining. Palo Alto Palo Alto currently uses audio recording, cameras in police vehicles, body -worn cameras for police officers, and received one ALPR through a County grant. The Council also recently (October 5, 2015) approved a contract to deploy low resolution cameras to count pedestrian and bicycle traffic (the City Manager added a privacy clause to the contract). For video recording in particular, Palo Alto has a staff -written policy that was revised as recently as January 2015. (See Attachment E). Other Cities Other municipalities around the state (see Attachment C) and country have adopted various other technologies, often without notification to the public or elected officials, and without robust policies governing data protection, data access, and data retention. Boston, it was recently revealed, collected ALPR data (tracking residents' locations) which was stored online and accessible by the public. Alameda, CA, recently adopted a policy for Stingrays which was transparent, and well received by privacy advocates and the community as a good example. County Santa Clara County recently rejected adoption of Stingray cell phone interceptors after concerns raised by Supervisor Joe Simitian, in particular due to concerns about transparency. (See attachment D). Santa Clara County is currently considering an ordinance governing surveillance technology use by county agencies. April 25, 2016 (ID # 6876) Page 2 of 4 State In 2015, Governor Jerry Brown signed several bills regarding privacy and modern technology. Two by Senator Jerry Hill deal with ALPRs (SB 34) and cell phone interceptors (SB 741). SB 178 by Senators Mark Leno and Joel Anderson requires a warrant prior to searching cell phones, emails, etc. AB 856 by Assemblymember Ian Calderon restricts use of drones over private property. AB 1116 by Assemblymember Mike Gatto restricts uses of voice recordings by private companies. Federal The Northern California Regional Intelligence Center (aka NCRIC or Fusion Center) in San Francisco links local surveillance with federal, raising concerns for residents about how data collected by local agencies will be shared with federal agencies. Federal intelligence, military, and law enforcement have been the subject of much controversy regarding surveillance technology - the nature, adoption, use, security, and legal justification of which have been questioned. DISCUSSION Law enforcement and government depend on the trust of the community. Use of technologies which has the appearance, potential, or effect of violating privacy or civil liberties can diminish community trust in government, particularly when adopted and used without transparency. The City's contracting processes include security and other requirements for data and personal information, and the City has a video management procedure that applies to visual information gathering, such as at sensitive utility infrastructure facilities, public garages, etc. Rapidly evolving surveillance technology raises concerns for the City including, but not limited to: privacy of residents and visitors; chilling effects on expression, research, travel, association, or other rights; misuse of data; data breach (access by unauthorized parties); and adoption, use, or expansion of capabilities without Council oversight. Rather than attempt to predict or react to each piece of emerging technology, the proposed ordinance would proactively establish a high level policy to be followed prior to the City (or contractor or partner) seeking funding, adopting, or re -purposing any specific technology. This standard operating procedure would provide clarity and predictability for City departments, the City Council, and the community. As technology advances in coming years, our Police Department in particular will benefit from the confidence of our community that such technologies will only be adopted and utilized in a transparent and responsible manner with clear oversight by the elected City Council and the public to whom they are accountable. Staff Impact Resources from the following departments will be needed to support a policy discussion in Policy & Services: Information Technology, Police Department, Planning & Community April 25, 2016 (ID # 6876) Page 3 of 4 Environment, Utilities, Public Works, Emergency Services, City Manager's Office, City Clerk's Office and City Attorney's Office. Depending on its breadth and specific requirements, significant staff resources may be needed to administer and maintain any new program. As a result of the evolving landscape of technology and security threads, privacy issues and the value of well -conceived policies are not limited to police and public safety activities alone. Utilities, for example, are increasingly working with data that can be sensitive for customers, and this sensitivity will increase with the roll -out of smart meter and smart grid technologies. Similarly, the capability of traffic and parking technologies to collect granular data presents another opportunity to examine the need for balancing data analytics and privacy priorities, while advancing the City's smart city initiatives. Staff is not suggesting that these issues be overlooked. To the contrary, this may be a topic in which Palo Alto is uniquely positioned to demonstrate leadership in thoughtful stakeholder engagement and policy development. It should be recognized, however, that this effort may be a significant undertaking requiring consummate resources and prioritization to address effectively. April 25, 2016 (ID # 6876) Page 4 of 4 MAKING, SMART DECISIONS ABOUT SURVEILLAN CGUIDE FOR OMMUNITIES 1 ROM THE ACLU OF CALIFORNIA alifornia communities are increasingly grappling with whether to deploy new surveillance technologies ranging from drones to license plate readers to facial recognition. This is understandable, since public safety budgets are tight, technology vendors promise the ability to do more with less, and federal agencies or industry sponsors may even offer funding. But surveillance can be both less effective and far more costly to local agencies and to the community at large than initially imagined, leaving communities saddled with long-term bills for surveillance that doesn't end up making the community safer. Surveillance can also be easily misused, leading to the erosion of community trust, bad press, and even costly lawsuits. In the wake of the revelations about the National Security Agency's rampant warrantless spying and the use of military equipment in Ferguson, Missouri to quell protests, communities are increasingly focused on the need for greater transparency, oversight, and accountability of surveillance and local policing. More than ever, people are aware of how billions of dollars in federal funding and equipment provided directly to law enforcement is circumventing normal democratic processes and preventing communities from thoroughly evaluating the costs and risks of surveillance. As a result, many community leaders and residents are no longer willing to heed local law enforcement's call to "just trust us." Instead, leaders and residents want to know when and why surveillance is being considered, what it is intended to do, and what it will really cost — both in dollars and in individual rights — before taking any steps to seek funding or acquire or deploy surveillance technology. They also want to craft robust rules to ensure proper use, oversight, and accountability if surveillance is used. Unfortunately, few resources exist to help communities make thoughtful decisions about surveillance. That's where this document comes in. This first -of -its -kind guide provides step-by-step assistance to help communities ask and answer the right questions about surveillance. It includes case studies highlighting smart approaches and missteps to avoid. Because each community and each type of surveillance may present a different set of issues, there is no one -size -fits -all solution. Instead, this guide gives communities a flexible framework that policymakers, community members and law enforcement should use to properly evaluate a wide array of surveillance technologies and develop policies that provide transparency, oversight, and accountability. It also includes a Surveillance & Community Safety Ordinance that communities should adopt to ensure that the right process is followed every time. We hope you will find this document and its supporting materials (available online at aclunc.org/smartaboutsurveillance) useful in making informed decisions about surveillance that recognize and address the costs, risks, and alternatives. Na aor' Nicole A. Ozer Technology and Civil Liberties Policy Director ACLU of California Peter Bibring Police Practices Director ACLU of California CONTENTS Technology Overview 2 Key Questions to Answer Before Moving Forward with Any Surveillance Proposal 3 Why It Matters: The Costs and Consequences of Surveillance 4 Surveillance Carries Both Immediate and Ongoing Financial Costs 4 Surveillance Carries Costs for the Community as a Whole 5 Surveillance Faces Increased Scrutiny from Public Officials 7 Key Steps when Considering a Surveillance Proposal 9 Collectively Evaluate the Effectiveness, Costs, and Alternatives Before Making Decisions about Surveillance 9 Establish a Surveillance Technology Use Policy to Mitigate Harms and Protect Rights .. 15 Ensure Accountability by Enforcing Policies and Encouraging Ongoing Public Engagement 19 Conclusion 21 Appendix: Model Surveillance & Community Safety Ordinance 22 Endnotes 216 Authors: Chris Conley, Matthew Cagle, Peter Bibring, Jessica Farris, Linda Lye, Mitra Ebadolahi and Nicole Ozer, ACLU of California Contributing Writers: Addison Litton & Thomas Mann Miller Design & Layout: Gigi Pandian & Daniela Bernstein Printing: InkWorks Press This publication was underwritten with support from the ACLU Foundation and the ACLU's generous members and donors. PUBLISHED BY THE ACLU OF CALIFORNIA NOVEMBER 2014 1 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE TECHNOLOGY OVERVIEW AUTOMATIC LICENSE PLATE READERS ("ALPRS"): Sophisticated farm ra systems mounted to police cars or light posts that scan license plates that come into view. They are often used to look for vehicles of interest, such as stolen cars, but in the process may record the time and place of every single vehicle that drives by. BODY CAMERAS: Small cameras worn by police that record audio and video. These cameras can record anything from typical public interactions with police to sounds and images at rallies or even lewd banter in a squad car. Some body cameras are always on, others are controlled by the wearer. DRONES: Unmanned aerial vehicles that may carry cameras, microphones, or other sensors or devices. Drones range from small "quadcopters" that can maneuver near ground level to high -altitude planes with extremely powerful cameras. Drones are often quieter than traditional aircraft, making it possible to use them for surreptitious surveillance. VIDEO SURVEILLANCE: Camera systems that allow remote observation or recording of activity in public spaces. Video feeds may be actively monitored in hopes of spotting crime as it happens or recorded for potential use for investigation and prosecution. Studies have repeatedly shown cameras are costly and of limited use in preventing or solving serious crime. FACIAL RECOGNITION: Software that identifies a person in photos or videos based on various characteristics of the person's face. 'lhe accuracy of facial recognition can vary widely. LOCATION TRACKING: A range of techniques used to remotely track a person's location. GPS (Global Positioning System) devices, ranging From modern cell phones to "darts" that can be fired at a moving car, determine their own location based on satellite signals. Electronic communications devices including phones can also be tracked by identifying the cell towers or wireless networks the device uses. Location information can be obtained every few seconds and may be accurate to within a Few feet. AUTOMATED SOCIAL MEDIA MONITORING: Software tools that collects posts and other information on sites such as Twitter and Facebook. These tools may also analyze the collected data in order to derive information such as social connections or political views. INTERNATIONAL MOBILE SUBSCRIBER IDENTITY ("IMSI") CATCHERS: A device that emulates a cell phone tower in order to interact with nearby cell phones. IMSI catchers, commonly known as Stingrays (the brand name of one such device), identify nearby devices and can also be configured to intercept and capture the contents of communications including calls, text messages, or Internet activity/ Many IMSI catchers operate in dragnet Fashion, scooping up information about every phone in range. DATA MINING: Techniques to discover statistical patterns, trends and other information in a collection of data. For rxample, analysis of connections on social networks can reveal hidden, sensitive information such as sexual orientation. 2 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES KEY QUESTIONS TO ANSWER BEFORE MOVING FORWARD WITH ANY SURVEILLANCE PROPOSAL WHY ARE YOU CONSIDERING SURVEILLANCE? ❑ What specific problem is your community trying to address? U How effective will surveillance be in addressing this concern? CI Are there alternatives that would be more effective, less expensive, or have less impact on civil liberties? WHAT ARE THE COSTS AND RISKS? • What are the financial costs ofsurveillance, including long-term training, operation and maintenance? U What impact would surveillance have on privacy, free speech, and civil rights? ❑ How could surveillance affect trust in law enforcement? ❑ Have you completed a Surveillance Impact Report? IS THE ENTIRE COMMUNITY ENGAGED IN EVALUATING THE PROPOSAL FROM THE OUTSET? CI Have you sought input on priorities, costs and risks from all segments of your community? ❑ Is there a Surveillance Impact Report and Surveillance Use Policy for the community to review? ❑ Will there be public hearings and debate before seeking any funds or purchasing any technology? IS SURVEILLANCE THE RIGHT CHOICE? LI Have elected policymakers reviewed the Surveillance Impact Report and Surveillance Use Policy? Have they had an opportunity to hear public concerns? ❑ Will local policymakers specifically vote to approve the project moving forward? Will this happen before seeking any funds or purchasing any technology? ❑ Will your community re-evaluate any surveillance program annually and determine whether the program should be continued, modified, or abandoned? WILL THESE QUESTIONS BE ANSWERED EVERY TIME? ❑ Has your community passed a Surveillance & Community Safety Ordinance to make sure these questions are consistently asked and answered every time surveillance is considered and to ensure proper transparency, oversight and accountability? 3 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE Why It Matters: The Costs and Consequences of Surveillance At first glance, surveillance technology may seem like an attractive way to increase public safety while decreasing the costs associated with policing, especially if potentially supported by outside funding. However, surveillance often has unexpected costs, including the expense of installing and maintaining equipment, the practical effect on law enforcement's ability to work with individuals who feel unfairly singled out, the impact on the rights of community members, and the potential for legal headaches as courts and legislatures continue to grapple with issues related to surveillance. Your community needs to identify and assess all of the costs of surveillance as early in the consideration process as possible in order to determine whether surveillance technology really is the right choice. A. SURVEILLANCE CARRIES BOTH IMMEDIATE AND ONGOING FINANCIAL COSTS The fiscal impact of surveillance can far exceed initial purchase prices for equipment. Modifying current infrastructure, operating and maintaining systems, and training staff can consume limited time and money even if federal or state grants fund initial costs.' Surveillance technologies may also fail or be misused, resulting in costly lawsuits. Looking beyond the sticker price is essential. 1. SURVEILLANCE REQUIRES INFRASTRUCTURE, STAFFING, TRAINING, AND MAINTENANCE The hidden costs of infrastructure, training and staffing, operations, and maintenance can dwarf the cost of acquiring surveillance technology in the first place. Communities that have failed to accurately estimate the full financial cost of a surveillance system have dealt with massive cost overruns and programs that fail to accomplish their stated purpose. For example, Philadelphia planned to spend $651,672 for a video surveillance program featuring 216 cameras. Instead, it spent $13.9 million on the project and wound up with only 102 functional cameras after a year, a result the city controller described as "exceedingly alarming, and outright excessive — especially when $13.9 million is equivalent to the cost of putting 200 new police recruits on our streets."3 To avoid a similar incident in your community, it is essential to identify all of the costs required to install, use, and maintain surveillance technology before making a decision about whether to do so. "When you're considering a new technology, it's important to evaluate not only the upfront costs but also the costs of maintenance and upgrades that will occur down the road." Captain Michael Grinstead, Newport News (VA) Police Department' 2. SURVEILLANCE CAN CREATE FINANCIAL RISKS INCLUDING LITIGATION AND DATA BREACH Surveillance can carry a number of legal risks. Programs that fail to include proper safeguards for freedom of expression, association, and religion, or that inadequately enforce such safeguards, can lead to expensive litigation. For example, Muslim residents in Orange County filed a discrimination lawsuit when it was revealed that state agents were sending informants into mosques to collect information on the identities and activities of worshippers.4 Even technical glitches can create the potential for costly lawsuits and other expenses: the City of San Francisco is still embroiled in a multi -year civil rights lawsuit after wrongly pulling over, handcuffing, and holding at gunpoint an innocent woman due to an error by its ALPR systems The collection of surveillance data also creates the risk of data breach liability. Even following best practices (which itself can entail significant expense) is not enough to prevent every breach. California law now requires that a local agency notify residents about a security breach.6 And the fiscal costs of a breach of sensitive surveillance data could be very high: a 2012 4 Under California Civil Code § 1798.29, local government agencies are required to notify affected individuals in the result of a data breach. MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES report found that companies spent an average of $5.5 million to resolve a data security breach.7 The more information your community collects and retains, the greater the risk and potential cost of a breach. 3. FUNDS SPENT ON SURVEILLANCE MAY BE WASTED DUE TO COMMUNITY BACKLASH Failing to thoroughly discuss surveillance proposals and listen to community concerns early in the process can result in massive backlash and wasted time and funds when plans have to be suspended or even cancelled. Oakland was forced to scrap most of the planning for its Domain Awareness Center and scale the project back considerably after community members protested the misleading mission statement and lack of transparency for the projects Engaging with the community before deciding whether to go forward with a surveillance proposal can help your community avoid a similar mistake. "After [public backlash about Oakland's proposed Domain Awareness Center] we really had to regroup and think about how we needed to proceed." Renee Domingo, Oakland Emergency Services Coordinator$ B. SURVEILLANCE CARRIES COSTS FOR THE COMMUNITY AS A WHOLE The community at large may also pay a heavy price if surveillance technology is acquired and deployed without public evaluation of the risks to the community and strong safeguards to prevent misuse. Surveillance can easily intrude upon the rights of residents and visitors if it is used, or creates the perception that it may be used, to monitor individuals and groups exercising their rights to freedom of expression, association, and religion — freedoms that public officials are sworn to protect.1° In addition, surveillance can erode trust in law enforcement, making it harder for officers and community members to work together to keep the community safe. 1. SURVEILLANCE CAN INTRUDE UPON COMMUNITY MEMBERS' RIGHTS Unfortunately, there are many examples demonstrating how readily surveillance can be misused to target individuals based on their associations or religious or political activities. Police in Santa Clara used a GPS device to track a student due to his father's association with the local Muslim Community Association.11 Police in Michigan sought "information on all the cell phones that were congregating in an area where a labor -union protest was expected."12 The NSA specifically monitored the email of several prominent Muslim -Americans with no evidence whatsoever of wrongdoing.13 And in Germany, drones that were supposed to be used only for traffic monitoring and for serious kidnapping situations were later used to monitor an anti-nuclear protest.14 "It is essential that big data analysis conducted by law enforcement outside the context of predicated criminal investigations be deployed with appropriate protections for individual privacy and civil liberties. The presumption of innocence is the bedrock of the American criminal justice system. To prevent chilling effects to Constitutional rights of free speech and association, the public must be aware of the existence, operation, and efficacy of such programs." - Big Data: Seizing Opportunities, Preserving Values (White House Report)15 Surveillance programs that do not focus on individual targets can be particularly problematic. "Dragnet" surveillance of the entire public creates the potential for all sorts of abuse, from NSA analysts tracking romantic partners16 to a Washington, D.C. police lieutenant blackmailing patrons of a gay bar.17 And surveillance targeted at specific groups, such as members of a religious congregation or attendees at a political rally or gun show, can discourage participation in community activities and alienate the group from the rest of 5 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE the community. Even if specific members of the group are legitimate targets of investigation, tracking the entire group extends "guilt by association" to those who have done nothing wrong. And once members of the group are tainted with such suspicion, it becomes easy to justify prying into their private lives, or even threatening them with further consequences, such as placement on the No -Fly List, if they do not cooperate with additional surveillance efforts.18 SURVEILLANCE AND POLITICAL ACTIVISM In an age when surveillance is often justified by the need to combat terrorism, it's easy to forget that police across the U.S. have a long history of conducting surveillance on political activists, from the "Red Squads" dedicated to disrupting communist groups in the early 20th century to COINTELPRO and other efforts by the police and FBI to infiltrate and discredit the antiwar and civil rights movements in the 1950s, 60s and 70s. In fact, California has seen a long list of such abuses in its recent history: o The California Office of Homeland Security collected detailed information about political demonstrations, including a rally outside a Canadian consulate office in San Francisco to protest seal hunting, a demonstration in Walnut Creek at which government officials spoke against the war in Iraq, and a Women's International League for Peace and Freedom gathering at a courthouse in support of a 56 -year -old Salinas woman facing federal trespassing charges.19 o Local police have monitored peaceful political events, including a Code Pink antiwar protest on Mother's Day2° and even a lecture on veganism at Cal State Fresno.21 o Undercover Oakland police officers infiltrated a group planning a peaceful protest against police brutality and even took a leadership role in directing the course of the march.22 o Santa Cruz police officers infiltrated planning meetings for a proposed alternative New Year's Eve march, leading to a media firestorm and a report from the Santa Cruz police auditor concluding that the department "violated ... [parade] organizers' rights to privacy, freedom of speech and freedom of assembly."23 Intelligence reforms born from lawsuits and congressional inquiries have led many law enforcement agencies to bar the collection of information about political activism and other First Amendment - protected activities without good reason to suspect that a particular individual is or has been involved criminal activity. There need to be similar restrictions on the use of surveillance technology to ensure that it is not used to chill or undermine political activism. Just the perceived threat of surveillance has the potential to harm community members by discouraging political advocacy, efforts to seek counseling about reproductive choices, avenues to explore one's sexuality, and other activities that are clearly protected by the federal and California constitutions. Most recently, in the wake of the revelations of NSA surveillance, research has shown that Internet users are less likely to use search engine terms that they believed might "get them in trouble with the government."24 Surveillance carries privacy and free speech threats even if it is conducted solely in public places. This is particularly true when surveillance information is aggregated to build a robust data profile that can "reveal much more in combination than any isolated record."25 As Supreme Court Justice Sonia Sotomayor has noted, "a precise, comprehensive record of a person's public movements . . . reflects a wealth of detail about her familial, political, professional, religious, and sexual associations." In addition, "[a]wareness that the Government may be watching chills associational and expressive freedoms."26 6 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES 2. SURVEILLANCE CAN ERODE TRUST IN LAW ENFORCEMENT The use of surveillance can also reinforce justified concerns of profiling and discrimination, particularly in communities that have historically faced similar issues Failing to fully engage with community members about the impact of surveillance or, worse, skirting the democratic process by acquiring and deploying surveillance technology without public discussion at all — can erode trust even further, making it even harder for law enforcement officers to work with the community to solve crimes and protect public safety. Compton police learned this lesson the hard way: after news of an aerial surveillance program that was intentionally kept "hush-hush" broke, both citizens and lawmakers reacted negatively to the secrecy, with the mayor calling for a "citizen private protection policy" ensuring that the community would be notified before any new surveillance equipment was deployed or used.27 This fear that surveillance could be used in a discriminatory fashion is well-founded. In the years after the September 11th attacks, the New York Police Department created a secretive intelligence wing that infiltrated Muslim neighborhoods with undercover officers, where they monitored the daily lives and compiled dossiers about Muslim -Americans engaging in constitutionally protected activities in cafes, bookstores, and private residences with no evidence of illegal activity.28 And in Britain, where video surveillance is pervasive, a European Parliament study showed that "the young, the male and the black were systematically and disproportionately targeted, not because of their involvement in crime or disorder, but for 'no obvious reason."'29 Acquiring and using surveillance technologies without recognizing these concerns can reinforce distrust of law enforcement, hindering rather than aiding the protection of public safety. In a recent report, Civil Rights Principles in an Era of Big Data, fourteen civil and human rights groups highlighted the potential disparate impact of data collection on marginalized communities and called for technology to "be designed and used in ways that respect the values of equal opportunity and equal justice." The report called for an end to high-tech profiling and efforts to safeguard constitutional principles.30 C. SURVEILLANCE FACES INCREASED SCRUTINY FROM PUBLIC OFFICIALS Public officials are increasingly tackling issues related to surveillance. There is broad, bipartisan political support for surveillance reform in both D.C. and at the state level, and courts are frequently grappling with cases involving surveillance technology. When evaluating a surveillance proposal, your community needs to consider the potential for legal change and the policy and individual rights concerns that are driving that change. One of the most dramatic shifts in the legal landscape has been an increasing recognition that legal protections for individual rights must take into account the impact of modern technology. As a result, a majority of the Supreme Court has suggested that using technology to track an individual's location — even in public — over an extended period of time triggers constitutional scrutiny.31 Similarly, a federal judge declared the NSA's warrantless collection of telephone metadata unconstitutional, criticizing its "almost Orwellian" scope.32 Surveillance programs that fail to account for this trend may well be held unconstitutional, and criminal investigations based on evidence from those programs could be jeopardized. 7 "GPS monitoring — by making available at a relatively low cost such a substantial quantum of intimate information about any person whom the Government, in its unfettered discretion, chooses to track — may 'alter the relationship between citizen and government in a way that is inimical to democratic society."" United States v. Jones (Sotomayor, J., concurring)33 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE The California Constitution is even more protective of community members' privacy, including in public spaces. The state right to privacy expressly gives Californians a legal and enforceable "right to be left alone" that protects interests in privacy beyond the home.34 The California Supreme Court has held that covertly "infiltrating" and monitoring the activities of students and professors at classes and public meetings without any indication of criminal activity violated the California Constitution,35 as did warrantless aerial surveillance of a resident's backyard.36 Californians' right to free expression also extends outside of the home, even to privately -owned areas like shopping centers.37 There are also bipartisan legislative efforts to rein in surveillance at the federal and state level. Federal lawmakers are evaluating proposals aimed at reining in the NSA38 and updating the Electronic Communications Privacy Act.39 As of October 2014, 6 states have enacted laws restricting law enforcement access to location information, with 14 other states considering similar legislation.4° 43 states have introduced legislation aimed at curbing the use of drones for surveillance purposes.41 And in communities from Menlo Park to Seattle, local ordinances are placing specific restrictions on the use of surveillance technologies.42 Your community should follow the lead of courts and lawmakers and carefully evaluate the costs and risks of surveillance in order to protect both your investments in public safety and the rights of everyone. ENACT A SURVEILLANCE & COMMUNITY SAFETY ORDINANCE TO MAKE SURE THE RIGHT PROCESS IS FOLLOWED EVERY TIME Passing the Surveillance & Community Safety Ordinance included in the Appendix to this guide will help your community avoid problems down the line by following the right process every time. It ensures that there is community analysis of surveillance technology whenever it is considered, that local lawmakers approve each step, and that any surveillance program that is approved includes both a Surveillance Use Policy that safeguards individual rights and transparency and accountability mechanisms to ensure that the Policy is followed. 8 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES Key Steps when Considering a Surveillance Proposal Surveillance can end up being very costly, both in dollars and in personal freedom. That's why it is essential to publicly and thoroughly evaluate surveillance proposals. The following section will help your community — including public officials, law enforcement and diverse community members — work together to determine whether surveillance really makes sense and put in place robust rules to ensure proper use, oversight and accountability if your community decides to move forward with a surveillance proposal. The Department of Homeland Security (DHS) Privacy Office and Office for Civil Rights and Civil Liberties issued CCTV: Developing Privacy Best Practices, a report that encourages government agencies to build privacy, civil rights, and civil liberties considerations into the design, acquisition, and operations of video surveillance systems. An appendix highlights the need to follow the Fair Information Practice Principles of Transparency, Individual Participation, Purpose Specification, Data Minimization, Use Limitation, Data Quality and Integrity, Security, and Accountability, and Auditing.43 • A. COLLECTIVELY EVALUATE THE EFFECTIVENESS, COSTS, AND ALTERNATIVES BEFORE MAKING DECISIONS ABOUT SURVEILLANCE Surveillance should only be a means to an end, never as an end in itself. That means that your community should have an actual purpose in mind or problem that needs to be addressed before even considering surveillance technology. Once you have that, you can collectively evaluate whether surveillance is likely to effectively accomplish your goals, as well as the costs to both your community's budget and to individual rights. 1. DECIDE AS A COMMUNITY: INVOLVE THE ENTIRE COMMUNITY FROM THE START The best way to consider whether surveillance is the right choice and avoid costly mistakes is to engage the entire community — including law enforcement, local lawmakers, and members of the public — in a thorough discussion about any surveillance proposal. Different segments of your community are likely to bring valuable perspectives to the process of evaluating whether to acquire and use surveillance technology. And the time to engage with your community is at the very beginning of the process, before any funding is sought, technology is acquired or system is used. ➢ How is the community engaged in an informed debate about a surveillance proposal? It is never too early for a public debate about a surveillance proposal. Community members should know what kind of surveillance is being considered, what it is intended to do and how it will affect them at the earliest stages of the process, when their input can bring out important information, highlight community concerns, and help avoid unforeseen problems and community backlash. "We need to have discussions with the public about new technologies and the robust privacy policies adopted to protect privacy. This lessens the pushback we get [and] benefits us in the long run." Chief Art Acevedo, Austin (TX) Police Department' 9 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE Effectively notifying the public that surveillance is being considered requires more than a line item in a public meeting agenda. Proactively reaching out to community groups, including those representing ethnic and religious communities, and local media to increase public awareness early in the process can help your entire community engage with the issue. CASE STUDY: OAKLAND'S "DOMAIN AWARENESS CENTER" FORCED TO SCALE BACK AFTER KEEPING COMMUNITY IN THE DARK In 2013 the City of Oakland tried to expand its "Domain Awareness Center," originally focused on the Port of Oakland, into a citywide surveillance network linking together video cameras from local streets and schools, traffic cameras, and gunshot microphones. Instead of soliciting early public input about the expanded system, Oakland tried to move forward without any meaningful engagement with the community. Residents were outraged and the City Council voted against expanding the system.45 An informed debate also requires that your community has access to a wide range of information in order to assess how surveillance would work in practice and whether it would advance local goals. Hosting community meetings with various speakers representing different perspectives (not just law enforcement and the technology vendor) can help the community understand how the surveillance technology actually works and its potential implications. Your community should also prepare and release a Surveillance Impact Report to help everyone understand the scope and potential costs of the proposal and a draft Surveillance Use Policy that details the safeguards that would be put in place if the proposal were approved. Your community may also consider convening an ad -hoc committee of local residents, experts and advocates who can work together to make recommendations or help complete these documents. CASE STUDY: CITIES ENGAGE WITH COMMUNITY MEMBERS TO EVALUATE SURVEILLANCE PROPOSALS Several cities considering proposals to introduce or expand surveillance have found it useful to actively engage community members through working groups and ad -hoc committees to shape policy and provide oversight. The Redlands Police Department convened a Citizens' Privacy Council, open to any resident of the city, to provide advice on policy for surveillance cameras and oversee police use of the cameras.46 Richmond formed an ad -hoc committee to evaluate policies for its video surveillance program.47 And in 2014, following community backlash and the vote not to expand Oakland's Domain Awareness Center, the City Council created a Privacy and Data Retention Ad Hoc Advisory Committee comprised of diverse community members to create safeguards to protect privacy rights and prevent the misuse of data for a scaled -back system to be used at the Port of Oakland.48 VI 10 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES USE A SURVEILLANCE IMPACT REPORT TO MAKE AN INFORMED DECISION The scope and potential costs of a surveillance technology should be assessed and made available to the community through a Surveillance Impact Report. This report should include: o information describing the technology, how it works, and what it collects, including technology specification sheets from manufacturers; o the proposed purposes(s) for the surveillance technology; o the location(s) it will be deployed and crime statistics for any location(s); o an assessment identifying any potential impact on civil liberties and civil rights and discussing any plans to safeguard the rights of the public; and o the fiscal costs for the surveillance technology, including initial purchase, personnel and other ongoing costs, and any current or potential sources of funding. A worksheet to help your community prepare a Surveillance Impact Report is available at aclunc.org/smartaboutsurveillance. ➢ How will the community decide whether to proceed with a surveillance proposal? Community members deserve more than just information about surveillance proposals: they need the opportunity to weigh in on whether the proposal actually benefits the community and how or whether it should move forward, either by giving input to local policymakers at public hearings or by casting their own ballot on the issue. In either case, initial community approval should be obtained before any steps towards acquiring surveillance technology are taken, including applying for funding from outside entities. This ensures that external grants do not circumvent the proper democratic process and cut community members out of the loop. Local policymakers or the community as a whole should be given additional opportunities to weigh in if the proposal changes or as more details become available. CASE STUDY: SAN JOSE'S DRONE GROUNDED UNTIL COMMUNITY APPROVES San Jose residents were outraged when they learned that their police department had purchased a drone without any public debate. Amid critical media coverage and protests from community groups, civil-rights advocates, and local residents, police apologized and said they would ground the drone until they could conduct adequate public outreach.49 2. DEFINE THE PURPOSE: ASK HOW AND WHETHER THIS TECHNOLOGY WILL AID YOUR COMMUNITY Your community cannot determine whether surveillance is an appropriate solution if you have not first identified the problem. Defining the specific purpose or issues that surveillance is intended to address is essential to evaluate the likely effectiveness of surveillance and to identify alternatives that might provide a better fit for your needs and budget. It can help highlight the individuals or communities who are likely to be most impacted by surveillance and ensure that their thoughts and concerns are fully understood. It also 11 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE provides a starting point for crafting a Surveillance Use Policy by defining specific objectives for which surveillance is appropriate and barring its use outside of those purposes. SURVEILLANCE AT THE "BORDER" When you think of the border, you probably imagine a narrow line between our country and our neighbors. But federal regulations grant the U.S. Customs and Border Protection Agency broad authority within 100 miles of the edge of U.S. territory, which includes not just cities like San Diego but Los Angeles, San Francisco, and even Fresno, Redding, and Sacramento.50 This means that the deployment of surveillance technology by border agencies, including technologies originally developed for military purposes, impacts individuals and communities throughout California. Unfortunately, there is very little transparency about the use of surveillance technology by border agencies. Are local officials or lawmakers cooperating in surveillance activities? Are they even informed? Or is the federal government monitoring Californians far from the actual border without the safeguards that our democracy and Constitution demand? A serious and informed discussion of the implications of widespread surveillance at the "border," whether by your local law enforcement or a federal agency, is absolutely necessary to prevent widespread violations of Americans' rights to privacy, property, liberty, equal protection, and due process. Even if your community can't easily prevent federal agencies from monitoring you, it can make sure that local law enforcement and lawmakers are transparent about their role. And it can clearly send a message to federal and state policymakers that you expect to be part of the discussion of any kind of surveillance in your area. ➢ What specific community purposes will be aided by adopting this technology? A well-defined community purpose should include a specific problem and a measurable outcome that the community desires. Vague purposes such as "protecting our city from criminals" make it difficult for the community to understand how surveillance might be used or how its effectiveness might be measured. In contrast, a purpose such as "increase recovery of stolen vehicles" succinctly identifies an outcome desired by community members and helps frame public discussion. That discussion may in turn lead you to narrow or alter the purposes for which surveillance should be used, if you decide to use it at all. CASE STUDY: OAKLAND SPENDS $2M ON "HARDLY -USED" POLICE TECHNOLOGY The cash -strapped city of Oakland learned the hard way that acquiring new police technology without a clearly -defined purpose can be a waste of time and money. A city audit revealed that the city had squandered almost $2 million on hardly -used police technology between 2006 and 2011. The auditor recommended steps to ensure that technology purchases were intended to fulfil specific strategic objectives and regular evaluation of their effectiveness.51 12 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES ➢ Will this surveillance technology help your community achieve that purpose? After your community identifies the purposes that surveillance technology might be able to address, you should evaluate whether the proposed technology would actually achieve them. Manufacturer's claims should not be taken at face value, and certainly not in isolation. Instead, your community should look at all of the evidence or arguments suggesting that surveillance will or will not effectively help you achieve your defined purpose. CASE STUDY: SAN FRANCISCO RECONSIDERS PLANS TO EXPAND SAFETY CAMERA PROGRAM THAT FAILS TO IMPROVE COMMUNITY SAFETY In 2005, San Francisco set out to deter violent crime and provide police with an investigative tool by installing video cameras in the City's high -crime, high -traffic areas. However, post -installation crime statistics published by mandate under a city ordinance revealed that the cameras neither reduced crime nor assisted in solving them in any meaningful way. In fact, the cameras only led to six suspects being charged by the SFPD between 2005 and 2008. As a result, the Police Commission reconsidered its plans to expand the program.52 ➢ Are there better alternatives to achieve your purpose? Even if the proposed surveillance technology does seem likely to help your community achieve its purpose, there still may be alternatives that are just as (or more) effective, less expensive, and/or less likely to be misused or otherwise impact your community members. In particular, you should compare the effectiveness and costs of technology -based solutions with non - technology -oriented approaches to address the problem. For example, multiple studies have shown that traditional approaches such as increased lighting and foot patrols significantly reduce crime.53 You should not automatically assume that surveillance technology will be more effective. CASE STUDY: CITIES REPLACE RED LIGHT CAMERAS WITH LONGER YELLOW LIGHTS California cities are increasingly shutting down red light cameras as evidence mounts that the cameras increase, rather than decrease, traffic accidents. For example, in Walnut, CA, a study found that red light cameras resulted in dramatic increases in "red light running collisions" (400%), "rear end collisions" (71%) and "broadside collisions" (100%)" and that "no argument can be made that photo enforcement has improved safety . . . within the city of Walnut. In fact, the use of red light cameras appears to have decreased safety and put roadway users at increased risk." In light of this evidence, more than half of the California cities that once used red light cameras have ended their programs, turning instead to alternatives that have proven more effective at preventing accidents such as longer yellow lights at dangerous intersections.' 3. IDENTIFY THE COSTS AND RISKS: EXAMINE FINANCIAL, LEGAL, AND PRACTICAL CONSEQUENCES Even if a specific technology is appropriate for your community's purposes, there still may be financial, legal and practical concerns that may make adopting it undesirable. This section will help you measure the likely costs of surveillance so that you can determine whether they are truly outweighed by the expected benefits. 13 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE ➢ How much will the technology cost your community to acquire and operate? Deciding how to allocate funds is one of your community's most important tasks. Every dollar your community spends on surveillance technology is a dollar it cannot spend on some other community need. Residents deserve assurance that funds are being spent on mutually agreed -upon interests. Costs related to surveillance technology will include personnel time, training costs, maintenance and upkeep, as well as any network and storage costs for the data your community may collect. Potential costs associated with risks of data breach or lawsuits based on abuse of surveillance also need to be recognized. These questions cannot be dismissed solely because your community is seeking grant funding to pay for the technology. These grants are attractive for obvious reasons: they appear to allow your community to buy a technology without having to spend local taxpayer dollars. But outside grants may not cover the costs that follow a technology's adoption, particularly the long-term costs of operation, repairs, and personnel. Estimating these costs as accurately as possible — and making sure those estimates are shared with the community and made part of the debate about adopting surveillance — is key. "One more question to ask ourselves is whether we are carefully considering the infrastructure that is needed to support technology — the costs of monitoring it and of staffing technology units at a time when departments are laying off civilians. We really need to think about all of the aspects of technology when initial investments are being made." - Police Executive Research Forum, "How Are Innovations in Technology Affecting Policing?"55 ➢ What are the legal risks and associated potential costs of the surveillance proposal? Surveillance technology can carry a number of significant legal risks, in part because of rapid changes to privacy law. Even under current law, misuse of surveillance systems or data or technical glitches outside of your control could subject your community to potential legal liability. And as courts and lawmakers continue to reassess how privacy and free speech rights should apply in the digital age, there is a risk that your community's investment in surveillance technology could leave you with equipment that can no longer be legally used as intended. These factors need to be accounted for when performing a cost - benefit analysis of any surveillance proposal. CASE STUDY: FBI REMOVES GPS TRACKERS AFTER SUPREME COURT RULES THAT WARRANTLESS TRACKING IMPLICATES FOURTH AMENDMENT The FBI had installed approximately 3,000 GPS trackers on cars without a warrant throughout the United States when the U.S. Supreme Court ruled in 2012 that their use implicated the Fourth Amendment.s6 As a result, the FBI deactivated the warrantless trackers and its agents had to physically retrieve them.' Obtaining warrants before using those GPS trackers would have ensured the constitutionality of obtained evidence and saved the FBI considerable time and effort. 14 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES ➢ How could the surveillance proposal negatively impact public safety or individual rights? A surveillance proposal designed to benefit your community may carry side effects that undermine that objective. Insecure systems can present a tempting target for hackers, potentially making your community less safe in the process. Surveillance programs that target — or appear to target — specific groups, especially those that already feel marginalized, can make it harder for law enforcement to work cooperatively with those groups to investigate crimes. And surveillance can chill political and social engagement such as attendance at political rallies, gun shows, or religious ceremonies if community members fear that their individual lives are constantly being monitored. Identifying the harms as well as benefits of surveillance is an important part of evaluating any proposal. CASE STUDY: REDLANDS DEPLOYS INSECURE CAMERA NETWORK The surveillance camera network in the city of Redlands made the news for the wrong reasons when computer security experts demonstrated how easily they could take control of the cameras. Although the police department expressed concern about "people with criminal intent using the public camera feed to case homes or businesses or track the police force," the network was deployed with no security at all. Even after the story broke, the network was secured with an outdated encryption protocol that a researcher described as "putting a diary lock on your front door."58 B. ESTABLISH A SURVEILLANCE USE POLICY TO MITIGATE HARMS AND PROTECT RIGHTS If after careful consideration and public debate your community decides that a particular surveillance technology is worth adopting, you need to ensure that policies are in place so that it is used properly. A clear, legally enforceable Surveillance Use Policy that provides guidance about when and how to use surveillance can safeguard individual rights while protecting local law enforcement and your entire community from costly lawsuits, bad press, loss of community trust, and more. Recognizing the necessity of use policies, Seattle and Spokane, Washington recently passed ordinances requiring police to develop use guidelines for new surveillance equipment before using it.s9 CASE STUDY: LAPD BODY CAMERA POLICIES PROTECT OFFICERS AND THE PUBLIC After announcing its intention to adopt body cameras, the Los Angeles Police Department reached out to the police union, the ACLU, and the public, to get input on the program and help designing policies that adequately safeguard privacy of officers and citizens. Being transparent about the program and soliciting input from the beginning can help ensure policymakers identify problems and address them from the start.' Here are some of the key elements of a robust, legally enforceable Surveillance Use policy. 1. USE APPROPRIATELY: PLACE CLEAR LIMITS ON SURVEILLANCE If your community has been following this guide, you've already defined community purposes that justify a particular technology. Now it's time to use those purposes to decide and memorialize the acceptable uses that will benefit the community and those that are simply prohibited. Doing so safeguards against use of the technology in a manner the community never intended. 15 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE ➢ When is surveillance permitted or prohibited? The first step is straightforward but essential: defining how and when the technology may be used. Every entity in your community that conducts surveillance should have a policy that clearly specifies appropriate uses of each technology and bars all other uses. In order to benefit from and reflect community input and oversight, technology should only be used for the particular purposes for which it was acquired. Any proposed new uses should be subject to the same public discussion as the acquisition of new technology, allowing the community to weigh in on the appropriateness of any expanded purpose. Your policy needs to be consistent with constitutional guarantees of privacy, equal protection, freedom of speech and freedom of religion. In fact, your use policy should not only address clearly unlawful but also potentially unlawful uses of surveillance technology. If there are questions about the legality of a specific practice, your use policy should prohibit that practice until there is a definite answer. ➢ What legal or internal process is required to use surveillance? It is also important to ensure that all legally required and internal processes are followed each time surveillance is used. These processes help to prevent unauthorized or outright illegal uses and also make sure that even appropriate uses of the surveillance technology minimize the impact on individual rights. In many cases, the best way to ensure that legal requirements are satisfied is to require a search warrant prior to conducting surveillance, allowing the court system to play a role in overseeing the program. With the streamlined modern warrant process, officers can seek a judge's approval quickly and easily by simply placing a phone call or using a mobile device.6l Internal recordkeeping, including recording the reason for each use of surveillance, can also help ensure compliance with the appropriate use policy and create an audit trail for ongoing feedback and oversight. ➢ How are officers trained before they conduct surveillance? Having clear policies is not helpful if the people using the technology or the data it collects lack the underlying knowledge to comply with those policies. You need to ensure that training programs for anyone involved with surveillance are comprehensive, encompassing not just the technology and Surveillance Use Policy but the purposes and legal rules that inform the Policy. Training should spell out both the obligations of anyone using the technology and the consequences for policy violations. "All of our officers receive First and Fourth Amendment training before they're allowed to access the system in any way." -Jonathan Lewin, Chicago Police Department Office of Emergency Management and Communications62 ➢ Are you only collecting necessary data? Ensuring that surveillance technology is used in a way that accomplishes its stated purpose without collecting additional data is a straightforward way to reduce the risk of privacy invasions. That's why the federal statute authorizing wiretaps has from its inception required "minimization" — an effort to make sure that even after a warrant has issued and collection is underway, police only intercept communications relevant to the investigation, not every communication made by the target 63 16 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES The same principle should be applied to other forms of surveillance, requiring a reasonable effort to avoid collecting superfluous information. For example, a police department that deploys drones to an accident scene to quickly identify any need for police or emergency intervention does not need to record and retain video footage. CASE STUDY: OHIO STATE HIGHWAY PATROL RETAINS ONLY ALPR HITS The Ohio State Highway Patrol policy for automated license plate readers (ALPRs) states that "all 'non - hit' captures shall be deleted immediately." The ALPR program is intended to detect stolen vehicles, Amber Alerts, and persons with outstanding warrants. As a result, retaining data about "non -hit" vehicles does not further that purpose, and a policy of deleting that data immediately protects the community from unnecessary risks.64 2. PREVENT MISUSE OF DATA: LIMIT WHEN DATA CAN BE USED AND WHO CAN ACCESS IT Even data collected for a legitimate purpose can be put to illegitimate uses. It is essential that your community establish clear rules so that surveillance data is used only for approved purposes. Doing so not only prevents outright abuses of the data that can erode public trust but also keeps "mission creep" from altering the balance that you have already worked out between government actions and individual liberties. ➢ How will surveillance data be secured? The first step in preventing misuse of data is ensuring that it is stored securely. Technical safeguards are necessary to help protect community members' data from accidental disclosure and misuse. You should consult with experts and implement safeguards at multiple levels that protect data at all points in its lifespan. Your community may already possess secure storage space separated from other databases and computer systems. This provides you with an obvious level of control. If you choose to store data elsewhere, you must ensure that it is secure and subject to your safeguards. Your community should also designate someone as an authority or custodian with responsibility over community members' data and your storage systems. CASE STUDY: MONTEREY COUNTY SUFFERS DATA BREACH DUE TO "TOTALLY OBSOLETE" DATA PRACTICES Monterey County's computer systems were breached in 2013 and the personal information of over 140,000 local residents was stolen. A subsequent grand jury investigation concluded that the breach stemmed from "totally obsolete" data practices and a failure to follow privacy laws. The grand jury warned of "serious financial consequences" if the county failed to change its practices.6s ➢ Under what circumstances can collected data be accessed or used? In addition to technical safeguards to protect data, you should also limit the circumstances under which it can be legitimately accessed or used. These limits should be based on the specific purposes your community agreed to when it adopted the technology. For example, if the purpose of the technology is to address specific violent crimes, your policy might allow database searches only as part of an official investigation of a violent crime, and only for data that is related to that investigation. Data access and use 17 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE policies that are consistent with the articulated purposes for the system will provide guidance to operators and engender community trust by deterring abuses that can follow unfettered access to surveillance data. Your community's goal of balancing privacy and security will be easier to achieve if particular data access and use limits are accompanied by steps to ensure the rules are followed. Database access should be limited — for example, by only allowing junior staff to access data with the permission and guidance of a more senior officer, or by limiting data access solely to senior officers. As explained earlier, training is a must. Restricting data access to a limited set of trained employees decreases the potential that community members' data can be misused. To ensure targeted use of data, it may be appropriate to require a search warrant or similar external process before the data can be accessed at all. CASE STUDY: LAX POLICIES LEAD TO "LOVEINT" ABUSE Without strong policies limiting access to data, the temptation to misuse the system for personal interests can be hard to resist. The NSA even has a specific term, LOVEINT, for employees who monitor their significant others,66 and two Fairfield officers could face criminal charges after using a statewide police database to screen women from online dating sites.67 ➢ What limits exist on sharing data with outside entities? Placing limits on how you use the data is a great step, but third parties you share the information with may not have the same limits in place. To protect residents' privacy and prevent uses of information contrary to community desires, it is important to articulate when — if ever — your purposes justify sharing any collected information. During the public debate over your Surveillance Use Policy, the community should decide when sharing is permissible and when it is prohibited. If data can be shared, your community must also determine how to ensure that the entity receiving the data lives up to your community's standards. This may require contractual language binding the third party to your data policies and safeguards. For example, the city of Menlo Park, California specifically requires by ordinance that any agreement with Northern California's fusion center demand compliance with the City's own retention policy.68 If a potential recipient of your data cannot agree with your policies or conditions, the best choice is to not share your data. 3. LIMIT DATA RETENTION: KEEP INFORMATION ONLY AS LONG AS NECESSARY The longer you retain information, the greater the potential privacy and security risks. The easiest way to minimize these risks is to retain only the information you need and only for as long as you need it. ➢ Does retaining data help accomplish the purpose for which the technology was acquired? To maximize the usefulness of your technology and minimize civil liberties concerns, your retention period should not be longer than necessary to directly advance community purposes. For instance, deploying automated license plate readers to locate stolen or Amber Alert vehicles is not aided by the collection of historical data. Retaining data "just in case it becomes useful" increases the risk that data will be used contrary to the purpose agreed upon by the community or wind up in the hands of a bad actor. Retaining data can also increase the costs of surveillance by requiring expensive storage solutions and making it harder to effectively use the system. Focusing on the specific objective that surveillance is intended to accomplish can help you determine a retention period that balances that objective with the costs and risks associated with data retention. 18 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES ➢ Are there other legal or policy reasons that inform your data retention policy? There may be other legal and policy issues that affect your data retention policy, informed by legal concerns unrelated to your community's purposes. For example, your community should choose a retention period that balances a desire to be responsive to public records requests with residents' civil liberties, including privacy. Responsiveness to records requests should not be a primary justification for an extended retention period, however, since community concerns about surveillance are better addressed by retaining less information in the first place. ➢ What happens when the data retention period expires? To prevent misuse of data after your community's desired retention period has lapsed, ensure that data is regularly deleted after that time. This can be accomplished via automated technical measures or periodic audits. "If there's anything of a criminal nature recorded on video, it's grabbed and inventoried within hours. Most everything else is never looked at again, so it's purged automatically." - Commander Steven Caluris, Chicago Police Department69 Before data is collected, your community should also decide whether there are any specific circumstances that justify the retention of data beyond your community's chosen retention period and specify what specific condition(s) must be met in order to do so. For instance, it might be appropriate to preserve data relevant to a specific ongoing investigation, data necessary to complete an investigation of internal data misuse, and data relevant to a criminal defendant's case. Any such conditions should be informed by your community's purposes and clearly articulated in your Surveillance Use Policy. C. ENSURE ACCOUNTABILITY BY ENFORCING POLICIES AND ENCOURAGING ONGOING PUBLIC ENGAGEMENT Even if your community has already deployed surveillance technology, the community as a whole has a crucial role in ensuring that the public interest is still being accomplished by surveillance. One key question is whether your Surveillance Use Policy is actually effectively safeguarding individual rights and preventing abuses. A second is whether the assumptions you made when you approved surveillance in the first place still hold true after actual experience with the technology and its impact. Revamping or even cancelling an ineffective or imbalanced program is better than wasting time, money, and community trust on a tool that does more harm than good. 1. IDENTIFY AND ADDRESS ABUSES: AUDIT USE OF TECHNOLOGIES AND DATA AND ADDRESS ANY MISUSE The safeguards in your Surveillance Use Policy are only worthwhile if the policy is actually followed. But given the secretive nature of many forms of surveillance, ensuring compliance takes conscious effort. Strong internal and external oversight and auditing can help identify isolated or systemic abuses of surveillance technology, and legally enforceable sanctions can deter both. ➢ What type of supervision exists for persons operating the technology? Your system of management, in addition to technical measures, facilitates internal oversight of your technology and data. Designating a chain of command for a given surveillance technology helps specific personnel understand what responsibilities they have over the equipment or data and makes it easy to trace where misuse occurred. All of this helps your community deter abuses and guarantee that resources are used wisely. 19 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE ➢ How will misuses of the technology be identified? The best way to identify misuse of surveillance is to "watch the watchers" by keeping thorough records of each time surveillance is deployed or surveillance data is called up. The person or persons with oversight responsibility should be independent, be given full access to the technology and database, and empowered to receive complaints about misuse and draw conclusions that can lead to legally enforceable consequences. To catch what human oversight misses, your community should ensure that technical measures including access controls and audit logs are in place. Placing the oversight authority with a third party such as the City Council or a citizen panel may also increase the likelihood that the misuses are accurately identified. "[A]II usage is supervised. All camera and operator actions are logged and can be tracked later." -Jonathan Lewin, Chicago Police Department Office of Emergency Management and Communications.70 CASE STUDY: FRESNO ADOPTS ANNUAL AUDIT OF VIDEO SURVEILLANCE When the Fresno Police Department proposed a citywide video -policing program using live -feed cameras, the city council required an annual independent audit to ensure that all of the privacy and security guidelines for the system's use are being followed. Fresno Police Chief Jerry Dyer said he supported the audit: "I have no doubt the audit will be very helpful to our ongoing video policing operations." The city's auditor, a retired federal district court judge with deep experience on civil rights cases, examined current use of the system and made specific policy recommendations.71 ➢ What legally enforceable sanctions exist against misuse and abuse of this technology? By establishing consequences for violations of the guidelines, your community encourages proper use of the technology and sends a message that community values apply to everyone. Depending on the circumstances, sanctions ranging from retraining to fines, suspensions, or termination may be appropriate for violations of your Surveillance Use Policy. In addition, your community should provide an appropriate remedy for anyone harmed by an abuse. Legally enforceable sanctions discourage misuse and guarantee that aggrieved community members will be made whole. 2. KEEP THE DIALOG OPEN: ENCOURAGE PUBLIC OVERSIGHT AND ONGOING DISCUSSION Your community at large plays two essential roles in ensuring that any current surveillance program actually benefits your community. First, transparency about abuses of surveillance allows the community to determine whether the Surveillance Use Policy or any associated sanctions need to be revised to address the issue. Second, as your community learns first-hand whether surveillance is effective and how it impacts different individuals and groups, you may wish to reassess the purposes for which surveillance should be used or even whether it should still be used at all. Surveillance should be under the control of the community at all times, not just when it is initially being considered. ➢ How will the community continue to be informed about the surveillance program? It is important that your community's oversight mechanisms not only are in place before surveillance is used but also remain available as long as the surveillance program continues or any collected data remains. This allows the community to continue to learn about and provide feedback on the effectiveness and impact of surveillance, and provides the information you will need to evaluate any changes going forward. 20 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES One of the most effective ways to keep your community informed is to produce an annual report about each surveillance technology that has been used in this past year. This report should include: o A description of how and how often the technology was used; o Information, including crime statistics, that indicate whether the technology was effective at accomplishing its stated purpose; o A summary of community complaints or concerns about the technology; o Information about any violations of the Surveillance Use Policy, data breaches, or similar incidents, including the actions taken in response, or results of any internal audits; o Whether and how data acquired through the use of the technology was shared with any outside entities; o Statistics and information about Public Records Act requests, including responses; and o The total annual costs for the technology, including personnel and other ongoing costs, and any external funding available to fund any or all of those costs in the coming year. In addition, there may be other ways to provide your community with information about the operation and effectiveness of the surveillance program. Responding to Public Records Act requests with as much information as possible, taking into account factors such as the privacy rights of individuals whose information may be included in the requested data, is one way to allow interested community members access to concrete information about the program. Creating standing committees of community members, regularly holding public events and forums, and establishing open inspection periods for the technology can also help keep the community informed. ➢ How will local officials and the public re-evaluate the decision to engage in surveillance or the existing policies and safeguards? The community's decision to approve surveillance should be reconsidered on an annual basis. If there is evidence that call into question the conclusion that the benefits of surveillance outweigh costs and concerns, or that there are better ways to achieve the same purpose with fewer costs or risks, policymakers should seek community input and take whatever action is appropriate to address these concerns. That may involve narrowing the purpose or scope of surveillance, requiring modifications to the Surveillance Use Policy, or exploring alternatives that better address community needs. Conclusion Communities increasingly understand the need to make smart choices about surveillance technology and ensure that time, energy, and resources are not spent on systems that cost more, do less, and have a greater impact on the rights of community members than you expect. And following public outcry about NSA spying and the use of military equipment by local police, community members demand — and deserve — both a voice in any decision to deploy surveillance technology and reassurance that robust safeguards and public oversight will be in place if surveillance is going to be used. Make sure that your entire community is engaged in asking and answering the right questions about surveillance technology by adopting a Surveillance & Community Safety Ordinance and following the other recommendations in this guide. 21 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE Appendix: Model Surveillance & Community Safety Ordinance A. KEY PRINCIPLES OF THE MODEL ORDINANCE o Informed Public Debate at Earliest Stage of Process: Public notice, distribution of information about the proposal, and public debate prior to seeking funding or otherwise moving forward with surveillance technology proposals. o Determination that Benefits Outweigh Costs and Concerns: Local leaders, after facilitating an informed public debate, expressly consider costs (fiscal and civil liberties) and determine that surveillance technology is appropriate or not before moving forward. o Thorough Surveillance Use Policy: Legally enforceable Surveillance Use Policy with robust civil liberties, civil rights, and security safeguards approved by policymakers. o Ongoing Oversight & Accountability: Proper oversight of surveillance technology use and accountability through annual reporting, review by policymakers, and enforcement mechanisms. B. MODEL ORDINANCE TEXT The [Council/Board of Supervisors] finds that any decision to use surveillance technology must be judiciously balanced with the need to protect civil rights and civil liberties, including privacy and free expression, and the costs to [City/County]. The [Council/Board] finds that proper transparency, oversight, and accountability are fundamental to minimizing the risks posed by surveillance technologies. The [Council/Board] finds it essential to have an informed public debate as early as possible about whether to adopt surveillance technology. The [Council/Board] finds it necessary that legally enforceable safeguards be in place to protect civil liberties and civil rights before any surveillance technology is deployed. The [Council/Board] finds that if surveillance technology is approved, there must be continued oversight and annual evaluation to ensure that safeguards are being followed and that the surveillance technology's benefits outweigh its costs. NOW, THEREFORE, BE IT RESOLVED that the [Council/Board] of [City/County] adopts the following: Section 1. Title This ordinance shall be known as the Surveillance & Community Safety Ordinance. Section 2. [Council/Board] Approval Requirement 1) A [City/County] entity must obtain [Council/Board] approval at a properly -noticed public hearing prior to any of the following: a) Seeking funds for surveillance technology, including but not limited to applying for a grant, accepting state or federal funds, or in -kind or other donations; b) Acquiring new surveillance technology, including but not limited to procuring such technology without the exchange of monies or consideration; c) Using new surveillance technology, or using existing surveillance technology for a purpose, in a manner or in a location not previously approved by the [Council/Board]; or d) Entering into an agreement with a non-[City/County] entity to acquire, share or otherwise use surveillance technology or the information it provides. 2) A [City/County] entity must obtain [Council/Board] approval of a Surveillance Use Policy prior to engaging in any of the activities described in subsection (1)(b) -(d). 22 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES Section 3. Information Required 1) The [City/County] entity seeking approval under Section 2 shall submit to the [Council/Board] a Surveillance Impact Report and a proposed Surveillance Use Policy at least forty-five (45) days prior to the public hearing. 2) The [Council/Board] shall publicly release in print and online the Surveillance Impact Report and proposed Surveillance Use Policy at least thirty (30) days prior to the public hearing. Section 4. Determination by [Council/Board] that Benefits Outweigh Costs and Concerns The [Council/Board] shall only approve any action described in Section 2, subsection (1) of this ordinance after making a determination that the benefits to the community of the surveillance technology outweigh the costs and the proposal will safeguard civil liberties and civil rights. Section 5. Compliance for Existing Surveillance Technology Each [City/County] entity possessing or using surveillance technology prior to the effective date of this ordinance shall submit a proposed Surveillance Use Policy no later than ninety (90) days following the effective date of this ordinance for review and approval by [Council/Board]. If such review and approval has not occurred within sixty (60) days of the submission date, the [City/County] entity shall cease its use of the surveillance technology until such review and approval occurs. Section 6. Oversight Following [Council/Board] Approval 1) A [City/County] entity which obtained approval for the use of surveillance technology must submit a Surveillance Report for each such surveillance technology to the [Council/Board] within twelve (12) months of [Council/Board] approval and annually thereafter on or before November 1. 2) Based upon information provided in the Surveillance Report, the [Council/Board] shall determine whether the benefits to the community of the surveillance technology outweigh the costs and civil liberties and civil rights are safeguarded. If the benefits do not outweigh the costs or civil rights and civil liberties are not safeguarded, the [Council/Board] shall direct that use of the surveillance technology cease and/or require modifications to the Surveillance Use Policy that will resolve the above concerns. 3) No later than January 15 of each year, the [Council/Board] shall hold a public meeting and publicly release in print and online a report that includes, for the prior year: a. A summary of all requests for [Council/Board] approval pursuant to Section 2 or Section 5, including whether the [Council/Board] approved or rejected the proposal and/or required changes to a proposed Surveillance Use Policy before approval; and b. All Surveillance Reports submitted. Section 7. Definitions The following definitions apply to this Ordinance: 1) "Surveillance Report" means a written report concerning a specific surveillance technology that includes all of the following: a. A description of how the surveillance technology was used; b. Whether and how often data acquired through the use of the surveillance technology was shared with outside entities, the name of any recipient entity, the type(s) of data disclosed, under what legal standard(s) the information was disclosed, and the justification for the disclosure(s); c. A summary of community complaints or concerns about the surveillance technology; 23 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE d. The results of any internal audits, any information about violations of the Surveillance Use Policy, and any actions taken in response; e. Information, including crime statistics, that help the community assess whether the surveillance technology has been effective at achieving its identified purposes; f. Statistics and information about public records act requests, including response rates; and g. Total annual costs for the surveillance technology, including personnel and other ongoing costs, and what source of funding will fund the technology in the coming year. 2) "[City/County] entity" means any department, bureau, division, or unit of the [City/County]. 3) "Surveillance technology" means any electronic device, system utilizing an electronic device, or similar used, designed, or primarily intended to collect, retain, process, or share audio, electronic, visual, location, thermal, olfactory or similar information specifically associated with, or capable of being associated with, any individual or group. 4) "Surveillance Impact Report" means a publicly -released written report including at a minimum the following: (a) Information describing the surveillance technology and how it works, including product descriptions from manufacturers; (b) information on the proposed purposes(s) for the surveillance technology; (c) the location(s) it may be deployed and crime statistics for any location(s); (d) an assessment identifying any potential impact on civil liberties and civil rights and discussing any plans to safeguard the rights of the public; and (e) the fiscal costs for the surveillance technology, including initial purchase, personnel and other ongoing costs, and any current or potential sources of funding. 5) "Surveillance Use Policy" means a publicly -released and legally -enforceable policy for use of the surveillance technology that at a minimum specifies the following: a. Purpose: The specific purpose(s) for the surveillance technology. b. Authorized Use: The uses that are authorized, the rules and processes required prior to such use, and the uses that are prohibited. c. Data Collection: The information that can be collected by the surveillance technology. d. Data Access: The individuals who can access or use the collected information, and the rules and processes required prior to access or use of the information. e. Data Protection: The safeguards that protect information from unauthorized access, including encryption and access control mechanisms. f. Data Retention: The time period, if any, for which information collected by the surveillance technology will be routinely retained, the reason such retention period is appropriate to further the purpose(s), the process by which the information is regularly deleted after that period lapses, and the specific conditions that must be met to retain information beyond that period. g. Public Access: How collected information can be accessed or used by members of the public, including criminal defendants. h. Third Party Data Sharing: If and how other [City/County] or non-[City/County] entities can access or use the information, including any required justification or legal standard necessary to do so , and any obligations imposed on the recipient of the information. i. Training: The training required for any individual authorized to use the surveillance technology or to access information collected by the surveillance technology, including any training materials. j. Auditing and Oversight: The mechanisms to ensure that the Surveillance Use Policy is followed, including identifying personnel assigned to ensure compliance with the policy, internal recordkeeping of the use of the technology or access to information collected by the technology, technical measures to monitor for misuse, any independent person or entity with oversight authority, and the legally enforceable sanctions for violations of the policy 24 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES Section 8. Enforcement 1) Any violation of this Ordinance constitutes an injury and any person may institute proceedings for injunctive relief, declaratory relief, or writ of mandate in any court of competent jurisdiction to enforce this Ordinance. 2) A court shall award costs and reasonable attorneys' fees to the plaintiff who is the prevailing party in an action brought to enforce this Ordinance. 3) In addition, for a willful, intentional, or reckless violation of this Ordinance, an individual shall be deemed guilty of a misdemeanor and may be punished by a fine not exceeding $1,000 per violation, imprisonment in the county jail for not more than six months, or both such a fine and imprisonment. Section 9. Severability The provisions in this Ordinance are severable. If any part of provision of this Ordinance, or the application of this Ordinance to any person or circumstance, is held invalid, the remainder of this Ordinance, including the application of such part or provisions to other persons or circumstances, shall not be affected by such holding and shall continue to have force and effect. Section 10. Effective Date This Ordinance shall take effect on [DATE]. 25 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE Endnotes 1 See Darwin Bond Graham & Ali Winston, The Hidden Costs of Oakland's Surveillance Center, East Bay Express, Jan. 22, 2014, available at http://www.eastbayexpress.com/oakland/controversial-the-hidden-costs-of-oaklands-surveillance- center/Content?oid=3816398; Nancy La Vigne et al., Urban Institute, Evaluating the Use of Public Surveillance Cameras for Crime Control and Prevention (2011), available at http://www.cops.usdoj.gov/Publications/ e071112381 _EvalPublicSurveillance. pd£ 2 Police Executive Research Forum, How Are Innovations in Technology Transforming Policing? 26 (Jan. 2012) [hereinafter PERF Report], available at http://www.policeforum.org/assets/docs/Critical_Issues_Series/ how°fo20are%20innovations%20in%20technology%20transforming%20policing%202012.pdf. 3 Press Release, Office of the Controller, ButkovikAlarmed by Police Camera Program, June 20, 2012, http://www.philadelphiacontroller.org/page.asp?id=792. 4 See Fazaga v. FBI, 844 F.Supp.2d 1022 (C.D. Cal. 2012). See Tim Cushing, Another Bogus Hit from a License Plate Reader Results in Another Citizen Surrounded by Cops with Guns Out, TechDirt (May 23, 2014), https://www.techdirt.com/articles/20140513/07404127218/another-bogus-hit-license-plate- reader-results-another-citizen-surrounded-cops-with-guns-out. shtml. 6 Cal. Civil Code § 1798.29 (2014). 7 Ponemon Inst. & Symantec, 2011 Cost of Data Breach Study: United States (2012), available at http://www.symantec.com/ content/ en/us /about/media/pdfs /b-ponemon-2011-cost-of-data-breach-us.en-us.pdf. 8 Symposium, The Value of Privacy, U. Cal. -Hastings School of L. Const. L. Q., Apr. 7, 2014 (oral remarks), available at http://livestre.am/4P7Lk. 9 See Will Kane, Oakland to Limit Surveillance Center to Port, Airport, S.F. Gate, Mar, 6, 2014, available at http: / /www. sfgate. com/bayarea/article/Oakland-to-limit-surveillance-center-to-port-5290273.php. 10 For example, the San Francisco Police Department's Mission Statement states that "policing strategies must preserve and advance democratic values" and that "police must respect and protect the rights of all citizens as guaranteed by the state's Constitution." Police Department, Mission Statement, http://sf-police.org/index.aspx?page=1616. 11 Terrence O'Brien, Caught Spying, FBI Asks Student to Return GPS Tracker, SWITCHED (Oct. 8, 2010), http: //www.switched.com/2010/ 10/08/caught-spying-fbi-asks-student-to-return-gps-tracker/. 12 Michael Isikoff, FBI Tracks Suspects' Cell Phones Without a Warrant, Newsweek, Feb, 18, 2010 (updated Mar. 13, 2010), available at http://www.newsweek.com/fbi-tracks-suspects-cell-phones-without-warrant-75099. 13 David Kravets, Rights Groups Decry New NSA Leak: Snooping on Muslim Americans' E-mail, Ars Technica (July 9, 2014), http:/ /arstechnica.com/tech-policy/2014/07/rights-groups-decry-new-nsa-leak-snooping-on-mslm-americans-e- mail/. 14 Christian Watien, 5 Uses for Drones that Don't Involve Fighting Terrorists, Epoch Times (Nov. 10, 2012), www. theepochtimes.com/n2/world/ 5-uses-for-drones-that-don-t-involve-fighting-terrorists-313051-print.html. 15 Executive Office of the President, Big Data: Seising Opportunities, Preserving Values 66 (2014), available at http://www.whitehouse.gov/sites/default/files/docs/big_data_privacy_report_may_1_2014.pdf. 16 Andrea Peterson, LOVEINT: When NSA Officers Use Their Spying Power on Love Interests, Wash. Post, Aug. 24, 2013, available at http://www.washingtonpost.com/blogs/the-switch/wp/2013/08/24/loveint-when-nsa-officers-use-their- spying-power-on-love-interests /. 17 See Julia Angwin & Jennifer Valentino-DeVries, New Tracking Frontier: Your License Plates, Wall St. J., Sep. 29, 2012, available at http://online.wsj.com/news/articles/SB10000872396390443995604578004723603576296. 18 See Tanvir v. Holder, Case No. 13 -CV -6951 (S.D. N.Y. Apr. 22, 2014) (First Amended Complaint), available at http: / / app s.washingtonpo st. com /g/ documents /world/lawsuit-accusing-us-of-putting-people-on-no-fly-lis t-after-they- say-they-wont-spy/941 /. 19 Peter Nicholas, State Tracked Protesters in the Name of Security, L.A. Times, July 1, 2006, available at http://articles.latimes.com/2006/jul/01/local/me-security1.. 20 Camille T. Taiara, Monitoring Malcontents: Why Do the Governor's Critics Keep Findings Themselves Targets of Strange Police Scrutiny:?, S.F .Bay Guardian, http://www.sfbg.com/39/41/news_governator.html. 21 See Mike Rhodes, Students at CSUFAre Starving for Civil Liberties, Indybay (Apr. 27, 2005), https: //www.indybay.org/newsitems/2005/04/27/1 7351181.php. 22 Local 10 ILWU v. City of Oakland, No. 3:03-cv-02962 (N.D. Cal. Apr. 28, 2005) (Jordan Dep. at 24:11-24). 23 See Bradley, Santa Cruzans Speak Out Against Police Infiltration and for an Independent Investigation, Indybay (Jan. 25, 2006), http s: / /www.indybay.org/newsitems/2006/01 /25 / 179 81451. p hp. 24 Alex Marthews & Catherine Tucker, Government Surveillance and Internet Search Behavior (March 24, 2014), http://ssrn.com/abstract=2412564. 25 Riley v. California, 134 S. Ct. 2473, 2489 (2014). 26 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES 26 United States v. Jones, 132 S.Ct. 945, 955, 56 (2012). 27 Angel Jennings, Richard Winston & James Rainey, Sherriff's Secret Air Surveillance of Compton Sparks Outrage, L.A. Times, Apr. 23, 2014, available at http://www.latimes.com/local/lanow/la-me-ln-sheriffs-surveillance-compton-outrage- 20140423-story.html. 28 Adam Goldman & Matt Apuzzo, NYPD Defends Tactics over Mosque Spying; Records Reveal New Details on Muslim Surveillance, Huffington Post (Feb 25, 2012), http://www.huffmgtonpost.com/2012/02/24/nypd-defends-tactics- over_n_1298997.html; Adam Goldman & Matt Apuzzo, New York Drops Unit That Spied on Muslims, N.Y. Times, April 15, 2014, available at http://www.nytimes.com/2014/04/16/nyregion/police-unit-that-spied-on-muslims-is- disbanded.html. 29 European Parliament Directorate General Internal Policies, A Review of the Increased Used of CCTV and Video -Surveillance for Crime Prevention Purposes in Europe 15 (2009). 3° See Press Release, Leadership Conference, Civil Rights Principles for the Era of Big Data, http:/ /www.civilrights.org/press/2014/civil-rights-principles-big-data.html. 31 U.S. v. Jones, 132 S.Ct. 945 , 954 (2012) (Sotomayor, J., concurring); id. at 957 (Auto, Ginsberg, Breyer, and Kagan, J., concurring in the judgment). 32 Klayman v. Obama, Civ. No. 13-0851 (D.D.C. Dec. 16, 2013). 33 U.S. v. Jones, 132 S.Ct at 956 (quoting U.S. v. Cuevas -Perez, 640 F.3d 272, 285 (7th Cir. 2011) (Flaum, J., concurring)). 34 Ballot Pamplet., Proposed Amendments to Cal. Const. with Arguments to Voters, Gen. Elec. (Nov. 7, 1972). 35 White v. Davis, 533 P.2d (Cal. 1975). 36 People v. Cook 41 Cal. 3d 373 (1985). 37 Robins v. Pruneyard Shopping Center, 592 P.2d 899 (Cal. 1979) (holding that, under the California Constitution, members of the public have a legal right to pass out pamphlets and seek signatures in a privately -owned shopping center), aff'd, .447 U.S. 74 (1980). 38 U.S.A. Freedom Act, H.R. 3361, 113th Cong. (2013). 39. Email Privacy Act, H.R. 1852, 113th Cong. (2013). 40 Allie Bohm, Status of Location Privacy Legislation in the States, ACLU Free Future (April 8, 2014), https://www.aclu.org/bldg/technology-and-liberty-national-security/status-location-privacy-legislation-states (as of May 6, 2014). 41 Allie Bohm, Status of 2014 Domestic Drone Legislation in the States, ACLU Free Future (April 22, 2014), https://www.aclu.org/blog/technology-and-liberty/status-2014-domestic-drone-legislation-states (as of May 6, 2014). 42 See Bonnie Eslinger, Menlo Park Council Approves Ordinance Regulating Police Use of Surveillance, San Jose Mercury News, May 14, 2014, available at http://www.mercurynews.com/breaking-news/ci_25766277/menlo-park-council-approves- ordinance-regulating-police-use; Seattle City Council Enacts Groundbreaking Legislation Protecting Residents' Civil Liberties, Local Progress (May 1, 2013), http://localprogress.org/sattle-city-council-enacts-groundbreaking-legislation-protecting- residents-civil-liberties /. 43 U.S. Dep't of Homeland Security, CCTV. Developing Best Practices (2007), available at http: / /www.dhs.gov/xlibrary/assets /privacy/privacy_rpt_cctv_2007.pdf. 44 PERF Report, supra note 2, at 35. 45 Ali Winston, Oakland City Council Rolls Back the Domain Awareness Center, East Bay Express (Mar. 5, 2014), http:/ /www.eastbayexpress.com/SevenDays/archives/2014/03/05/oakland-city-council-rolls-back-the-dac. 46 Redlands Police Department, Citizen Privacy Council, http://www.cityofredlands.org/police/CPC. 47 Memorandum, Establishing Ad Hoc Committee to Review the Community Warning System and Industrial Safety Ordinance (Sept. 18, 2012), http://64.166.146.155/agenda_publish.cfm?mt=ALL&get_month=9&get_year=2012&dsp=agm& seq=12339&rev=0&ag=241 &1n=23604&nseq=0&nrev=0&pseq=12303&prev=0. 48 See Memorandum, City Administrator's Weekly Report (Apr. 25, 2014), http: / /www2.oaklandnet.com/oakcal /groups/cityadministrator/documents/report/oak046804.pdf. 49 Robert Salonga, San Jose: Police Apologise for Drone Secrecy, Promise Transparency, San Jose Mercury News, Aug 5, 2014, available at http://www.mercurynews.com/crime-courts/ci_26279254/san-Jose-police-apologize-secret-drone- purchase-promise. 5o See ACLU, Know Your Rights: The Government's 100 Mile `Border" Zone - Map, https://www.aclu.org/know-your-rights- governments-100-mile-border-zone-map. 51 See Oakland City Auditor, Police Technology Performance Audit: FY2006-07 through 2010-11 (2012), available at http:/ /www.oaklandauditor.com/images/oakland/auditreports/0pd%20tech.pdf. 52 See Citris, Cistris Study on SF Public Cameras Released (Jan. 9, 2009), http://citris-uc.org/citris-study-on-sf-public- cameras-released/. 27 ONLINE AT ACLUNC.ORG/SMARTABOUTSURVEILLANCE 53 See David P. Farrington & Brandon C. Welsh, Effects of Improved Street Lighting on Crime: A Systematic Review, Home Office Research Study 251 (Aug. 2002), p. 42; Ronald V. Clarke, U.S. Department of Justice, Office of Community Oriented Policing Services, Improving Street Lighting to Reduce Crime in Residential Areas (Dec. 2008), available at http://cops.usdoj.gov/Publications/e1208-StreetLighting.pdf; Jay Beeber, Collision Analysis of the Photo Enforced Intersection in Walnut, CA, http://www.thenewspaper.com/rlc/docs/2014/ca-walnut.pdf. 54 See Steve Scauzillo, Red Light Cameras Being Stopped, L.A. Daily News. (Jan. 21, 2014), http: / /www.dailynews.com/general-news /201 40121 /red -light -cameras -being -stopped. 55 PERF Report, supra note 2, at 44. 56 United States v. Jones, 132 S. Ct. 945 (2012). 57 Joann Pan, FBI Turns Off 3000 GPS Devices After Ruling, Mashable (Feb. 27, 2012), http://mashable.com/2012/02/27/fbi-turns-off-3000-gps-devices/. 58 Kashmir Hill, Whoops, Anyone Could Watch California City's Police Surveillance Cameras, Forbes.com (Aug. 21, 2014), http://www.forbes.com/sites/kashmirhill/2014/08/11/ surveillance -cameras -for -all/. 59 Seattle City Council Enacts Groundbreaking Legislation Protecting Residents' Civil Liberties, Local Progress (May 1, 2013), http:/ /localprogress.org/ seattie-city-council-enacts-groundbreaking-legislation-protecting-residents-civil-liberties/; Jamela Debelak, ACLU of Washington, Surveillance: Spokane Acts to Protect Privacy and Provide Transparency (Aug. 21, 2013), https: //aclu-wa.org/blog/surveillance-spokane-acts-protect-privacy-and-provide-transparency. 60 Erika Aguilar, LAPD Body Cameras: 90 -Day Test Seeks to Answer Key Questions to Create New Policy, 89.3 KPCC (Feb. 4, 2014), http://www.scpr.org/news/2014/02/04/41855/lapd-body-cameras-90-day-test-seeks-to-answer-key/. 61 Terry McFadden, Technology HelpingPolice to Receive Warrants Faster, WNDU.com (July 8, 2013), http://www.wndu.com/ news/ specialrcports/headlines/Technology-helping-police-to-receive-search-warrants-faster--214651051.htm1. 62 PERF Report, supra note 2, at 14. 6318 U.S.C. § 2518(5) (2014). 64 Ohio State Highway Patrol Policy No. OSP-103.29 (revised Dec. 23, 2008). 65 Julia Reynolds, Monterey County Grand Jury Finds Computer Data Risks, Monterey Herald, Aug. 21, 2014, available at http: / /www.montereyherald. com/news /ci_26009592/monterey-county-grand-jury-fords-computer-data-risks. 66 Dianne Feinstein, NSA Officers Spy on Love Interests, Wall St. J., Aug. 23, 2013, available at http:/ /blogs.wsj.com/washwire/2013/08/23/nsa-officers-sometimes-spy-on-love-interests/. 67 Anjali Hemphill, Dating on Duty: Officers Accused of Screening Dates Using Police System, CBS 13 Sacramento (Aug. 22, 2014), http:/ /sacramento.cbslocal.com/2014/08/22/dating-on-duty-officers-accused-of-screening-dates-using-police-system/. 68 See Bonnie Eslinger, Menlo Park Council Approves Ordinance Regulating Police Use of Surveillance, San Jose Mercury News, May 14, 2014, available at http://www.mercurynews.com/breaking-news/ci_25766277/menlo-park-council-approves- ordinance-regulating-police-use. 69 PERF Report, supra note 5, at 36. 70 Id at 14. 71 George Hostetter, Former Judge Wanger Writes Far -Ranging Audit on Fresno Video Policing, Fresno Bee, Jan. 7, 2014, available at http://www.fresnobee.com/2014/01/07/3701754/judge-wanger-delivers-impressive.html. 28 MAKING SMART DECISIONS ABOUT SURVEILLANCE: A GUIDE FOR COMMUNITIES IACP TECHNOLOGY POLICY FRAMEWORK' January 2014 Introduction New and emerging technologies increasingly play a crucial role in the daily work of police, equipping officers with enforcement and investigative tools that have the potential of making them safer, better informed, and more effective and efficient. Developing and enforcing comprehensive agency policies regarding deployment and use is a critical step in realizing the value that technologies promise, and is essential in assuring the public that their privacy and civil liberties are recognized and protected. Technological advances have made it possible to monitor and record nearly every interaction between police and the public through the use of in -car and body -worn video, access to an expanding network of public and private video surveillance systems, and the increasing use of smartphones with digital recording capabilities by citizens and officers alike. Police can track suspects with the use of GPS tracking technologies and officers themselves can be tracked with automated vehicle location (AVL) systems. Automated license plate recognition (ALPR) systems can scan the license plates of vehicles within sight of officers in the field and quickly alert them if the vehicle has been reported stolen or is wanted. Identity can be remotely verified or established with biometric precision using mobile fingerprint scanners and facial recognition software. Crimes can be mapped as they are reported, gunshot detection technology can alert law enforcement almost instantaneously when a firearm is discharged, and surveillance cameras can be programmed to focus in on the gunshot location and stream live video to both dispatchers and responding officers. With these advancements come new opportunities to enhance public and officer safety. They also present new challenges for law enforcement executives. The challenges include identifying which technologies can be incorporated by the agency to achieve the greatest public safety benefits, and defining metrics that will enable the agency to monitor and assess the value and performance of the technologies. Just because a technology can be implemented, does not mean that it should be. There are also challenges in integrating these technologies across different platforms, building resilient infrastructure and comprehensive security, providing technical support, and maintaining and upgrading applications and hardware. All of this can be confusing and technically demanding, underscoring the need for effective planning, strategic deployment, and performance management. IACP Technology Policy Framework January 2014 Page 1 Addressing these challenges is paramount because of the broader issues that the use of this expanding array of technologies by law enforcement presents. A principal tenet of policing is the trust citizens grant police to take actions on their behalf. If that trust is violated and public approval lost, police are not able to effectively perform their duties to keep communities safe. The Policy Mandate Creating and enforcing agency policies that govern the deployment and use of technology, protecting the civil rights and civil liberties of individuals, as well as the privacy protections afforded to the data collected, stored, and used, is essential to ensure effective and sustainable implementation, and to maintain community trust. Policies function to reinforce training and to establish an operational baseline to guide officers and other personnel in proper procedures regarding its use. Moreover, policies help to ensure uniformity in practice across the agency and to enforce accountability. Policies should reflect the mission and values of the agency and be tightly aligned with applicable local, state, and federal laws, regulations, and judicial rulings. Policies also function to establish transparency of operations, enabling agencies to allay public fears and misperceptions by providing a framework that ensures responsible use, accountability, and legal and constitutional compliance. The use of automated license plate recognition (ALPR) technologies, unmanned aerial systems, and body -worn video by law enforcement, for example, has generated substantial public discussion, increasing scrutiny, and legislative action in recent years.2 Privacy advocates, elected officials, and members of the public have raised important questions about how and under what circumstances these technologies are deployed, for what purposes, and how the data gathered by these technologies are retained, used, and shared. Having and enforcing a strong policy framework enables law enforcement executives to demonstrate responsible planning, implementation, and management. Agencies should adopt and enforce a technology policy framework that addresses technology objectives, deployment, privacy protections, records management, data quality, systems security, data retention and purging, access and use of stored data, information sharing, accountability, training, and sanctions for non-compliance. Agencies should implement safeguards to ensure that technologies will not be deployed in a manner that could violate civil rights (race, religion, national origin, ethnicity, etc.) or civil liberties (speech, assembly, religious exercise, etc.). The policy framework is but one of several critical components in the larger technology planning effort that agencies should undertake to ensure proper and effective use of automation. Universal Principles Given the privacy concerns and sensitivity of personally identifiable information and other data often captured and used by law enforcement agencies,3 and recognizing evolving perceptions of what constitutes a reasonable expectation of privacy,4 the IACP Technology Policy Framework January 2014 Page 2 technology policy framework should be anchored in principles universally recognized as essential in a democratic society. The following universal principles should be viewed as a guide in the development of effective policies for technologies that can, or have the potential to monitor, capture, store, transmit and/or share data, including audio, video, visual images, or other personally identifiable information which may include the time, date, and geographic location where the data were captured.5 1. Specification of Use —Agencies should define the purpose, objectives, and requirements for implementing specific technologies, and identify the types of data captured, stored, generated, or otherwise produced. 2. Policies and Procedures —Agencies should articulate in writing, educate personnel regarding, and enforce agency policies and procedures governing adoption, deployment, use, and access to the technology and the data it provides. These policies and procedures should be reviewed and updated on a regular basis, and whenever the technology or its use, or use of the data it provides significantly changes. 3. Privacy and Data Quality —The agency should assess the privacy risks and recognize the privacy interests of all persons, articulate privacy protections in agency policies, and regularly review and evaluate technology deployment, access, use, data sharing, and privacy policies to ensure data quality (i.e., accurate, timely, and complete information) and compliance with local, state, and federal laws, constitutional mandates, policies, and practice. 4. Data Minimization and Limitation —The agency should recognize that only those technologies, and only those data, that are strictly needed to accomplish the specific objectives approved by the agency will be deployed, and only for so long as it demonstrates continuing value and alignment with applicable constitutional, legislative, regulatory, judicial, and policy mandates. 5. Performance Evaluation —Agencies should regularly monitor and evaluate the performance and value of technologies to determine whether continued deployment and use is warranted on operational, tactical, and technical grounds. 6. Transparency and Notice —Agencies should employ open and public communication and decision -making regarding the adoption, deployment, use, and access to technology, the data it provides, and the policies governing its use. When and where appropriate, the decision -making process should also involve governing/oversight bodies, particularly in the procurement process. Agencies should provide notice, when applicable, regarding the deployment and use of technologies, as well as make their privacy policies available to the public. There are practical and legal exceptions to this principle for technologies that are IACP Technology Policy Framework January 2014 Page 3 lawfully deployed in undercover investigations and legitimate, approved covert operations.6 7. Security —Agencies should develop and implement technical, operational, and policy tools and resources to establish and ensure appropriate security of the technology (including networks and infrastructure) and the data it provides to safeguard against risks of loss, unauthorized access or use, destruction, modification, or unintended or inappropriate disclosure. This principle includes meeting state and federal security mandates (e.g., the FBI's CJIS Security Policy'), and having procedures in place to respond if a data breach, loss, compromise, or unauthorized disclosure occurs, including whether, how, and when affected persons will be notified, and remedial and corrective actions to be taken.8 8. Data Retention, Access and Use —Agencies should have a policy that clearly articulates that data collection, retention, access, and use practices are aligned with their strategic and tactical objectives, and that data are retained in conformance with local, state, and/or federal statute/law or retention policies, and only as long as it has a demonstrable, practical value. 9. Auditing and Accountability —Agencies and their sworn and civilian employees, contractors, subcontractors, and volunteers should be held accountable for complying with agency, state, and federal policies surrounding the deployment and use of the technology and the data it provides. All access to data derived and/or generated from the use of relevant technologies should be subject to specific authorization and strictly and regularly audited to ensure policy compliance and data integrity. Sanctions for non-compliance should be defined and enforced. Developing Policies and Operating Procedures The universal principles provide structural guidance for the development of specific agency policies and operating procedures that comport with established constitutional, legal, and ethical mandates and standards. Agency policies and procedures specify the operational components of each individual technology implementation, deployment, and management, and should typically include and address the following factors:9 1. Purpose a. A general discussion of the purpose of a specific agency policy to include the agency's position on protecting privacy. 2. Policy a. A discussion of the overarching agency policy regarding the deployment and use of a specific technology, its application to members of the agency, and reference to relevant laws, policies, and/or regulations that authorize the agency to implement a technology, or that relate to the use and deployment of a technology. 3. Definitions IACP Technology Policy Framework January 2014 Page 4 a. A description of the technology, its components, and functions. b. Definitions and acronyms associated with the technology. 4. Management a. Strategic Alignment: Describe how the technology aligns and furthers the agency's strategic and tactical deployment objectives. b. Objectives and Performance: Identify objectives for the deployment and conditions for use of a technology, and a general strategy for assessing performance and compliance with the agency's policy. c. Ownership: Clearly specify that the hardware and software associated with the technology is the property of the agency, regardless whether it has been purchased, leased, or acquired as a service, and that all deployments of a technology are for official use only (FOUO). All data captured, stored, generated, or otherwise produced by a technology are the property of the agency, regardless where the data are housed or stored. All access, use, sharing, and dissemination of the data must comply with the policies established and enforced by the agency. d. Classification of Data: Clearly specify the data classification and its level of sensitivity (e.g., top secret, secret, confidential, restricted, unclassified, private, public, etc.), whether the data captured, stored, generated, or otherwise produced by a technology are considered public information, and whether it is subject to applicable public records act requests and under what circumstances. e. Privacy Impact: Develop or adopt and use a formal privacy impact assessment (PIA)1° or similar agency privacy assessment on technology and the data it captures, stores, generates, or otherwise produces. 5. Operations a. Installation, Maintenance, and Support: Require regular maintenance, support, upgrades, calibration, and refreshes of a technology to ensure that it functions properly. b. Deployment: Identify who is authorized to officially approve the deployment and use of a technology, and the conditions necessary for deployment and use, if applicable. c. Training: Require training, and perhaps certification or other documented proficiency, if applicable, of all personnel who will be managing, maintaining, and/or using a technology. Training should also cover privacy protections on the use of the technology, and the impact and sanctions for potential violations. d. Operational Use: Identify specific operational factors that must be addressed in deployment and use of a technology. (For example, for ALPR, the officer should i) verify that the system has correctly "read" the license plate characters; ii) verify the state of issue of the license plate; iii) verify that the "hot list" record that triggered the alert is still active in the state or NCIC stolen vehicle or other file, and confirm the IACP Technology Policy Framework January 2014 Page 5 hit with the entering agency; and iv) recognize that the driver of the vehicle may not be the registered owner). e. Recordkeeping: Require recordkeeping practices that document all deployments of the technology, including who authorized the deployment; how, when, and where the technology was deployed; results of deployments; and any exceptions. Recordkeeping will support efforts to properly manage technology implementation, ensure compliance with agency policies, enable transparency of operations, enable appropriate auditing review, and help document business benefits realization. 6. Data Collection, Access, Use, and Retention a. Collection: Define what data will be collected, how data will be collected, the frequency of collection, how and where data will be stored, and under what authority and conditions the data may be purged, destroyed, or deleted in compliance with applicable local, state, and/or federal recordkeeping statutes and policies, court orders, etc. Identify the destruction/deletion methods to be used. b. Access and Use: Define what constitutes authorized use of data captured, stored, generated, or otherwise produced by a technology. Define who is authorized to approve access and use of the data, for what purposes and under what circumstances. c. Information Sharing: Specify whether data captured, stored, generated, or otherwise produced by a technology can be shared with other agencies, under what circumstances, how authorization is provided, how information that is shared is tracked/logged, how use is monitored, and how policy provisions (including privacy) will be managed and enforced. Any agency contributing and/or accessing shared information should be a signatory of a data sharing Memorandum of Understanding (MOU). Dissemination of any shared information should be governed by compliance with applicable state and federal laws, standards, agency privacy policies, and procedures as agreed in the MOU. d. Security: Define information systems security requirements of the technology and access to the data to ensure the integrity of the systems and confidentiality of the data. The security policy should address all state and federal mandated security policies, and clearly address procedures to be followed in the event of a loss, compromise, unauthorized access or use, destruction, modification, or unintended or inappropriate disclosure of data, including how and when affected persons will be notified, and remedial and corrective actions to be taken. e. Data Retention and Use: Establish data retention schedules in accordance with state or federal law or policy, access privileges, purge, IACP Technology Policy Framework January 2014 Page 6 and deletion criteria for all data captured, stored, generated, or otherwise produced by a technology. Agencies should consider differentiating between data that are part of an ongoing or continuing investigation and information that is gathered and retained without specific suspicion or direct investigative focus. Agencies may wish to limit the retention of general surveillance data. Empirical research assessing the performance of a technology may assist in determining an appropriate retention schedule. 7. Oversight, Evaluation, Auditing, and Enforcement a. Oversight: Establish a reporting mechanism and a protocol to regularly monitor the use and deployment of a technology to ensure strategic alignment and assessment of policy compliance. b. Evaluation: Regularly assess the overall performance of a technology so that it can i) identify whether a technology is performing effectively, ii) identify operational factors that may impact performance effectiveness and/or efficiency, iii) identify data quality issues, iv) assess the business value and calculate return on investment of a technology, and v) ensure proper technology refresh planning. c. Auditing: Audit all access to data captured, stored, generated, or otherwise produced by a technology to ensure that only authorized users are accessing the data for legitimate and authorized purposes, and establish regular audit schedules. d. Enforcement: Establish procedures for enforcement if users are suspected of being or have been found to be in noncompliance with agency policies. Conclusion Realizing the value that technology promises law enforcement can only be achieved through proper planning, implementation, training, deployment, use, and management of the technology and the information it provides. Like all resources and tools available to law enforcement, the use of new technologies must be carefully considered and managed. Agencies must clearly articulate their strategic goals for the technology, and this should be aligned with the broader strategic plans of the agency and safety needs of the public. Thorough and ongoing training is required to ensure that the technology performs effectively, and that users are well versed in the operational policies and procedures defined and enforced by the agency. Policies must be developed and strictly enforced to ensure the quality of the data, the security of the system, compliance with applicable laws and regulations, and the privacy of information gathered. Building robust auditing requirements into agency policies will help enforce proper use of the system, and reassure the public that their privacy interests are recognized and protected. The development of these policies is a proven way for executives to ensure they are taking full advantage of technology to assist in providing the best criminal justice services, while protecting the privacy, civil rights, and civil liberties of citizens. IACP Technology Policy Framework January 2014 Page 7 1 This Technology Policy Framework was developed by an ad -hoc committee of law enforcement executives and subject matter experts representing IACP Divisions, Committees, Sections, the IACP National Law Enforcement Policy Center, and other organizations and groups, including the Criminal Intelligence Coordinating Council, Major Cities Chiefs Association, National Sheriffs' Association, Major County Sheriffs' Association, Association of State Criminal Investigative Agencies, the Institute for Intergovernmental Research (IIR), the Integrated Justice Information Systems (IJIS) Institute, and federal partners. 2 The American Civil Liberties Union (ACLU) recently released two reports addressing law enforcement technologies—ALPR and body -worn video. Both reports discuss the value of the technology to law enforcement operations and investigations, and both call for policies addressing deployment, operations, data retention, access, and sharing. Catherine Crump, You are Being Tracked: How License Plate Readers Are Being Used to Record Americans' Movements, (New York: ACLU, July 2013), at https://www.aclu.org/technology-and-liberty/you-are-being- tracked-how-license-plate-readers-are-being-used-record, and Jay Stanley, Police Body -Mounted Cameras: With Right Policies in Place, a Win for All, (New York: ACLU, October 2013), at https://www.aclu.org/technology-and-liberty/police-body-mounted-cameras-right-policies- place-win-all. Also see, Massachusetts Senate Bill S.1648, An Act to Regulate the Use of Automatic License Plate Reader Systems, Cynthia S. Creem, Sponsor, at https://malegislature.gov/Bills/188/Senate/S1648; Cynthia Stone Creem and Jonathan Hecht, "Check it, then chuck it," The Boston Globe, December 20, 2013, at http://www.bostonglobe.com/opinion/2013/12/20/podium- license/R1tKQerVOYAPLW6VCKodGK/story.html; Shawn Musgrave, "Boston Police halt license scanning program," The Boston Globe, December 14, 2013, at http://www.bostonglobe.com/metro/2013/12/14/boston-police-suspend-use-high-tech- licence-plate-readers-amid-privacy-concerns/B2hy9UIzC7KzebnGyQOJNM/story.html; Ashley Luthern and Kevin Crowe, "Proposed Wisconsin bill would set rules for license -plate readers," Milwaukee Journal Sentinel, December 3, 2013, at http://www.isonline.com/news/milwaukee/proposed-wisconsin-bill-would-set-rules-for-license- plate-readers-b99155494z1-234324371.html; Dash Coleman, "Tybee Island abandons license plate scanner plans," Savannah Morning News, December 3, 2013, at http://savannahnow.com/news/2013-12-02/tybee-island-abandons-license-plate-scanner- plans#.UcCAy8RDuNO; Kristian Foden-Vencil, "Portland police are collecting thousands of license plate numbers every day," Portland Tribune, December 3, 2013, at http://portlandtribune.com/pt/9-news/203130-portland-police-are-collecting-thousands-of- license-plate-numbers-every-day; Alicia Petska, "City Council split over how to handle license plate reader concerns," The News & Advance, (Lynchburg, VA), November 12, 2013, at http://www.newsadvance.com/news/local/article 5327dc78-4c18-11e3-bc28- 001a4bcf6878.html; Jonathan Oosting, "Proposal would regulate license plate readers in Michigan, limit data stored by police agencies," MLive, (Lansing, MI), September 9, 2013, at http://www.mlive.com/politics/index.ssf/2013/09/proposal would regulate licens.html; Katrina Lamansky, "Iowa City moves to ban traffic cameras, drones, and license plate recognition," WQAD, June 5, 2013, at http://wgad.com/2013/06/05/iowa-city-moves-to-ban- traffic-cameras-drones-and-license-plate-recognition/; Richard M. Thompson, II, Drones in Domestic Surveillance Operations: Fourth Amendment Implications and Legislative Responses, (Washington, DC: Congressional Research Service, April 3, 2013), at http://www.fas.org/sgp/crs/natsec/R42701.pdf; Somini Sengupta, "Rise of Drones in U.S. Drives IACP Technology Policy Framework January 2014 Page 8 Efforts to Limit Police Use," New York Times, February 15, 2013, at http://www. nyti mes.com/2013/02/16/tech nology/rise-of-drones-i n-us-spu rs-efforts-to-li mit- uses.html?pagewanted=all; Stephanie K. Pell and Christopher Soghoian, "Can You See Me Now? Toward Reasonable Standards for Law Enforcement Access to Location Data That Congress Could Enact," Berkeley Technology Law Journal, Vol. 27, No. 1, pp. 117-196, (2012), at http://papers.ssrn.com/sol3/papers.cfm?abstract id=1845644; and Stephen Rushin, "The Legislative Response to Mass Police Surveillance," 79 Brooklyn Law Review 1, (2013), at http://papers.ssrn.com/sol3/papers.cfm?abstract id=2344805. All accessed December 30, 2013. 3 Personally identifiable information (P11) has been defined as "...any information about an individual maintained by an agency, including (1) any information that can be used to distinguish or trace an individual's identity, such as name, Social Security number, date and place of birth, mother's maiden name, or biometric records; and (2) any other information that is linked or linkable to an individual, such as medical, educational, financial, and employment information." Government Accountability Office (GAO), Privacy: Alternatives Exist for Enhancing Protection of Personally Identifiable Information, (Washington, D.C.: GAO, May 2008), p. 1, at http://www.gao.gov/new.items/d08536.pdf. McCallister, et. al., define "linked" information as "information about or related to an individual that is logically associated with other information about the individual. In contrast, linkable information is information about or related to an individual for which there is a possibility of logical association with other information about the individual." Erika McCallister, Tim Grance, and Karen Scarfone, Guide to Protecting the Confidentiality of Personally Identifiable Information (P11): Recommendations of the National Institute of Standards and Technology, (Gaithersburg, MD: NIST, April 2010), p. 2-1, at http://csrc.nist.gov/publications/nistpubs/800-122/sp800-122.pdf. McCallister, et. al., go on to describe linked and linkable information: "For example, if two databases contain different PII elements, then someone with access to both databases may be able to link the information from the two databases and identify individuals, as well as access additional information about or relating to the individuals. If the secondary information source is present on the same system or a closely -related system and does not have security controls that effectively segregate the information sources, then the data is considered linked. If the secondary information source is maintained more remotely, such as in an unrelated system within the organization, available in public records, or otherwise readily obtainable (e.g., Internet search engine), then the data is considered linkable." Id. Both accessed December 30, 2013. 4 Justice Harlan first articulated a "constitutionally protected reasonable expectation of privacy" in Katz v. United States, 389 U.S. 347 (1967), at 361. Justice Harlan's two -fold test is "first that a person have exhibited an actual (subjective) expectation of privacy and, second, that the expectation be one that society is prepared to recognize as 'reasonable." Id. Many of the technologies being deployed by law enforcement capture information that is publicly exposed, such as digital photographs and video of people and vehicles, or vehicle license plates in public venues (i.e., on public streets, roadways, highways, and public parking lots), and there is little expectation of privacy. "A person traveling in an automobile on public thoroughfares has no reasonable expectation of privacy in his movements from one place to another." United States v. Knotts, 460 U.S. 276 (1983), at 281. Law enforcement is free to observe and even record information regarding a person's or a vehicle's movements in public venues. The U.S. Supreme Court, however, has ruled that the electronic compilation of otherwise publicly available but IACP Technology Policy Framework January 2014 Page 9 difficult to obtain records alters the privacy interest implicated by disclosure of that compilation. U.S. Department of Justice v. Reporters Committee for Freedom of the Press, 489 U.S. 749 (1989). Automation overwhelms what the Court referred to as the practical obscurity associated with manually collecting and concatenating the individual public records associated with a particular person into a comprehensive, longitudinal criminal history record. "...[T]he issue here is whether the compilation of otherwise hard -to -obtain information alters the privacy interest implicated by disclosure of that information. Plainly there is a vast difference between the public records that might be found after a diligent search of courthouse files, county archives, and local police stations throughout the country and a computerized summary located in a single clearinghouse of information." Id., at p. 764. This has subsequently been referred to as the "mosaic theory" of the Fourth Amendment. United States v. Maynard, 615 F.3d 544 (D.C. Cir.) (2010). See also, Orin Kerr, "The Mosaic Theory of the Fourth Amendment," Michigan Law Review, Vol. 111, p. 311, (2012), at http://www.michiganlawreview.org/assets/pdfs/111/3/Kerr.pdf. Accessed December 30, 2013. 5 These universal principles largely align with the Fair Information Practices (FIPs) first articulated in 1973 by the Department of Health, Education & Welfare (HEW). HEW, Records, Computers and the Rights of Citizens, July 1973, at http://epic.org/privacy/hew1973report/default.html. See, Robert Gellman, Fair Information Practices: A Basic History, Version 2.02, November 11, 2013, at http://bobgellman.com/rg- docs/rg-FIPShistory.pdf. Comparable principles have been articulated by various governmental agencies, including the U.S. Department of Homeland Security, (Hugo Teufel, I I I, Privacy Policy Guidance Memorandum, Number: 2008-01, (Washington, DC: DHS, December 29, 2008), pp. 3-4, at http://www.dhs.gov/xlibrary/assets/privacy/privacypolicyguide_2008-01.pdf); the Home Office in the United Kingdom (Home Office, Surveillance Camera Code of Practice, (London, UK; The Stationery Office, June 2013), pp 10-11, at https://www.gov.uk/government/uploads/system/uploads/attachment data/file/204775/Surve illance Camera Code of Practice WEB.pdf); and the Information and Privacy Commissioner of Ontario, Canada (Ann Cavoukian, Guidelines for the Use of Video Surveillance Cameras in Public Places, (Ontario, Canada: Information and Privacy Commissioner of Ontario, September 2007), pp. 5-6, at: http://www.ipc.on.ca/images/Resources/up-3video e sep07.pdf, and Ann Cavoukian, Privacy and Video Surveillance in Mass Transit Systems: A Special Investigative Report (Privacy Investigation Report MC07-68), (Ontario, Canada: Information and Privacy Commissioner of Ontario, March 3, 2008), p 3, at: http://www.ipc.on.ca/images/Findings/mc07- 68-ttc 592396093750.pdf). Also see, National Research Council, Protecting Individual Privacy in the Struggle Against Terrorists: A Framework for Program Assessment, (The National Academies Press: Washington, D.C., 2008), at http://nap.edu/catalog.php?record id=12452. All accessed December 30, 2013. 6 Law enforcement is not, for example, expected to notify the subjects of lawfully authorized wiretaps that their conversations are being monitored and/or recorded. These deployments, however, are typically subject to prior judicial review and authorization. See, e.g., Katz v. United States, 389 U.S. 347 (1967); Berger v. New York, 388 U.S. 41 (1967); Title 111, Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S.C. §§ 2510-2522, as amended by the Electronic Communications Privacy Act of 1986. IACP Technology Policy Framework January 2014 Page 10 Federal Bureau of Investigation, Criminal Justice Information Services (CJIS) Security Policy, Version 5.2, August 9, 2013, CJISD-ITS-DOC-08140-5.2, at http://www.fbi.gov/a bout- us/cjis/cjis-security-policy-resource-center/view. Accessed December 30, 2013. 8 Additional guidance regarding safeguarding personally identifiable information can be found in the Office of Management and Budget (OMB) Data Breach notification policy (M-07- 16), at http://www.whitehouse.gov/sites/default/files/omb/memoranda/fy2007/m07-16.pdf, and state data breach notification laws available from the National Conference of State Legislatures, at http://www.ncsl.org/research/telecommunications-and-information- technology/security-breach-notification-laws.aspx. Accessed December 30, 2013. 9 See, e.g., International Association of Chiefs of Police, Model Policy: License Plate Readers, August 2010 http://iacppolice.ebiz.uapps.net/personifyebusiness/OnlineStore/ProductDetail/tabid/55/Defau It.aspx?Productld=1223; Paula T. Dow, Attorney General, Directive No. 2010-5, Law Enforcement Directive Promulgating Attorney General Guidelines for the Use of Automated License Plate Readers (ALPRs) and Stored ALPR Data, (Trenton, NJ: Office of the Attorney General, December 3, 2010), at http://www.state.nj.us/oag/dcj/agguide/directives/Dir-2010-5- LicensePlateReadersl-120310.pdf; Office of the Police Ombudsman, 2011 Annual Report: Attachment G: Body -Worn Video & Law Enforcement: An Overview of the Common Concerns Associated with Its Use, (Spokane, WA: Spokane Police Ombudsman, February 20, 2012), at http://www.spdombudsman.com/wp-content/uploads/2012/02/Attachment-G-Body-Camera- Report.pdf; ACLU, Model Policy: Mobile License Plate Reader (LPR) System, (Des Moines, IA: ACLU, September 19, 2012), at http://www.aclu-ia.org/iowa/wp- content/uploads/2012/09/Model-ALPR-Policy-for-Iowa-Law-Enforcement.pdf. Many of these policy elements are also addressed in the National Research Council's report, op. cit., specifically in chapter 2, "A Framework for Evaluating Information -Based Programs to Fight Terrorism or Serve Other Important National Goals," at pp. 44-67. All accessed December 30, 2013 10 A privacy impact assessment (PIA) is "a systematic process for evaluating the potential effects on privacy of a project, initiative or proposed system or scheme." Roger Clarke, "Privacy Impact Assessment: Its Origins and Development," Computer Law & Security Review, 25, 2 (April 2009), pp. 125-135, at http://www.rogerclarke.com/DV/PIAHist-08.html. Law enforcement agencies should consider using the Global Advisory Committee's Guide to Conducting Privacy Impact Assessments for State, Local, and Tribal Justice Entities at https://it.oi p.gov/gist/47/G u ide-to-Cond ucti ng-Privacy-I mpact-Assessments-for-State--Local-- and-Tribal-Justice-Entities. This resource leads policy developers through appropriate privacy risk assessment questions that evaluate the process through which PII is collected, stored, protected, shared, and managed by an electronic information system or online collection application. The IACP published Privacy Impact Assessment Report for the Utilization of License Plate Readers, (Alexandria, VA: IACP, September 2009), at http://www.theiacp.org/Portals/0/pdfs/LPR Privacy_ Impact_Assessment.pdf. For a list of PIAs completed by the U.S. Department of Justice, see http://www.justice.gov/opcl/pia.htm; Department of Homeland Security, see https://www.dhs.gov/privacy-office-privacy-impact- assessments-pia. All accessed December 30, 2013. IACP Technology Policy Framework January 2014 Page 11 ko‘ ACLU AMERICAN CIVIL LIBERTIES UNION of CALIFORNIA State of Surveillance in California — Findings & Recommendations January 2015 Executive Summary In the wake of revelations about the National Security Agency's rampant warrantless spying and local law enforcement's use of military equipment in cities like Ferguson, Missouri, community members have been regularly contacting the ACLU with concerns about the proliferation of surveillance. Cities and counties have also increasingly reached out for guidance about how to approach the use of surveillance in ways consistent with civil liberties and civil rights. Yet very little information exists about surveillance technology in California or how to properly consider its acquisition or use. To address this, the ACLU of California conducted a first -of -its -kind assessment of surveillance technology in the state. We also released a new resource guide, Making Smart Decisions About Surveillance: A Guide for Communities, and developed a model ordinance designed to help policymakers ensure adequate transparency, oversight, and accountability.' The following document summarizes our findings about the state of surveillance in California and recommends several ways that the Attorney General and other state policymakers could take action to help address the widespread lack of transparency, oversight, and accountability for surveillance technology in California. Methodology and Summary of Surveillance Survey Findings From June to November 2014, the ACLU of California2 examined thousands of publicly available' records for California's 58 counties and 60 selected cities.' We researched the types of surveillance technology in communities, including automated license plate readers (ALPRs), 5 body cameras,' drones,' facial recognition,8 "Stingrays," 9 and video surveillance.10 We investigated how much money has been spent to acquire and maintain surveillance technology and the source of those funds. We also examined any public processes in place to provide for transparency, oversight, and accountability for surveillance technology's acquisition and use. What we discovered raised a number of significant concerns. Across the state, there is widespread proliferation of surveillance, with at least 90 communities (40 counties, 50 cities) possessing some form of surveillance technology. Vast sums of money are being spent on surveillance, including over $65 million in publicly available figures, a significant portion of which is federal grant dollars. While some communities are taking important steps to thoroughly consider surveillance technology and develop plans to promote public safety and safeguard citizen rights, we discovered that even basic transparency, oversight, and accountability has become the exception, not the rule. Many California communities lack the 1 guidance to make smart decisions about surveillance and are moving forward without public conversation, careful consideration of the costs and benefits, or adequate policies in place to prevent misuse and safeguard rights. There is Widespread Proliferation of Surveillance Technology in California California communities have acquired and deployed a wide array of surveillance technologies. Our research uncovered at least 90 California communities (40 counties, 50 cities) in possession of various surveillance technologies.11 Video cameras are the most common form of surveillance technology in California - more than half of the cities and counties we examined have acquired them. ALPRs are a close second - 57 of the 118 counties and cities in our survey possess such devices.12 Finally, at least 32 California communities had body cameras as of November 2014.13 Local law enforcement agencies are also acquiring newer, more powerful technologies like drones and Stingray cell phone tracking devices that can facilitate other forms of surreptitious surveillance.14 At least 3 communities (San Jose and Los Angeles and Alameda Counties) have acquired drones for law enforcement purposes. Information about Stingray purchases was nearly impossible to locate, yet we know from reporting and our research that they exist in at least 10 different communities, including Los Angeles, Oakland, San Jose, San Francisco, San Diego and Sacramento.15 While a lack of publicly available information about drones and Stingrays makes it difficult to discover which localities possess these tools and the legal basis for their use, it may be that other communities are either considering or already have these technologies as well. Vast Sums of Money is Being Spent on Surveillance Technology We found publicly available evidence documenting more than $65 million dollars in spending on surveillance technology in California. We identified over $20 million of spending on video surveillance alone.16 These funds come from multiple sources, including local,17 state,18 and federal funding streams.19 Law enforcement agencies have also obtained surveillance funding from private sources such as police foundations,2° asset forfeiture proceeds,21 and other jurisdictions22 (LAPD received its two drones from Seattle police).23 Federal dollars are a very common source of funding for California's surveillance technology. Federal funds constituted roughly 40 percent of the surveillance programs we examined with identifiable funding sources. Numerous localities have used federal funds to buy everything from automated license plate readers24 to facial recognition technology.25 Federal funds were also originally earmarked for San Jose's drone purchase.26 In California, these federal funds are typically administered under programs operated by the Depai liuent Homeland Security Grant Programs that include the Urban Areas Security Initiative (UASI) and the Port Security Grant Program (PSGP). The California Emergency Management Association (CalEMA) also manages federal surveillance grants to local governments.27 Yet with all of the funding we found for the acquisition of these technologies, surveillance technology's post -acquisition costs, including maintenance, replacement, staffing, and training were often not accounted for or reported in publicly available materials. We did not find a single surveillance program that was preceded by a comprehensive cost -benefit analysis that included information about current and future costs and an analysis of the potential impact on civil 2 liberties and civil rights. It is clear from the few public records that we located that these ongoing costs can be substantial. For example, Clovis was spending at least $60,000 in maintenance costs for its network of video surveillance cameras by 201128 and Richmond was spending $300,000 annually for maintenance by 2013.29 Because our research was based solely on publicly available information about surveillance, the spending data noted is almost certainly just the tip of the iceberg. Very little information is easily and publicly accessible about local surveillance technology acquisitions. For example, although public records reflect that Riverside acquired ALPR units in 2011, the ACLU was unable to locate any other documents concerning the acquisition, funding or policies concerning these ALPR units.3o Basic Transparency, Accountability and Oversight Is the Exception for Surveillance Technology in California, Not the Rule Surveillance technology is often purchased without adequate community engagement Our research also revealed that communities in California are also acquiring surveillance technology without first adequately engaging the public.31 And when information about surveillance technology is included in public documents at some point in the process, it may include language so vague that it is difficult for the public and even some policymakers to understand what is being considered and know to voice concern. Community members were surprised to learn in 2014 about drone purchases in San Jose and Alameda County. In San Jose, the relevant city council meeting agenda only specified that the police and fire departments had sought authorization to receive $983,000 from the federally funded Bay Area Urban Areas Security Initiative.32 The public did not learn about the purchase until months later when ACLU researchers discovered attached agenda documents with earmarked funds for an "unmanned aerial vehicle." 33 There was immediate public outrage at this "secret" purchase.34 The police soon apologized and have now initiated a public process to consider the potential use of the drone.35 Unfortunately, this trend continues - in late 2014, the Alameda County Sheriff simply announced that he had bought two drones, providing no public notice despite the fact that widespread local concerns sidelined a similar proposal in 2012.36 The purchase of invasive Stingray cell phone surveillance technology is another area where policymakers and the public appear to also be left in the dark. When Sacramento County approved over $300,000 dollars in funding for what the ACLU believes to be Stingray equipment, the only information provided in public records was that law enforcement was seeking "wireless tracking equipment." 37 In San Jose public documents, over $300,000 in funding for what the ACLU also suspects to be Stingray technology was referred to as "law enforcement surveillance technology equipment." 38 Public debate is rare and late in the process Our research found that adequate public debate over surveillance technology is rare and if it happens at all, is very late in the process. We found evidence of public debate about the acquisition of surveillance technology for less than 15% of the programs we tracked. None of the 52 communities we identified with two or more surveillance technologies publicly debated every 3 technology.39 For more than 100 of the 180 surveillance technology programs we identified in publicly available records, we either could not locate evidence of a public hearing or approval was via consent calendar. Consent calendar items are typically designated as routine in nature, are intended to have no discussion, and are often approved en masse with a single vote. We found only two occasions where surveillance technology proposals were removed from the consent calendar to entertain public debate: for body cameras in Fresno,4° and for a mounted infrared video -surveillance camera and microwave transmission system in San Diego County.41 Even where there are public records disclosing the consideration or acquisition of a surveillance program, they are often incomplete, lacking basic information about the technology involved, costs, or potential impact on civil liberties. The result is that policymakers may not have the information they need to make an informed decision. For example, after the Santa Cruz City Council approved the use of federal funds to purchase ALPRs for the police department, one councilmember was asked what effect the scanners might have on on community members, he replied, "I don't know enough about the technology." 42 Another was unaware of privacy issues, admitting, "I was asleep at the wheel. The council didn't get much correspondence about the potential for the erosion of civil rights that these kinds of devices can cause . If I'd been better informed about [the ALPRs] I may have voted against the purchase ." 43 We also found that the timing of any public debate and policymaker approval is often late in the process — after law enforcement agencies apply and obtain funding for surveillance technology rather than before. The Santa Clara County Sheriff was awarded $489,000 by the Urban Areas Security Initiative to purchase facial -recognition software prior to public process before the Santa Clara County Board of Supervisors.44 In Placerville, police obtained a grant for $26,000 in federal funds for a license -plate reader before City Council public process.45 San Rafael police were awarded $33,126 in federal funds for a license -plate reader before public process at the city counci1.46 Recently, the San Jose police received federal funding approval and earmarked it to purchase a drone prior to public process at the city counci1.47 While some California communities have taken important steps to ensure a more robust public process, there is a lack of consistency in the process between different surveillance technologies.48 For example, before Ventura acquired a $93,000 video monitoring system, its police department discussed the system's intended uses with local community councils, addressed residents' concerns, and explained the proposed internal use restrictions.49 And while San Jose's acquisition of a drone initially lacked public involvement, when considering acquisition of body cameras the city developed a robust 12 -month work plan that included a diverse ad -hoc committee, an assessment of technological needs, and the drafting of a policy for Council consideration.5° Although we could not locate a community with a policy that ensures consistent public engagement and debate for all surveillance technology, members of the board of supervisors in Santa Clara, San Francisco, and Santa Cruz counties have announced plans to introduce separate Surveillance Technology & Community Safety Ordinances. Few surveillance technologies have adequate use policies We found a publicly available use policy for fewer than 1 in 5 surveillance technology programs. None of the 52 communities with two or more surveillance technologies had publicly available use policies for every technology. Many cities had no use policy whatsoever for their surveillance technology — for example, only 3 of the 61 counties and cities we identified using 4 video surveillance had publicly available use policies. The publicly available policies that do exist largely fail to properly address all of the necessary issues including purpose specification, limited use, training, data security, data retention, auditing, and accountability discussed by the Department of Homeland Security Privacy Office, the International Association of Chiefs of Police Technology Policy Framework, or the ACLU of California guide and model ordinance.51 Many policies we looked at appear to be modified templates that do not properly address all of the necessary issues. The City of Alameda's 2013 proposal for an ALPR policy is a prime example of this.52 Produced by a company called Lexipol, that policy did not place clear limits on the technology's use, instead directing that the technology be used for "official and legitimate business." That policy also lacked detail about officer training, meaningful limits on retention or use of ALPR data, and enforceable consequences for violation of the use policy itself. After analyzing the policy last year, the ACLU urged Alameda to delay adoption of ALPR technology until the community revised and improved its use policy.53 Other surveillance programs appear to have no policies in place except for those written by a federally connected fusion center, such as by the South Bay Information Sharing System (SBISS), the Southern California -based Automated Regional Justice Information System (ARJIS), or the Northern California Regional Intelligence Center (NCRIC).54 These policies lack strong protections to prevent against misuse and infringements of constitutionally protected activities.55 For example, NCRIC's ALPR policy only prohibits monitoring of First Amendment activities where those activities are the sole reason for monitoring. The ARJIS policy lacks a detailed set of acceptable and prohibited uses.56 While NCRIC expressly permits law enforcement agencies to set local retention policies, others, like ARJIS, do not, and once a community decides to share surveillance data with this fusion center, its control over what happens to community members' data diminishes.57 We also found that few policies have clear and effective enforcement provisions for violations. The need for enforceable policies is illustrated by Oakland's officer body camera policy, which contains specific directives to officers' use of the equipment, prohibitions on conduct, and instructions for the storage and access to data. However, Oakland's policy does not contain a mechanism ensuring its enforcement58 and it appears that Oakland police have repeatedly violated the department's body camera policy without consequence.59 Not having a proper use policy can also lead to significant legal problems for communities. San Francisco learned this lesson the hard way when it adopted license plate readers without a formal policy that required officers to confirm plate reads visually to safeguard civil rights. In March 2009, an ALPR unit misread the plate of Denise Green, a 47 year -old African American woman, erroneously flagging her burgundy Lexis as a stolen gray truck. The police stopped Green, handcuffed her, and held her at gunpoint while a search took place.6° In early 2014, a federal appeals court authorized a constitutional rights suit by Green against the SFPD, the City, and the patrol officers. While no community has a surveillance use policy in place that comprehensively addresses all of the necessary issues, several community policies have integrated important building blocks that others can replicate. 5 • In 2006, the San Francisco Board of Supervisors passed the Community Safety Camera ordinance (CSC).61 The CSC includes a specific purpose for the cameras and limits use of camera data, requires public notice when new cameras are being considered, a public hearing, a vote of the police commission, approval only if benefits outweigh concerns and community support exists, and annual reporting. • In 2006, the Fresno Police Department adopted a Video Policing Project Policy and Guidelines Manual.62 This extensive manual describes the system and its purpose, includes guidance and specific prohibitions on racial profiling, details access limits for collected data, addresses primary and secondary uses of data, strictly limits retention of footage, addresses the public's right of access to footage obtained by the city's cameras, and requires independent auditing. • In 2014, Menlo Park's City Council passed an ordinance consisting of a use policy for ALPRs and video surveillance.63 This enforceable policy includes provisions setting forth specific prohibited uses of each technology, quarterly auditing of the use and efficacy of ALPR, and constraints on how data can be shared with third parties including the area fusion center, NCRIC. • In 2014, a citizens' committee appointed by the Oakland City Council drafted a proposed policy for the City's DHS-funded Port Domain Awareness Center (DAC) that places clear limits on allowable uses, provides guidance to operators with regards to constitutionally protected activities, requires comprehensive auditing, and sets forth enforceable consequences for misuse.64 Oversight of surveillance technology after deployment is virtually non-existent Necessary provisions for oversight of surveillance technology after initial use, including audits, fiscal and civil liberties reviews, and evaluation of program efficacy are few and far between. Two programs we found that planned for more than minimal periodic oversight are Fresno's citywide video -policing program and San Francisco's Community Safety Camera Program.65 In Fresno, the city council required an annual independent audit of the police department's citywide, live -feed, video -policing program to ensure that all of the privacy and security guidelines for the system's use are being followed. 66 The auditor is specifically instructed to report to the city council on police compliance with Fresno's video -policing policies.67 The first comprehensive audit was completed in 2014 by a former federal judge.68 Fresno Police Chief Jerry Dyer expressed support for the auditing process, saying "I have no doubt the audit will be very helpful to our ongoing video policing operations."69 San Francisco's CSC requires that the San Francisco Police Department prepare a report every year on all cameras in the City and County.70 The annual report is designed to assess the cameras' effectiveness, effect on crime, and to help the community determine whether any changes to the program should be made.71 In 2008, researchers at the University of California, Berkeley, comprehensively evaluated San Francisco's surveillance cameras. The resulting report found that the existing camera program had not addressed its intended purpose of preventing or reducing violent crime.72 This report informed subsequent public debate amongst the Board of Supervisors regarding a proposal to expand the program.73 6 Finally, Menlo Park's ALPR and video surveillance ordinance requires NCRIC (the entity that stores the City's ALPR data) to provide a quarterly report to the city that summarizes the number of license plates captured by the ALPR in the city, how many of those license plates were "hits" (on an active wanted list), the number of inquiries made by Menlo Park personnel along with the justifications for those inquiries, and information on any data retained beyond six months and the reasons for such retention. In November 2014, Menlo Park published its first quarterly ALPR review. The data indicated that only about .05% of the plate reads were "hits," most of which were false reads.74 Policy Recommendations Surveillance technology is proliferating in California's communities largely without mechanisms that ensure transparency, accountability, and oversight for its acquisition and use. Local law enforcement lacks clear guidance and direction from state policymakers on how to promote public safety while safeguarding civil liberties and civil rights. As the state's chief law officer and defender of liberty for Californians, the Attorney General is well -positioned to work to address these growing concerns in a variety of ways: 1. Issue Attorney General Best Practices for Surveillance Technology With growing community concern about policing, the Attorney General should use the opportunity to issue clear guidance to law enforcement in the state about the basic mechanisms for public transparency, accountability, and oversight that should be in place at the earliest stage of the process — when surveillance technology is being considered and well before it is purchased or deployed. Best Practices issues by the Attorney General's Office would be very helpful to communities throughout California. The ACLU of California's guide for communities, Making Smart Decisions About Surveillance, and resources also developed by The International Association of Chiefs of Police, Police Executive Research Forum, and the Depai liiient of Homeland Security Privacy Office would hopefully all be helpful to the development of Attorney General Best Practices.75 2. Encourage Law Enforcement Support of Local Ordinances The Attorney General could also encourage local law enforcement to support local Surveillance Technology & Community Safety Ordinances and create mechanisms that facilitate consistent transparency, accountability, and oversight at the local level. Policymakers in Santa Clara County, San Francisco County, and Santa Cruz County have already committed to introducing the ordinance, the Oakland Ad Hoc Advisory Committee on Privacy and Data Retention has also recommended its adoption,76 and several other large and small communities throughout California are also considering next steps. Key principles for local ordinances include: • Informed Public Debate at Earliest Stage of Process: Public notice, distribution of information about the proposal and public debate prior to seeking funding or otherwise moving forward with surveillance technology proposals. 7 • Determination that Benefits Outweigh Costs and Concerns: Local leaders, after facilitating an informed public debate, expressly consider costs (fiscal and civil liberties) and determine that surveillance technology is appropriate or not before moving forward. • Thorough Surveillance Use Policy: Legally enforceable Surveillance Use Policy with robust civil liberties, civil rights, and security safeguards approved by policymakers. • Ongoing Oversight & Accountability: Proper oversight of surveillance technology use and accountability through annual reporting, review by policymakers and enforcement mechanisms. 3. Support State Legislation to Create Consistent Transparency, Oversight, and Accountability Mechanisms for California Law Enforcement The Attorney General might also consider state legislation that also incorporates these key principles and ensures proper and consistent transparency, oversight, and accountability when surveillance technology is being considered by any California law enforcement entity. 4. Develop & Periodically Issue California State of Surveillance Report The ACLU of California's extensive research on surveillance in California also highlighted just how difficult it is to identify what is happening in the state. It would be very helpful for the Attorney General to streamline transparency about surveillance in California, both to increase public awareness and facilitate oversight. As a recommendation in Best Practices or a provision in a potential state law, the Attorney General's Office should consider mechanisms to compile and release regularly -updated information about surveillance technology in the state, including what is being used and where, funding sources, and what processes are in place to provide for transparency, accountability, and oversight. i The Making Smart Decisions About Surveillance guide, an interactive map of findings, and additional resources are available at https://www.aclunc.org/smartaboutsurveillance. 2 Thank you to legal researchers Matt Cagle, Thomas Mann Miller, Molly Caldwell, Tony Huynh, Lauren Harriman, and Leighanna Mixter. 3 For purposes of this document, "publicly available" information is that which a resident with Internet access could obtain online without the assistance of a request under the California Public Records Act. Our search included but was not limited to publicly available agendas, minutes, and staff reports of city councils and county boards of supervisors; documents of regional quasigovernmental entities; government statements; and news reports. 4 We researched the following California cities: Anaheim, Bakersfield, Beverly Hills, Burbank, Blythe, Chico, Chula Vista, Clovis, Concord, East Palo Alto, El Centro, Elk Grove, Escondido, Eureka, Fontana, Fremont, Fresno, Gilroy, Glendale, Hayward, Huntington Beach, Inglewood, Irvine, Long Beach, Los Angeles, Martinez, Merced, Menlo Park, Modesto, Moreno Valley, Napa, Oakland, Oceanside, Ontario, Oxnard, Pasadena, Placerville, Rancho, Cucamonga, Redding, Redlands, Richmond, Riverside, Roseville, Sacramento, Salinas, San Bernardino, San Diego, San Jose, San Rafael, Santa Ana, Santa Clara, Santa Cruz, Santa Maria, Santa Monica, Santa Rosa, Stockton, Turlock, Ukiah, Vallejo, Ventura, Visalia, Yuba City. 5 Automated license plate readers are sophisticated camera systems mounted to police cars or light posts that scan license plates that come into view. They are often used to look for vehicles of interest, such as stolen cars, but in the process may record the time and place of all vehicles that drive by. 6 Body cameras are small cameras worn by police that record audio and video. These cameras can record everything from typical public interactions with police to sounds and images at rallies or even lewd banter in a squad car. Some body cameras are always on, others are controlled by the wearer. 8 7 Drones are unmanned aerial vehicles that may carry cameras, microphones, or other sensors or devices. Drones range from small "quadcopters" that can maneuver near ground level to high -altitude planes with extremely powerful cameras. Often quieter than traditional aircraft, drones are capable of surreptitious surveillance. 8 Facial recognition is software that identifies a person in photos or videos based on various characteristics of the person's face. Facial recognition software may be applied to photos or videos captured by an array of devices or contained in government databases. 9 "Stingrays," or International Mobile Subscriber Identity ("IMSI") Catchers are devices that emulate a cell phone tower in order to interact with nearby cell phones. Stingrays identify nearby devices, operate in a dragnet fashion that affects every phone in range, and can also be configured to intercept and capture the contents of communications including calls, text messages, or Internet activity. 19 Video surveillance camera systems that allow the remote observation or recording of activity in public spaces. Video feeds may be actively monitored in hopes of spotting crime as it happens or recorded for potential investigations or prosecutions. " A summary of the ACLU of California's surveillance findings is located at the following URL: http://www.aclunc.org/surveillancemap. 12 We located approximately $7.8 million in funding allocated for automated license plate readers. 13 We located approximately $8.2 million in funding allocated for officer body cameras. 14 See Jennifer Valentino-Devries, 'Stingray' Phone Tracker Fuels Constitutional Clash, Wall Street Journal, Sept. 22, 2011, available at: http://www.wsj.com/articles/SB10001424053111904194604576583112723197574. 15 We located publicly available information suggesting the following localities possess Stingrays: San Bernardino, Los Angeles Police Department, Los Angeles Sheriff Department, Oakland Police Department, San Jose Police Department, San Francisco Police Department, San Diego Police Department, San Diego County, Sacramento Police Department, and the Sacramento County Sheriffs Department. 16 We located approximately $21.5 million in funding allocated for video surveillance technology. Cities have spent the most local money on video surveillance programs, totaling almost $10 million across 12 cities. Fresno spent over $3 million on its live -feed cameras between 2006 and 2013, and has resorted to staffing the cameras with volunteers, rather than sworn officers as originally intended. Oliver Wanger, "Video Policing Unit Audit" (Nov. 30, 2013), 3-6, available at http://www.wjhattorneys.com/assets/files/VPU-Audit-00449144.pdf and https://s3.amazonaws.com/s3.documentcloud.org/documents/1003257/wanger-report.pdf ($870,000 in 2007, $1,016,477.95 in 2008, $547,803 in 2009, $124,200 in 2010, $103,600 in 2011, $111,400 in 2012, $148,320 in 2013, and $135,200 in 2014, totaling $3,057,000.95). Richmond and the Port of Richmond spent $4 million on 34 CCTV cameras in "high -crime" Richmond neighborhoods and 79 cameras at the Port of Richmond, in 2007. Richmond City Council, Meeting Minutes (July 31, 2007), 1-2, available at http://www.ci.richmond.ca.us/ArchiveCenter/ViewFile/Item/1253 (the City of Richmond contributed $1,538,244, the Port of Richmond contributed $3,833,279, and the City of Richmond reserved $166,721 for contingencies). Oakland has most likely spent millions of dollars on surveillance cameras, but there is no clear record of total spending. In 2008, Oakland police proposed spending $5.8 million for a wireless mesh system with 20 surveillance cameras and a monitoring center, with expected annual recurring costs of $800,000, and another $1.5 million on cameras around public schools. Oakland currently has 35 CCTV cameras and 40 live -feed cameras in the city, 135 cameras at the Oakland Coliseum complex, and over 700 cameras around public schools. Memo from Wayne Tucker, Chief of Police, to the Office of the City Administrator, regarding a report on crime fighting strategies to the Public Safety Committee (Jul. 8, 2008), at 1, Port of Oakland, Board of Port Commissioners Meeting Agenda (May 23, 2013), Item 3.1, at 12, available at http: //www.portofoakland. com/pdf/about/meetings/2013 /boar_shee_ 13 05 2 3 .pdf. L7 For example, in September 2014 the City of Anaheim allocated over $1.15 million of local funds for the purchase of officer body cameras. The specific source of funds was the Police Dept. 2014/2015 Budget for Civil Liabilities Investigator in the General Fund. See Ana Venagas, Anaheim police officers to wear cameras, OC Register, Sept. 9, 2014, available at http://www.ocregister.com/articles/cameras-634334-video-police.html; see also http://www.anaheim.net/docs_agend/questys pub//MG47522/AgendaFrame.htm; http://www.anaheim.net/docs_agend/questys pub//MG47522/AS47561/AS47565/AI47816/DO47817/DO_47817.pd f. 18 For example, video surveillance in Roseville was paid for in part with CA Prop. lb funds. http://roseville. granicus. com/MetaViewer.php?view_id=2&clip_id=23 5 8 &meta_id=8 8314 19 For example, the Depaitiiient of Homeland Security (DHS) funneled $35,546,960 to local governments in the Bay Area as part of the Urban Area Security Initiative (UASI) between May 1, 2012, and November 30, 2013. From those funds, Oakland received $1,200,730 during that period, San Jose received $1,548,879, Santa Clara County 9 received $4,143,890, and Santa Cruz received $345,800, totaling $7,239,299. While not all UASI funds are allocated to surveillance technology, a significant portion are: See Memo from Tristan Levardo, CFO of the Bay Area Urban Area Security Initiative, to the Bay Area Urban Area Security Initiative Approval Authority regarding FY2011 UASI Spending Report (June 12, 2014), available at http://bayareauasi.org/sites/default/files/resources/061214%20Agenda%20Item%207%20FY2011 %2OUASI%20Spe nding%20Report.pdf; Bay Area Urban Areas Security Initiative, Project Proposal Guidance for Fiscal Year 2015 (Interim) (Sept. 11, 2014), at 9, available at http://bayareauasi.org/sites/default/files/resources/091114%20Agenda%201tem%204%20Appendix%20A%2OFY 15 %20Project%20Proposal%20Guidance%20%26%20Sample%20Form.pdf (marked draft for Approval Authority review). 20 The Chico Police Department Business Support Team funded a license -plate reader in Chico. See, e.g., Chico City Council, Meeting Minutes (Feb. 19, 2013), Consent Agenda Item 2.2 (unanimously approving donation of license - plate reader from Chico Police Department Business Support Team), available at http://chico- ca.granicus.com/MinutesViewer.php?view_id=2&clip_id=370&doc_id=9db34992-d762-1030-9122-24b3144c4264; 21 Our research uncovered multiple purchases of surveillance technology made with asset forfeiture funds, including officer body cameras in Hayward and El Centro, video surveillance in Santa Barbara and Bakersfield, and ALPRs in Inglewood. See Hayward City Council Agenda, July 1, 2014, available at http://www.hayward-ca.gov/CITY- GOVERNMENT/CITY-COUNCIL-MEETINGS/2014/CCA14PDF/cca070114full.pdf; City of El Centro Council Agenda Report, Oct. 2, 2012, available at http://www.cityofelcentro.org/userfiles/10-02-12%20- %201tem%209%281%29.pdf; City of Santa Barbara City Council Minutes, Sept. 20, 2011, available at http://services.santabarbaraca.gov/cap/MG100814/AS 100818/AS 100825/AS 100826/A1101983/DO102015/DO_102 015.PDF; Gretchen Wenner, Downtown surveillance cameras will bring Big Brother to Bakersfield, The Californian, Aug. 12, 2010, available at http://www.bakersfieldcalifornian.com/local/x1415295660/Downtown- surveillance-cameras-will-bring-Big-Brother-to-Bakersfield ; City of Inglewood Minutes, July 19, 2011, available at http://www.cityofinglewood.org/civica/filebank/blobdload.asp?B1obID=7045; see also Dave Maass, Asset Forfeiture and the Cycle of Electronic Surveillance Funding, Electronic Frontier Foundation, Jan. 16, 2015, https://www.eff.org/deeplinks/2015/01 /asset -forfeiture -and -cycle -electronic -surveillance -funding. 22 In February 2014, the Modesto police announced they were sending a surveillance vehicle called an "Armadillo" equipped with eight live -feed, wide-angle, high -definition cameras to monitor "high -crime" neighborhoods. There was no decision by local leaders to approve the transfer; the police department had received the vehicle as a donation from neighboring Ceres. Modesto Police Depaitnient, Police Armadillo Hits High Crime Areas (Feb. 25, 2014), http://www.ci.modesto.ca.us/newsroom/releases/police/prdetail.asp?ID=1872; Tim Daly, Modesto cops add "armadillo" to force, News 10, Feb. 26, 2014, available at http: //www.news 10.net/story/news/local/modesto/2014/02/26/modesto-armadillo-police-camera/5 848819/. In another example, several Native American tribes funded license -plate readers for the San Diego County Sheriff. 2011 ALPR funding $78,673.25, San Diego County Meeting Agenda, available at http://www. sdcounty. ca.gov/lueg/iglcbc/meetingdocs/4-8-11 _IGLCBC_MeetingAgenda.pdf. 23 Joel Rubin, LAPD adds drones to arsenal, says they'll be used sparingly, LA Times, May 30, 2014, available at http://www.latimes.com/local/lanow/la-me-In-lapd-adds-drones-to-arsenal-20140530-story.html ("[T]he department announced that it had acquired two "unmanned aerial vehicles" as gifts from the Seattle Police Department.") 24 Numerous California localities have used federal funding to purchase automated license plate readers and include Chula Vista, Clovis, East Palo Alto, Marin County, Roseville, San Diego, Tulare County, and Elk Grove. 25 See Memo from Assistant Attorney General Regina B. Schofield to Dr. Pamela Scanlon regarding federal funding in the amount of $418,000 for the Automated Regional Justice Information System (ARKS) which includes a "query system based on facial recognition." Available at: https://www.eff.org/files/2013/11/07/01_- _tacids award_letter_2.pdf; see also Jennifer Lynch & Dave Maass, San Diego Gets in Your Face With New Mobile Identification System, Electronic Frontier Foundation, Nov. 7, 2013, https://www.eff.org/deeplinks/2013/11/san- diego-gets-your-face-new-mobile-identification-system. 26 Memo from Larry Esquivel, San Jose Chief of Police, to the Mayor and City Council (Nov. 1, 2013), at 3, available at http://sanjoseca.gov/DocumentCenter/View/23693 (requesting permission to purchase an unmanned aerial vehicle with $8,000 of $354,000 in DHS funding); City of San Jose, City Council Meeting Minutes (Nov. 19, 2013), Item 2.12, at 9, (authorizing execution of agreement with the City and County of San Francisco to accept $983,000 in funding from the Urban Areas Security Initiative); see also Shawn Musgrave, Despite Repeated Denials, San Jose Police Definitely Have a Drone, Vice (July 29, 2014), available at motherboard.vice.com/read/despite-repeated-denials-san Jose -police -definitely -have -a -drone; Robert Salonga, San 10 Jose police drone inflames surveillance -state rumblings, San Jose Mercury News (July 30, 2014), available at http://www.mercurynews.com/crime-courts/ci_26253376/san Jose-surveillance-state-rumblings-inflamed-by-sjpd. 27 For example, the Alameda County Sheriff originally planned to purchase a drone in 2012 with part of a larger $1.2 million grant dispersed through the California Emergency Management Agency. Angela Woodall, Alameda County puts the brakes on purchasing drone, Oakland Tribune, Dec. 4, 2012, available at http://www.mercurynews.com/breaking-news/ci_22 122536. 28 City OI Clovis, Report to the City Council (Sept. 19, 2011), available at https://www.ci.clovis.ca.us/Portals/0/Documents/CityCouncil/Agendas/2011/20110919/CC-D-1.pdf; see also Demian Bulaw, Future Fuzzy for Government Use of Surveillance Cameras/Still Some Bay Area Cities Hope to Follow Clovis ' Lead, SFGate, July 23, 2006, available at http://www.sfgate.com/news/article/Future-fuzzy-for- government-use-of-public-2515607.php. 29 See City of Richmond, Human Resources Management Dept. Meeting Minutes (Apr. 25, 2013), at 1-3, available at http://www.ci.rihmond.ca.us/Archive/ViewFile/Item/5178. 30 ALPR units were mentioned in a community update newsletter, RPD Happenings, available at http://www.riversideca.gov/rpd/community/newsletters/rpd-2011-05.pdf. 31 There are many examples of surveillance technology purchases without public notice or involvement. For example, a 2009 report to the Salinas city council listed a video surveillance system as having been acquired "recently" despite the fact that the ACLU could not locate publicly available City Council records mentioning the initial purchase. Salinas Police Depaitinent, 180 -day Report to the Community, October 20, 2009, available at http://www.ci. salinas.ca.us/services/police/pdf/180-DayReport-102009.pdf. 32 Matt Bigler, Bay Area's first cop drone sparks worry, outrage from civil-rights group, KCBS Bay Area, http://sanfrancisco.cbslocal.com/2014/11/13/san Jose -police -hear -residents -concerns -about -surveillance -drone/; Thom Jensen, Mike Bott, Is sheriffs department using tracking and data -collecting device without search warrants?, CBS News 10, June 23, 2014, http://www.news10.net/story/news/investigations/2014/06/23/is- sacramento-county-sheriff-dept-using-stingray-to-track-collect-data/ 11296461 /. 32 City of San Jose, City Council Meeting Agenda (Nov. 19, 2013), at 6 (Consent Calendar Item 2.12), available at http://sanjoseca.gov/DocumentCenterNiew/23727. 33 When the San Jose City Council gave approval to police to purchase a drone, the description on the city council meeting agenda specified only that the police and fire departments sought authorization to receive $983,000 from the Bay Area Urban Areas Security Initiative. The description provided only a link to a memo from the police and fire chiefs and the budget director with more information about what the funds would be used for, including $8,000 for an unmanned aerial vehicle. See City of San Jose, City Council Meeting Agenda (Nov. 19, 2013), at 6 (Consent Calendar Item 2.12), available at http://sanjoseca.gov/DocumentCenter/View/23727; Memo from Larry Esquivel, San Jose Chief of Police, to the Mayor and City Council (Nov. 1, 2013), at 3, available at http://sanjoseca.gov/DocumentCenter/View/23693 (requesting permission to purchase an unmanned aerial vehicle with $8,000 of $354,000 in DHS funding). 34 Scott Herhold, Big Brother, begone: The San Jose police should get rid of their drone, San Jose Mercury News, Aug. 2, 2014, available at http://www.mercurynews.com/scott-herhold/ci_26264766/big-brother-begone-san jose- police-should-get; San Jose Peace & Justice Center, Rally Against the Drone! And Militarization of the Police (last accessed Jan. 20, 2015), http://www.sanjosepeace.org/article.php/20141001152838137. 3s Robert Salonga, San Jose: Police apologize for drone secrecy, promise transparency, San Jose Mercury News, Aug. 5, 2014, available at http://www.mercurynews.com/crime-courts/ci_26279254/san Jose -police -apologize - secret -drone -purchase -promise 36 In November 2014 the Alameda County Sheriff purchased two drones with over $97,000 in funds from the county's Office of Homeland Security and Emergency Services. See Matt O'Brien, Alameda County sheriff buys two drones, Dec. 4, 2014, available at http://www.mercurynews.com/crime-courts/ci_27059034/alameda-county-sheriff- buys-two-drones. 37 Sacramento County, Board of Supervisors Agenda (Nov. 5, 2013), Item 14, available at http://www.agendanet. saccounty.net/sirepub/cache/2/uwdlotm54esv3znzOpwswbzy/1131109042014035517303.htm ; Memo from the Sheriff's Department to the Sacramento County Board of Supervisors for the Agenda of Nov. 5, 2013, at 2, available at http: //www. agendanet. saccounty. net/sirepub/cache/2/uwdlotm54esv3 znzOpwswbzy/6492 63 409042014035719458.P DF (spending authorization request includes $300,075 for "Wireless Tracking Equipment") (in a response to a public -records request from the ACLU of Northern California about documents related to IMSI catchers, Sacramento County returned a document with the same budget line, $300,075, with the description, apparently "Wireless Tracking Equipment," redacted); Kim Minugh, Sacramento County sheriff acknowledges possession, use 11 of cellphone surveillance technology, Sacramento Bee (Jul. 31, 2014), available at http://www. sacbee. com/2014/07/31 /6596112/sacramento-sheriff-acknowledges.html. 38 Memo from Christopher M. Moore, Chief of Police, to the San Jose Mayor and City Council (July 30, 2014), at 3 (requesting authorization to enter into agreement with City and County of San Francisco to allocate UASI funds to San Jose, including $250,000 for "law enforcement surveillance technology equipment"); Agreement Between the City and County of San Francisco and the City of San Jose for the Distribution of FY 2011 UASI Grant Funds (May 1, 2012), at A-3, available at http://www3.sanjoseca.gov/clerk/Agenda/20120821/20120821_0802acon.pdf ($250,000 to purchase "law enforcement surveillance technology equipment"). The equipment number included in the agreement description, AEL#: 13LE-00-SURV, is used by DHS. See Depai tment of Homeland Security, Equipment, Law Enforcement Surveillance, AEL / SEL Number 13LE-00-SURV, available at https://www.11is. dhs. gov/knowledgebase/authorizedequipmentlist/equipment-law-enforcement-surveillance (accessed Sept. 4, 2014) (equipment description: "Surveillance equipment and related accessories, including but not limited to: audio, data, and visual equipment. Includes electronic equipment such as Pen registers (equipment capable of capturing incoming and outgoing phone numbers, along with the duration of calls, without listening to the actual conversations)."); City of San Jose, Early Distribution Council Packet for May 14, 2013 (Apr. 30, 2013), at 12 (including memo from San Jose Chief of Police Larry Esquivel regarding proposed spending for 2012 UASI funding); Agreement Between the City and County of San Francisco and the City of San Jose for the Distribution of FY 2012 UASI Grant Funds (Dec. 1, 2012), at A-2, available at http://sanjoseca.gov/DocumentCenter/View/15909 ($172,000 to purchase "law enforcement surveillance equipment," AEL# 13LE-00-SURV); The two expenditures of $250,000 and $172,000 match records San Jose released in response to a public -records request, including proposals to UASI (for the same amounts) and purchase agreements with Harris Corp. (totaling $432,485.31), which produces the most well-known IMSI catchers. See KXTV News 10, 9 Calif. law enforcement agencies connected to cellphone spying technology, Mar. 6, 2014, available at http://www.news 10.net/story/news/investigations/watchdog/2014/03/06/5-california-law-enforcement-agencies- connected-to-stingrays/61473 81 /. 39 In at least one instance, local officials did not debate acquisition but did debate policy: the Chico City Council authorized the purchase of a license -plate reader on the consent calendar, in 2013, but directed staff to draft a use policy, which it did debate. City of Chico, City Council Meeting Minutes (Sept. 3, 2013), available at http://chico- ca.granicus.com/MinutesViewer.php?view_id=2&clip_id=416&doc_id=d8a860c2-67dd-1031-9668-843478bb431 f; City of Chico, City Council Meeting Agenda (Sept. 3, 2013), available at http://chico- ca.granicus.com/MetaViewer.php?view_id=2&clip_id=416&meta_id=36829. 4° City of Fresno, City Council Meeting Minutes (Jul. 31, 2014), available at https://fresno.legistar. com/LegislationDetail.aspx?ID=1852287&GUID=83 3 F6193-OCCE-45 C7-86CC- 3C0194672568. 41 San Diego County, Board of Supervisors Meeting Agenda (Jan. 26, 2010), Item 2, available at http://sdcounty.granicus.com/DocumentViewer.php?file=sdcounty_673669eb2e688fc71 ef2bec80221 ad8c.pdf&view =1; Memo from William D. Gore, San Diego County Sheriff, to the San Diego County Board of Supervisors (Jan. 26, 2010) (request for sole source authority to purchase surveillance equipment), available at http://www.sdcounty.ca.gov/bos/supporting_docs/012610agO2t.pdf. 42 John Malkin, Surveillance City? GoodTimes, Jan 29, 2014, http://www.gtweekly.com/index.php/santa-cruz- news/good-times-cover-stories/5 3 86-surveillance-city.html. 43 Id. 44 Santa Clara Board of Supervisors, Minutes, Sept. 11, 2012, available at http://sccgov.igm2.com/Citizens/FileOpen.aspx?Type=12&ID=4131&Inline=True (approving grant of UASI federal funds); see also Memo from Laurie Smith, Santa Clara County Sheriff, to the Santa Clara County Board of Supervisors regarding Integrated Regional Law Enforcement Information Sharing System (Coplink) (Feb. 12, 2013) (requesting authorization to spend $489,000 from the Department of Homeland Security to upgrade regional database with facial recognition software), available at sccgov.iqm2.com/Citizens/FileOpen.aspx?Type=30&ID=13873. 4s Memo from George Nielson, Chief of Police, to the Placerville City Council, Aug. 20, 2008, available at http://www.cityofplacerville.org/civicax/filebank/blobdload.aspx?blobid=3962 ("[A]pproximately $26,000.00 has been approved by the Approval Authority Board for the City's use, for the purchase of an Automated License Plate Recognition system.") 46 City of San Rafael, City Council Agenda Report, prepared by Lt. Raffaello Pata, Captain (Mar. 19, 2012). 12 47 See Memo from Larry Esquivel, San Jose Chief of Police, to the Mayor and City Council (Nov. 1, 2013), at 3, available at http://sanjoseca.gov/DocumentCenter/View/23693 (requesting permission to purchase an unmanned aerial vehicle with $8,000 of $354,000 in DHS funding). 48 The Redlands Police Department convened a Citizens' Privacy Council, open to any resident of the city, to provide advice on policy for surveillance cameras and oversee police use of the cameras. Richmond formed an ad - hoc committee to evaluate policies for its video surveillance program. And in 2014, following community backlash and the vote not to expand Oakland's Domain Awareness Center, the City Council created a Privacy and Data Retention Ad Hoc Advisory Committee comprised of diverse community members to create safeguards to protect privacy rights and prevent the misuse of data for a scaled -back system to be used at the Port of Oakland. Redlands Police Department, Citizen Privacy Council, http://www.cityofredlands.org/police/CPC; Memorandum, Establishing Ad Hoc Committee to Review the Community Warning System and Industrial Safety Ordinance (Sept. 18, 2012), http://64.166.146.155/agenda_publish.cfm?mt=ALL&get month=9&getyear=2012&dsp=agm& seq=12339&rev=0&ag=241&1n=23604&nseq=0&nrev=0&pseq=12303&prev=0; see Memorandum, Oakland City Administrator's Weekly Report (Apr. 25, 2014), http: //www2. oaklandnet.com/oakca l /groups/cityadministrator/documents/report/oak046804.pdf. a9 City of Ventura Administrative Report (Dec. 14, 2011), available at http://www.cityofventura.net/files/file/meetings/city_council/2012/01-09-12/item%2004.pdf so Memo from Larry Esquivel, Chief of Police, to the San Jose Mayor and City Council (Mar. 20, 2014), regarding body worn cameras (detailing work plan for Body Worn Camera Committee), available at http://www.piersystem.com/external/content/document/ 1914/2126242/ 1 /03-21-14Police.PDF. 51 U.S. Dep't of Homeland Security, CCTV: Developing Best Practices (2007), available at http://www.dhs.gov/xlibrary/assets/privacy/privacy_rpt_cctv_2007.pdf; International Association of Chiefs of Police, Technology Policy Framework (2014), available at www. theiacp. org/Portals/0/documents/p dfs/IACP%20Technology%20Policy%20Framework%20January%202014 %20Final.pdf. 52 See, e.g., Draft ALPR Policy 462 for the use of Automated License Plate Readers, Alameda City website, http://alamedaca.gov/sites/default/files/department-files/2013-12-26/draft_alpr_policy.pdf. 53 Analysis of Alameda's Draft Policy Manual for Automated License Plate Readers, Jan. 29, 2014, available at http://alamedaca.gov/sites/default/files/department-files/2014-02-04/aclu_analysis_of alameda_alpr policy.pdf. sa For example, San Diego, Chula Vista, Oceanside, and Escondido share all data they collect with ALPRs through a regional data -sharing system called ARJIS. In the Bay Area alone, several regional data -sharing systems aggregate and analyze ALPR data, including SBISS for the South Bay (Santa Clara and Gilroy), NCRIC for the North Bay (Menlo Park, San Mateo County), and the UASI's West Node Regional Data Sharing in Marin County. ss NCRIC Automated License Plate Reader Policy, available at https://ncric.org/html/NCRIC%20ALPR%20POLICY.pdf ARJIS LPR Regional Guidelines (Jan. 2015 draft), available at http://www.arj is.org/Portals/0/PortalDocuments/DRAFT%20ARJIS%20LPR%20Acceptable%20Use%20Policy%2 Opsc%2001%2002%202015%20ps.pdf; SBISS Memorandum of Understanding, http://www3. sanjoseca.gov/clerk/Agenda/20100330/20100330_0210mou.pdf. 'SBISS MOU mentions no set limit. NCRIC has a default length of one year, but allows shorter limits set by contributing cities or counties to trump its retention period. ARJIS has a retention period of one year for fixed cameras and two years for portable cameras regardless of limit set by contributor. City of Palo Alto City Council Staff Report (May 5, 2014), available at https://www.cityofpaloalto.org/civicax/filebank/documents/40191; NCIRC Automated License Plate Reader Policy, available at https://ncric.org/html/NCRIC%20ALPR%20POLICY.pdf; LPR Regional Guidelines (Jan. 2015 Draft), available at http://www.arj is.org/Portals/0/PortalDocuments/DRAFT%20ARJIS%20LPR%20Acceptable%20Use%20Policy%2 0psc%2001%2002%202015%20ps.pdf; The City of Novato California Staff Report (Oct. 8, 2013), available at http://ci.novato.ca.us/agendas/pdfstaffreports/cc100813_F-3.pdf; Memorandum of Understanding, available at http://apps.co. shasta.ca.usBOS_Agenda/MG69199/AS69205/AS69234/AI69367/DO69369/13.PDF. 57 A data sharing agreement in one jurisdiction may affect residents in another. For example, when the Santa Clara County Board of Supervisors approved, via consent calendar, a request from the county sheriff to upgrade a regional database with facial -recognition software, the decision also affected dozens of other cities that cooperate with the county sheriff and contribute information to the database including every city in Santa Clara, Santa Cruz, Monterey, and San Benito counties. See Memo from Laurie Smith, Santa Clara County Sheriff, to the Santa Clara County Board of Supervisors regarding Integrated Regional Law Enforcement Information Sharing System (Coplink) (Feb. 12, 2013) (requesting authorizing to spend $489,000 from the Department of Homeland Security to 13 upgrade regional database with facial recognition software); Santa Clara County Board of Supervisors, Board of Supervisors Meeting Minutes (Feb. 12, 2013) (approving request from Laurie Smith on consent calendar). 58 Oakland Police Department, Portable Video Management System, Departmental General Order, Effective Date Mar. 5 2014, available at https://www.muckrock.com/foi/california-52/oakland-police-dept-body-cam-policy- emails-and-complaints-13459/#files. 59 See, e.g., Sixteenth Monitoring Report of Robert S. Warshaw, Monitor of the Negotiated Settlement Agreement (NSA) in the case of Delphine Allen, et al., vs. City of Oakland, et al., in the United States District Court for the Northern District of California, at 45, available at http://www.cand.uscourts.gov/filelibrary/1350/2014- 01 %20monitoring%20report.pdf. 6° Matt Cagle, San Francisco - Paying the Price for Surveillance Without Safeguards, ACLU -NC Blog, May 22, 2014, https://www.aclunc.org/blog/san-francisco-paying-price-surveillance-without-safeguards. 61 Community Safety Camera Ordinance, Chapter 19 of the San Francisco Administrative Code, available at http://administrative.sanfranciscocode.org/19/. 62 For complete Video Policing Project Policy Guidelines and Manual, see Memo from Jerry Dyer, Fresno Police Chief, to Fresno City Council, Oct. 21, 2008, 13-24, available at http://www.fresno.gov/NR/rdonlyres/77999966- 4ABA-45C5-9519-42E4E29657A4/0/HonorableBrettDorianVideoPolicingAuditorServices.pdf. 63 City of Menlo Park, City Council Special and Regular Meeting Agenda (June 3, 2014), Item #D-1, An Ordinance Regarding the Use of Automated License Plate Readers and Neighborhood Surveillance Cameras, available at http://www.menlopark.org/ArchiveCenterNiewFile/Item/1658. 64 The Ad Hoc committee's draft, dated January 15, 2015, is available here: https://oaklandprivacy.files.wordpress. com/2015/01 / 1-13-15-dac-privacy-and-data-retention-policy-draft- 011515.pdf. 65 Cities and counties have occasionally required that surveillance technologies be reviewed within a certain time period after deployment, but these requirements are rare and incomplete where they exist. For example, while San Bernardino maintains a city website listing statistics about the use of ALPR, including stolen cars recovered, publicly available statistics have not been published for any year following 2010. See ALPR Statistics, City of San Bernardino website (last visited Jan. 20, 2015), http://www.ci.san- bernardino.ca.us/cityhalllpolice_department/public_safety/traffic_safetyprograms/alpr/default.asp. Roseville's City Council required that the Roseville Police Depaitiuent report the benefits and costs of bus cameras to a city commission one year after installation. In the case of Roseville, the ACLU found no record that the post -deployment report was ever conducted. City of Roseville, Transit On -Board Video Cameras Purchase (May 31, 2012), available at http://roseville.granicus.com/MetaViewer.php?view_id=2&clip_id=2358&meta_id=88314. 66 Fresno City Council Minutes, Sep. 20, 2012, available at http://www.fresno.gov/CouncilDocs/agenda9.20.2012/1b.pdf. 671d.; City of Fresno, City Council Meeting Minutes, Aug. 22, 2006, available at http://www.fresno.gov/NR/rdonlyres/CE8889CD-A095-40D 1-968B- B50237558584/0/August222006CityCouncilMinutes.pdf (amending policy to include annual audit); City of Fresno, City Council Meeting Minutes, Sep. 26, 2006, available at http://www.fresno.gov/NR/rdonlyres/2D4OAAED-5A45- 4FD1-8316-1EE714F42D78/0/September262006CityCouncilMinutes.pdf (amending policy to include greater protections for individuals participating in demonstrations or other lawful gatherings). 68 Hon. Oliver W. Wanger, Annual Audit for the Fresno Police Department Video Policing Unit for the Period Ending November 30, 2013 (December 30, 2013), available at http://www.wjhattorneys.com/assets/files/VPU- Audit-00449144.pdf; George Hostetter, Former Judge Wanger Writes Far -Ranging Audit on Fresno Video Policing, in The Fresno Bee (Jan. 7, 2014), available at http://www.fresnobee.com/2014/01/07/3701754/judge-wanger- delivers-impressive.html. 69 Judge Wanger: Fresno video policing done right, needs money, Fresno Bee, Jan 8, 2014, available at http://cgrcengage.com/mnmaj ority/app/document/ 1354649;] sessionid=ocJiPHEyGHZ 19bsd440Xgp5B.undefined 70 Ordinance No. 127-06, Sec. 19.4(d), available at https://sfgov.legistar.com/View.ashx?M=F&ID=2592763 &GUID=E040FBD 1-E991-425A-AE5B-0A4449FFD 108. 71 Id. The report must "identify the camera locations, the crime statistics (or the vicinity surrounding each camera both before and after the camera is installed, crime statistics from surrounding vicinities, the number of times the Police Department requested copies of the recorded images, the number of times the images were used to bring criminal charges, the types of charges brought, and the results of the charges." 72 See Citris, Citris Study on SF Public Cameras Released (Jan. 9, 2009), http://citris-uc.org/citris-study-on-sf- publiccameras-released/. 14 73 Andrew Dudley, Lights, Camera, Inaction: San Francisco's Broken Surveillance System, Hoodline, Oct. 19, 2014, http://hoodline.com/2014/10/lights-cameras-inaction-san-francisco-s-broken-surveillance-state. 74 Quarterly Review of Data Captured by Automated License Plate Readers (ALPR) for the Period Beginning July 1, 2014 through October 1, 2014, Menlo Park City Council Meeting, Nov. 18, 2014, available at http://menlopark.org/DocumentCenterNiew/5786. 75 See Making Smart Decisions About Surveillance: A Guide for Communities, https://www.aclunc.org/publications/making-smart-decisions-about-surveillance-guide-communities; Map: State of Surveillance in California, ACLU of Northern California, https://www.aclunc.org/article/map-state-surveillance- california; U.S. Dep't of Homeland Security, CCTV: Developing Best Practices (2007), available at http://www.dhs.gov/xlibrary/assets/privacy/privacy_rpt_cctv_2007.pdf; Police Executive Research Forum, How Are Innovations in Technology Transforming Policing? 26 (Jan. 2012), available at http://www.policeforum.org/assets/docs/Criticalissues_Series/ how%20are%20innovations%20in%20technology%20transforming%20policing%202012.pdf; International Association of Chiefs of Police, Technology Policy Framework (2014), available at www.theiacp. org/Portals/0/documents/pdfs/IACP%20Technology%20Policy%20Framework%20January%202014 %20Final.pdf. 76 The DAC Ad Hoc Advisory Committee's recommendations supplementing its privacy policy include a recommendation that Oakland adopt a citywide surveillance technology ordinance. https://oaklandprivacy.files.wordpress. com/2015/01 / 1-13-15-dac-privacy-and-data-retention-policy-draft- 011515.pdf. 15 In rare move, Silicon Valley county gov't kills stingray acquisition l Ars ... http://arstechnica.com/tech-policy/2015/05/in-rare-move-silicon-valley-... ars technica MAIN MENU MY STORIES: FORUMS SUBSCRIBL JOBS ARS CONSORTIUM Ars Technica has arrived in Europe. Check it out! LAW & DISORDER CIVILIZATION S DISCONTENTS In rare move, Silicon Valley county gov't kills stingray acquisition Santa Clara county executive tells Ars what Harris wanted was "on the silly side." by Cyrus Farivar - May 7, 2015 6:OOam PDT 8 Jhaymesisviphotography The Santa Clara County Board of Supervisors has halted a plan to approve the purchase of a cell -site simulator, better II Share FURTHER READING V Tweet LA1 SEC SV\ "r( srr. LA1 i FEA1 GI t0 1 of 5 5/7/2015 6:49 PM In rare move, Silicon Valley county gov't kills stingray acquisition l Ars ... http://arstechnica.com/tech-policy/2015/05/in-rare-move-silicon-valley-... known as a stingray. The secretive surveillance devices can be used to determine a phone's location, but they can also intercept calls and text messages. During the act of locating a phone, stingrays also sweep up information about nearby phones —not just the target phone. Earlier this year, Ars reported on how the FBI is actively trying to "prevent disclosure" of how these devices are used in local jurisdictions across America. The move, happening in one of the primary counties in Silicon Valley, marks an unusual occasion that a local government has turned away from federal funds that would be used to acquire such a device. The device was approved initially during a February 24, 2015 meeting, despite a testy exchange between the Santa Clara Sheriff's Office and Supervisor Joe Simitian, a former state senator with a penchant for an interest in privacy issues. Simitian's office didn't immediately respond to Ars' request for comment. STINGRAY PHONE TRACKERS COMING TO SANTA CLARA AFTER "15 MINUTES" OF REVIEW Staying mum Vote this week comes after community given little chance to object. James Williams, the deputy county executive, wrote in a Tuesday letter to his boss Jeffrey Smith: After negotiations regarding contract terms, including business and legal issues, the County and Harris have been unable to reach agreement on a contract for the purchase of the System. Accordingly, the System will not be purchased at this time. Harris Corporation is the Florida -based defense contractor that is the manufacturer of the device produced under the StingRay trademark. As the dominant maker of cell -site simulators, stingray has also become the generic name for this class of devices. Both the FBI and the Harris Corporation have previously declined to answer Ars' specific questions. Smith told Ars that Harris wanted to impose overly strict restrictions as to what could be disclosed through the public records process. "What happened was, we were in negotiations with Harris, and we couldn't get them to agree to even the most basic criteria we have in terms of being responsive to public records requests," he said. FURTHER READING ROBBERY SUSPECT PULLS GUILTY PLEA AFTER STINGRAY DISCLOSURE, CASE DROPPED "What's the point of gathering evidence if you're not going to use it?" "After many hours of back and forth it became clear that they weren't going to consent to a contract in an attempt to keep everything secret and non -discoverable and that's not something we could live with as a public agency. The negotiations are going to be terminated and the grant money will go to other purposes." PC ThE Nei WA' H; G4 LG S m. STP 1 LA1 ,1 WH4 AB thi Doi 2 of 5 5/7/2015 6:49 PM In rare move, Silicon Valley county gov't kills stingray acquisition l Ars ... http://arstechnica.com/tech-policy/2015/05/in-rare-move-silicon-valley-... He said that the FBI was not involved in the discussions, and that Santa Clara County did not even get to the stage of the onerous non -disclosure agreement along the lines of a previously published one revealed in a court case in Erie County, New York. In that case, a rare unredacted form demonstrated the full extent of the FBI's attempt to quash public disclosure of stringray information. The most egregious example from the document showed that the FBI would prefer to drop a criminal case in order to protect secrecy surrounding the stingray. In St. Louis, a defense lawyer who represented a woman who had pleaded guilty to being involved in a series of robberies recently told Ars that prosecutors dropped charges rather than expose the use of a stingray. Last year, prosecutors in Baltimore did the same thing during a robbery trial. "The best I can get into is that [Harris has] been convinced by somebody, maybe by themselves, that federal law prohibits them saying anything to anybody about their technology unless that person has a badge or is a criminal investigation in the criminal justice system," Smith added. "So if we're buying this as civilians we would have to guarantee that we would never tell anybody that it was being bought. It was a little on the silly side. They're claiming that everything is a trade secret, but the reality is that the public is quite well -aware that this is a wireless wiretapping and it's not a secret, I can't understand where they're coming from." Bringing sunlight to the process Civil liberties and legal experts hope that the newfound scrutiny that has come from various cities around the country, including Tacoma, Washington, and Erie County, New York, are beginning to reach those in government. "With more scrutiny of these deals and the strings that are attached to them, I am hopeful that more counties will negotiate more aggressively," Brian Owsley, a former federal judge who is now a law professor at Indiana Tech, told Ars. "As Harris Corporation is in the business of selling its products, if enough local law enforcement agencies object to the "standard' agreement, then Harris Corporation may have to change its standard language." FURTHER READING NEW CALIFORNIA BILL WOULD REQUIRE LOCAL APPROVAL FOR STINGRAY USE Berkeley law prof: "Communities ought to have a say in decisions like this." Relatively little is known about how, exactly, stingrays, known more generically as cell -site simulators, are used by law enforcement agencies nationwide, although new documents have recently been released showing how they have been purchased and used in some limited instances. However, it has been well -established that cops have lied to courts about their use. Typically, police deploy them without first obtaining a search warrant. A local privacy activist who has closely followed stingrays from nearby San Leandro, California, Mike Katz-Lacabe, told Ars this was the first time he had ever heard of a county resisting acquisition of a stingray. "Much, if not all, of the credit goes to Supervisor Joe Simitian and his push for transparency," he told An gel woi Txn fin 3 of 5 5/7/2015 6:49 PM In rare move, Silicon Valley county gov't kills stingray acquisition l Ars ... http://arstechnica.com/tech-policy/2015/05/in-rare-move-silicon-valley-... Ars by e-mail. "In addition, this is one of the few times that there has been a public discussion BEFORE the acquisition of a stingray. There were no public discussions in Oakland, San Jose, or San Francisco when each of those police departments acquired a stingray, and they may not have even appeared on an agenda of the respective City Councils." "I hope that this is a sign that sunlight is finally piercing the veil of the secrecy surrounding the use of this equipment," he added. "Use of this equipment is specifically kept hidden from judicial authority and the courts under the terms of the non -disclosure agreement that police departments must sign before they can buy a Stingray. It is critical to our judicial system and our democracy that the public and our elected representatives be informed about the use of these devices so that we can have a discussion about their privacy implications and make informed decisions about policies for their use." Smith, the county executive, for his part was surprised to learn that Santa Clara may be the first local entity to refuse Harris' demands. "We're not focused on being the only one to do something, but we had to do what we thought was right in terms of negotiations," he added. "If it's the only time it's happened, I'm surprised." READER COMMENTS 4iEl 11 Share If Tweet 8+ Google 4zy Reddit Cyrus Farivar / Cyrus is the Senior Business Editor at Ars Technica, and is also a radio producer and author. His first book, The Internet of Elsewhere, was published in April 2011. @cfarivar on Twitter <- OLDER STORY YOU MAY ALSO LIKE NEWER STORY 4 of 5 5/7/2015 6:49 PM In rare move, Silicon Valley county gov't kills stingray acquisition I Ars ... http://arstechnica.com/tech-policy/2015/05/in-rare-move-silicon-valley-... SITE LINKS About Us Advertise with us Contact Us Reprints SUBSCRIPTIONS Subscribe to Ars © 2015 Conde Nast. All rights reserved Use of this Site constitutes acceptance of our User Agreement (effective 1/2/14) and Privacy Policy (effective 1/2/14), and Ns Technica Addendum (eft Your California Privacy Rights The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of Cond MORE READING RSS Feeds Newsletters CONDE NAST SITES Reddit Wired Vanity Fair Style Details Visit our sister sites Subscribe to a magazine CONDE, '\ \ ST Ad Choices 5 of 5 5/7/2015 6:49 P City of Palo Alto Policy on Video Management Revised January 2015 I. INTRODUCTION The purpose of this Policy is to provide guidelines for the use of City -owned video management systems (VIVIS) and accompanying cameras that are permanently installed. Mobile, portable, wearable and other such audio/video systems are outside the scope of this Policy. II. POLICY STATEMENT The City of Palo Alto is committed to enhancing the quality of life of employees and residents of Palo Alto by integrating security practices with available technology. To enhance security of City property and aid investigatory capability, it may be appropriate to permanently install stationary video devices that are owned by the City of Palo Alto, and to ensure that the video systems currently in existence are governed by a single City-wide policy. The City remains committed to ensuring that all video systems are used in a manner that respects and balances the privacy interests of employees and residents. Video systems will be used by various departments to monitor critical infrastructure that support on -going City services, prevent acts of vandalism, theft and other crimes, provide real-time situational awareness in the event of natural disasters or other critical incidents, assist with response to public safety incidents in the City, and, where appropriate, the investigation of criminal activity. III. DEFINITIONS "General Monitoring" refers to viewing recorded images from stationary cameras and monitors that have been approved under this Policy for the purpose of complying with City policies and laws and regulations. "Specific monitoring," for purposes of this Policy, refers to a more focused type of observation on an individual or group of individuals that involves: (1) realtime or live monitoring; (2) a closer degree of scrutiny related to the reasonable grounds to believe the person(s) who are the target of the monitoring are engaging in or have engaged in prohibited activity and (3) is designed to be investigatory and generally conducted over a longer timeframe. Specific monitoring does not include incidental observation or inadvertent discovery. For any specific monitoring activity to occur, there must be some connection between the information collected and unlawful activity. "Operators" are those persons provided with access to any part of the VMS. Current staffing precludes the routine monitoring of cameras. Accordingly, operators may be capable of viewing live (real-time) or recorded video and other information, depending on their level of access. 1 "VMS Administrator" refers to the designee(s) of the City Manager, who shall oversee this Policy, as defined herein. As of January 2015, the designee(s), who are to form a committee and work collaboratively, are as follows: (1) the Director of Emergency Services; (2) a representative from the Palo Alto Utilities Department; and (3) a representative of the City Attorney's Office. IV. USE OF PERMANENTLY INSTALLED STATIONARY VIDEO EQUIPMENT A. Rules 1) Application: The head of a City department ("applicant") wishing to permanently install video cameras shall submit a written request (form) to the VMS Administrator with a statement justifying the benefit of installing such equipment. The application must include the proposed number and location of the device(s), the purpose of the installation, whether the location of the cameras involves recording of activity by employees or the general public or both, and the names and titles of the individuals who will be the operators. The source of funding for the installation must be specifically identified as part of the request. 2) Review: The VMS Administrator will review the request and advise the applicant of the decision within ninety (90) business days after receipt. The applicant may appeal the decision of the VMS Administrator by submitting an appeal to the City Manager or his/her designee, who will consult with the City Attorney's Office and respond to the request within thirty (30) business days after receipt. The decision of the City Manager or his/her designee is final. 3) Equipment Specifications: The VMS Administrator will develop a specification that provides guidance regarding the type of equipment City departments may purchase, compatibility, installation (contractors, etc.), and other such implementation details. 4) Changes: An applicant may file a written request to change the location or limit the visual range of a specific installation of video equipment based on a belief that it infringes on a reasonable expectation of privacy or other protected rights. The request shall be submitted to the VMS Administrator and shall (a) identify the location, (b) identify the concern or issue, and (c) provide the suggested changes. The VMS Administrator shall respond to the request within ninety (90) business days after receipt. The response will be based on a reconsideration of the initial request to install the devices in light of the concerns. The appeal process is the same as paragraph 2, above. 5) Retroactive Provisions: Within twelve (12) months of the effective date of this Policy and the Equipment Specifications, all existing City -owned systems shall be brought into compliance with all aspects of this Policy. Those which do not conform shall be removed, unless a waiver is granted by the VMS Administrator. 6) Security: Operators shall exercise due care to ensure that video displays shall not be viewable by unauthorized persons. 7) Signage: Any area in which a video system is permanently installed shall have signage prominently displayed indicating the fact of monitoring. In cases in which there is an ongoing investigation, monitoring shall be governed by usual legal or City procedures, which may not require signage. 2 In the event third parties (such as private businesses and other non -government entities) desire to share their video feeds with the City, the following rules will apply: 1) Except for exigent circumstances or temporary (less than 90 days) access, the third party shall submit a written authorization form to the VMS Administrator, specifying which City department is to be granted access, for what duration (if any), and any other conditions or limitations. 2) The VMS Administrator shall maintain a registry of such third parties which have authorized the City of Palo Alto to have access to their video systems. B. Training 1) Operators shall be trained in the technical, legal and ethical parameters of appropriate system use. 2) Operators shall receive a copy of this policy and provide written acknowledgement that they have read and understood its contents. 3) Certain operators, such as those in the 911 Communications Center and the Emergency Operations Center, may require additional training. C. Operation 1) Monitoring will be conducted in a professional, ethical and legal manner The system will not be used to invade the privacy of individuals or otherwise utilized in areas where the reasonable expectation of privacy exists. Monitoring shall not be used to harass, intimidate or discriminate against any individual or group. 2) Duties of Department Heads. (a) Each Department Head shall designate the Operators and provide the list of staff to the VMS Administrator; (b) Each Department Head shall keep this list of Operators up-to-date and ensure staff completes the required training (per Section B) and completes the VMS Employee Statement and other forms; (c) Department Operators may engage in General Monitoring for the purpose of enhancing compliance with City policies as described in Section I herein; (d) Department Operators shall not engage in Specific Monitoring except in instances of suspected criminal activity, natural disaster, or threat to public property or safety, unless authorized by the VMS; and (e) Every Department Head shall ensure that they or their staff notify the VMS Administrator as soon as practicable of any instances of or planned Specific Monitoring. 3) Duties of VMS Administrator. (a) The VMS Administrator may engage in General Monitoring for the purpose of enhancing compliance with City policies as described in Section I herein; (b) The VMS Administrator shall have City-wide system access and may engage in realtime and Specific Monitoring in the event of natural disaster, law enforcement 3 emergency, imminent threat situation, authorized law enforcement investigation, for the purpose of system -wide threat and safety assessments, and/or with the approval of the Chief of Police or his/her designee or City Manager or his/her designee; (c) The VMS Administrator shall prepare an annual report to the City Manager and the Chief of Police containing information regarding system use City-wide; and (d) All requests for recordings or other system use that are made in connection with internal investigations, disciplinary matters, or criminal investigation shall be made to the VMS Administrator. D. Storage, Public Records 1) Both current and archived recordings will be secured in accordance with current state of art and best practices. 2) The volitional public release of video images shall be done only with the authorization of the VMS Administrator and only with a properly completed written request. 3) Video images needed for a criminal investigation or other official reason shall be collected and booked in accordance with current departmental evidence procedures. 4) Requests for recorded video images from other government agencies or by the submission of a court order or subpoena shall be promptly submitted to the Police Department Communications Manager, who will research the request and submit the results of such search through the VMS Administrator to the City Attorney's office for further handling. Every reasonable effort should be made to preserve the data requested until the request has been fully processed by the City Attorney's office. 5) Video images captured by the system that are requested by the public or media will be made available only to the extent required by law. Except as required by a valid court order or other lawful process, video images requested under the Public Records Act will generally not be disclosed to the public when such video images are evidence in an ongoing criminal investigation in which a disposition has not been reached. 6) Recordings shall be retained for one (1) year in accordance with California Government Code Section 34090.6(a) and then will be erased or recorded over unless retained as part of a criminal investigation, a civil or criminal court proceeding, pursuant to a Preservation Notice issued by the City Attorney's Office. No attempt shall ever be made to alter any recording, except to enhance quality for investigative purposes and to blur elements (such as uninvolved bystander faces) consistent with other policies and common practice to preserve privacy, to preserve evidence or other such lawful and valid reason. The VMS may have network video recorders (NVRs) or similar mechanisms where images are "buffered" for a period of time before they overwritten. Such data are not considered recordings. A recording occurs when images are exported to another medium (such as a DVD). 7) Retained recordings will be destroyed at the appropriate time, which will be determined and directed by the City Attorney's Office. 4 E. Destruction or Tampering with Cameras or System Components Any person who tampers with or destroys a camera or any part of the video system may be prosecuted in the criminal justice system as well as subject to discipline, up to and including termination, in the case of staff. F. Routine Audits The video system shall be subject to regular audits. Any unauthorized use of the video system shall be reported to the VMS Administrator as well as the City Manager or his/her designee. 5 �.r CITY OF PALO ALTO POLI CY AND SERVI CES COM M I TTEE ACTI ON MINUTES Special Meeting Wednesday, December 14, 2016 Chairperson DuBois called the meeting to order at 6:04 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: DuBois (Chair), Kniss, Scharff Absent: Berman Oral Communications None. Agenda Items 2. Directions to Staff Concerning Further Requirements and Restrictions Related to Basement Construction and Dewatering. MOTI ON: Vice Mayor Scharff moved, seconded by Chair DuBois to recommend the City Council direct Staff to: 1. Modify the Pilot Construction Dewatering Program (per the list below) approved by Council (on February 1, 2016), to apply to new applications after adoption (to the extent possible, for the 2017 construction season); and 2. Draft an ordinance codifying and enhancing the Construction Dewatering Program, with a goal of bringing the ordinance to Council in 2017, in order to be in place for projects not having either their Conditions of Approval or Building Permits by July 1, 2017, for the 2018 construction season; and 3. Explore the implementation and incentives for using advanced construction techniques such as cut-off walls. Page 1 of 3 ACTION MINUTES AMENDMENT: Chair DuBois moved, seconded by Council Member XX to add to the Motion "Have Staff evaluate and bring options to Council regarding additional incentives such as the mandatory cone test, allowing a longer construction season if you use a cutoff wall and the idea of a required draw down test." AMENDMENT FAI LED DUE TO THE LACK OF A SECOND AMENDMENT: Chair Dubois moved, seconded by Council Member XX to add to the Motion "Ask Staff to evaluate the idea of a temporary moratorium with the exception for those that participate in the pilot program." AMENDMENT FAI LED DUE TO THE LACK OF A SECOND MOTI ON RESTATED: Vice Mayor Scharff moved, seconded by Chair DuBois to recommend the City Council direct staff to: 1. Modify the Pilot Construction Dewatering Program (per the list below) approved by Council (on February 1, 2016), to apply to new applications after adoption (to the extent possible, for the 2017 construction season); and 2. Draft an Ordinance codifying and enhancing the Construction Dewatering Program, with a goal of bringing the ordinance to Council in 2017, in order to be in place for projects not having either their Conditions of Approval or Building Permits by July 1, 2017, for the 2018 construction season; and 3. Explore the implementation and incentives for using advanced construction techniques such as cut-off walls. MOTI ON PASSED: 2-1 DuBois no, Berman absent The Committee took a break from 8:37 P.M. to 8:44 P.M. 1. Discussion and Recommendations for Data Collection and Privacy Policy Guidelines. MOTI ON: Chair DuBois moved, seconded by Council Member Kniss to recommend Staff return to the Policy and Services Committee with a Page 2 of 3 Policy and Services Committee Special Meeting Action Minutes 12/14/16 ACTION MINUTES potential Ordinance that would establish department policies and practices in order to reinforce the protection of individual privacy. MOTI ON PASSED: 3-0 Berman absent 3. Discussion and Recommendations for the 2017 City Council Priority Setting Process and Retreat Planning. NO ACTI ON TAKEN Future Meetings and Agendas ADJOURNMENT: Meeting was adjourned at 9:18 P.M. Page 3 of 3 Policy and Services Committee Special Meeting Action Minutes 12/14/16 CITY OF PALO ALTO TO: HONORABLE CITY COUNCIL FROM: MOLLY STUMP, CITY ATTORNEY DATE: SEPTEMBER 10, 2018 SUBJECT: 8834- POLICY AND SERVICES COMMITTEE RECOMMENDATION TO ADOPT AN ORDINANCE ADDING SECTIONS 2.30.620 - 2.30.690 TO TITLE 2 OF THE ADMINISTRATIVE CODE TO ESTABLISH CRITERIA AND PROCEDURES FOR PROTECTING PERSONAL PRIVACY WHEN CONSIDERING THE ACQUISITION AND USE OF SURVEILLANCE TECHNOLOGIES, AND PROVIDE FOR ONGOING MONITORING AND REPORTING The ordinance included with this memo replaces the ordinance included with the original packet. Molly Stump City Attorney 1 of 1 NOT YET APPROVED Ordinance No. Ordinance of the Council of the City of Palo Alto Adding Sections 2.30.620 — 2.30.690 to Title 2 of the Palo Alto Municipal Code to Establish Criteria and Procedures to Protect Personal Privacy in the Acquisition and Use of Surveillance Technology and Provide for Ongoing Monitoring and Reporting The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings and Recitals. The Council of the City of Palo Alto finds and declares as follows: To promote public trust and ensure protection of privacy, the Palo Alto City Council desires to establish a general policy governing consideration, acquisition and use of technologies by the City, including its contractors and partners, that gather information about specific individuals or groups of individuals; The City also recognizes the value of and wishes to foster Smart City initiatives that enhance City programs and services to citizens and visitors through the use of technology; Accordingly, the City adopts the following ordinance to increase transparency, oversight and accountability in the acquisition and deployment of technologies that collect and retain personally identifiable information of persons not accused of unlawful activity. SECTION 2. PART 6A — SURVEILLANCE AND PRIVACY PROTECTIONS, Sections 2.30.620- 2.30.690, is added to Chapter 2.30 [Contracts and Purchasing Procedures], of Title 2 [Administrative Code] of the Palo Alto Municipal Code to read as follows: 2.30.620 Title. This Part 6A shall be known as the Surveillance and Privacy Protection Ordinance. 2.30.630 Council Approval Required for Contracts, Agreements, Grant Applications and Donations Involving Surveillance Technology. The Council shall approve each of the following: (a) Applications for grants, acceptance of state or federal funds, or acceptance of in -kind or other donations of Surveillance Technology; (b) Notwithstanding any delegation of authority to award contracts in this Chapter 2.30, contracts of any type and any amount that include acquisition of new Surveillance Technology; (c) Use of Council -approved Surveillance Technology for a purpose, in a manner, or in a location outside the scope of prior Council approval; or 180419 th 0140191 NOT YET APPROVED (d) Agreements with a non -City entity to acquire, share, or otherwise use Surveillance Technology or the information it provides. 2.30.640 Council Approval of Surveillance Use Policy. The Council shall approve a Surveillance Use Policy addressing each activity that it approves that is listed in Section 2.30.630. If no current Surveillance Use Policy covers an approved activity, Council shall adopt a new policy or amend an existing policy to address the new activity. 2.30.650 Information Required. Unless it is not reasonably possible or feasible to do so, before Council approves a new activity listed in Section 2.30.630, the City should make available to the public a Surveillance Evaluation and a proposed Surveillance Use Policy for the proposed activity. 2.30.660 Determination by Council that Benefits Outweigh Costs and Concerns. Before approving any new activity listed in Section 2.30.630, the Council shall assess whether the benefits of the Surveillance Technology outweigh its costs. The Council should consider all relevant factors, including financial and operational impacts, enhancements to services and programs, and impacts on privacy, civil liberties, and civil rights. 2.30.670 Oversight Following Council Approval. Beginning after the close of fiscal year 2019 and annually thereafter, the City shall produce and make available to the public an Annual Surveillance Report. The Annual Surveillance Report should be noticed as an informational report to the Council. The Council may calendar the Annual Surveillance Report or any specific technology included in the report for further discussion or action, and may direct that (a) use of the Surveillance Technology be modified or ended; (b) the Surveillance Use Policy be modified; or (c) other steps be taken to address Council and community concerns. 2.30.680 Definitions. The following definitions apply to this Section: (a) "Annual Surveillance Report" means a written report, submitted after the close of the fiscal year and that includes the following information with respect to the prior fiscal year: (1) A description of how each Council -approved Surveillance Technology was used, including whether it captured images, sound, or information regarding members of the public who are not suspected of engaging in unlawful conduct; (2) Whether and how often data acquired through the use of the Surveillance Technology was shared with outside entities, the name of any recipient entity, the types of data disclosed, and the reason for the disclosure; Page 2 of 5 NOT YET APPROVED (3) A summary of any community complaints or concerns about the surveillance technology; (4) Non -privileged and non -confidential information regarding the results of any internal audits, information about violations of the Surveillance Use Policy, and any actions taken in response; (5) Whether the Surveillance Technology has been effective at achieving its identified purpose; (6) The number and nature of Public Records Act requests relating to the Surveillance Technology; (7) Annual costs for the Surveillance Technology and for compliance with this Surveillance and Privacy Protection Ordinance, including personnel and other ongoing costs, and sources of funding; and (8) Other relevant information as determined by the City Manager. The Annual Surveillance Report will not include information that may compromise the integrity or limit the effectiveness of a law enforcement investigation. (b) "Surveillance Evaluation" means written information, including as part of a staff report, including: (1) A description of the Surveillance Technology, including how it works and what information it captures; (2) Information on the proposed purpose, use and benefits of the Surveillance Technology; (3) The location or locations where the Surveillance Technology may be used; (4) Existing federal, state and local laws and regulations applicable to the Surveillance Technology and the information it captures; the potential impacts on civil liberties and privacy; and proposals to mitigate and manage any impacts; (5) The costs for the Surveillance Technology, including acquisition, maintenance, personnel and other costs, and current or potential sources of funding. (c) "Surveillance Technology" means any device or system primarily designed and actually used or intended to be used to collect and retain audio, electronic, visual, location, or similar information constituting personally identifiable information associated with any specific individual or group of specific individuals, for the purpose of tracking, monitoring or analysis associated with that individual or group of individuals. Examples of Surveillance Technology include drones with cameras or monitoring capabilities, automated license plate readers, Page 3 of 5 NOT YET APPROVED closed-circuit cameras/televisions, cell -site simulators, biometrics -identification technology and facial -recognition technology. For the purposes of this Ordinance, "Surveillance Technology" does not include: (1) Any technology that collects information exclusively on or regarding City employees or contractors; (2) Standard word-processing software; publicly available databases; and standard message tools and equipment, such as voicemail, email, and text message tools; (3) Information security tools such as web- filtering, virus detection software; (4) Audio and visual recording equipment used exclusively at open and public events, or with the consent of members of the public; (5) Medical devices and equipment used to diagnose, treat, or prevent disease or injury. (d) "Surveillance Use Policy" means a stand-alone policy or a section in a comprehensive policy that is approved by Council and contains: (1) The intended purpose of the Surveillance Technology. (2) Uses that are authorized, any conditions on uses, and uses that are prohibited. (3) The information that can be collected by the Surveillance Technology. (4) The safeguards that protect information from unauthorized access, including, but not limited to, encryption, access -control, and access- oversight mechanisms. (5) The time period for which information collected by the Surveillance Technology will be routinely retained; the process by which the information is regularly deleted after that period lapses; and conditions and procedures for retaining information beyond that period. (6) If and how non -City entities can access or use the information, including conditions and rationales for sharing information, and any obligations imposed on the recipient of the information. (7) A description of compliance procedures, including functions and roles of City officials, internal recordkeeping, measures to monitor for errors or misuse, and corrective procedures that may apply. 2.30.690 No Private Right of Action. Page 4 of 5 NOT YET APPROVED This Surveillance and Privacy Protection Ordinance is not intended and shall not be interpreted to create a private right of action for damages or equitable relief on behalf of any person or entity against the City or any of its officers or employees. SECTION 3. Severability. If any provision, clause, sentence or paragraph of this ordinance, or the application to any person or circumstances, shall be held invalid, such invalidity shall not affect the other provisions of this ordinance which can be given effect without the invalid provision or application and, to this end, the provisions of this ordinance are hereby declared to be severable. SECTION 4. CEQA. This ordinance is exempt from the requirements of the California Environmental Protection Act (CEQA) pursuant to Section 15061(b)(3) of Title 14 of the California Code of Regulations since it can be seen with certainty that there is no possibility the adoption and implementation of this ordinance may have significant effect on the environment. SECTION 5. Effective Date. This ordinance shall be effective on the thirty-first date after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST: APPROVED: City Clerk Mayor APPROVED AS TO FORM: City Attorney City Manager Page 5 of 5 CITY OF PALO ALTO City of Palo Alto (ID # 9532) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/10/2018 Summary Title: P&S Recommendation to Accept Status Update Fee Schedule Audit Title: Policy and Services Committee Recommends Approval of the Status Update of the Community Services Department: Fee Schedule Audit From: City Manager Lead Department: Community Services Recommendation The Policy and Services Committee and Staff recommend that the City Council approve the status update of Audit Recommendations for the Community Services Department: Fee Schedule Audit. Discussion The City Auditor's Office issued an audit of the Community Services Department's fee schedule in 2017, which was subsequently approved by the City Council on April 17, 2017. The Community Services and Administrative Services departments agreed with the Auditor's recommendations and provided a status update to the Policy and Services Committee on June 21, 2018. The Policy and Services Committee approved and unanimously recommended that the City Council accept the Status of Audit Recommendations report presented by the Community Services Department (link below). The Policy and Services Committee report, status update, and minutes are available at these links: 1. Status of Audit Recommendations: pages 3 and 4 of the Report: https://www.cityofpaloalto.orq/civicax/filebank/documents/65406 2. Full Staff Report from the June 21, 2018 Policy and Services Committee Meeting: https://www.cityofpaloalto.orq/civicax/filebank/documents/65406 3. Minutes of the June 21, 2018 Policy and Services Committee Meeting: https://www.cityofpaloalto.orq/civicax/filebank/blobdload.aspx?BIobID=62174 City of Palo Alto Page 1 CITY OF PALO ALTO CITY OF PALO ALTO OFFICE OF THE CITY CLERK September 10, 2018 The Honorable City Council Palo Alto, California SECOND READING: Adoption of an Ordinance to Amend the Contract Between the Board of Administration of the California Public Employees' Retirement System (CaIPERS) and the City of Palo Alto to Implement the Share of Employer Contribution in Accordance With Section 20516 of the California Government Code (FIRST READING August 20, 2018 PASSED: 9-0) This was first heard by the City Council on August 20, 2018. Below is the motion and vote for the item. It is now before you for a second reading. MOTION: Mayor Kniss moved, seconded by Council Member Wolbach to: A. Adopt a Resolution of Intention of the Council of the City of Palo Alto stating its intent to amend the contract between the California Public Employees' Retirement System (CaIPERS) and the City of Palo Alto in order to implement the pension cost share provision in accordance with California Government Code section 20516 and the Compensation Plan between the City of Palo Alto and the Management and Professional Personnel (MGMT) employee group; and B. Adopt, on first reading, an Ordinance amending the City's contract with CaIPERS. This Ordinance will return to the Council on second reading in accordance with state law. MOTION PASSED: 9-0 ATTACHMENTS: • Attachment A: CALPERS Ord (PDF) Department Head: Beth Minor, City Clerk Page 2 Not Yet Approved Ordinance No. Ordinance of the Council of the City of Palo Alto Authorizing an Amendment to the Contract between the City of Palo Alto and the Board of Administration of the California Public Employees' Retirement System to Add Cost -Sharing Pursuant to Government Code Section 20516 The Council of the City of Palo Alto ORDAINS as follows: SECTION 1. That an amendment to the contract between the City of Palo Alto and the Board of Administration, California Employees' System is hereby authorized, a copy of said amendment hereto, marked Exhibit A, and such reference made a part hereof as though herein set out in full. SECTION 2. The City Manager, or his designee is authorized, empowered, and directed to execute said amendment for and on behalf of the City of Palo Alto. SECTION 3. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: City Attorney City Manager Director of Human Resources Director of Administrative Service AY/HR/2017-07-26 Ord Amending CalPERS Contract 1 Not Yet Approved AY/HR/2017-07-26 Ord Amending CaIPERS Contract 2 CITY OF PALO ALTO CITY OF PALO ALTO OFFICE OF THE CITY CLERK September 10, 2018 The Honorable City Council Palo Alto, California SECOND READING: Adoption of an Ordinance Adding Chapter 10.62 to Title 10 (Vehicles and Traffic) of the Municipal Code to Regulate Unnecessary Idling of Vehicles (Continued From April 2, 2018 and June 12, 2018)(FIRST READING: July 30, 2018 PASSED: 9-0) This was first heard by the Council on July 30, 2018, and it is now before you for a second reading. Below is the motion and vote on the item. MOTION: Council Member Holman moved, seconded by Mayor Kniss to: A. Adopt an Ordinance amending the Municipal Code to add Chapter 10.62 to Title 10 (Vehicles and Traffic) to regulate unnecessary idling of vehicles; and B. Direct Staff to create cards detailing negative air quality impacts of vehicle idling and fuel savings from turning the engine off and restarting. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion Part A, "including Municipal Code Section 10.62.040, Option 2." INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion Part A, "(with Option 3 applying to construction vehicles)." INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to remove from the Motion Part A, "(with Option 3 applying to construction vehicles)." MOTION AS AMENDED RESTATED: Council Member Holman moved, seconded by Mayor Kniss to: A. Adopt an Ordinance amending the Municipal Code to add Chapter 10.62 to Title 10 (Vehicles and Traffic) to regulate unnecessary idling of vehicles, including Municipal Code Section 10.62.040, Option 2; and B. Direct Staff to create cards detailing negative air quality impacts of vehicle idling and fuel savings from turning the engine off and restarting. MOTION AS AMENDED PASSED: 9-0 ATTACHMENTS: • Attachment A: Anti Idling ORD 20180830 (PDF) Department Head: Beth Minor, City Clerk Page 2 Page 3 Not Yet Approved Ordinance No. Ordinance of the Council of the City of Palo Alto Adding Chapter 10.62 to Title 10 (Vehicles and Traffic) of the Palo Alto Municipal Code to Regulate Unnecessary Idling of Vehicles. The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. The City Council finds and declares as follows: A. Program N5.2.1 of the updated City of Palo Alto Comprehensive Plan instructs the city to "[p]romote understanding of the impacts of extended idling on air quality, for residents, auto -dependent businesses and schools." Additionally, Program N5.2.1 of the updated Comprehensive Plan instructs the city to "[c]onsider adopting and enforcing penalties for drivers that idle for longer than 3-5 minutes." This ordinance is intended to effectuate Policy N-5.2 and support behavior changes to reduce emissions of particulate matter and other air pollutants from automobiles. B. Title 13, California Code of Regulations, section 2485 currently makes it unlawful for any diesel -fueled commercial vehicle weighing over 10,000 pounds and operating in California to idle for more than 5 minutes, subject to certain exceptions. Additionally, Title 13, California Code of Regulations, section 2480 requires that school busses and other school - serving busses turn off their engines when stopping at or within 100 feet of a public or private K-12 school, with idling permitted for only up to 30 seconds prior to departure. The California Air Resources Board is authorized to enforce these laws by issuing civil and/or criminal citations to vehicle owners and/or operators and penalties of at least $300 per violation. These regulations do not preclude local governments from regulating vehicle idling more stringently or in a broader manner than the state does currently. C. The unnecessary operation of internal combustion engines poses a number of public health concerns. In particular, airborne pollutants from engine emissions can cause or aggravate pulmonary diseases, including asthma, lung cancer, bronchitis, acute respiratory infections, and emphysema. In addition to public health concerns, idling engines also impose economic costs, including wasted energy, consumption of non-renewable resources, and costs related to medical care and lost productivity due to pollution -related illness. Idling engines also diminish citizens' quality of life by generating noise, odor, and visible smog. D. In addition to impacts on local community health and welfare, unnecessary idling contributes to environmental degradation in the Bay Area and more broadly by emitting greenhouse gases, hydrocarbons, nitrogen oxides, and particulate matter. Although technological advancements in internal combustion engines have reduced some of these impacts, increases in vehicle usage and the continued use of older vehicles has offset many of these technological benefits. Not Yet Approved E. The City of Palo Alto is committed to reducing greenhouse gas emissions from activities within the city. This commitment is demonstrated in part by the city's Sustainability and Climate Action Plan, which targets an 80 -percent reduction in greenhouse gas emissions from 1990 levels by 2030. Additionally, Goal N-5 of the updated Comprehensive Plan demonstrates the city's commitment to developing local policies and working with BAAQMD to promote regional solutions to improve air quality in Palo Alto and throughout the Bay Area. SECTION 2. Chapter 10.62 (Idling of Vehicles) of Title 10 (Vehicles and Traffic) is hereby added to read as follows: Chapter 10.62 Idling of Vehicles 10.62.010 Intent and Purpose. It is the intent and purpose of this chapter to discourage the Idling of Vehicle engines in the City of Palo Alto in order to protect public health, improve environmental conditions, conserve energy and resources, promote economic efficiency, and improve quality of life. This intent and purpose shall be effectuated through primarily educational means. 10.62.020 Definitions. For the purposes of this chapter, these words shall have the following definitions: (a) Idle or Idling means to operate a Vehicle's internal combustion engine while the Vehicle is stationary. (b) Vehicle is defined as in California Vehicle Code section 670. 10.62.030 Restriction of Vehicle Idling. (a) A Vehicle owner or a Vehicle operator shall not cause or permit the Vehicle to Idle on public property, in public rights of way, or on private property that is open to the general public within city limits for more than 3 consecutive minutes. (b) Subsection (a) of this section shall not apply in any of the following circumstances: (1) A Vehicle is forced to remain stationary because of an official traffic control device, direction of a law enforcement official, or any traffic conditions beyond the operator's control, including traffic congestion, railroad crossings, construction zones, security checkpoints, and vehicle queues for drive -through goods and services; (2) Idling is necessary to operate defrosters, heaters, air conditioners, or other equipment to prevent a safety or health emergency for human or animal occupants, or Not Yet Approved to prevent the aggravation of a passenger's disability or health condition, but not merely to maintain the comfort of vehicle occupants; (3) Idling is necessary to provide heat to an occupied Vehicle if the outside ambient temperature is below 40 degrees Fahrenheit, or Idling is necessary to provide cooling to an occupied vehicle if the outside temperature is more than 85 degrees Fahrenheit; (4) Idling is necessary to power heaters or air conditioners to maintain the comfort of vehicle occupants while waiting for assistance when a vehicle is immobilized due to mechanical problems; (5) An emergency or law enforcement vehicle, including police, fire, ambulance, public safety, military, or any vehicle being used in an emergency capacity, Idles in the course of or in preparation for emergency or law enforcement duties; (6) An armored vehicle Idles while in the course of business; (7) Idling is necessary to power auxiliary work equipment that is actively in use, including, but not limited to, cargo refrigeration units, waste collectors/compactors, lifts, winches, pumps, compressors, drills, mixers, and other safety and construction equipment. Auxiliary work equipment does not include equipment primarily intended for vehicle cabin comfort or occupancy, such as air conditioning, heating, radio, television, digital displays, or kitchen appliances; (8) Idling is necessary for any Vehicle maintenance, service, repair, inspection, research and development, or diagnostics; (9) An engine is operated in accordance with instructions from the Vehicle manufacturer for proper operation; (10) Idling is necessary for a licensed private security provider to perform security duties; (11) A Vehicle designed to carry 15 or more passengers Idles to maintain comfortable cabin temperatures while paying passengers are on board for up to 10 minutes prior to a scheduled embarkation; or (12) Applicable federal, state, or local law requires Idling. 10.62.040 Enforcement. It is the responsibility of the members of the police department or such persons as assigned by the chief of police to enforce the provisions of this chapter through any appropriate action, including administrative citation, compliance order, criminal citation, civil injunctive code Not Yet Approved designated as an infraction. Until such time as the City Council designates, by resolution, an intent to administratively enforce this chapter and includes this chapter in a revision to the city's Administrative Penalty Schedule, the city shall not be authorized to enforce this chapter under Chapter 1.08 (Violations), 1.12 (Administrative Penalties — Citations), 1.16 (Administrative Compliance Orders), or by any criminal or civil means. Upon passage of such a resolution or resolutions, enforcement of this chapter shall be available solely through the administrative mechanisms in Chapters 1.12 and 1.16 of this code, and/or written warnings. 10.62.050 Penalties. The maximum penalty for a first violation of this chapter occurring within a calendar year shall be a written warning with no fine. The maximum fine shall be $100.00 for a second violation and $150.00 for a third and any subsequent violation of this chapter occurring within a calendar year. SECTION 3. This chapter shall be in pilot status until June 1, 2019. Before the end of the pilot period, staff will return to Council to review the program, make any necessary adjustments, and consider this chapter for permanent adoption, subject to amendment from time to time as deemed appropriate. Unless Council acts to extend the pilot period or make permanent this chapter before June 1, 2019, this chapter, as it may from time to time be amended, shall be deemed approved on a continuing basis on that date. SECTION 4. If any section, subsection, clause, or phrase of this ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portion or sections of the ordinance. The Council hereby declares that it should have adopted the ordinance and each section, subsection, sentence, clause or phrase thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid. SECTION 5. The Council finds that this project is exempt from the provisions of the California Environmental Quality Act ("CEQA"), pursuant to Section 15308 of the CEQA Guidelines, as an action taken for the protection of the environment. // // // // 4 Not Yet Approved SECTION 6. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: City Attorney City Manager Chief of Police Director of Administrative Services 5 CITY OF PALO ALTO CITY OF PALO ALTO OFFICE OF THE CITY ATTORNEY September 10, 2018 The Honorable City Council Palo Alto, California SECOND READING: Adoption of an Ordinance Amending Chapter 9.68 (Rental Housing Stabilization) of Title 9 (Public Peace, Morals, and Safety) of the Palo Alto Municipal Code to Require Relocation Assistance for No-fault Eviction for Multifamily Housing Developments Containing 50 or More Rental Units (FIRST READING: August 27, 2018 PASSED 7-1 Tanaka no, Fine Absent) MOTION: Council Member Scharff moved, seconded by Mayor Kniss to: A. Adopt Emergency Ordinance 1A. Amending Chapter 9.68 (Rental Housing Stabilization) of the Palo Alto Municipal Code to Require Relocation Assistance Payments for No -Fault Evictions for Multifamily Housing Developments Containing 50 or More Rental Units, and to incorporate the following language: "To be eligible for relocation assistance, a displaced residential household must have an annual household income that does not exceed one hundred (100) percent of the area median household income for Santa Clara County as adjusted for household size according to the United States Department of Housing and Urban Development, as may be adjusted from time to time, and whose rental payments to the landlord remain current through the date of displacement;" and B. Adopt a substantively identical (non -emergency) ordinance on first reading, which will be effective on the 31st day following its second reading. MOTION PASSED: 7-1 Tanaka no, Fine absent ATTACHMENTS: • Attachment A: Relocation assistance regular ordinance_Final 20180830 (PDF) Department Head: Molly Stump, City Attorney Page 2 ORDINANCE NO. Ordinance of the Council of the City of Palo Alto Amending Chapter 9.68 (Rental Housing Stabilization) of Title 9 (Public Peace, Morals, and Safety) of the Palo Alto Municipal Code to Require Relocation Assistance for No -Fault Eviction for Multifamily Housing Developments Containing 50 or More Rental Units The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings and Declarations. The City Council finds and declares as follows: (a) There is a significant and prolonged shortage of, but increasing demand for, rental housing in the City of Palo Alto. These conditions have created a housing crisis that is particularly acute for those residents of Palo Alto seeking rental housing. (b) Numerous recent studies conclude that the housing crises at the state and local levels have reached emergency levels. An April 2018 report by the California Housing Partnership states that Santa Clara County is facing a "housing emergency," resulting in a 13% rise in homelessness and demand for almost 60,000 more affordable rental units throughout the county. A May 2018 report by Next 10 ranks California 3rd worst among states in share of household income spent on rental costs and worst in the nation for rental housing over-crowdedness. (c) The cost of housing in Palo Alto is among the highest in the world. As of July 2018, the median home sales price is reported at over $3 million and the median rent is reported as high as $5,900 per month. (d) According to rental market tracking sites Zumper, Trulia, and Rentometer, as of August 2018, the average rent in Palo Alto is approximately $2,300 per month for a studio, $2,900 for a one -bedroom, $4,300 for a two -bedroom, $5,600 for a three -bedroom, and $7,000 for a four -bedroom unit. (e) Tenants evicted in Palo Alto are forced to incur substantial costs related to new housing including, but not limited to, move -in costs, moving costs, new utility hook-ups, payments for temporary housing, and lost work time seeking housing. (f) Move -in costs commonly include first and last month's rent plus a security deposit equal to one month's rent, leading to total relocation expenses in excess of three months' rent. 180830 sm 010 1 (g) Tenants who do not have adequate funds to move and who are forced to move pursuant to no-fault eviction notice face displacement and great hardship. (h) The impacts of these no-fault evictions are particularly significant on low- income, elderly, and disabled tenants, and tenants with minor children, justifying an additional payment for households with these tenants. (i) Certain no-fault evictions that reduce the number of rental units available, whether on a temporary or permanent basis, exacerbate the housing crisis in Palo Alto, particularly for structures containing 50 of more rental units. (j) For the reasons set forth above, the relocation assistance provided in this ordinance is justified and necessary as an emergency measure for evicted tenants to find new housing and avoid displacement and to otherwise preserve the public peace, health, and safety. SECTION 2. Section 9.68.035 (Relocation Assistance for Certain Displacements) of the Chapter 9.68 (Rental Housing Stabilization) of Title 9 (Public Peace, Morals, and Safety) of the Palo Alto Municipal Code is hereby added to read as follows: 9.68.35 Relocation Assistance for No Fault Eviction (a) This section shall be applicable only to structures or lots containing 50 or more rental units. (b) For the purposes of this section, a "no-fault eviction" means an action by a landlord to recover possession of a rental unit for any reason other than the following: 1. The tenant has failed to pay rent to which the landlord is legally entitled. 2. The tenant has violated a lawful obligation or covenant of the tenancy. 3. The tenant has refused the landlord reasonable access to the unit for the purposes of making repairs or improvements, for any reasonable purpose as permitted by law, or for the purpose of showing the rental unit to any prospective purchaser or tenant. 4. The tenant is permitting a nuisance to exist in, or is causing damage to, the rental unit. 5. The tenant is using, or permitting a rental unit to be used for any illegal purpose. 6. The landlord seeks in good faith to recover possession of the rental unit in order to comply with regulations relating to the qualifications of tenancy established by a governmental entity, where the tenant is no longer qualified. No fault evictions shall include, without limitation, actions in which the landlord seeks in good faith to recover possession of the rental unit: 180830 sm 010 2 7. To demolish or otherwise permanently withdraw the rental unit from offer for rent or lease pursuant to California Government Code sections 7060-7060.7. 8. To perform work on the building or buildings housing the rental unit that will render the rentable unit uninhabitable; 9. For use and occupancy by the landlord or the landlord's spouse, grandparents, brother, sister, father-in-law, mother-in-law, son-in- law, daughter-in-law, children, or parents provided the landlord is a natural person. 10. For no specified cause. (c) For the purposes of this section, an "eligible household" means a displaced residential household whose annual household income does not exceed 100% of the area median household income for Santa Clara County, as adjusted for household size according the United States Department of Housing and Urban Development, as may be adjusted from time to time, and whose rental payments to the landlord remain current through the date of displacement. (d) Whenever a landlord seeks a no-fault eviction of an eligible household, as defined in this section, other than temporary displacement of 31 days or fewer, the landlord shall provide a relocation assistance payment as follows: 1. Unit Type Amount 0 bedrooms $7,000 1 bedroom $9,000 2 bedrooms $13,000 3 or more bedrooms $17,000 If the eligible household occupying a rental unit is comprised of two or more tenants, the landlord shall provide each tenant with a proportional share of the required payment. One half of the payment shall be paid at the time that the landlord provides notice of its intent to seek no-fault eviction or as soon as the landlord is aware that the rental unit is occupied by an eligible household; the remainder of the payment shall be paid when the tenant vacates the unit. 2. Notwithstanding subsection (d)(1), each rental unit that, at the time the landlord provides notice of its intent to seek no-fault eviction, is occupied by a low-income household as defined in Chapter 16.65, a tenant who is 60 years of age or older, a tenant who is disabled within the meaning of Government Code section 12955.3, or a tenant who is a minor, shall be entitled to a single additional relocation payment of $3,000. This amount shall be divided equally among the qualifying (i.e. low-income, elderly, disabled, or minor) tenants. In order to receive this additional payment a qualifying tenant must provide written notice to the landlord of his or her eligibility along with supporting evidence within 15 days of receiving the landlord's notice. The entirety 180830 sm 010 3 of this additional payment shall be paid within 15 days of the tenant's written notice to the landlord. (e) Prior to or at the same time that the landlord provides notice of its intent to seek no-fault eviction, the landlord shall serve on the tenant a written notice describing the rights described in this section. The failure to provide this notice shall not operate as a substantive defense to an eviction pursuant to California Government Code sections 7060-7060.7. (f) Commencing July 1, 2019, the relocation payments specified in this section shall increase annually at the rate of increase in the "rent of primary residence" expenditure category of the Consumer Price Index (CPI) for All Urban Consumers in the San Francisco -Oakland -San Jose Region for the preceding calendar year. Current rates shall be published on the City's website. (g) A landlord may request a waiver or adjustment of the relocation assistance payment required by this section only upon a showing that strict application of its requirements would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property. Requests for waiver or adjustment must be submitted in writing to the Director of Planning and Community Environment together with supporting documentation at least 90 days before the proposed termination of tenancy. Requests shall be acted on by the City Council. (h) The Director of Planning and Community Environment may issue regulations implementing this section. SECTION 3. If any provision, clause, sentence or paragraph of this Ordinance, or the application to any person or circumstances, shall be held invalid, such invalidity shall not affect the other provisions of this Ordinance which can be given effect without the invalid provision or application and, to this end, the provisions of this Ordinance are hereby declared to be severable. In addition, this Ordinance is enacted to exercise the specific authority provided for in Chapter 12.75 of Division 7 of Title 1 of the California Government Code and reserved to local governments in Chapter 2.7 of Title 5 of Part 4 of Division 3 of the California Civil Code. In the case of any amendment to these chapters or any other provision of State law which amendment is inconsistent with this Ordinance, this Ordinance shall be deemed to be amended to be consistent with State law. SECTION 4. The City Council finds and determines that this Ordinance is not a project within the meaning of section 15378 of the California Environmental Quality Act ("CEQA") because it has no potential for resulting in physical change in the environment, either directly or ultimately. In the event that this Ordinance is found to be a project under CEQA, it is subject to the CEQA exemption contained in CEQA Guidelines section 15061(b)(3) because it can be seen with certainty to have no possibility of a significant effect on the environment. // 180830 sm 010 4 SECTION 5. This ordinance shall be effective on the thirty-first date after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: City Attorney City Manager Director of Planning and Community Environment Director of Administrative Services 180830 sm 010 5 CITY of City of Palo Alto (ID # 9481) PALO ALT© City Council Staff Report Report Type: Action Items Meeting Date: 9/10/2018 Summary Title: Response to Grand Jury Report and RHNA Sub -Region Discussion Title: Approval of Responses to the Grand Jury Report on Affordable Housing Crisis and Discussion of Establishing a Regional Housing Needs Assessment (RHNA) Sub -region From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that Council: 1. Review, provide input, and approve the draft responses (Attachment A) to the Santa Clara County Civil Grand Jury regarding the report entitled "Affordable Housing Crisis: Density Is Our Destiny" dated June 21, 2018; and 2. Discuss and provide input to the Cities Association Board of Directors regarding the potential participation of the City in a Regional Housing Needs Allocation (RHNA) sub- region. Executive Summary On June 21, 2018, the Civil Grand Jury of Santa Clara County released the Grand Jury Report entitled "Affordable Housing Crisis: Density Is Our Destiny" ("Report"). This Report discusses the specific need for affordable housing or below market rate (BMR) housing within the county, understanding that the region as a whole is experiencing a housing deficit. The Report, which makes 13 Palo Alto specific findings and 12 recommendations regarding various approaches to support the creation of BMR housing, must be responded to within 90 days of the report publication (by September 20). Staff has prepared a draft response (Attachment A) for Council to consider, refine as needed, and approve. City of Palo Alto Page 1 On a separate but similar track, the Cities Association of Santa Clara County ("Cities Association") has requested formal direction or comments on the subject of establishing a Regional Housing Needs Assessment (RHNA) sub -region; all cities within the County were asked to report on legislative body interest in forming a sub -region. The Cities Association plans to discuss the RHNA sub -region formation at their October 11, 2018 Board of Directors meeting and requested comments by September 28, 2018. The formation of a RHNA sub -region is also listed in the Report as a recommendation for Palo Alto, and because of the similar timelines staff has combined these two discussion items in one staff report to facilitate more effective Council deliberations. Background Grand Jury Report The Civil Grand Jury is an investigative body created for the protection of the public and the enforcement of the law. The Grand Jury may examine all aspects of county and city government to ensure that the best interests of Santa Clara county citizens are being served. The Grand Jury reviews and evaluates procedures, methods and systems utilized by county/city government to determine whether more efficient and economical programs could be considered. The Grand Jury's investigation covered BMR housing challenges faced not just by the County and its 15 cities, but also by nonprofits and agencies such as the Housing Authority of Santa Clara County, as well as the Santa Clara Valley Transportation Authority (VTA) and Santa Clara Valley Water District (SCVWD). The Grand Jury researched the Housing Elements for each city and for the County, as well as the Regional Housing Needs Allocation (RHNA) for the current housing cycle tracked by RHNA, 2015-2023, and the prior cycle, 2007-2014. More than 100 documents and media articles were reviewed and a visit to a homeless shelter was included. The Report states that housing growth continues to fall far behind job growth in the County. The San Francisco Bay Area Planning and Urban Research Association reports that from 2010 through 2015, San Jose created 171,000 jobs, but just 29,000 housing units. From 2010 through 2016, employment in Silicon Valley jumped 29%, while housing inventory rose just 4%. The Report provides additional information on the background of the issues, methodology, and discussion on recommended solutions. In its conclusion, the Report makes 13 Palo Alto specific findings and sub -findings and 12 recommendations regarding various approaches to support creation of BMR housing. The findings and recommendations are detailed in the Report (Attachment B). A draft letter addressed to the Santa Clara County Superior Court includes draft City of Palo Alto Page 2 responses to the Report. The City Council is asked to affirm or modify staff's proposed responses as appropriate. Cities Association Request for Comments on RHNA Sub -region Formation The Cities Association of Santa Clara County was formed in 1990 and is comprised of a council member from each of the 15 cities in Santa Clara County. Through the Cities Association, city leaders collaborate, research policy, and work together on issues of mutual local interest. The Palo Alto representative in the Cities Association focused on the sub -region consideration is Council Member Greg Scharff. The Cities Association, in an effort to improve the regional housing deficit problem, has actively been discussing the RHNA sub -region formation for more than five years. As part of that on- going effort, the Cities Association reached out to the cities within the county to get feedback from the individual councils regarding the formation of a sub -region. This feedback will be presented at the Cities Association Board of Director's meeting on October 11, 2018. To respond to the Cities Association's request for comments on the formation of a RHNA sub- region, staff has outlined some key discussion points below. These include the state requirements to form a sub -region; previous discussions; guiding principles for formation; and the pros and cons. Staff requests that the City Council provide direction on whether or not the City should participate and support the formation of a RHNA sub -region. Requirements for a RHNA Sub -region RHNA is the process by which the State of California Housing and Community Development (HCD), in coordination with the jurisdiction's Council of Governments (COG),1 determines a city's share of the regional housing need. The regional housing need is determined by estimating both the existing need and the projected need for housing. The City's Housing Element must contain enough capacity to meet the determined housing allocation. Housing Elements must be updated every eight years and Palo Alto's current Housing Element was adopted in November 10, 2014 for the 2015-2023 Housing Element cycle. HCD, as permitted by the Housing Element Law (Government Code Sections 65580-65589), allows certain combinations of local governments to form a sub -region to implement the RHNA process and determine the allocation of housing units within its jurisdictions, instead of the COG. State law allows for the formation of a sub -region by two or more contiguous cities and a county at least 28 months prior to the schedule housing element update. The sub -region can then develop its own methodology, issue draft allocations and conduct the revision and appeals process, while meeting its statutory requirements per State law. The sub -region can also facilitate and approve trades between jurisdictions as long as the overall numbers and ratio of 1 The COG for Palo Alto is the Association of Bay Area Governments (ABAG). City of Palo Alto Page 3 required income levels are maintained. All of this provides a sub -region with greater flexibility and control than the traditional process managed by HCD and ABAG. Sub -region Formation Discussions The idea of a sub -region has been the subject of multiple discussions during the previous housing cycle, and prior to the issuance of the Grand Jury report, by several County wide organizations, including the Santa Clara County/City Managers Association (SCCCMA), the Santa Clara County Planning Officials (SCCAPO), and the City's Association of Santa Clara County (Cities Association). Sub -regions have been formed for three northern California counties: San Mateo, Napa and Solano Counties. All of the sub -regions for the three Counties included full participation by all the cities in the associated counties. Following Santa Clara County county- wide discussions, in 2011 it was recommended that the County jurisdictions would study the possibility of a RHNA sub -region for the 2022-2030 Housing Element cycle. The decision to defer the discussion was due to a lack of resources and time constraints. To respond to the recommendation, the Cities Association formed a Regional Housing Task Force/subcommittee in November 2015 to study this issue. The Cities Association identified the sub -region formation as a priority in 2017 and 2018 because it would provide an opportunity for greater flexibility to ensure that the RHNA allocations make sense regionally. The subcommittee is comprised of elected officials and staff representatives from Palo Alto, Sunnyvale, San Jose, Los Gatos, Morgan Hill and the County. Over three years, the subcommittee developed a framework and process to establish and implement a RHNA sub -region. During the discussions, it was emphasized that this process would include the input of all jurisdictions and be a cooperative effort so that no city would be compelled to implement an action they did not support. It was suggested that existing organizations, such as the Cities Associations, be used to act as the sub -region entity, as a low cost way and to utilize existing structures. Using existing organizations also allows the discussions to take place within a greater context. These same groups will also discuss other County -wide issues, allowing for a more robust conversation for both RHNA requirements and trades, as well as other regional concerns, fostering greater cooperation. At their June 2018 meeting, the Cities Association recommended a two-step process for the formation of a sub -region. The first step would be for the city councils to discuss the formation of a sub -region, which includes review of the pros/cons, the draft Guiding principles, and draft By-laws. Following these discussions, the Cities Association will make a formal decision at their Board of Directors meeting on October 11. If there is a decision to move forward with the formation of the sub -region, the second step would be for participating cities to adopt a resolution to support the formation. A sample resolution is provided in Attachment C. City of Palo Alto Page 4 As outlined by the Government Code, an eligible sub -region can be formed with each jurisdiction adopting a resolution, identification of a sub -region entity (the Cities Association subcommittee for example), adoption of rules and agreement with ABAG/MTC. Once the sub- region is formed, the entity would create a methodology, allow for public comment and distribute the allocation. The next RHNA cycle for the housing element will start in 2020. Guiding Principles The Cities Association established guiding principles for the sub -region formation that reflects its goals as a collaborative organization. The Guiding Principles, approved in May 2018 (Attachment D), incorporate a vision that defines the purpose: "For Santa Clara County and its cities to work collaboratively to produce more housing in the Region, have a unified voice in responding to the area's housing needs —a problem that transcends jurisdictional barriers." The principles state that the sub -region shall accomplish the following: 1. Conform with all State objectives, including ensuring that the allocation of housing units is allocated to all jurisdictions in the region in an equitable manner. 2. Allocate housing growth strategically around major transportation corridors and near employment and services, while respecting infrastructure constraints and the unique natural resources of Santa Clara County. 3. Foster collaboration between jurisdictions and develop collective strategies that provide a framework for addressing housing need, including the potential for resources/housing allocation trade-offs. 4. Facilitate an open dialogue between jurisdictions, the public, and interested organizations, including transportation agencies and land use bodies. 5. Utilize existing forums for discussion (e.g. Cities Associations, City Managers' Association, SCCAP, etc.). Pros and Cons for Sub -region Formation The sub -region subcommittee also developed a list of pros and cons for the sub -region formation, which is provided in Attachment E. The most significant pros include the following: • Creates flexibility and allows cities to trade for housing units. • Empowers cities and increases local control. • Allows better alignment between local and regional needs. • Creates a forum for collaboration. The most significant cons include the following: • Time, effort and resources which may end in same result as what the City would have received from the State/ABAG. • Lack of trust for fair and equitable process within the subregion. City of Palo Alto Page 5 • Potentially greater pressure on jurisdictions with either more land or resources. • Santa Clara County has such large population/resource variations that brokering agreements may be more challenging than other counties. Staff supports the concept of a RHNA sub -region. Participation could foster regional communication and collaboration in trying to solve this greater Bay Area housing problem and related issues. And, if for some reason the City of Palo Alto did not wish to follow the sub - regional allocations, the City can choose to follow the standard state allocations. With this provision, there is no significant risk for the City to join/establish a sub -region. Next Steps If the Council supports the further exploration of a RHNA sub -region, the City's representative will share this at the October Cities Association Board of Directors meeting for further discussion. The results of that discussion will then be shared with the City Council with the option of adopting a resolution of support. The sub -region will include cities only with their full support. Policy Implications The proposed actions are consistent with numerous Comprehensive Plan goals and policies that encourage and support housing development, including affordable housing. Resource Impact At this time, the recommended actions are not anticipated to have a significant fiscal impact to the City. Timeline The City is required to provide a response to the Grand Jury Report within 90 days of its publication and is due by September 20, 2018. The Cities Assocation requested city comments by September 28, 2018 in order to prepare those for their October 11, 2018 Board meeting. Environmental Review The action requested in this report does not constitute a project as defined by the California Environmental Quality Act (CEQA) and no further analysis is required. Attachments: Attachment A: DRAFT Grand Jury Report Affordable Housing Response Letter (DOCX) Attachment B: Grand Jury Report: Affordable Housing Crisis Density Is Our Destiny (PDF) Attachment C: Resolution to Support RHNA Subregion TEMPLATE (PDF) Attachment D: SCC RHNA Subregion Guiding Principles (PDF) Attachment E: Pros and Cons of RHNA Subregion Formation (PDF) Attachment F: RHNA Subregion Overview (PDF) City of Palo Alto Page 6 Attachment G: SCC RHNA Subregion Guiding Principles (PDF) City of Palo Alto Page 7 PLANNING & COMMUNITY ENVIRONMENT CITY OF 250 Hamilton Avenue, 5th Floor PALO Palo Alto, CA 94301 ALTO 650.329.2441 September , 2018 Honorable Patricia Lucas Santa Clara County Superior Court 191 North First Street San Jose, CA 95113 Re: Response to the Santa Clara County Civil Grand Jury Report "Affordable Housing Crisis Density Is Our Destiny" Judge Lucas: On June 21, 2018, the Civil Grand Jury of Santa Clara County released the Grand Jury Report entitled "Affordable Housing Crisis Density Is Our Enemy" ("Report") that makes 13 Findings and 12 Recommendations. The City is required by CA Government Code §§ 933(c) & 933.05(a) & (b) to respond to the Findings and Recommendations listed below. Civil Grand Jury Finding la Lack of housing near employment centers worsens traffic congestion in the County and increases the urgency to add such housing. Cities to respond are Campbell, Cupertino, Gilroy, Los Altos, Los Gatos, Milpitas, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. City of Palo Alto Response Partially Disagree. Traffic congestion is influenced by many factors. The City has not conducted an analysis of County -wide employment centers let alone its effect on traffic congestion relative to the placement of housing or how those employment centers are served through transportation networks. The City supports reasonable objectives of reducing single occupancy trips and vehicle miles traveled and finds value in placing housing opportunities near employment centers. Civil Grand Jury Finding lb Mass transit stations (Caltrain, VTA, BART) create opportunities for BMR units. Cities to respond are Campbell, Gilroy, Milpitas, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. City of Palo Alto Response Partially Disagree. Transit stations alone may not be a sufficient catalyst to create opportunities for BMR units. Zoning, property values, construction costs and other land use policies - combined with the intended purpose of the station require alignment to create housing opportunities generally, and BMR units specifically. Civil Grand Jury Finding lc Density bonus programs are not being used aggressively enough to produce the needed BMR units within one-half mile of transit hubs. Cities to respond are Campbell, Gilroy, Milpitas, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. City of Palo Alto Partially Disagree. Density bonus programs are land use tools that offer Page 1 of 7 CityOfPaloAlto.org Response developers a greater increase in housing density, floor area, or other development potential in exchange for providing a certain amount of affordable housing units on site. It is uncertain what is meant by aggressive implementation in this finding or whether such implementation strategy is the intent of State law. Other metrics to consider when evaluating the effectiveness of density bonus programs is to understand how many times it has been used when there were qualifying housing projects and how many additional units did it yield. State law creates incentives whereby qualifying housing projects can receive parking reductions without providing and density bonus. Civil Grand Jury Recommendation 1a To improve jobs -to -housing imbalances, the cities of Palo Alto, Santa Clara, Milpitas, Mountain View and Sunnyvale should identify, by June 30, 2019, parcels where housing densities will be increased. The identification should include when projects are expected to be permitted and the number of BMR units anticipated for each parcel. City of Palo Alto Response This recommendation has been implemented. The City of Palo Alto has an adopted Housing Element, which includes programs and policies for implementation. The City is on track for implementing the vast majority of these policies and programs, including and active policy analysis that raises the RM-15 zoning to RM-20 (from 15 units to an acre to 20 units) and establishes minimum unit densities on certain properties within all multi- family zones. Estimated completion is December 2018. Additionally, the City is exploring the possibility of raising the BMR requirement from 15% of the project to 20% and extending on -site BMR requirements to rental housing. Civil Grand Jury Recommendation 1b Cities should identify parcels within one-half mile of a transit hub that will help them meet their LI and moderate -income BMR objectives in the current RHNA cycle, by the end of 2019. Cities to respond are Campbell, Gilroy, Milpitas, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. City of Palo Alto Response This recommendation has been implemented. The City of Palo Alto has an adopted Housing Element, which includes a list of properties identified and approved by the State as being suitable for redevelopment. When preparing the list of suitable sites, the City examined property within a one half mile radius of major transit stations and within a quarter mile radius of major bus routes. Identification of these properties was intended to address the regional housing needs for all income levels in Palo Alto. Civil Grand Jury Recommendation lc Cities should revise their density bonus ordinances to provide bonuses for LI and moderate -income BMR units that exceed the minimum bonuses required by State law for parcels within one-half mile of a transit hub, by the end of 2020. Cities to respond are Campbell, Gilroy, Milpitas, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. City of Palo Alto Response The recommendation will not be implemented because it is not warranted. The City has a density bonus ordinance that is compliant with State law. In Palo Alto, all housing projects that are subject to the local BMR program are also eligible for state density bonuses. While in time the City may revisit its density bonus program, given limited municipal resources, the City is focusing on other measures that it anticipates will better incentivize housing Page 2 of 7 production. Civil Grand Jury Finding 2a Employers in the County have created a vibrant economy resulting in an inflated housing market displacing many residents. Agencies to respond are all 15 cities and the County. City of Palo Alto Response Partially Disagree. There are many factors that are responsible for the strong economy in the County. Policy implementation at all levels of government support job development, which has resulted in strong jobs production. Likewise, government (federal, state and local) policy and funding decisions have had an impact on housing production. Civil Grand Jury Recommendation 2a The County should form a task force with the cities to establish housing impact fees for employers to subsidize BMR housing, by June 30, 2019. Agencies to respond are all 15 cities and the County. City of Palo Alto Response The recommendation requires further analysis. If the County forms a task force, representatives from the City of Palo Alto could participate. However, there are several other funding mechanisms that have been implemented and are being revised to provide more funds for affordable housing throughout the region. In Palo Alto, the City has recently increased its development impact fees and in -lieu fees for BMR housing Civil Grand Jury Finding 2b Contributions to BMR housing from employers in the County are not mandated nor evenly shared. Agencies to respond are all 15 cities and the County. City of Palo Alto Response Agree. The City of Palo Alto does not require a direct contribution from employers for BMR housing, as such obligations are levied on the developers of commercial space based on an analysis of the impacts the tenants/employers will create on the need for BMR housing. Civil Grand Jury Recommendation 2b Every city in the County should enact housing impact fees for employers to create a fund that subsidizes BMR housing, by June 30, 2020. Agencies to respond are the County and all 15 cities. City of Palo Alto Response This recommendation requires further analysis. The City of Palo Alto already collects impact fees for commercial development to mitigate the impact of such development on the need for BMR housing. Civil Grand Jury Finding 3a RHNA sub -regions formed by several San Francisco Bay Area counties enable their cities to develop promising means to meet their collective BMR requirements. Such sub -regions can serve as instructive examples for cities in the County. Agencies to respond are all 15 cities. City of Palo Alto Response Partially Disagree. The City of Palo Alto has not evaluated the effectiveness of other Bay Area RHNA sub -regions in terms of meeting their respective BMR units. Palo Alto is willing to explore a RHNA sub -region and agrees it would be instructive to examine other Bay Area RHNA sub -regions. Civil Grand Jury Recommendation 3a Every city in the County should identify at least one potential RHNA sub - region they would be willing to help form and join, and report how the sub- region(s) will increase BMR housing, by the end of 2019. Agencies to respond are all 15 cities. City of Palo Alto Response The recommendation requires further analysis. The City of Palo Alto cannot speak to the appropriateness of this recommendation for other cities. For Palo Alto, the City Council will discuss its support for joining a possible Page 3 of 7 RHNA sub -region on September 10, 2018. The Santa Clara County Cities Association is a task force within the County that is presently exploring this possibility. Palo Alto and other communities will report back to the Cities Association, which is anticipated to take the lead coordinating this effort with the State Housing and Community Development department to implement a sub -region in time for the next housing element cycle. Civil Grand Jury Finding 3b Developers are less willing to consider BMR developments in cities with the County's highest real estate values because these developments cannot meet their target return on investment. Cities to respond are Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Palo Alto and Saratoga. City of Palo Alto Response Partially Disagree. Palo Alto does not have any evidence to support this finding. While return on investment is a key factor for any developer, there may be other considerations that make housing development less attractive. While it appears to be softening, the demand for office space generated a higher return rate, which is different than achieving a reasonable or target return rate for housing. Some housing developers may be willing to initially have a lower return rates in Palo Alto because the housing market has remained consistently strong and over the long term would achieve target returns. Other factors, including housing policy decisions may have as much influence or more in developer decisions to locate housing within a particular jurisdiction. Civil Grand Jury Recommendation 3b A RHNA sub -region should be formed including one or more low-cost cities with one or more high -cost cities, by the end of 2021. Agencies to respond are all 15 cities. City of Palo Alto Response The recommendation will not be implemented because it is not reasonable. Palo Alto cannot accept a recommendation on another jurisdiction's behalf. Moreover, BMR housing should not be directed to low-cost cities as implied with this recommendation. Housing affordability are acute problems in high - cost cities and the City supports equitable distribution throughout the region. Civil Grand Jury Finding 3c More BMR units could be developed if cities with lower housing costs form RHNA subregions with adjacent cities with higher housing costs. Responding agencies are all 15 cities. City of Palo Alto Response Partially Disagree. Palo Alto has not conducted an analysis of housing costs between different jurisdictions. Land value clearly influences the cost of development. However, unit rental rates and sale prices also influence return on investment, which is anticipated to be lower in low-cost cities. Civil Grand Jury Recommendation 3c High -cost cities and the County should provide compensation to low-cost cities for increased public services required for taking on more BMR units in any high-rent/low-rent RHNA subregion, by the end of 2021. Agencies to respond are Campbell, Cupertino, Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Mountain View, Palo Alto, Santa Clara, Saratoga, Sunnyvale and the County. City of Palo Alto Response The recommendation will not be implemented because it is not warranted or reasonable. This recommendation establishes a timeline for high -rent Page 4 of 7 jurisdictions to compensate low -rent communities for increased public services related to housing units not built in reliance on a sub -regional housing plan that has not been adopted and whose support is unknown. Moreover, the suggestion that low -rent communities should support a greater responsibility for meeting the regional housing needs is dubious. All jurisdictions share a responsibility for providing affordable housing opportunities within their boundaries. If a regional sub -region is formed and Palo Alto is a participant, it is willing to explore strategies that advance appropriate and reasonable housing goals. Civil Grand Jury Finding 3e High-cost/low-cost RHNA sub -regions could be attractive to high -cost cities because they could meet their BMR requirements without providing units in their cities. Cities to respond are Campbell, Cupertino, Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Mountain View, Palo Alto, Santa Clara, Saratoga and Sunnyvale. City of Palo Alto Response Partially Disagree. For reasons stated above, this approach may not be the best strategy for advancing equitable housing opportunities in the region. If a regional sub -region is formed and Palo Alto is a participant, it is willing to explore strategies that advance equitable housing goals. Civil Grand Jury Finding 5a Uneven BMR achievements among cities is caused in part by varying inclusionary BMR unit percentage requirements. Agencies to respond are all 15 cities and the County. City of Palo Alto Response Partially Disagree. The City of Palo Alto has not examined other municipalities BMR production and is unable to affirm or reject the finding. There may also be other factors that influence BMR housing production. Civil Grand Jury Recommendation 5 Inclusionary BMR percentage requirements should be increased to at least 15% in Gilroy, Los Altos, Los Gatos, Milpitas, Morgan Hill, Palo Alto and Sunnyvale, by the end of 2019. City of Palo Alto Response The recommendation has been implemented. Palo Alto is not able to suggest other cities adjust their BMR requirements. For its part, Palo Alto already requires a minimum of 15% for BMR units for projects with three or more residential ownership units. This requirement can range up to 25% when the new project converts or removes existing rental units. Additionally, Palo Alto is currently exploring the possibility of increasing this standard from 15% to 20% and applying it to rental housing projects. Civil Grand Jury Finding 6 In -lieu fees, when offered as an option, are too low to produce the needed number of BMR units and delay their creation. Cities to respond are Campbell, Cupertino, Milpitas, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. City of Palo Alto Response Partially Disagree. It may be that some municipalities would benefit from re - evaluating in lieu housing fees. The City of Palo Alto has recently conducted a study and held public hearings to ensure that in -lieu fees are appropriately set. Civil Grand Jury Recommendation 6 Cities with an in -lieu option should raise the fee to at least 30% higher than the inclusionary BMR equivalent where supported by fee studies, by the end of 2019. Cities to respond are Campbell, Cupertino, Milpitas, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. Page 5 of 7 City of Palo Alto Response This recommendation will not be implemented because it is not warranted. The City of Palo Alto's recently updated its inclusionary housing ordinance to clearly prioritize the production of affordable units over payment of fees. The City will accept in -lieu fees only if a developer can show that all higher priority options that would result in the immediate production of BMR units are infeasible. Civil Grand Jury Finding 7 NIMBY (Not in My Backyard) opposition adversely affects the supply of BMR housing units. Agencies to respond are all 15 cities and the County. City of Palo Alto Response Partially Disagree. Opposition to development may constrain housing development generally and BMR housing units specifically. However, opposition to development may or may not be specifically related to BMR housing units. There may be other concerns related to traffic, neighborhood character, construction -related impacts or other issues that generate opposition to projects. Civil Grand Jury Recommendation 7 A task force to communicate the value and importance of each city meeting its RHNA objectives for BMR housing should be created and funded by the County and all 15 cities, by June 30, 2019. City of Palo Alto Response The recommendation will not be implemented because it is unwarranted and vague. Through adoption of the City's Housing Element, the City engaged in a community dialogue about the importance of housing and identifying potential redevelopment sites to meet housing goal objectives. The City continued a community dialogue about housing with its recent Comprehensive Plan adoption. Through active implementation programs, the continues to support and is actively crafting ordinances to increase housing production. The City's local decision -makers, board and commission members are aware of the value and importance of housing generally and more specifically, the State mandated RHNA requirements. Forming a task force for the stated purpose stretches government resources, is unnecessary and can likely be handled by other governmental entities such as the County's Housing and Community Development Advisory Committee. Civil Grand Jury Finding 8 It is unnecessarily difficult to confirm how many BMR units are constructed in a particular year or RHNA cycle because cities and the County only report permitted units. Agencies to respond are all 15 cities and the County. City of Palo Alto Response Partially Disagree. While there continues to be opportunities to improve access to information and enhance transparency, the City of Palo Alto annually reports the number of housing units generated each year to the State Housing and Community Development departments in compliance with mandated requirements. Civil Grand Jury Recommendation 8 All 15 cities and the County should annually publish the number of constructed BMR units, starting in April 2019. City of Palo Alto Response The recommendation has not yet been implemented, but will be implemented in the future, no later than March 31, 2019. Should you have any questions regarding this letter, please contact me at 650-329-2679 or jonathan.lait@cityofpaloalto.org. Page6of7 Sincerely, Jonathan Lait, AICP Interim Director Page 7 of 7 AFFORDABLE HOUSING CRISIS DENSITY IS OUR DESTINY Civil Grand Jury of Santa Clara County June 21, 2018 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY TABLE OF CONTENTS Summary 2 Background 3 Methodology 4 Discussion 4 Regional Housing Needs Assessment Suggested Solutions Communications Campaign 11 Strengthening RHNA 11 As Goes San Jose RHNA Performance - So Goes the County 14 Inclusionary Housing Ordinances 17 Density Bonus Implementation and Density Near Transit 18 California Versus Its Cities 18 Housing and Employment - Commercial Linkage Fees 19 Employer Contributions 21 Accessory Dwelling Units 23 Residential Impact Fees and Parcel Taxes 23 VTA Serves as Model for Public Entities 24 Findings and Recommendations 25 Required Responses 30 Appendix 31 Glossary and Abbreviations 42 Page 1 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY SUMMARY The critical need for affordable housing is the issue of the day in Santa Clara County ... and our cities are flailing. Higher densities are a necessary solution, but cities are not fully embracing this solution in the face of resident resistance, and a lack of funding, land and urgency. In addition, there is confusion as to the effect of higher densities on traffic congestion. California's report card gives Santa Clara County (County) cities an F. Everyone shares the blame and the challenge. A city marches to the beat of its populace, and with citizen resistance, the affordable housing crisis continues. However, innovation -focused Silicon Valley points to some affordable housing successes. In December 2017, the Mountain View City Council approved general development plans for nearly 10,000 housing units. This North Bayshore plan includes 2,000 affordable units, 30% more than officials envisioned just a few years earlier. The County's other successes include the new 262 -unit Alexander Station in Gilroy, with every unit priced for below -median - income households, and the Santa Clara Valley Transportation Authority's (VTA) organized housing efforts. An increasing number of people are one missed pay check away from relocation or homelessness. The lack of affordable housing is destined to have an increasingly profound impact on the County. Ironically, the County's great economic success is a cause of the exceedingly high housing costs. The 2017-18 Santa Clara County Civil Grand Jury (Grand Jury) tackled the issue of affordable, or below market rate (BMR) housing. The Grand Jury's investigation made one thing clear — drastic action is long overdue. Greater communication about the need for every city to do its share will help. Cities can increase densities and enact policies to spark more BMR housing. Yet, there are only minimal repercussions for cities that do not meet State -set BMR housing objectives. Passage of Measure A, a $950 million housing bond, in 2016 demonstrates that County voters are willing to pay a price to help solve the problem. Housing officials estimate Measure A will create and preserve 5,000 housing units for the neediest.' That is a start, but the County needs more than 67,000 such units.2 Besides cities, other governmental entities and the County's largest employers must step up. There is no getting around that higher densities are needed, with a greater focus on putting housing near jobs and near transit hubs, taking pressure off regional infrastructure. Increasing fees that developers can pay in lieu of providing BMR units within projects is 1 https://www.sccgov.org/sites/scc/Pages/Affordable-Housing-Bond-Measure-A.aspx 2 Ibid Page 2 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY critical. Some cities need to boost their inclusionary ordinances, which require that developments include BMR units. Accessory dwelling units (ADUs) should be encouraged. Employers must shoulder some of the load, perhaps via a BMR housing impact fee based on number of employees. San Jose, which accounts for more than half the County population, has long had more housing than jobs and has not implemented commercial linkage fees. However, the time has come for the nation's 10th -largest city to take that step. Smaller cities with little commercial sites should consider residential impact fees or parcel taxes. Cities can create a Regional Housing Needs Allocation (RHNA) sub -region that pools the resources of more than one city to meet housing needs. Cities should have to report not just housing permits issued, as is now the case, but also the number of BMR units actually constructed. BACKGROUND The phrase "below market rate" itself reveals a big part of the challenge. Funding for BMR housing comes from a variety of federal, state, local and private sources. The need for more housing has challenged the County for more than a decade. The Grand Jury focused on BMR housing, which consists of households with incomes designated as Extremely Low Income (ELI), Very Low Income (VLI), Low Income (LI) and moderate. (See Table Al in the Appendix.) The average monthly rent for a two -bedroom apartment in San Jose jumped 21% to $2,8343 this year from $2,3504 five years ago. As for single-family homes, the middle class is being priced out. In February 2018, the median price of a single-family home in the County rose a staggering 34% from February 2017, to $1.29 millions. From 2012-16, wages in Santa Clara County, San Mateo County and San Francisco County areas have risen an average of 2.8 percent a year, while average housing rents have risen roughly 9 percent a year.6 Housing growth continues to fall far behind job growth in the County. The San Francisco Bay Area Planning and Urban Research Association reports that from 2010 through 2015, San 3 https://www.rentcafe.com/average-rent-market-trends/us/ca/santa-clara-county/san-jose/ 4 San Jose Housing Market Update Q2 2013, referenced source is RealFacts, http://www.sanjoseca.gov/DocumentCenter/View/19820 , page 4 5 https://www.mercurynews.com/2018/03/22/bay-area-home-prices-keep-going-up-one-county-sets-a- new-record/ 6 https://www.mercurynews.com/2017/07/17/bay-area-rent-increases-far-outstrip-wage-gains/ Page 3 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Jose created 171,000 jobs, but just 29,000 housing units. From 2010 through 2016, employment in Silicon Valley jumped 29%, while housing inventory rose just 4%.7 METHODOLOGY The Grand Jury interviewed over 65 people for this report, many more than once. Those interviewed included elected and appointed government officials, leaders of nonprofits and developers. The investigation covered BMR housing challenges faced not just by the County and its 15 cities, but also by nonprofits and agencies such as the Housing Authority of Santa Clara County, as well as the VTA and Santa Clara Valley Water District (SCVWD). The Grand Jury researched the Housing Elements for each city and for the County, as well as the Regional Housing Needs Allocation (RHNA) for the current housing cycle tracked by RHNA, 2015-2023, and the prior cycle, 2007-2014. More than 100 documents and media articles were reviewed and a visit to a homeless shelter helped the Grand Jury appreciate the impact of our BMR housing shortage in a more personal manner. DISCUSSION Density is our Destiny Density is at the heart of the many BMR housing solutions. The Grand Jury's review focused on the County's 15 cities and unincorporated area, and included these topics: • the Regional Housing Needs Assessment (RHNA - pronounced ree-na), • NIMBY (Not in My Backyard) vs. YIMBY (Yes in My Backyard) advocacy • inclusionary housing ordinances • transit -oriented development • jobs -housing ratios • linkage and impact fees • employer contributions • accessory dwelling units • governmental entities other than cities 7 http://svlg.org/new-study-shows-students-making-incremental-progress-in-some-key-educational-areas- and-a-vexing-exodus-of-residents-from-the-bay-area Page 4 of 45 AFFORDABLE HOUSING CRISIS — DENSITY IS OUR DESTINY Regional Housing Needs Assessment California law vests most land -use regulatory authority with cities and counties. Since 1969, California has required that these jurisdictions adequately plan to meet their housing needs. Cities and counties must adopt Housing Elements, updated in every eight -year cycle, as part of their general plans.8 California's RHNA is crucial to the Housing Elements. The State requires cities to submit Annual Progress Reports on their Housing Elements to the California Department of Housing and Community Development (HCD) and the Governor's Office of Planning and Research.9 Yet, the RHNA process does little to ensure that housing needs are met. Cities and counties face no consequences other than bad press for failing to meet their RHNA objectives. The State Legislature is starting to force cities to increase the housing permitting pace, a source of conflict between the State and cities. HCD determines the RHNA goals for California's regional planning bodies, which are known as Council of Governments (COGs). Each COG uses demographic data to calculate housing needs and assign RHNA goals for each city and county, in eight -year cycles. Association of Bay Area Governments (ABAG) is the COG for the nine Bay Area counties. The RHNA process requires local governments to be "accountable" for projected housing needs. RHNA provides a benchmark for evaluating local zoning and regulatory actions.18 The County's BMR RHNA results for the prior cycle (2007-2014) are shown in Figure 1. This data is provided in Appendix, Table A2. None of the County's 15 cities met their BMR goals last cycle, and 11 failed to even reach half. Figure 1 shows that the best BMR performers in the last cycle were unincorporated County (92%), Sunnyvale (85%) and Campbell (83%), while the worst were Saratoga (8%), Los Gatos (13%) and San Jose (15%). Figure 2 shows how the cities are doing this cycle through 2017, with Los Gatos (2%), Campbell (2%) and Santa Clara (2%) barely making a dent in BMR permits and Milpitas AWOL (0%). This data is provided in Appendix, Table A3. Los Gatos and San Jose requested that their 2014 permits be counted in the current 2015- 8 California Department of Housing and Community Development, "Regional Housing Needs Allocation and Housing Elements", http://www.hcd.ca.gov/community-development/housing-element/index.shtml 9 Ibid. io California Department of Housing and Community Development, "Projected Housing Needs - Regional Housing Needs Allocation", http://www.hcd.ca.gov/community-development/building-blocks/housing- needs/prof ected-housing-needs.shtml Page 5 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY 2023 cycle.1' The request was granted so now these two cities have an extra year of units credited compared to the other cities in the County. For these two cities, the numbers in Figure 2 include 48 months of performance, vs. 36 months for the other cities. The RHNA need in the current cycle is calculated from Jan 1, 2014, through Oct 31, 2022. (See "RHNA current cycle" definition in the Glossary.) Figure 3 shows performance in BMR and overall permits for the prior cycle and current cycle through 2017. Three cities struggled to provide BMR units but succeeded in above -moderate housing: Milpitas (19% of BMR vs. 366% of above -moderate), Los Altos (13% vs 645%) and Los Altos Hills (41% vs 375%). This data is provided in Appendix, Table A4. Trailing in BMR units are Los Gatos (7%), Saratoga (7%), San Jose (10%) and Cupertino (10%). As the Figures on the following pages show, no city met its BMR objective in the prior cycle and only Gilroy is close to being on pace in the current 2015-2023 cycle. Proposed SB 828 says RHNA goals should be viewed as the minimum numbers needed. Worse yet, the Grand Jury found that many BMR permitted units have not been built. Because there is no requirement that constructed units be reported, the permitted units might never be built. San Jose is presented in gold in Figures 1 through 4 to highlight its importance to the County, as discussed below in the section headlined As Goes San Jose's RHNA Performance, So Goes the County's. 11 San Francisco Bay Area Progress in Meeting 2015-2023 Regional Housing Need Allocation (RHNA), https://abag.ca.gov/planning/housingneeds/pdfs/2015-2023%20 RHNAProgressReport.pdf Page 6 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Figure 1: RHNA results for the 2007-2014 cycle Percent of 2007-2014 RHNA BMR Goal Met Saratoga Los Gatos San lose Palo Akio Cuptertino Mountain View Gilroy Santa Clara Los Altos Morgan Hill Milpitas Los Altos Hills Monte Sereno Campbell Sunnyvale Unincorporated 11 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of 2007-2014 RHNA Above Market Goal Met Saratoga 0 Campbell 0 Palo Alto 11 San lose Los Gatos Unincorporated Sunnyvale Gilroy O Monte Sereno 11 1 Cuptertino 1 11 1 Mountain View Santa Clara Morgan Hill - - Los Altos Hills Milpitas Los Altos 0% 100% 200% 300% 400% 500% 600% 700% 800% 900% 1000%1100%120091S Percent of 2007-2014 RHNA Total Units Goal Met Saratoga • Palo Alto Los Gatos San Jose Cuptertino Campbell Monte Sereno Gilroy 11 Unincorporated Mountain View Sunnyvale Santa Clara Morgan Hill Los Altos Hills Los Altos Milpitas 0% 50% 100% 150% 200% 250% 300% 350% Page 7 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Figure 2: RHNA results for 2015-2023 cycle, through 201712 Percent of 2015-2023 RHNA BMR Goal Met Milpitas Santa Clara ■ Los Gatos ■ Campbell A Los Altos ■ Cupertino • Sunnyvale • San Jose —I Saratoga t Palo Alto Unincorporated Morgan Hill 111 Mountain View fi Monte Sereno Los Altos Hills t♦ Gilroy 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of 2015-2023 RHNA Above Market Goal Met Saratoga 1 Palo Alto • Los Gatos MI Sunnyvale p Campbell San Jose iJ Cupertino Santa Clara Milpitas lC1 Mountain View Gilroy Morgan Hill Monte Serena Los Altos Hills Los Altos Unincorporated 0% 100% 200% 300% 400% 500% 600% 700% 800% 900% Percent of 2015-2023 RHNA Total Units Goal Met Saratoga Los Gatos Palo Alto Cupertino 1 Sunnyvale D Campbell San Jose Santa Clara Milpitas Monte Sereno Mountain View 1� Los Altos Hills Morgan Hill i Los Altos Unincorporated Gilroy 40% 60% 80% 100% 120% 12 Regional Housing Needs Allocation and Housing Elements, 5th Annual Progress Report Permit Summary, http://www.hcd.ca.gov/community-development/housing-element/index.shtml f Page 8 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Figure 3: RHNA results for 2007-2017 Percent of 2007-2017 RHNA BMR Goal Met Los Gatos Saratoga = Cupertino San Jose Palo Alto Los Altos Santa Clara Mountain View Milpitas Morgan Hill Gilroy Sunnyvale Monte Sereno Campbell Los Altos Hills Unincorporated 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of 2007-2017 RHNA Above Market Goal Met Saratoga 0 Campbell IO Palo Alto Los Gatos i`=1 San Jose — 4 Sunnyvale Cupertino I n 1 Unincorporated Gilroy Mountain View Monte Serena ► Santa Clara Morgan Hill Milpitas Los Altos Hills Los Altos — 0% 100% 200% 300% 400% 500% 600% 700% Percent of 2007-2017 RHNA Total Units Goal Met Saratoga Los Gatos Palo Alto San Jose Cupertino Campbell Sunnyvale Monte Sereno Mountain View Santa Clara Los Altos Hills Gilroy Morgan Hill Unincorporated Milpitas Los Altos 0% 20% 40% 60% 80% 100% 120% 140% 160% Page 9 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY The Debate and Suggested Solutions The Grand Jury reviewed scores of topics that cover aspects of the BMR housing challenge. This report focuses on several potentially impactful solutions. But first, there is a need to understand the resistance to continued growth. The Debate There often are sound reasons to limit development. Too much development stresses infrastructure, as vocal local residents often are quick to point out. The NIMBY (Not in My Backyard) mindset can be strong, with arguments that sway politicians and discourage BMR developers. NIMBY arguments often center on transportation and schools. Greater housing density requires acceptance of greater traffic congestion and therefore the need for modes of travel other than the automobile. Improving transportation is often an elusive piece of the housing puzzle, especially in cities with a high jobs -to -employed resident imbalance. Commute times have increased by 17% in Silicon Valley this past decade. Commute times have more than doubled to 66,000 additional vehicle hours daily.13 Another big piece of the puzzle is the stress that added population puts on overburdened schools. A grassroots movement known as YIMBY (Yes In My Backyard), led largely by millennials, has started to exert influence in support of denser developments.14 YIMBYs support more affordable housing and backed the failed SB 827, which would have forced cities to increase development densities near transit hubs.15 The no-more-growth/no-more-jobs constituency is vocal. They want to cap jobs and population near current levels. The ramifications of these views for our economy must be clearly communicated. Planners must consider which key variables should be monitored and optimized when considering growth implementation and limits. The Grand Jury urges leaders in the County to clearly articulate their views regarding the most critical variables to monitor and manage in determining the preferred pace and limits for housing and employment growth. 13 2018 Silicon Valley Index, Rachel Massaro, Institute for Regional Studies and Joint Venture Silicon Valley, page 9 https://siliconvalleyindicators.org/download-the-2018-index/ 14 https://cayimby.org/ 15 Ibid. Page 10 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Communications Campaign The Grand Jury found strong support among both public -sector and private -sector leaders for a unified communications campaign to educate County citizens regarding the critical need for BMR housing and the necessity of every jurisdiction doing its RHNA share. Many residents do understand the need. The proof came on Nov. 8, 2016, when more than 450,000 County residents voted to approve affordable housing Measure A, needed to issue $950 million in bonds to fund BMR housing countywide. Still, the margin of approval was a thin 1.21 percentage points above the two-thirds required. SB 316 is on the Nov. 6, 2018, ballot. It authorizes the issuance of $3 billion in bonds for BMR housing statewide. But officials say Measure A and SB 3 won't be enough to meet demand for BMR housing. Officials say more outreach describing the magnitude of the problem is needed. While the Cities Association of Santa Clara County is among entities that could lead the way, the Grand Jury believes the County is the logical choice to facilitate a unified communications campaign that aims to convert NIMBYs into YIMBYs and ease the road ahead for higher densities and more BMR housing. A communications campaign could inform residents about a lesser -known component of Measure A. It includes support of social services such as counseling and job training for the ELI, VLI and LI segment. As one County official put it, "Housing is actually a treatment," a part of whole -person care. That message, properly articulated, can go a long way toward overcoming the objections of the NIMBYs. The communications campaign should analyze the need for higher densities in the context of the leadership consensus for preferred pace and limits for housing and employment growth. Strengthening RHNA One avenue for possible cooperation among cities is to form one or more RHNA sub -regions. ABAG encourages forming sub -regions. San Mateo, Napa and Solano counties have done so, but not Santa Clara County. Sub -regions offer promise of encouraging more BMR housing. A sub -region gives cities more control and flexibility to meet their RHNA housing goals by sharing the burden with adjacent cities. Sub -regions must be a combination of geographically contiguous local governments and require ABAG's approval. The Cities Association of Santa Clara County17 is considering 16 https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill id=201720180SB3 17 http://citiesassociation.org/ Page 11 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY the possibilities of sub -regions. BMR categories are defined by the countywide median income (Table Al in the Appendix). The consequence is widely different ratios between cities in the median price of housing (which is a city statistic) and the median income of buyers (which is a countywide statistic). As a result, fewer developers are willing to consider BMR developments in the cities with the highest -priced real estate: Los Altos, Los Altos Hills, Palo Alto, Saratoga, Los Gatos and Monte Sereno. Their high real estate values make it harder for developers to meet their target return on investment without greater public subsidies. As of late 2017, 83% of County residents earning less than $50,000 a year were rent - burdened, defined as paying more than 30% of pretax income to monthly rent.18 The workforce the County needs to maintain Silicon Valley's vibrant economic engine is all too frequently leaving for more affordable places. Studies show that even tech engineers struggle to afford homes in the County.19 The total cost of BMR units, as with any housing, largely depends on the underlying real estate values. The Grand Jury calculated the hypothetical cost to developers, government entities, buyers and all other stakeholders in creating a BMR unit. This was done in order to look at the potential to create more BMR units in a sub -region that combines lower -cost with higher -cost cities. The County's median purchase price for a two -bedroom ranges from $609,000 in Gilroy to $4,090,000 in Los Altos Hills, according to real estate firm Zillow's website on May 25, 2018 (Figure 4 and Table A620 ). The high end price is 6.7 times greater than the low end. The 6.7 value is referred to as location leverage for obtaining BMR housing. Housing officials stress, and the Grand Jury agrees, that BMR housing should not be concentrated in the lowest -cost areas in part because this would result in a burden shift from wealthier cities to less wealthy ones. Still, there can be win -win situations. Cities with higher real estate prices and little developable land could form a sub -region with adjacent cities having lower prices to leverage more BMR units for the County overall for a given amount of investment. For example, a Los Gatos -San Jose sub -region would provide a location leverage of about 2 because the Los Gatos median price for a two -bedroom home is $1.43 million and San Jose's $773,000. Nearly twice as many BMR units could be created in San Jose as in Los Gatos, for the same cost of development and therefore purchase price. 18 https://www.mercurynews.com/2017/10/05/lifestyle-switch-more-bay-area-residents-are-choosing-to- rent-than-ever-before-and-theyre-paying-through-the-nose/ 19 https://www.mercurynews.com/2018/02/14/buying-a-bay-area-home-now-a-struggle-even-for-apple- google-engineers/ 20 Data from 15 Zillow.com city sites including https://www.zillow.com/palo-alto-ca/home-values/ and https://www.zillow.com/gilroy-ca/home-values/ Page 12 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Figure 4: Median Prices of Two -Bedroom Homes in Santa Clara County The potential cost benefit of creating a single sub -region comprising the entire County is presented in Appendix, Table A6. The cities in such a sub -region would strike their own alliances depending on their mutual needs. The data in Table A6 describe two extreme situations for the expected sales cost of creating the BMR units needed in the County to meet its RHNA objectives. The highest cost option is where no sub -regions are created. The total sales price for the 32,791 BMR units required in the current cycle would be $31.9 billion with an average price of $975 thousand. The lowest cost sub -region option would be to place all of the BMR units in the least expensive city (Gilroy). The total sales price for all of the BMR units needed to meet the County's RHNA objective using this lowest cost option would be $20.1 billion (at an average cost of $609 thousand), which would be an $11.9 billion savings. The lowest cost sub -region option is presented only for comparison purposes. There is no political or social justification for this lowest cost option. It is presented only to compute the lowest possible cost of BMR housing that meets the Countywide RHNA objectives. The higher cost cities are encouraged to evaluate their potential savings with lower cost cities using an RHNA BMR objective sharing approach, and to determine where savings and Page 13 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY regional considerations support such sharing. Such regional considerations include the impact of BMR units on critical infrastructure and services, including; public safety, transportation, schools, retail access, parks, and social and health services. Cities that take on additional BMR units would need to be incentivized by their sub -region partners, perhaps with extra funding for transportation infrastructure, parks, schools, safety and social services. There are other scenarios where a RHNA sub -region makes sense. The Grand Jury envisions combining cities that have few vacant buildable parcels and no rail transit hubs with adjacent cities that could accommodate more dense transit -oriented developments (TOD). As Goes San Jose's RHNA Performance, So Goes the County's San Jose's roughly 1.05 million residents comprise more than 55% of the County population. San Jose has long complained of its lack of jobs vs. housing, a challenge because commercial development brings in more tax revenue than the cost of services, while residential development demands are just the opposite. San Jose has the highest housing -jobs imbalance of any of the largest U.S. cities.21 San Jose has ambitious goals for both commercial and residential development. In September 2017, Mayor Sam Liccardo established an objective of 25,000 new housing units in five years, starting in 2018, with 10,000 (40%) of those units below market rate.22 That would require almost a doubling of San Jose's permitting pace. The 10,000 BMR target would require a permitting pace five times faster than the average over the past 11 years. The Liccardo plan directs staff to identify barriers to meeting this objective. Developers characterize the city's approval process as overly burdensome, which critics attribute to the city: • being too conservative regarding litigation risks • maintaining unrealistic open space requirements • requiring full approval of its Urban Village plans before construction can start • maintaining architectural requirements that are too expensive • having high turnover in the city's planning department Developers indicate they require a 10% to 14% return on investment (ROI) to deem a project viable.23 They say high land, materials and labor costs in this County make achieving the 2i US Suburbs Approaching Jobs -Housing Balance, Wendell Cox, Apr. 12, 2013 http://www.newgeography.com/content/003637-us-suburbs-approaching-j obs-housing-balance 22 Sam Liccardo's 15 point plan for "Responding to the Housing Crisis" - 9/28/2017, http://sanjose.granicus.com/MetaViewer.php?meta id=667033 23 "Construction costs could limit where homes are built in San Jose" by George Avalos, 5/1/2018 Page 14 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY target margins challenging. San Jose's General Plan provides valuable elements for BMR housing. In December 2014, San Jose amended its General Plan, establishing a goal that at least 15% of new housing be priced for ELI, VLI and LI households. In December 2016, the city amended its General Plan to: • Establish a 25% goal for affordable housing in each Urban Village • Allow 100% restricted (deed or income) affordable housing to move forward ahead of market -rate development in Urban Villages • Allow selected commercial sites of at least 1.5 acres to convert to mixed -use residential -commercial developments if the project includes 100% restricted - affordable housing But developers say the city's slow pace in approving Urban Villages has delayed development. San Jose officials say 12 of 64 total Urban Villages have been approved, and a 13th was pending at the time of this report. Figure 5 and Appendix, Table A7 show that San Jose is 36,000 units short of meeting its BMR objectives for the prior and current RHNA cycles. The current cycle runs until October 2022, so San Jose has only four years to catch up. https://www.mercurynews.com/2018/05/01/construction-costs-could-limit-where-san-j ose-homes-are- built-google-adobe-diridon/ Page 15 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Figure 5: BMR Permits - Unit Deficit To make up that deficit, San Jose would have to issue 9,000 BMR permits per year through this cycle, while it has averaged only 400 per year between 2007-2017. This BMR deficit emphasizes why San Jose must maintain a strong BMR push even as it focuses on adding jobs. The San Jose BMR deficit dwarfs that of any other city in the County. The city with the next - highest BMR deficit is Santa Clara, at 4,200 units. This enormous difference in BMR unit deficit demonstrates San Jose's shortcomings and that the County cannot make substantial Permits - Unit Deficit San Jose Santa Clara Sunnyvale • Milpitas ■ Palo Alto ■ Mountain View Cupertino Gilroy . Morgan Hill Los Gatos Campbell ' Los Altos Saratoga Unincorporated Los Altos Hills Monte Serena 0 5 10 15 20 25 30 35 40 Santa Clara County Total Permits Unit Deficit: 59,172 Thousands progress in meeting its RHNA BMR goals if San Jose does not perform. San Jose's importance is why it is highlighted in Figures 1, 2, 3 and 5. San Jose is ahead of pace for above -moderate housing, as Figure 3 shows. This housing is needed, but it shouldn't come at the expense of BMR housing. In 2013, San Jose expanded and extended its Downtown High -Rise Development Incentive Program, which in three downtown areas provides exemptions to the inclusionary housing ordinance and reduces in - lieu fees to half of the rest of downtown.24 This shows San Jose's willingness to relax BMR requirements. Given, the lack of BMR unit production by San Jose, the Grand Jury encourages San Jose to push as hard as possible to use tools to create BMR units to their fullest advantage. 24 City of San Jose 2014-2023 Housing Element, page IV -33 Page 16 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Inclusionary Housing Ordinances Inclusionary housing ordinances (IHOs) require that developers allocate a percentage of units for BMR housing. Eight cities in the County allow developers to pay fees in lieu of providing the units on -site. As Appendix, Table A8 shows, Los Altos Hills, Monte Sereno, Morgan Hill and Saratoga do not have inclusionary ordinances. All but Morgan Hill have residential zones with large lot sizes and few sites for large housing developments. Due to the small number of potential multi- unit developments in Los Altos Hills, Monte Sereno and Saratoga, inclusionary ordinances would generate few BMR units in these cities and are not a priority. As shown in Table A8, seven Santa Clara cities have BMR inclusionary requirements of 15% to 20%. But the inclusionary ordinances for Los Altos, Milpitas, Palo Alto and Sunnyvale require less than 15%. Raising that percentage could help spark more BMR housing. Setting the percentage too high, however, can be a problem. San Francisco's housing development applications sank after the city hiked its BMR inclusionary percentage to 25% from 12% for new rental projects, forcing the city to compromise at 18%.25 Palo Alto, much coveted by developers, is considering a 25% requirement but only in some situations. Morgan Hill has a voter -approved Residential Development Control System 26 (RDCS) instead of an IHO. The RDCS makes developers compete for development permits based on how well their applications meet the city's goals. One issue that weakens inclusionary ordinances is the use of in -lieu fees. Cupertino, Milpitas, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale give developers the option of paying these fees instead of creating BMR units within their development. Many officials interviewed by the Grand Jury said these fees are a bargain for developers, who often choose that option. In -lieu fees usually go into the cities' BMR housing funds, but it can be many years before the fees translate into BMR units. Officials say in -lieu fees usually produce fewer BMR units than the on -site requirement would have realized. The Grand Jury believes that in -lieu fees should be avoided and that cities should incentivize developers to build BMR units within their developments. If cities retain in -lieu fees, they should be raised above comparable inclusionary requirements. The fee should be set at least one-third higher than the inclusionary requirement to encourage on -site BMR units. For example, Santa Clara has a 15% BMR inclusionary requirement. So, at one-third higher, the in -lieu fee would be no lower than the cost equating to a 20% inclusionary requirement. 25 Roland Li, May 18, 2017, https://www.bizjournals.com/sanfrancisco/news/2017/05/18/sf-affordable- housing-compromise-development.html 26 http://www.morgan-hill.ca.gov/109/RDCS-Process Page 17 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Density Bonus Implementation and Density Near Transit All cities must offer density bonuses to allow developers to build more units overall so long as they allocate more units for BMR. Density bonuses can generate more BMR units, especially in Transit -Oriented Developments (TODs). Transit experts advocate densities of at least 50 units per acre for TODs.27 Such densities can effectively increase transit system usage and enable developers to meet their profitability goals. A 2016 State 1aw28 extends density bonuses to mixed -use developments 29 and offers related incentives and concessions to make projects financially feasible. Mixed -use development can be especially attractive near transit hubs because both employees and residents can readily access mass transit and thereby ease traffic congestion. Mixed -use projects also have the advantage of generating tax revenue from the commercial component, offsetting the cost of the residential component. One alternative to denser in -fill developments is housing in exurbs where land is less costly and housing is therefore more affordable. However, persons who work in the County and find lower -cost housing outside the County find that high transportation costs eat into their housing cost savings.38 Residential, commercial and mixed -use TOD appeals to cities and developers for a variety of reasons.31 TOD encourages use of mass transit by persons who live or work near a transit hub. Parking requirements for TOD are often eased to encourage use of mass transit. Recently defeated SB 827 would have mandated high densities near transit hubs. It failed in part due to organized multi -city opposition. However, cities can still move forward with their own TOD efforts. Caltrain, VTA and BART create opportunities for BMR units in cities with transit hubs. Cities should identify parcels within one-half mile of a transit hub and work to bring high -density BMR-related developments on those sites. California Versus Its Cities Cities have failed to meet their BMR and the overall housing challenge. State lawmakers increasingly are proposing to take some control from cities in an effort to force more housing to be built. 27 VTA interview 28 An act to amend Section 65915 of the Government Code, relating to housing https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill id=201520160AB2501 29 California Government Code §65915(i) 38 Mixed -Income Housing Near Transit: Increasing Affordability with Location Efficiency, TOD 201, by The Center for Transit -Oriented Development, page 5 http://www.reconnectingamerica.org/assets/Uploads/091030ra201mixedhousefinal.pdf 31 Id., page 8 Page 18 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY SB 828, as of June 1, 2018, proposes to modify current 1aw32 to state that cities and counties should undertake all necessary actions to encourage, promote and facilitate the development of housing to accommodate the entire regional housing need. The proposed measure also requires reasonable actions be taken by local and regional governments to ensure that future housing production meets, ataminimum, the RHNA objectives. The League of California Cities leads the cities' fight with the State over control of land use decisions. Local governments strongly object to any loss of local control, but State lawmakers are looking to give RHNA allocations more teeth. Cities will increasingly face such threats if they don't move faster to create more BMR housing. Housing and Employment, Commercial Linkage Fees Figure 6 and Appendix, Table A9 provide jobs to employed resident ratios for the 15 cities in the County. The values range from 0.33 for Monte Sereno to 3.02 for Palo Alto. A jobs to employed resident ratio of about 1.0 is viewed as balanced by the Local Agency Formation Commission (LAFCO) of Santa Clara.33 A balanced ratio is associated with lower traffic congestion impact compared to an unbalanced ratio. However, striving to have each city attain a ratio of 1.0 would likely lead to unnecessary inefficiencies. Given that many employed residents commute to other cities in the region, regional balance may be as important as balance within a single city. The Grand Jury believes a city with a ratio of 0.9 to 1.1 reasonably balances jobs and housing. The cities that fall within the ratio range of the translucent vertical bar (0.9 to 1.1), meet this reasonable balance. They are represented by yellow horizontal bars in Figure 6. Cities with jobs to employed resident ratios above 1.1 have substantially more jobs than employed residents and typically create more road congestion flow from employees commuting to and from their jobs. These cities are represented by the upper cluster of red bars in Figure 6. These cities could alleviate regional traffic congestion by adding more housing. Cities with jobs to employed resident ratios below 0.9 have substantially more employed residents than jobs and typically create more road congestion as well from employees commuting to and from their homes. These cities are represented by the lower cluster of red bars in Figure 6 and could alleviate regional traffic congestion by adding more jobs. Commercial developments tend to raise revenue for cities. That puts more services and corresponding financial burden on cities with more housing and less employment. For cities 3z Government Code (GC) Section 65584(a)(2) 33 LAFCO of Santa Clara County, Cities Service Review, Section 22, "Sprawl Prevention/Infi11 Development, pages 314-315, http://santaclaralafco.org/file/ServiceReviews/CitiesSR2015/23CSRR FA Sprawl.pdf Page 19 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY with high employment, higher density can place more employees near their jobs. The larger pool of potential skilled employees makes these cities more attractive for employers. Milpitas and Palo Alto have many differences, but among their similarities are they have fallen short on BMR housing and have jobs to employed resident ratios above 1.1. Their commercial linkage fee revenue could be leveraged in a RHNA sub -region to provide more BMR housing. Additionally, higher -density residential zoning would bring in more BMR units and improve their jobs to employed resident ratios. Figure 6: Jobs Per Employed Resident Jobs Per Employed Resident Palo Alto Santa Clara Los Gatos Milpitas Campbell Los Altos Mountain View Cupertino Sunnyvale Morgan Hill San Jose Saratoga Gilroy Los Altos Hills Monte Serena 0.00 0.20 0.40 0,60 0.80 1,00 1.20 1.40 1.60 1,80 2.00 2,20 2.40 2,60 2.80 3.00 3.20 Google and the city of Mountain View, in the North Bayshore project, set an example of providing substantial BMR housing for the community. By comparison, Cupertino -based Apple's new headquarters for 12,000 employees,34 including many new employees, was planned with no additional housing. That might have been OK if the new headquarters was solely a consolidation of Apple's existing space. But it appears Apple will vacate little space and the new headquarters largely will be used to accommodate work force expansion. This was a missed opportunity for collaboration by Cupertino. In many cities, developers of commercial projects pay commercial linkage fees. The idea is that cities will use these funds for new developments that would house about as many people as are employed in that commercial project. State law requires that cities complete a nexus 34 "Here's how much every inch of Apple's new $5 billion campus cost to build" by Abagail Hess, CNBC, Oct. 9, 2017 - https://www.cnbc.com/2017/10/09/how-much-every-inch-of-apples-new-5-billion-campus-cost-to- build.html Page 20 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY study to determine the appropriate linkage fee.35 Linkage fees justified by the nexus studies are often much higher than the fees adopted. The nexus study evaluates the number of employees generated by different types of development. Appendix, Table A10 shows that Palo Alto, Santa Clara, Cupertino, Mountain View and Sunnyvale have commercial linkage fees for BMR housing. Palo Alto has the highest fee, at up to $35 per square foot. Santa Clara's top linkage fee increases to $20 per square foot after Jan. 18, 2019.36 Cities with larger jobs to employed resident ratios could form a RHNA sub -region to share their commercial linkage fee income with other cities that have more sites for BMR projects. This could have a bigger impact if the fees were shared with cities that can develop BMR housing near transit stations. Table A10 shows that Campbell, Milpitas and Saratoga have completed nexus studies that provide fee recommendations, but none have enacted a commercial linkage fee. These cities could quickly benefit from these commercial linkage fees. San Jose, with its low jobs to employed resident ratio, has encouraged commercial development. It has not completed a nexus study. But in view of the city's big BMR shortfall, the Grand Jury recommends San Jose complete a nexus study and enact a commercial linkage fee to create more funding for BMR housing. Employer Contributions The County and cities should consider enacting housing impact fees on employers. Officials interviewed by the Grand Jury have been receptive to the idea. Mountain View and Cupertino are to be commended for exploring the idea.37 Such a fee could be appropriate because employers have benefited from their activities in the County. They need housing and other local services for the jobs they create directly and indirectly. Experts say one high-tech job translates into four jobs in other sectors.38 Housing challenges and congested roads can be improved by subsidizing denser housing near employment centers and transportation hubs. 3s Mitigation Fee Act, Gov. Code section 66000 et seq. 36 Santa Clara City Resolution 17-8482 - Establishing Affordable Housing Fees and Integrating the Fees into the Municipal Fee Schedule, Attachment A 37 https://www.sfchronicle.com/business/article/Apple-could-get-hit-with-employer-tax-in-its- 12927462.php 38 http://www.bayareacouncil.org/community engagement/new-study-for-every-new-high-tech-job-four- more-created/ Page 21 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Housing impact fees set too high could make the County less desirable for companies. Still, such a fee would be designed to help fix a region -wide problem shared by all the County's employers and make for a more vibrant region. The County and cities should form a task force to establish the specifics of a BMR housing impact fee on employers. A measure recently approved by the Seattle City Council could provide a template. Referred to as the "Amazon Tax," because Amazon.com is the largest company headquartered in Seattle, the measure requires that businesses with annual revenue above $20 million pay $275 per full-time employee each year over the next five years. Seattle officials expect the tax will generate nearly $47 million and be used in part to build more than 590 BMR housing units.39 Many large employers in Santa Clara County have contributed to solutions to the housing crisis. Google is the major landowner in Mountain View's landmark North Bayshore Plan.4o Facebook offers monetary incentives for employees who reside near work and has pledged $30 million for affordable housing. LinkedIn was an early, major investor41 in the Housing Trust's TECH Fund, which aims to fund affordable housing. Cisco Systems has invested in the TECH Fund and in March pledged $50 million42 for efforts to house the homeless in the County. Adobe Systems, Intel, HP and Applied Materials are among major donors to the Housing Trust. The BMR housing crisis requires steady sources of funding, from all sectors. Given the history of innovative solutions and philanthropy by employers, we urge the County and cities to partner with the largest employers and groups such as the Silicon Valley Leadership Group to develop additional solutions for the BMR housing crisis. 39 http://m_ynorthwest.com/925685/task-force-employee-hours-tax-seattle/ 49 https://www.mountainview.gov/depts/comdev/planning/activeprojects/northbayshore .asp 41 http://www.housingtrustsv.org/news/linkedin-commits-to-affordable-housing-in-mountain-view-w-l0m- investment-in-tech-fund/ 42 https://newsroom.cisco.com/feature-content?articleId=1918354 Page 22 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Accessory Dwelling Units ADUs are being encouraged by several cities as the most expedient option to satisfy their RHNA allocations. These also are referred to as "granny" or "NexGen" units. Appendix, Table All provides ADU regulation and production data. For Monte Sereno, Saratoga, Los Gatos, Los Altos, Los Altos Hills and unincorporated County, ADUs are a major component of their BMR housing efforts. ADUs are attractive in these cities because they have mostly large -lot single-family residences. These cities should require deed restrictions for ADUs, guaranteeing that these units remain within the BMR income categories. If such deed restrictions for ADUs cannot be required, the cities should provide incentives so owners are encouraged to voluntarily include long-term deed restrictions. ADUs can fit the bill for families, so long as the cities allow ADUs to be a certain size, perhaps 1,200 square feet or more, to accommodate family households. Residential Impact Fees and Parcel Taxes Cities with limited commercial development or developable land lack ways to generate funding to meet BMR objectives. These cities have limited options to raise revenue in view of Proposition 13 and the elimination of redevelopment agencies. They also have small populations and small RHNA requirements. An impact fee imposed on new residential development is one tool these cities could use. Such fees are already in place in Palo Alto, San Jose and Sunnyvale, as shown in Table A8. The fee is based on the connection between the development of market -rate housing and the need to expand the supply of BMR housing. Such fees are typically 10% of construction costs and are just one of many substantial fees developers have to pay. BMR parcel taxes could be an answer but require voter approval. Fulfilling the jurisdiction's RHNA BMR allocation would be a proper purpose for a parcel tax. What level of revenue could be achieved from a parcel tax? In Monte Sereno there are 1,222 assessor's parcels. A tax of $1,000 per parcel would generate more than $1.2 million a year. At an estimated price of $500,00043 per BMR unit, that could produce two BMR units per year. The RHNA allocation to Monte Sereno for ELI, VLI and LI for the current cycle is 35 units. The same formula for the 3,014 assessor's parcels in Los Altos Hills brings in $3 million per year, which could yield six BMR units. The Town's current RHNA allocation for ELI, VLI and 43 The per unit cost of $500,000 is obtained using an average unit size of 1,000 sq ft, $300 per sq ft construction cost, a density of 20 units per acre, and land cost of $4 million per acre. Page 23 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY LI is 74. VTA Serves as Model for Public Entities The VTA recognizes the importance of developing its real estate assets and has created a Joint Development Program (JDP).44 The VTA is creating high -density projects on its land adjacent to transit by partnering with developers. The VTA transit -oriented developments (TODs) include BMR housing with the aim to improve VTA ridership. The VTA's development process includes inter -agency coordination and collaboration with developers, cities and other stakeholders.45 The VTA development process can serve as a model for other public entities including the Santa Clara Valley Water District (SCVWD) and the County. Potential County sites include Civic Center, Fairgrounds and Burbank area. The VTA says its JDP encourages higher -density development. 46 Local jurisdiction willingness to rezone transit -adjacent properties from commercial to residential or mixed use is a critical step for creating BMR housing. This is especially important in San Jose, where nine of 18 potential TOD sites presently have non-residential zoning.47 The VTA properties having potential for BMR units are listed in Appendix, Table Al2. The Almaden and Cottle sites can provide more BMR units if San Jose would rezone these parcels for mixed -use including residential. With the VTA model in mind, the County and SCVWD should identify parcels they own that are suitable for BMR. 44 VTA Joint Development Program, http://vtaorgcontent.s3-us-west- 1.amazonaws.com/Site Content/VTA%20Joint%20Development%20Policy.pdf 4s Ibid. 46 Ibid. 47 Grand Jury interview with VTA Page 24 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY FINDINGS AND RECOMMENDATIONS Finding la Lack of housing near employment centers worsens traffic congestion in the County and increases the urgency to add such housing. Cities to respond are Campbell, Cupertino, Gilroy, Los Altos, Los Gatos, Milpitas, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. Finding 1b Mass transit stations (Caltrain, VTA, BART) create opportunities for BMR units. Cities to respond are Campbell, Gilroy, Milpitas, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. Finding lc Density bonus programs are not being used aggressively enough to produce the needed BMR units within one-half mile of transit hubs. Cities to respond are Campbell, Gilroy, Milpitas, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. Recommendation la To improve jobs -to -housing imbalances, the cities of Palo Alto, Santa Clara, Milpitas, Mountain View and Sunnyvale should identify, by June 30, 2019, parcels where housing densities will be increased. The identification should include when projects are expected to be permitted and the number of BMR units anticipated for each parcel. Recommendation 1b Cities should identify parcels within one-half mile of a transit hub that will help them meet their LI and moderate -income BMR objectives in the current RHNA cycle, by the end of 2019. Cities to respond are Campbell, Gilroy, Milpitas, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. Recommendation lc Cities should revise their density bonus ordinances to provide bonuses for LI and moderate - income BMR units that exceed the minimum bonuses required by State law for parcels within one-half mile of a transit hub, by the end of 2020. Cities to respond are Campbell, Gilroy, Milpitas, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. Finding 2a Employers in the County have created a vibrant economy resulting in an inflated housing market displacing many residents. Agencies to respond are all 15 cities and the County. Finding 2b Contributions to BMR housing from employers in the County are not mandated nor evenly shared. Agencies to respond are all 15 cities and the County. Page 25 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Recommendation 2a The County should form a task force with the cities to establish housing impact fees for employers to subsidize BMR housing, by June 30, 2019. Agencies to respond are all 15 cities and the County. Recommendation 2b Every city in the County should enact housing impact fees for employers to create a fund that subsidizes BMR housing, by June 30, 2020. Agencies to respond are the County and all 15 cities. Finding 3a RHNA sub -regions formed by several San Francisco Bay Area counties enable their cities to develop promising means to meet their collective BMR requirements. Such sub -regions can serve as instructive examples for cities in the County. Agencies to respond are all 15 cities. Finding 3b Developers are less willing to consider BMR developments in cities with the County's highest real estate values because these developments cannot meet their target return on investment. Cities to respond are Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Palo Alto and Saratoga. Finding 3c More BMR units could be developed if cities with lower housing costs form RHNA sub- regions with adjacent cities with higher housing costs. Responding agencies are all 15 cities. Finding 3d High-cost/low-cost RHNA sub -regions would be attractive to low-cost cities if they are compensated by high -cost cities for improving streets, schools, safety, public transportation and other services. Cities to respond are Gilroy, Milpitas, Morgan Hill and San Jose. Finding 3e High-cost/low-cost RHNA sub -regions could be attractive to high -cost cities because they could meet their BMR requirements without providing units in their cities. Cities to respond are Campbell, Cupertino, Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Mountain View, Palo Alto, Santa Clara, Saratoga and Sunnyvale. Recommendation 3a Every city in the County should identify at least one potential RHNA sub -region they would be willing to help form and join, and report how the sub-region(s) will increase BMR housing, by the end of 2019. Agencies to respond are all 15 cities. Recommendation 3b A RHNA sub -region should be formed including one or more low-cost cities with one or more high -cost cities, by the end of 2021. Agencies to respond are all 15 cities. Page 26 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Recommendation 3c High -cost cities and the County should provide compensation to low-cost cities for increased public services required for taking on more BMR units in any high-rent/low-rent RHNA sub- region, by the end of 2021. Agencies to respond are Campbell, Cupertino, Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Mountain View, Palo Alto, Santa Clara, Saratoga, Sunnyvale and the County. Finding 4a Commercial linkage fees can be an important tool to generate critical revenues to support BMR housing. Cities to respond are Campbell, Milpitas, Los Gatos, Los Altos and San Jose. Finding 4b Use of commercial linkage fees is overdue and could be expected to substantially increase BMR units. Cities to respond are Campbell, Milpitas, Los Gatos, Los Altos and San Jose. Recommendation 4 Campbell, Milpitas, Los Gatos, Los Altos and San Jose should enact commercial linkage fees to promote additional BMR housing, by June 2019. Finding 5a Uneven BMR achievements among cities is caused in part by varying inclusionary BMR unit percentage requirements. Agencies to respond are all 15 cities and the County. Finding 5b Inclusionary ordinances in cities having only a small number of potential multi -unit developments would generate too few BMR units to justify their passage. Cities to respond are Los Altos Hills, Monte Sereno and Saratoga. Recommendation 5 Inclusionary BMR percentage requirements should be increased to at least 15% in Gilroy, Los Altos, Los Gatos, Milpitas, Morgan Hill, Palo Alto and Sunnyvale, by the end of 2019. Finding 6 In -lieu fees, when offered as an option, are too low to produce the needed number of BMR units and delay their creation. Cities to respond are Campbell, Cupertino, Milpitas, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. Recommendation 6 Cities with an in -lieu option should raise the fee to at least 30% higher than the inclusionary BMR equivalent where supported by fee studies, by the end of 2019. Cities to respond are Campbell, Cupertino, Milpitas, Mountain View, Palo Alto, San Jose, Santa Clara and Sunnyvale. Page 27 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Finding 7 NIMBY (Not in My Backyard) opposition adversely affects the supply of BMR housing units. Agencies to respond are all 15 cities and the County. Recommendation 7 A task force to communicate the value and importance of each city meeting its RHNA objectives for BMR housing should be created and funded by the County and all 15 cities, by June 30, 2019. Finding 8 It is unnecessarily difficult to confirm how many BMR units are constructed in a particular year or RHNA cycle because cities and the County only report permitted units. Agencies to respond are all 15 cities and the County. Recommendation 8 All 15 cities and the County should annually publish the number of constructed BMR units, starting in April 2019. Finding 9 Accessory Dwelling Units (ADUs) offer a prime opportunity for cities with low housing density and limited developable land to produce more BMR units. Cities to respond are Los Altos, Los Altos Hills, Los Gatos, Monte Sereno and Saratoga. Recommendation 9a ADU creation should be encouraged by decreasing minimum lot size requirements and increasing the allowed unit maximum square footage to that prescribed by state law, by the end of 2019. Cities to respond are Los Altos, Los Altos Hills, Los Gatos, Monte Sereno and Saratoga. Recommendation 9b Increasing BMR unit creation by incentivizing long-term affordability through deed restrictions for ADUs should be adopted, by the end of 2019. Cities to respond are Los Altos, Los Altos Hills, Los Gatos, Monte Sereno and Saratoga. Finding 10 Lack of funding mechanisms to create BMR housing has restricted BMR achievement by cities with limited commercial development or developable land. Cities to respond are Los Altos Hills, Monte Sereno and Saratoga. Recommendation 10a Residential development impact fees to fund BMR developments should be enacted by the cities of Los Altos Hills, Monte Sereno and Saratoga, by the end of 2019. Page 28 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Recommendation 10b Parcel taxes to fund BMR developments should be brought as a ballot measure to the voters of the cities of Los Altos Hills, Monte Sereno and Saratoga, by the 2020 elections. Finding 11 The VTA is a valuable model for effectively generating BMR housing on publicly owned property. Agencies to respond are the County and the SCVWD. Recommendation 11a The County should identify or create an agency, modeled after the VTA's Joint Development Program, to coordinate partnerships between developers and both the SCVWD and the County, for the development of BMR housing, by June 30, 2019. Recommendation 11b Parcels suitable for BMR housing should be offered for development by the SCVWD and the County, by the end of 2019. Page 29 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY REQUIRED RESPONSES Pursuant to Penal Code sections 933 and 933.05, the Grand Gury requests responses as follows: From the following governing bodies: Responding Agency Findings Recommendations Campbell la, lb, lc, 2a, 2b, 3a, 3c, 3e, lb, lc, 2a, 2b, 3a, 3b, 4a, 4b, 5a, 6, 7,8 3c, 4, 6, 7,8 Cupertino Gilroy la, 2a, 2b, 3a, 3c, 3e, 5a, 6, la, 2a, 2b, 3a, 3b, 3c, 6, 7, 8 7, 8 la, lb, lc, 2a, 2b, 3a, 3c, lb, lc, 2a, 2b, 3a, 3b, 5, 3d,5a,6,7,8 7,8 Los Altos la, 2a, 2b, 3a, 3b, 3c, 3e, 2a, 2b, 3a, 3b, 3c, 4, 5, 4a, 4b, 5a, 6, 7, 8, 9 7, 8, 9a, 9b 2a, 2b, 3a, 3b, 3c, 3e, 5a, 2a, 2b, 3a, 3b, 3c, 7, 8, 5b, 6, 7, 8, 9, 10 9a, 9b, 10a, 10b Los Altos Hills Los Gatos la, 2a, 2b, 3a, 3b, 3c, 3e, 2a, 2b, 3a, 3b, 3c, 4, 5, 4a, 4b, 5a, 6, 7,8,9 7, 8, 9a, 9b la, lb, lc, 2a, 2b, 3a, 3c, la, lb, lc, 2a, 2b, 3a, 3d, 4a, 4b, 5a, 6, 7,8 3b, 4, 6, 7,8 Milpitas Monte Sereno 2a, 2b, 3a, 3b, 3c, 3e, 5a, 2a, 2b, 3a, 3b, 3c, 7, 8, 5b, 6, 7, 8, 9, 10 9a, 9b, 10a, 10b lb, lc, 2a, 2b, 3a, 3c, 3d, lb, lc, 2a, 2b, 3a, 3b, 5. 5a, 6, 7, 8 7, 8 Morgan Hill Mountain View Palo Alto la, lb, lc, 2a, 2b, 3a, 3c, 3e, la, lb, lc, 2a, 2b, 3a, 5a, 6, 7,8 3b, 3c, 6, 7,8 la, lb, lc, 2a, 2b, 3a, 3b, la, lb, lc, 2a, 2b, 3a, 3c, 3e, 5a, 6, 7,8 3b, 3c, 5, 6, 7,8 SanJose la, lb, lc, 2a, 2b, 3a, 3c, lb, lc, 2a, 2b, 3a, 3b, 4, 3d, 4a, 4b, 5a, 6, 7,8 6, 7,8 Santa Clara la, lb, lc, 2a, 2b, 3a, 3c, 3e, la, lb, lc, 2a, 2b, 3a, 5a, 6, 7,8 3b, 3c, 6, 7,8 Santa Clara County Board of Supervisors 2a, 2b, 3a, 3b, 3c, 3d, 3e, 7, 2a, 2b, 3c, 7 11 Santa Clara Valley Transportation Authority Santa Clara Valley Water District 11 l la, l lb 11 11a, l lb Saratoga 2a, 2b, 3a, 3b, 3c, 3e, 5a, 2a, 2b, 3a, 3b, 3c, 7, 8, 5b, 6, 7, 8, 9, 10 9a, 9b, 10a, 10b Sunnyvale la, lb, lc, 2a, 2b, 3a, 3c, 3e, la, lb, lc, 2a, 2b, 3a, 5a, 6, 7,8 3b, 3c, 5, 6, 7,8 Unincorporated County 11 8, l la, l lb Page 30 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY APPENDIX Table Al: Income limits for housing assistance eligibility in the County (as of 4/1/2018)48 Housing Assistance Income Eligibility Limits for Santa Clara County Number of Persons in Household Income Limit Category (based on AMI) Extremely Low (30%) Very Low (50%) Low (80%) 1 $27,950 $46,550 $66,150 2 $31,950 $53,200 $75,600 3 $35,950 $59,850 $85,050 4 $39,950 $66,500 $94,450 5 $43,100 $71,850 $102,050 6 $46,300 $77,150 $109,600 7 $49,500 $82,500 $117,150 8 $52,700 $87,800 $124,700 BMR is separated into three income categories: Very Low Income (VLI), Low Income (LI) and moderate -income categories. The County's income limits for these categories are provided in Appendix Table Al. Very Low Income (VLI) is housing for households making up to 50% of area median income (AMI), Low Income (LI, 50%-80% of AMI); moderate income (80-120%) and above moderate (more than 120%). Extremely Low Income (ELI) is a sub -category within VLI and is for households making 0-30% of AMI. Note that the values in Table Al are for 30% (ELI), 50% (VLI) and 70% (LI). 48 Santa Clara Housing Authority, Section 8 Housing Programs, Income Limits https://www.scchousingauthority.org/section-8-housing-programs/waiting-lists-applicants/income-limits/ Page 31 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Table A2: RHNA results for the 2007-2014 cycle City/Entity BMR Subtotal Above Moderate (>120%)) Total RHNA Permits Issued % of RHNA Met RHNA Permits Issued % of RHNA Met RHNA Permits Issued % of RHNA Met Saratoga 235 18 8% 57 20 35% 292 38 13% Los Gatos 376 48 13% 186 180 97% 562 228 41% San Jose 19,271 2,956 15% 15,450 13,073 85% 34,721 16,029 46% Cupertino 813 127 16% 357 657 184% 1,170 784 67% Palo Alto 1,874 293 16% 986 787 80% 2,860 1,080 38% Mountain View 1,447 269 19% 1,152 2,387 207% 2,599 2,656 102% Gilroy 807 164 20% 808 1,262 156% 1,615 1,426 88% Santa Clara 3,209 721 22% 2,664 5,952 223% 5,873 6,673 114% Los Altos 243 57 23% 74 784 1059% 317 841 265% Morgan Hill 812 241 30% 500 1,286 257% 1,312 1,527 116% Milpitas 1,551 709 46% 936 6,442 688% 2,487 7,151 288% Los Altos Hills 68 40 59% 13 76 585% 81 116 143% Monte Sereno 33 21 64% 8 14 175% 41 35 85% Campbell 479 399 83% 413 217 53% 892 616 69% Sunnyvale 2,557 2,178 85% 1,869 2,403 129% 4,426 4,581 104% Unincorporated 677 620 92% 413 422 102% 1,090 1,042 96% County Total 34,452 8,861 26% 25,886 35,962 139% 60,338 44,823 74% Pink cells and larger font entries in Tables A2, A3, A4, A5 and A6 represent lower BMR achievement, and green cells and bold font represent higher BMR achievement. Page 32 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Table A3: RHNA results for 2015-2023 cycle, through 201749 City/Entity Total BMR Data Above Moderate (>120%) Total RHNA Permits Issued % of RHNA Met RHNA Permits Issued % of RHNA Met RHNA Permits Issued % of RHNA Met Milpitas 2,139 0 0% 1,151 1,193 104% 3,290 1,193 36% Los Gatos 445 7 2% 174 60 34% 619 67 11% Santa Clara 1,745 37 2% 755 611 81% 2,500 648 26% Campbell 542 12 2% 391 211 54% 933 223 24% Cupertino 794 27 3% 270 172 64% 1,064 199 19% Sunnyvale 3,478 87 3% 1,974 1,017 52% 5,452 1,104 20% San Jose 20,849 890 4% 14,231 7,671 54% 35,080 8,561 24% Los Altos 380 21 6% 97 319 329% 477 340 71% Saratoga 346 20 6% 93 12 13% 439 32 7% Palo Alto 1,401 115 8% 587 189 32% 1,988 304 15% Morgan Hill 612 75 12% 316 534 169% 928 609 66% Unincorporated 249 29 12% 28 229 818% 277 258 93% Mountain View 1,833 231 13% 1,093 1,205 110% 2,926 1,436 49% Monte Sereno 48 11 23% 8 14 175% 56 25 45% Los Altos Hills 106 32 30% 15 29 193% 121 61 50% Gilroy 495 287 58% 475 727 153% 970 1,014 105% County Total 35,462 1,881 5% 21,658 14,193 66% 57,120 16,074 28% 49 https://abag.ca.gov/planning/housingneeds/ Page 33 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Table A4: RHNA results for 2007-2017, compared to objectives through Oct 31, 2022 City/ Entity Total BMR Data Above Moderate (>120%) Total RHNA Permits Issued RHNA Met RHNA Permits Issued / of RHNA Met RHNA Permits Issued % of RHNA Met Saratoga 581 38 '. 150 32 21% 731 70 10% Los Gatos 821 55 ' . 360 240 67% 1,181 295 25% Cupertino 1,607 154 1' . 627 829 132% 2,234 983 44% San Jose 40,120 3,846 1' % 29,681 20,744 70% 69,801 24,590 35% Los Altos 623 78 •. 171 1,103 645% 794 1,181 149% Palo Alto 3,275 408 ' . 1,573 976 62% 4,848 1,384 29% Santa Clara 4,954 758 '. 3,419 6,563 192% 8,373 7,321 87% Mountain View 3,280 500 '. 2,245 3,592 160% 5,525 4,092 74% Milpitas 3,690 709 •'. 2,087 7,635 366% 5,777 8,344 144% Gilroy 1,302 451 1,283 1,989 155% 2,585 2,440 94% Morgan Hill 1,424 316 816 1,820 223% 2,240 2,136 95% Sunnyvale 6,035 2,265 3,843 3,420 89% 9,878 5,685 58% Monte Sereno 81 32 0' , 16 28 175% 97 60 62% Los Altos Hills 174 72 28 105 375% 202 177 88% Campbell 1,021 411 0' , 804 428 53% 1,825 839 46% Unincorporated 926 649 0', 441 651 148% 1,367 1,300 95% County Total 69,914 10,742 ' . 47,544 50,155 105% 117,458 60,897 52% Page 34 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Table A5: RHNA results for 2007-2017, compared with time -proportionate objectives (75.5% for San Jose and Los Gatos, 72% for other cities) City/ Entity Total BMR Data Above Moderate (>120%) Total RHNA 2017 Permits Issued % of RHNA Met RHNA 2017 Permits Issued % of RHNA Met RHNA 2017 Permits Issued % of RHNA Met Saratoga 418 38 9% 108 32 30% 526 70 13% Los Gatos 620 55 9% 272 240 88% 892 295 33% Cupertino 1,157 154 13% 451 829 184% 1,608 983 61% San Jose 30,291 3,846 13% 22,409 20,744 93% 52,700 24,590 47% Los Altos 449 78 17% 123 1,103 896% 572 1,181 207% Palo Alto 2,358 408 17% 1,133 976 86% 3,491 1,384 40% Santa Clara 3,567 758 21% 2,462 6,563 267% 6,029 7,321 121% Mountain View 2,362 500 21% 1,616 3,592 222% 3,978 4,092 103% Milpitas 2,657 709 27% 1,503 7,635 508% 4,159 8,344 201% Morgan Hill 1,025 316 31% 588 1,820 310% 1,613 2,136 132% Gilroy 937 451 48% 924 1,989 215% 1,861 2,440 131% Sunnyvale 4,345 2,265 52% 2,767 3,420 124% 7,112 5,685 80% Monte Sereno 58 32 55% 12 28 243% 70 60 86% Los Altos Hills 125 72 57% 20 105 521% 145 177 122% Campbell 735 411 56% 579 428 74% 1,314 839 64% Unincorporated 667 649 97% 318 651 205% 984 1,300 132% County Tota I 51,771 10,742 21% 35,283 50,155 142% 87,054 60,897 70% Page 35 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Table A6: Lower-Cost/Higher-Cost City Combination Sub -region Benefit Analysis - Current RHNA Cycle: 2015-2023 City Median Sale Price ($ million) RHNA BMR Units Objective Present RHNA BMR Units Deficit No Sub -region ($ million) Lowest Cost Sub -region ($ million) Gilroy $0.609 613 326 $198.53 $198.53 Morgan Hill $0.701 612 537 $376.44 $327.03 San Jose $0.773 20,849 19,959 $15,428.31 $12,155.03 Milpitas $0.821 2,139 2,139 $1,756.12 $1,302.65 Campbell $0.940 542 530 $498.20 $322.77 Santa Clara $0.944 1,745 1,708 $1,612.35 $1,040.17 Sunnyvale $1.200 3,478 3,391 $4,069.20 $2,065.12 Mountain View $1.310 1,833 1,602 $2,098.62 $975.62 Cupertino $1.340 794 767 $1,027.78 $467.10 Los Gatos $1.430 445 438 $626.34 $266.74 Saratoga $1.610 346 326 $524.86 $198.53 Palo Alto $2.250 1,401 1,286 $2,893.50 $783.17 Los Altos $2.580 380 359 $926.22 $231.42 Monte Sereno $3.000 48 37 $111.00 $22.53 Los Altos Hills $4.090 106 74 $302.66 $45.07 15 City Total n/a 35,331 33,479 $32,450.13 $20,401.50 15 City Median $1.192 n/a n/a n/a n/a The median sale price values in Table A6 are for two -bedroom units in all cities other than Monte Sereno. The value for Monte Sereno is for three -bedroom units, because there was no data available for two -bedroom units. The Sub -region totals (No and Lowest Cost) are computed using the Present RHNA BMR Units Deficit. Page 36 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Table A7: Allocated BMR Permit Share and Permitted Unit Deficit 2007-2017 B M R Allocation to Permitted Unit Deficit Gap Analysis Allocated Share (%) Permitted Unit Deficit San Jose 57.4% 36,274 Santa Clara 7.1% 4,196 Sunnyvale 8.6% 3,770 Milpitas 5.3% 2,981 Palo Alto 4.7% 2,867 Mountain View 4.7% 2,780 Cupertino 2.3% 1,453 Morgan Hill 2.0% 1,108 Gilroy 1.9% 851 Los Gatos 1.2% 766 Campbell 1.5% 610 Saratoga 0.8% 543 Los Altos 0.9% 545 Unincorporated 1.3% 277 Los Altos Hills 0.2% 102 Monte Sereno 0.1% 49 County Totals 59,172 Page 37 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Table A8 - Inclusionary Ordinances and Residential Impact Feess° City Ordinance in Place (Y/N) Minimum Number of Units Rental Property BMR Requirement (% of units) BMR Requirement for Resident Owned Units (% of units) In Lieu Fees (% of sales price or $ per sq ft) Residential Impact Fee Campbell Y 10 15% 15% no requests yet N Cupertino Y 7 15% 15% $15.48-25.80 N Gilroy N - Neighborhood District Policy 15% 15% N N Los Altos Y 5, 10 15% 10% N N Los Altos Hills N N Los Gatos Y 5, 100 10-20% 10-20% limited option N Milpitas Y 5 N/A 5% 5% N Monte Sereno N N Morgan Hill N - RCDS 5 8% 8% $12.92 N Mountain View Y 5 15% 10% 3% N Palo Alto Y 3 N/A 15-25% $50-75 $20-35/sq ft San Jose Y 20 15% 15% $125K per BMR unit required $17.41/sq ft Santa Clara Y 10 15% 15% $6.67-20 N Saratoga N N Sunnyvale Y 4, 8 (full) N/A 12.5% 7% $9-18/sq ft Red cells in Table A8 indicate that a city is not taking full advantage of a key means to generate BMR units, while a green cell indicates that a city has stepped up and is using a key means to a greater advantage than other cities in the County. An empty cell indicates that that no entry is needed for that cell. 50 Sunnyvale had a Rental Property BMR Requirement of 15% through 2012, when it was replaced with a Rental Impact Fee to comply with Palmer. Sunnyvale is working on a new BMR Rental Requirement consistent with AB 1505 for City Council consideration in 2018. Page 38 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY • 51 lame ey - Jobs per tmployea Kesiaent Kanos City Jobs per Employed Resident Ratio Palo Alto 3.02 Santa Clara 2.08 Los Gatos 1.82 Milpitas 1.50 Campbell 1.35 Los Altos 1.28 Mountain View 1.23 Cupertino 1.08 Sunnyvale 1.07 Morgan Hill 1.02 San Jose 0.89 Saratoga 0.85 Gilroy 0.84 Los Alto Hills 0.72 Monte Sereno 0.33 Table A10: Commercial Linkage Fees City/Entity Nexus Study Completed Ordinance in Place Linkage Fee ($/sq ft) Campbell Y N N/A Cupertino Y Y $21.35 Gilroy N N N/A Los Altos Y N N/A Los Alto Hills N N N/A Los Gatos N N N/A Milpitas Y N N/A Monte Sereno N N N/A Morgan Hill N N N/A Mountain View Y Y $2.68 to $25.58 Palo Alto Y Y $20.37 to $35 San Jose N N N/A Santa Clara Y Y up to $20* Saratoga Y N Sunnyvale Y Y $8 to $16 Unincorporated N N N/A * Starting Jan. 18, 2019. Cities with a mustard cell have not completed nexus studies, and those with green have completed nexus studies. 51 LAFCO of Santa Clara County, Cities Service Review, Section 22, "Sprawl Prevention/Infill Development, pages 314-315, http://santaclaralafco.org/file/ServiceReviews/CitiesSR2015/23CSRR FA Sprawl.pdf Page 39 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Table All: ADU regulations and production City Minimum Lot Area (sq ft) 2007-2014 Permits 2015-2017 Permits Potential Units for 2018-2023 Campbell 10,000 15 13 25 Cupertino 10,000 detached 7.2 per yr 3 32 Gilroy 6,000 20 12 15 Los Altos No limit 11 15 35 Los Altos Hills N/A 40 28 N/A Los Gatos No limit 14 4 55 Milpitas 2500-10,000 6 N/A N/A Monte Sereno 8,000 15 21 9 Morgan Hill 3,500 31 41 58 Mountain View No limit 7 11 45 Palo Alto 5,000 35 23 N/A San Jose 6,000-8,000 N/A N/A N/A Santa Clara 6,000 29 20 30 Saratoga 90% of district minimum 39 38 50 Sunnyvale 5,000-8,000 20 23 N/A Unincorporated No limit N/A 96 N/A Page 40 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Table Al2: VTA sites with potential for BMR unit construction Description/ Address Optimistic Construction Completion Date Total Acres Develop- able Acres City Present Status in Development Process Estimated Number of BMR Units Tamien - 1197 Lick Ave 6/1/21 6.9 6.9 San Jose Current negotiations with developer. Application for revised entitlements June 2018. 135 Mountain View- Evelyn 6/1/21 2 2 Mtn. View Pending negotiations with City of Mtn. View 200 Milpitas BART Station 6/1/22 1.7 1.7 Milpitas Developer RFP June 2018 35+ Santa Clara Caltrain 6/1/22 0.3 0.3 Santa Clara Current negotiations with developer. TBD Berryessa BART Station - southeast corner 6/1/23 3.3 3.3 San Jose Awaiting preparation of Urban Village Plan by CSJ 70+ Blossom Hill - Blossom Hill Rd at Canoas Creek 6/1/23 6.8 4+ (a) San Jose Developer RFP June 2018 80+ Curtner - Highway 87 at Curtner 6/1/23 5.9 3.5+ (a) San Jose Developer RFP June 2018 70+ Ohlone - Chynoweth Ave at Pearl Avenue 6/1/23 8.3 TBD (a) San Jose Parking study and policy pending, needed to identify developable parcel TBD Capitol Station - Southeast Capitol Expressway @ Narvaeaz 6/1/25 13.3 10+ (a) San Jose Inactive - City requirement for commercial renders project infeasible Morgan Hill - 17300 Depot Street 6/1/25 6.5 TBD Morgan Hill Inactive - awaiting resolution of ownership TBD Cerone - 3990 Zanker Rd 6/1/28 54.13 40 San Jose VTA predevelopment 0 River Oaks - 3331 N. First St. 6/1/28 17.5 17.5 San Jose Application to City for housing allotment 280+ Gilroy - Monterey Highway at 7th St 6/1/29 6.1 6.1 Gilroy Inactive - awaiting High Speed Rail Plans TBD VTA (Mitchell) Block 2027 - 2032 3.3 3.3 San Jose Preliminary studies 150+ Santa Teresa - Santa Teresa Blvd at Miyuki Dr TBD 35.8 35.8 San Jose Inactive 0 Snell - Snell Ave at Highway 85 TBD 6.5 TBD (a) San Jose Preliminary study done. Lower priority than other sites. TBD Winchester - Winchester Blvd at Budd Avenue TBD 1.6 1.6 Campbell Inactive - landbanking for future development TBD Almaden TBD 4.8 3+ (a) San Jose Preliminary studies 60+ Cottle TBD 4.7 3+ (a) San Jose Ongoing discussion TBD The optimistic construction dates are highlighted in the table to focus attention on the potential near term BMR unit potential for the sites described in this table. Page 41 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY GLOSSARY Area Median Income - A value determined on an annual basis by the U.S. Department of Housing and Urban Development that represents the household income for the median household in a specified region. Current RHNA Cycle - ABAG defines this as two distinct periods. The "planning period" spans the due date for one housing element and the due date for the next housing element. For the current cycle, this is Jan 31, 2015, through Jan. 31, 2023. More important for this report, the "projection period" is the span for which the RHNA need is calculated. It is Jan 1, 2014, through Oct 31, 2022. That is 94 months for cities that include 2014 data in their annual housing element progress updates during the current cycle, and 82 months for the other cities. Cities that include 2014 data in the current cycle (Los Gatos and San Jose) completed 51% of the current cycle by the end of 2017, and 75.5% of both the prior and current cycle. The other 13 cities and County completed 44% of the current cycle as of the end of 2017, and 72% of both cycles. In -Lieu Fees - Funds collected from developers that enable developers to forego BMR inclusionary unit requirements within a project. In -lieu fees are discussed in greater detail in view of the data presented in Table 2. There are two basic types of in -lieu fees, one determined as a percentage of the cost of the development and the other as a cost per square foot of the development. Jobs per Employed Resident Ratio52 - Employed residents are calculated by subtracting the unemployed residents from the labor force. Unemployed residents are calculated by multiplying the labor force by the unemployment rate. This ratio is influenced by levels of in -commuting and out -commuting as well as the number of employed residents holding multiple jobs. ABAG assumes that this ratio holds at the 2010 level, implying the rates of net- incommuting and multiple job -holding remain constant. ABAG's strategy is based on the halting of the trend of increasing rates of incommuting into the region seen in recent decades, due to road capacity constraints and additional housing production supports within the region. This also keeps the incommute well below 2000 levels. Urban Village53 - An urban village is a walkable, bicycle -friendly, transit -oriented, mixed use setting that provides both housing and jobs. The urban village strategy fosters: • Engagement of village area residents in the urban village planning process • Mixed residential and employment activities that are attractive to an innovative work force 52 Plan Bay Area Jobs Housing Connection Strategy, Appendix B : Housing and Employment Methodology, page 114, May 15, 2012 https://www.planbayarea.org/sites/default/files/pdf/JHCS/May 2012 Jobs Housing Connection Strategy A ppendices Low Res.pdf 53 http://sanjoseca.gov/planning/urbanvillages Page 42 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY • Revitalization of underutilized properties that have access to existing infrastructure • Densities that support transit use, bicycling, and walking • High -quality urban design Page 43 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY ACRONYMS ABAG: Association of Bay Area Governments AMI: Area Median Income BMR: Below Market Rate CTOD: Center for Transit -Oriented Development ELI: Extremely Low Income HCD: California Department of Housing and Community Development IHO: Inclusionary Housing Ordinance JDP: Joint Development Program NIMBY: Not in My Back Yard LI: Low Income RHNA: Regional Housing Needs Allocation SCVWD: Santa Clara Valley Water District VLI: Very Low Income TOD: Transit -Oriented Development VTA: Santa Clara Valley Transportation Authority YIMBY: Yes in My Back Yard Page 44 of 45 AFFORDABLE HOUSING CRISIS - DENSITY IS OUR DESTINY Peter L. Hertan Foreperson This report was ADOPTED by the 2017-2018 Santa Clara County Civil Grand Jury on this % day of (1714 , 2018. Page 45 of 45 RESOLUTION NO. RESOLUTION OF INTENT TO SUPPORT FORMATION OF A HOUSING SUBREGION OF SANTA CLARA COUNTY LOCAL AND COUNTY GOVERNMENTS TO FACILITATE AND IMPLEMENT COUNTYWIDE HOUSING PRODUCTION CONSISTENT WITH THE REGIONAL HOUSING NEEDS ALLOCATION (RHNA) FORMULA CURRENTLY ASSIGNED BY THE ASSOCIATION OF BAY AREA GOVERNMENTS (ABAG) WHEREAS, Housing Element Law (Gov. Code Sections 65580 — 65589.8) provides for a Regional Housing Need Allocation process (RHNA); and WHEREAS, to implement such RHNA process in the San Francisco Bay Area, the State of California has delegated to the Association of Bay Area Governments (ABAG) responsibility to adopt an allocation methodology, then use the adopted methodology to assign to each jurisdiction in the Bay Area the obligation to zone enough housing development capacity to accommodate production of a specific number of housing units during the period from 2021 through 2029; and WHEREAS, Government Code Section 65584.03 provides that certain combinations of local governments may form a subregion to perform RHNA for themselves in order to allocate among themselves the total number of housing units assigned to them collectively by ABAG; and WHEREAS, the City/County of is interested in exploring the formation of a Regional Housing Needs Allocation (RHNA) subregion consistent with the California Government Code Section 65584 et seq and acceptable to the Association of Bay Area Governments (ABAG) and the California Department of Housing and Community Development (HCD) to facilitate collaboration with the county and all cities in the County of Santa Clara, to efficiently and effectively deliver housing production goals; and WHEREAS, the Board of the Cities Association of Santa Clara County has directed the review of the benefits of such a subregion and subsequently representatives of the Cities Association of Santa Clara County (CASCC) have formed a committee to evaluate and make recommendations regarding the importance of and opportunities for success through shared housing strategies which could be facilitated by a subregional effort; and WHEREAS, housing is a countywide challenge, and housing production types, numbers, density, appropriateness and affordability levels can vary in different communities, and the Cities' recognize all production types are important to the housing supply of the County and its related economic and social health; and WHEREAS, Cities are individually accountable for, and retain full local authority for, identifying sites for housing development and for adopting and implementing housing policies intended to facilitate production of housing to meet local, regional and state policy objectives embodied in the numbers prescribed by ABAG the Sustainable Community Strategy that will be adopted by ABAG and the Metropolitan Transportation Commission (MTC) in 2021; and WHEREAS; through mutual cooperation and planning, the production of these housing units may be enhanced through collective efforts and resources, therefore creating a forum for developing countywide policy consensus on matters related to the Sustainable Community Strategy; NOW, THEREFORE the City of does hereby find, determine, resolve and order as follows: Section 1: That it is in the best interest of the City to join with other cities in Santa Clara County to explore creation of the RHNA subregion and that by working together to plan for housing growth, the stage is set for implementing housing and more housing will ultimately be built to meet the needs of the entire County and its residents. Section 2: That the City Manager is hereby authorized and directed to enter into discussions regarding the formation of a RHNA subregion and the development of a workplan and budget, and schedule of actions leading to the countywide, self -administration of the housing needs allocation process, allocating the countywide total housing needs allocation among all the Cities and unincorporated County by consensus; and to bring back a recommendation and resolution for action to join a RHNA subregion, or in the alternative, an explanation detailing the decision not to participate in the RHNA subregion. SANTA CLARA COUNTY RHNA SUBREGION TASK FORCE GUIDING PRINCIPLES - May 2018 Vision For Santa Clara County and its cities to work collaboratively to produce more housing in the Region. have a unified voice in responding to the area's housing needs-- a problem that transcends jurisdictional barriers. Benefits 1. By working together to plan for housing growth, the stage is set for implementing housing, and more housing will ultimately be built. 2. Housing will be planned in the right places, near transportation, jobs, and services. 3. Santa Clara County jurisdictions can work together to share resources. 4. Collaboration enables collective advocacy on regional and Statewide issues. 5. Partnership sets the stage for other cooperation, including sharing Housing Element consultants, sharing expertise, analyses, and policies, and potentially enabling a shared review by the California Housing and Community Development (HCD) Department. 6. Collective agreement is reached on strategies and tools to meet the region's housing need, including the potential for trading RHNA numbers. 7. Greater flexibility. Guiding Principles 1. Conform with all State objectives included in Section 66584(d), including ensuring that the allocation of affordable homes is allocated to all jurisdictions in the region in an equitable manner. 2. Allocate housing growth strategically around major transportation corridors and near employment and services, while respecting infrastructure constraints and the unique natural resources of Santa Clara County. 3. Foster collaboration between jurisdictions and develop collective strategies that provide a framework for addressing housing need, including the potential for resource / housing allocation trade-offs. 4. Facilitate an open dialogue between jurisdictions, the general public, and interested organizations, including transportation agencies and land use bodies. 5. Utilize existing forums for discussion (e.g., Cities Association, City Managers' Association, SCCAPO, etc.). Keys to Success 1. Taking responsibility for the process and the resulting housing shares. 2. Taking into consideration other communities' interests as well as your own. 3. Being willing to accept a reasonable housing share, not just the lowest. 4. Being willing to consider negotiating trades. 5. Recognizing that working together locally is better than abdicating the responsibility to the region and the state. 6. Elected leaders in all jurisdictions willing to compromise for regional benefit. SANTA CLARA COUNTY RHNA SUBREGION TASK FORCE PROS & CONS OF RHNA SUBREGION FORMATION Pros Cons Example Creates flexibility & allows cities to trade Distribute the subregion's numbers or can use ABAG's distribution Empowers cities to have a say in the regional planning process Self-determination: a city is able to accept or not accept allocation from another city. Allows better alignment between local and regional needs Ability to plan along on transit corridors and near employment. Can find innovative solutions Collective problem -solving which may include negotiating credits and creative financing May facilitate the production of more housing Utilizes economies of scale and eliminates duplication. Siting housing near supportive services. Creates a forum for collaboration that leads to innovative solutions San Mateo County Trade Woodside/Redwood City & Daly City/Colma/County Creates awareness (and healthy competition) Creates a forum to share knowledge and success. When one city is doing the heavy lifting, may encourage other jurisdictions to step up to the plate. If success, may create additional opportunities for collaborative work Success may be housing or spill over to other technical areas (transportation). May use collaboration for legislative advocacy. Better development Cities can work together to build near transit and not SANTA CLARA COUNTY RHNA SUBREGION TASK FORCE PROS & CONS OF RHNA SUBREGION FORMATION necessarily confined by a city boundary. Creates a forum to discuss sharing of planning resources Share resources - - may share in cost to pay consultants for housing element preparation or program ideas (for those who want to share). Time, effort & resources which may end in same result. What if subregion fails to produce a different allocation? Lack of trust for fair and equitable process. Some cities may shirk their responsibility to step up and accept housing. Increases local control Ability to control own numbers and improve county -wide performance. Loss of political distance from MTC and ABAG Pressure on community to produce additional housing. Lack of clarity of the benefits to accept someone's numbers/housing City worried about allocation dumping Still need to plan for housing for all income levels Can't go to zero. Every jurisdiction still has an allocation in every income level. No role model No other subregion has such large population variances. Increased use of ADUs ADUs more feasible with cities with large residential lots. Santa Clara County Regional Housing Needs Allocation (RHNA) Subregion Overview What is a RHNA subregion? (Government Code Section 65584.03) In recognition of the common interests and mutual challenges and opportunities associated with providing housing, two or more contiguous cities and a county may form a subregional entity for the purpose of allocation of the subregion's existing and projected need for housing among its members in accordance with the allocation methodology established pursuant to Government Code Section 65584.04. All decisions of the subregion shall be approved by vote as provided for in the rules adopted by the local governments comprising the subregion, or shall be approved by vote of the county and the majority of the cities with the majority of population within the county. What are the steps to create a subregion, following the prescribed timelines in State law? 1. Each participating jurisdiction adopts a resolution indicating its commitment to participating in the subregional entity. 2. For Santa Clara County, the subregional entity could be a committee of the Cities Association with participating cities and the County. 3. The Cities Association (or other entity) would enter into an agreement with the Council of Governments (COG, in our case ABAG/MTC) that sets forth the process, timing, and other terms and conditions of the delegation of responsibility by the COG to the subregion. What does the subregion do, following the prescribe timelines in State law? 1. The subregion determines the methodology for allocating housing need to its participating jurisdictions according to State law (or accepts the methodology factors from the COG as a starting point for further distribution), providing opportunity for public comment and modification prior to adoption of the methodology. 2. The COG allocates a share to the subregion based on a proportion consistent with the distribution of households assumed for the comparable time period of the applicable regional transportation plan. 3. The subregion allocates the distribution of the RHNA to the participating jurisdictions according to the adopted methodology, providing an opportunity for public comment and modification prior to finalizing the distribution. What is the estimated cost of a subregion versus typical participation in the RHNA process? Assuming that the subregion does not hire a consultant to create a separate methodology, the costs would be: 1. Administrating and documenting the subregion meetings and decisions; 2. Conducting the required outreach prior to the subregion making its decisions; 3. Communicating with ABAG/MTC as needed; and 4. Publishing the required notices. The Planning Departments of the participating jurisdictions typically absorb the RHNA evaluation without additional staffing or consultant assistance. 1 Santa Clara County Regional Housing Needs Allocation (RHNA) Subregion Overview What are other activities that the subregion could assume outside of the RHNA process and State law? • Foster collaboration between cities within Santa Clara County o Focus on Measure A implementation o Facilitate an open dialogue between the jurisdictions, public, and interested organizations on housing issues and opportunities o Share best practices regarding rehabilitating existing housing stock, addressing gentrification/displacement, etc. • Work together to obtain and commit more financial resources to affordable housing production o Support for 2018 ballot measure for affordable housing funding o Consider potential legislative efforts to seek meaningful tax credits and other mechanisms 2 SANTA CLARA COUNTY RHNA SUBREGION TASK FORCE GUIDING PRINCIPLES - May 2018 Vision For Santa Clara County and its cities to work collaboratively to produce more housing in the Region. have a unified voice in responding to the area's housing needs-- a problem that transcends jurisdictional barriers. Benefits 1. By working together to plan for housing growth, the stage is set for implementing housing, and more housing will ultimately be built. 2. Housing will be planned in the right places, near transportation, jobs, and services. 3. Santa Clara County jurisdictions can work together to share resources. 4. Collaboration enables collective advocacy on regional and Statewide issues. 5. Partnership sets the stage for other cooperation, including sharing Housing Element consultants, sharing expertise, analyses, and policies, and potentially enabling a shared review by the California Housing and Community Development (HCD) Department. 6. Collective agreement is reached on strategies and tools to meet the region's housing need, including the potential for trading RHNA numbers. 7. Greater flexibility. Guiding Principles 1. Conform with all State objectives included in Section 66584(d), including ensuring that the allocation of affordable homes is allocated to all jurisdictions in the region in an equitable manner. 2. Allocate housing growth strategically around major transportation corridors and near employment and services, while respecting infrastructure constraints and the unique natural resources of Santa Clara County. 3. Foster collaboration between jurisdictions and develop collective strategies that provide a framework for addressing housing need, including the potential for resource / housing allocation trade-offs. 4. Facilitate an open dialogue between jurisdictions, the general public, and interested organizations, including transportation agencies and land use bodies. 5. Utilize existing forums for discussion (e.g., Cities Association, City Managers' Association, SCCAPO, etc.). Keys to Success 1. Taking responsibility for the process and the resulting housing shares. 2. Taking into consideration other communities' interests as well as your own. 3. Being willing to accept a reasonable housing share, not just the lowest. 4. Being willing to consider negotiating trades. 5. Recognizing that working together locally is better than abdicating the responsibility to the region and the state. 6. Elected leaders in all jurisdictions willing to compromise for regional benefit. City of Palo Alto CITY COLLEAGUES MEMO PALO ALTO DATE: September 10, 2018 TO: City Council Members FROM: Council Member Wolbach, Council Member Holman, Council Member Kou, Council Member DuBois SUBJECT: COLLEAGUES MEMO FROM COUNCIL MEMBERS DUBOIS, HOLMAN, KOU AND WOLBACH REGARDING STRENGTHENING RENTER PROTECTION FOR PALO ALTO RESIDENTS (PREVIOUS COLLEAGUES MEMO HEARD ON OCTOBER 16, 2017) Issue: The cost of rental housing in Palo Alto and the region has soared in recent years as the pace of job growth has far exceeded the rate of housing growth. Housing that has been built is predominantly high -end or, to a lesser extent, subsidized, low-income housing. The needs of moderate -income workers and families too often have been ignored. These trends undermine our social and economic health and cannot be sustained. While Palo Alto is working to increase our supply of housing, especially very low, low and moderate levels, many renters face precarious housing stability. Goals: • Support retention of a healthy, diverse community, an action that also supports our local economy; • Moderate the rate of rent increases; • Provide protections from and/or mitigations for unjust evictions by means that are fair to both renters and landlords; • Continue to promote construction of new multi -unit rental developments. Background and Discussion: Approximately 44% of Palo Alto residents are renters who are predominantly long-term members of our community, contributing to our social balance and economy. In recognition of the vital importance that renters have on our civic vitality and economic health, past Palo Alto city councils have adopted long-standing renter protection ordinances. Those ordinances offer renters greater protection than under California State law and include provisions that: • Require a sixty-day notice of large rent increases at multi -family rental units; September 10, 2018 Page 1 of 3 (ID # 9592) • Prevent discrimination against families by prohibiting landlords from requiring that fewer than two people per bedroom occupy a unit; • Provide Tenant — Landlord mediation services; • Require one-year leases to be offered. Although the growth in our tech economy has been a boon to many, that growth has been accompanied by negative disruptions, including a steep increase in demand that has severely degraded our housing affordability and resulted in many long-term renters being forced out or having to spend inordinate amounts of their incomes on housing. Since 2011, the average monthly rent in Palo Alto has soared 50% while the county median income has risen less at 1/10 that rate. These trends are clearly not sustainable. Our affordable housing supply is far below demand while the cost of building new affordable units dwarfs our available resources. Furthermore, many vital members of our community have moderate incomes and are not eligible for our limited affordable housing; teachers, policemen, service and retail workers, nurses and health care providers are continuing to be priced out of their homes and are being forced to leave our community. To encourage new housing construction, cities that enact renter protections are required to do so within the framework of State law, such as the Ellis Act and Costa Hawkins. Neighboring communities have recognized that the issue has reached a near crisis level and are considering similar measures. Current and future economic forces have made additional renter protections necessary for the well-being of our community, its valuable diversity, and a viable economy. In addition, the Council's Healthy City, Healthy Community priority identifies diversity as a key component. Doing our part to address the housing crisis requires production, preservation, and protection. This memo focuses on the latter. Renter protections are only one part of protecting and expanding our existing housing supply. This initiative is not intended to substitute for other measures that may be addressed separately from this memo including short-term rental abuses, loss of existing housing units, and investment homes left vacant for long periods of time. This initiative is also offered in the context of Palo Alto's renewed focus on housing through our Comprehensive Plan, Housing Work Plan, and 2018 Council Priority on Housing. Recommendation: We recommend the following: That, for the short-term, staff should immediately bring back to Council specific proposals to adjust our current renter protection ordinance regarding, potentially as an emergency ordinance: • Reasonable eviction mitigations such as relocation provisions for tenants facing displacement. AND That, for the Tong -term, Council refer this memo to the Policy and Services Committee for review. The review should include at least the following: September 10, 2018 Page 2 of 3 (ID # 9592) • Review of our existing renter protection ordinance and comparable ordinances in Bay Area. • Evaluate reasonable relocation assistance to be provided for tenants of properties with 5 or more units displaced due to change of use, sizable rental increases or eviction without just cause, while protecting the fair rights of property owners. • Strengthened enforcement measures to ensure compliance with and penalties for violations of Palo Alto's existing requirement to offer an annual lease to tenants. • Consider other updates to our existing renter protections and mediation program as needed to continue a healthy and diverse community. In addition, the Council may elect to refer the item to the Human Relations Commission as part of the review process. Staff Impact: A moderate level of staff resources will be needed to support deliberations in Policy & Services. Staff resources needed to implement enhanced or new requirements will depend on the what Council determines. Tenant protections that are enforceable by tenants in civil court require little to no ongoing City staff work. Tenant protections that are enforceable through administrative processes run by the City will require new staff and budget allocations. Staff has added two background reports from other jurisdictions regarding potential types of renter protection programs. These materials provide an overview of state and federal laws relating to municipal renter protection regulations; describe renter protection measures adopted by a number of California cities; list key areas for policy determination; and describe staffing levels and budgets required for various types of programs and services. September 10, 2018 Page 3 of 3 (ID # 9592) Attachment A COUNTY OF SAN MATEO INTERDEPARTMENTAL CORRESPONDENCE To: All County Departments From: John C. Beiers, County Counsel John D. Nibbelin, Chief Deputy County Counsel Subject: Continuum of Residential Tenant Protection Measures Date: September 23, 2015 I. Introduction and Executive Summary This memorandum provides legal and historical background for rent stabilization and other tenant protections (including just cause eviction and relocation assistance measures); surveys tenant protection measures that exist throughout the State; describes the legal powers of, and constraints on, local government agencies with respect to the adoption of rent stabilization and other tenant protection measures. Local jurisdictions throughout the area are confronting a housing affordability crisis and many of these cities and counties are considering a range of tools to address these circumstances. For example, at its meeting on August 5, 2015, the City of Richmond voted to adopt an ordinance that institutes rent stabilization and provides for "just cause evictions, for rental units in that city.' The ordinance also provides for an elected "rent board" to discharge various functions under the ordinance. The City contemplates adding several staff members to administer rent stabilization. This action by the City of Richmond implements some of the tenant protection tools available to local jurisdictions and this memorandum discusses these and others across the continuum of options available to the County. In preparing this memorandum, we have surveyed the history of local government tenant protections in California, reviewed statutory and case law and constitutional provisions bearing on such protections and analyzed existing local government tenant protections, with a particular focus on Bay Area jurisdictions. In addition, we met with local stakeholders, including Community Legal Services in East Palo The Richmond rent stabilization ordinance was the first new rent stabilization ordinance adopted in several decades. The ordinance was scheduled to go into effect on September 4, 2015, but the California Apattiuent Owners Association has submitted a sufficient number of signatures to require a referendum on the ordinance before it goes into effect. The Contra Costa County Elections Office is presently validating the signatures. [CCO-92427] All County Departments September 23, 2015 Page 2 Alto and the California Apartment Owners Association. Finally, we have included the following attachments to this memorandum to supplement our work: • Policy Arguments: a set of documents that briefly summarize the key characteristics of more common tenant protection measures and the policy arguments that are most commonly advanced for and against the measures • Rent Stabilization Table: a table that summarizes the key characteristics of existing rent stabilization ordinances from a selection of representative jurisdictions II. Existing Statewide Laws Relating to Residential Tenancies a. Notice of Rent Increases California law sets forth in the Civil Code the standard that landlords must comply with before raising a residential tenant's rent. If the tenant's lease is for a term of more than thirty days, the rent cannot be raised during the term, unless the lease specifically allows for an increase. In cases where rent increases are allowed, California law requires that tenants receive at least 30 days' advance notice before a rent increase goes into effect. Specifically, if a proposed rent increase is ten percent or less of the rent charged at any time during the preceding 12 months, the landlord must provide the tenant with at least 30 days advance written notice of the rent increase.2 If the proposed rent increase is more than ten percent of the rent charged at any time during the receding twelve months, the landlord must provide the tenant with at least sixty days' advance written notice of the increase.' In our research, we have found no jurisdictions that have attempted to impose, on a local basis, notice periods for rent increases longer than those required under the California Civil Code and, in our view, any such local efforts would be preempted by state law. 4 2 Ca1. Civil Code § 827(b)(2). 3 Ca1. Civil Code § 827(b)(3). 4 Subsection (c) of Civil Code section 827 states that "if a state or federal statute, state or federal regulation, recorded regulatory agreement or contract provides for a longer period of notice regarding a rent increase than that provided" by section 827, that longer period shall control Cal. Civil Code § 827(c) (emphasis added). This text strongly infers that only state and federal statutes or regulations may impose longer notice provisions than those set forth in section 827. All County Departments September 23, 2015 Page 3 b. Notice of Lease Termination Along similar lines, California law imposes certain notice obligations upon landlords who seek to end tenancies. If a lease is for a set term (e.g., one year), the tenancy ends on the last day of the lease term, unless the tenant does not vacate and the landlord allows the tenant to remain, in which case the tenancy is converted to a month -to -month periodic tenancy. To terminate a periodic (e.g., month to month) tenancy, the landlord must give either thirty or sixty days' prior written notice. If all tenants in the rental unit have resided in the unit for at least one year, the landlord must give at least sixty days' prior written notice of termination.5 If any tenant in the rental unit has resided there for less than one year or the landlord has contracted to sell the unit another person who intends to occupy it for at least a year after the tenancy ends, the landlord need provide only thirty days' prior written notice.6 As discussed below, some local jurisdictions, such as the City of San Jose, have adopted ordinances that provide for longer notice periods to terminate a tenancy than those set forth in state law. Many local jurisdictions have determined that these state law provisions do not afford an adequate degree of protection to residential tenants and they have therefore adopted ordinances that provide additional protections, which we will discuss in this memorandum. III. The Continuum of Tenant Protection Measures Local government agencies have available and have implemented tenant protection measures that run along a continuum, in terms of the amount of government regulation of the landlord - tenant relationship and the agency resources dedicated to implementation of the regulation. At one end are measures that mandate a minimum lease term with stable rents during the term, required notice periods in addition to or beyond those required under State law and mandatory (but non -binding) mediation of certain landlord -tenant disputes, including with respect to rent increases. Further along the continuum are measures that limit the basis upon which a tenant may be evicted from a tenancy (so-called "just cause eviction ordinances") and that may require a landlord to provide relocation assistance in some cases to displaced tenants. Finally, some jurisdictions have moved further along the continuum and adopted rent stabilization ordinances that limit, to some extent, the ability of a landlord to increase rents on covered units. The key characteristics of these ordinances vary among jurisdictions and many of them incorporate other tenant protection measures, such as just cause evictions and relocation 5 Ca1.Civil Code § 1946.1(b). 6 Cal Civil Code §§ 1946, 1946.1(c), 1946.(d). All County Departments September 23, 2015 Page 4 assistance. All of these ordinances are subject to limitations imposed by State law, including in the Costa -Hawkins Act. IV. Minimum Lease Term The City of Palo Alto has adopted a rental housing stabilization ordinance that provides, among other things, that a landlord must offer the prospective tenant of any rental unit (defined to include all multiple -family dwellings) a written lease for a minimum term of at least one year. The offered lease must set the rent for the unit at a rate certain for the entire one year term of the lease and the rent cannot be changed during that lease term, except as provided in the written lease. If the tenant rejects the offered one year lease, the parties are free to negotiate a lease term of less than one year. Requiring a landlord to offer a minimum one year term for a lease affords the tenant protection against rent increases during that term. However, while a landlord is required to offer a tenant a new one-year tenancy at the end of the succeeding one year lease term (if the landlord chooses to renew the lease with that tenant), the landlord is free to demand whatever rental rate the market will bear at the time of lease renewal. V. Enhanced Notice Provisions Other jurisdictions, while not requiring that landlords offer leases with specific minimum terms, do have ordinances requiring notice prior to termination of a tenancy in excess of the notice otherwise required by State law. San Jose, for example, requires 90 days' prior notice before termination of a tenancy if the tenant has resided in the unit for one year or more.8 If the city's housing director finds a "severe rental housing shortage," 120 days' notice is required. A shorter notice period (60 days; the amount of notice otherwise provided by State law) is allowed if the landlord agrees to arbitration on the termination date. As noted above, we believe that State law would preempt any local regulations that would purport to impose notice requirements for rent increases beyond the notice periods otherwise required under State law (i.e., thirty days notice for rent increases of ten percent or less and sixty days for rent increases of greater than ten percent). VI. Landlord -Tenant Mediation of Rent Increases We have also identified jurisdictions that have adopted ordinances that implement landlord - tenant mediation programs. These ordinances establish programs that offer or, in some cases, require, a mediation process before landlords are able to impose certain rent increases and, ' Palo Alto Ordinance Code, § 9.68.030. s San Jose Ordinance Code § 17.23.610. All County Departments September 23, 2015 Page 5 depending on the jurisdiction, such programs may also require mediation of other aspects of the landlord -tenant relationship. Most ordinances imposing mandatory mediation of rent increases limit the types of rental properties that are subject to the mediation requirement (e.g., units in buildings with multiple dwelling units).9 Likewise, these ordinances typically specify the types of disputes that are subject to mandatory mediation (e.g., proposed rent increases of a set percentage above "base rent," rent increases of more than a certain dollar amount per month, or multiple rent increases in any twelve-month period). Under many such ordinances, landlords are required to participate in a non -binding mediation process if a tenant requests mediation of a dispute within the scope of the ordinance and if a landlord fails to do so, the proposed rent increase is invalid. VII. Just Cause Eviction Ordinances Moving along the continuum of possible tenant protection measures, some jurisdictions have adopted ordinances that impose relatively extensive restrictions on the circumstances under which a landlord can evict a tenant. As noted below, jurisdictions with rent stabilization ordinances typically couple them with so- called "just cause eviction" ordinances. However, most such jurisdictions extend the just cause eviction protection of their ordinances to the tenants of rental units that are not themselves subject to rent stabilization, and the California courts have recognized that the Costa -Hawkins Act does not itself preempt just cause eviction ordinances. In fact, some jurisdictions have adopted just case eviction ordinances without instituting rent stabilization.") Under these just cause eviction ordinances, landlords may evict a tenant only for reasons that are specifically enumerated in the ordinance. Examples of permissible grounds for evicting a tenant typically include the following: • Failure to pay rent or habitually paying rent late; • Violation of a material term of rental agreement, where there has been notice and an opportunity to correct the violation; • Committing or allowing the existence of a nuisance; • Damaging the unit or common areas; • Unreasonably interfering with the comfort, safety or enjoyment of other tenants; • Committing or allowing an illegal activity or use; 9 Palo Alto Municipal Code, § 9.72.010. 10 See, e.g., City of Glendale Municipal Code, Chapter 9.30; City of Maywood Municipal Code, Title 8, Ch. 17. All County Departments September 23, 2015 Page 6 • Owner or family member occupancy; • Resident manager occupancy; • Substantial renovation; • Denying landlord lawful entry; or • Unauthorized subtenant in possession at the end of the lease term. In contrast, San Jose employs a narrower approach and only prohibits evictions where the landlord's dominant motive is retaliation against a tenant's exercise of his or her rights under the city's rent stabilization ordinance, or to evade the purposes of the ordinance. In jurisdictions with a just cause eviction ordinance, landlords are often required to satisfy special notice requirements. For example, a landlord might be required to identify the grounds for the eviction, including the facts that support that determination, and to describe the renter's rights and resources. Some jurisdictions require that a landlord give a former tenant notice when they are returning a property to the rental market where the eviction was based on owner occupancy. Tenant advocates maintain that just cause eviction ordinances afford tenants some degree of protection against arbitrary landlord actions, particularly in a tight rental market. Landlords often assert that such ordinances make it more difficult for them to act quickly to deal with problem tenants. VIII. Relocation Assistance Local jurisdictions often require landlords to provide relocation assistance payments to all tenants when the eviction is not the fault of the tenant ("no-fault evictions"). Other jurisdictions limit such mandated assistance based on the type of eviction or the status of the affected tenant; it is particularly common to require relocation assistance for evictions occurring when landlords require tenants to depart in order to occupy units themselves (so-called "owner -occupancy" evictions) or Ellis Act evictions (i.e., an eviction to remove a unit from the rental market). In addition to a lump sum payment, many cities require the landlord to pay for relocation assistance services. As with eviction controls, many local agencies extend the relocation assistance requirements to tenants in units that are not subject to rent stabilization. For example, in Mountain View, landlords are required to pay relocation assistance when evicting tenants under certain circumstances. The Mountain View ordinance applies only where a landlord vacates four or more rental units within a one-year period in order to (1) withdraw from the rental market (an Ellis Act eviction), (2) demolish the rental property, (3) perform substantial renovations, (4) convert to condominiums, or (5) change to a non-residential land use. Further, only tenants with a household income at or less than eighty percent of the area median All County Departments September 23, 2015 Page 7 household income are eligible for relocation assistance." Other jurisdictions require relocation assistance payments without reference to the income level of the affected tenants.12 Under the Mountain View ordinance, in covered eviction cases, the landlord is required to refund the tenant's security deposit (with limited exceptions), provide the affected tenants with a 60 -day subscription to a rental agency, and pay the equivalent of three months' rent, based on the median monthly rent for a similar -sized unit in Mountain View. Certain special -circumstances households, including seniors, persons with disabilities, and families with a dependent child, are entitled to an additional $3,000 payment. The ordinance also requires 90 days' notice of termination. Other ordinances, such as the City of Glendale's, require payment of "two times the amount of the fair market rent as established by the U.S. Department of Housing and Urban Development for a rental unit of similar size of that being vacated in Los Angeles County . . . plus one thousand dollars." Glendale Municipal Code § 9.30.035. IX. What is Rent Stabilization? A further step along the continuum of tenant protection measures is rent stabilization and the following sections describe rent stabilization and statutory/constitutional limits on rent stabilization ordinances and analyze existing rent stabilization ordinances. The cost of market -rate housing units fluctuates with changes in the housing market. For example, a recent report from the Housing Authority of the County of San Mateo states that the average cost of rent in the County has increased more than 45% over the last four years. The general purpose of rent stabilization is to protect tenants by limiting the amount that rents may increase as market rents increase. These ordinances provide tenants certainty that their rents will not increase above a certain amount each year, while also providing landlords with a fair return on their investments.13 a. Types of Rent Stabilization Ordinances Commentators typically speak of three general types of rent stabilization ordinances, two of which remain legal in California." 11 In 2014, 80 percent of the median income for Santa Clara County was $71,300 for a four -person household. 12 See, e.g., City of Glendale Municipal Code, § 9.30.035; City of Maywood Municipal Code § 8.17.035. 13 Pennell v. City of San Jose (1988) 485 U.S. 1, 13. 14 Friedman et al., Cal. Practice Guide: Landlord —Tenant (The Rutter Group 2014) ¶ 2:707, p. 2D-4. All County Departments September 23, 2015 Page 8 i. Vacancy Control The most restrictive type, known as "vacancy control," sets the maximum rental rate for a unit and maintains that rate when the unit is vacated and another tenant takes occupancy.15 Under "vacancy control" ordinances — which, as discussed below, California law no longer allows — the rent that can be charged for a unit remains subject to control at all times, including upon the occurrence of a vacancy and the establishment of a new tenancy. ii. Vacancy Decontol-Recontrol A less restrictive form of rent regulation, known as "vacancy decontrol-recontrol," allows a landlord to establish the initial rental rate for a vacated unit (typically at the then -prevailing market rate) but, after that rental rate is fixed, limits rent increases as long as the same tenant occupies the unit.16 For example, under such an ordinance, a landlord could set a monthly rent at the hypothetical prevailing market rate of $1,000 when a new tenant moves in and that amount would become the "base rent" during the term of that tenancy. During that tenancy, the limitations on rent increases would be applied against that $1,000 base rent. Thus, if the ordinance allowed for rent increases of up to 5% per year, the landlord could increase the rent to no more than $1,050 after the first year of the lease. However, if this tenant moves out and the landlord thereafter rents to a new tenant who is willing to pay rent of $1,500 per month, that $1,500 amount becomes the new "base rent" and the 5% limitation would be applied to this new base rent. iii. Permanent Decontrol The least restrictive type of rent control, known as "permanent decontrol," limits rent increases only on units occupied at the time the ordinance is adopted and when such units are vacated, they become unregulated and landlords are free to determine the initial rental rate and any future rent increases.17 Stated differently, under "permanent decontrol," rent stabilization would apply only to tenancies existing at the time that such an ordinance is adopted and, as these tenancies end when the tenants move out, the units would cease to be covered by the ordinance. iv. Scope Rent stabilization measures may be exhaustive in scope. In addition to capping permissible rent 15 Id., 112:708, p. 2D-4. 16 Id., ¶ 2:710, p. 2D-5. "Id., ¶ 2:711, p. 2D-5. All County Departments September 23, 2015 Page 9 increases, they may regulate landlord conduct that has the effect of imposing a rent increase (e.g., decrease in housing services without a corresponding decrease in rental rates).18 They may also impose "eviction controls," such as those described above, which protect tenants from arbitrary evictions while ensuring that landlords can lawfully evict tenants for good cause.19 Also, as noted, rent stabilization ordinances may be, and often are, coupled with relocation assistance provisions, which require landlords who evict tenants for certain reasons to pay tenants some of their displacement costs in advance.2° X. What Legal Standards Apply to Rent Stabilization Ordinances in California? a. Costa -Hawkins Rental Housing Act Prior to the enactment of the Costa -Hawkins Rental Housing Act in 199521, there was no statutory provision limiting local rent stabilization ordinances in California.22 Costa -Hawkins was the California Legislature's first major effort to limit local controls over rents chargeable to residential tenants.23 Proponents of the legislation viewed it as "a moderate approach to overturn extreme vacancy control ordinances . . . which deter construction of new rental housing and discourage new private investments . . . ." 24 Opponents, on the other hand, argued that the legislation was "an inappropriate intrusion into the right of local communities to enact housing policy to meet local needs" and that the law "would cause housing prices to spiral, with the result that affordable housing would be available to fewer households."25 Costa -Hawkins imposed the following limitations on local rent stabilization ordinances: 1. Housing constructed on or after February 1, 1995 is exempt from such local ordinances;26 2. Single-family homes and condominiums (units where title is held separately) are exempt from such ordinances;27 and 3. Such ordinances cannot regulate the initial rate at which a dwelling unit is offered once the previous tenants have vacated the unit.28 In other words, "vacancy control" ordinances have been abolished and, with limited exceptions, landlords may impose "whatever rent they choose at the commencement of a tenancy." Action Apartment Ass'n '8Id., ¶ 5:1, p. 5-1. '9 Id. 20 For further discussion regarding relocation 21 See Cal. Civ. Code § 1954.50 et seq. 22 Legis. Analyst, analysis of Assem. Bill No. 23 Legis. Analyst, analysis of Assem. Bill No. 24 Id. at p. 6. 25 Id. at p. 6. 26 Cal. Civ. Code § 1954.52(a)(1). 27 Id. at § 1954.52(a)(3) 28 Id. at § 1954.53(a). assistance mandates, see section IV.D of this memo. 1164 (1995-1996 Reg. Sess.) p. 1. 1164 (1995-1996 Reg. Sess.) p. 1. All County Departments September 23, 2015 Page 10 Inc. v. City of Santa Monica (2007) 41 Ca1. 4th 1232, 1237. Costa -Hawkins allowed local jurisdictions to continue to impose rent stabilization on units that are not otherwise exempt, provided that the rents may be reset to market levels by landlords upon a new tenancy (i.e. "vacancy recontrol-decontrol"). b. Constitutional Issues Both the United States and California Supreme Courts have held that rent stabilization is a proper exercise of a local government's police power if it is calculated to eliminate excessive rents and it provides landlords with just and reasonable returns on their property.29 Thus, in order to withstand constitutional scrutiny, a rent stabilization ordinance must provide a mechanism for ensuring landlords a "just and reasonable" return on their property.3° A "just and reasonable" return is one that is "sufficiently high to encourage and reward efficient management, discourage the flight of capital, maintain adequate services, and enable [landlords] to maintain and support their credit status."31 At the same time, the amount of return should not defeat the purpose of rent stabilization, which is to prevent excessive rents.32 A rent stabilization scheme would be vulnerable to constitutional challenge if, for instance, it indefinitely freezes landlord profits, imposes an absolute (inflexible) cap on rent increases, or prohibits a particular class of landlords from obtaining rent increases.33 On the other hand, even a narrowly -drawn ordinance will be valid so long as it grants the responsible body or authority discretion to provide a fair return by approving rent increases in extraordinary cases.34 In addition to ensuring that landlords are guaranteed a "just and reasonable" return on their investments, any rent stabilization measure must avoid classification as a "regulatory taking" under federal and state constitutional law principles. Depending on how a rent stabilization ordinance is drafted and/or applied, it may violate the Fifth and Fourteenth Amendments of the U.S. Constitution, which prohibit the taking of private property for public use without "just compensation."35 The "just compensation" provision is "designed to bar [g]overnment from forcing some people alone to bear public burdens which, in all fairness and justice, should be 29 See Birkenfeld v. City of Berkeley (1976) 17 Cal. 3d 129; Pennell v. City of San Jose, supra, 485 U.S. at 12; Santa Monica Beach, Ltd. v. Super. Ct (1999) 19 Ca1.4th 952, 962. 3o Birkenfeld v. City of Berkeley, supra, 17 Ca1.3d at 165; Galland v. City of Clovis (2001) 24 Ca1.4th 1003, 1021. 31 Carson Harbor Village, Ltd. v. City of Carson Mobilehome Park Rental Review Board (1999) 70 Ca1.App.4th 281, 288-289; TG Oceanside, L.P. v. City of Oceanside (2007) 156 Cal.App.4th 1355, 1372; MHC Operating Limited Partnership v. City of San Jose (2003) 106 Ca1.App.4th 204, 220. 32 Ibid. 33 Donohue v. Santa Paul West Mobile Home Park (1996) 47 Ca1.App.4th 1168, 1179. 34 Ibid. 3s See U.S.C.A. Const. Amend. 5, 14. All County Departments September 23, 2015 Page 11 borne by the public as a whole."36 A regulatory taking of private property occurs when a government regulation limits the uses of the property to such an extent that the regulation effectively deprives the owners of its economically reasonable use or value even though the regulation does not divest them of title to it.37 If the owners can show the value of their property has been diminished as a result of the regulation and that the diminution in value is so severe that the regulation has "essentially appropriated their property for public use[,]" then a regulatory taking has taken place and the local government which enacted the regulation must provide the owners "just compensation."38 XI. Overview of Local Rent Stabilization Ordinances in California As of July 2015, we have identified 14 cities in California — many of which are in the Bay Area — that have instituted some form of rent stabilization.39 News reports also indicate that a number of jurisdictions are currently considering adopting rent stabilization (Santa Rosa) or increasing the stringency of existing measures (San Jose). No county, other than the City and County of San Francisco, has, to date, adopted a rent stabilization ordinance.46 As noted, rent stabilization ordinances are price control mechanisms subject to State and Federal constitutional limitations. Therefore, rent stabilization laws tend to be complex and to vary by jurisdiction. Generally, however, rent stabilization measures address the following points: the type of housing subject to rent stabilization; the limits on and procedure for setting or raising rents; and eviction controls. The chart included as an exhibit to this memorandum compares the key features of rent stabilization ordinances adopted by various jurisdictions and a summary of these ordinances is provided below. 36 First English Evangelical Lutheran Church of Glendale v. County of Los Angeles (1987) 482 U.S. 304, 318-319 (internal quotations marks and citations omitted). 37 See Yee v. City of Escondido (1992) 503 U.S. 519, 522-523; Hensler v. City of Glendale (1994) 8 Ca1.4th 1, 10. 38 See Garneau v. City of Seattle (9th Cir. 1998) 147 F.3d 802, 807-808. The economic impact equation must also account for any valuable "quid pro quo" the property owners may have received as a result of the enactment. Id. Also, a temporary regulatory taking, consisting of the temporary deprivation of all economically viable use of the property, may require compensation for the period of time the regulation denied the owner all use of the land. See First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, supra, 482 U.S. 304, 318; Ali v. City of Los Angeles (1999) 77 Ca1.App.4th 246, 254-255. 39 California jurisdictions with rent stabilization ordinances include Richmond (which recently adopted a rent stabilization ordinance that may be subject to the referendum process), Berkeley, Oakland, San Francisco, San Jose, East Palo Alto, Hayward, Los Gatos, Beverly Hills, Los Angeles, Palm Springs, Santa Monica, Thousand Oaks, and West Hollywood. 40 Note that a number of counties (including San Mateo County) and many more cities have adopted rent control ordinances that apply only to mobilehome parks; although this type of rent control is subject to the same constitutional standards, mobilehome rent control is governed by a separate statutory scheme (California's Mobilehome Residency Law) and a review of mobilehome rent control is not included in this memorandum. All County Departments September 23, 2015 Page 12 A. What Type of Housing May be Subject to Rent Stabilization? As discussed above, State law preempts local ordinances that purport to apply rent stabilization to single-family housing units and to housing built after 1995, or that purport to limit the initial rent established at the beginning of a new tenancy. Likewise, residential units owned or managed by the government, and units with government subsidized rents are exempt under all ordinances. Federal law expressly preempts local rent stabilization on federally -assisted rental buildings. Beyond the limits imposed by State and federal law, however, local governments often create additional exemptions and limits on the applicability of rent stabilization ordinances. Many jurisdictions that imposed rent stabilization prior to the 1995 adoption of the Costa -Hawkins Act typically exempted from their own ordinances units constructed and initially occupied after the date the local ordinance was adopted. For example, San Francisco imposes rent stabilization only on units built before 1979, when the San Francisco ordinance was adopted. While it is less relevant to cities or counties considering rent stabilization post -Costa Hawkins, cities tended to impose rent stabilization only on existing housing stock in order to avoid discouraging production of new housing. Similarly, some cities (such as Oakland and San Francisco) allow substantially renovated units to become exempt from rent stabilization if they meet certain criteria. Presumably this type of provision is intended to encourage substantial renovations when necessary. In addition, most jurisdictions exempt temporary or non-traditional residential uses, such as hotels, hospitals and other medical care facilities, school dormitories, and, in some locations, retirement homes, from rent stabilization. Under Costa Hawkins, rent stabilization may not be applied to single-family residences, but many cities also exempt small -unit residential buildings such as duplexes or triplexes. We did not identify jurisdictions in California that limit the applicability of rent stabilization based on tenant income, although cities in other states have adopted such an approach. In New York City, for example, tenants must have a combined income under $200,000 to qualify for rent stabilization. While not focused on tenant income, Los Angeles exempts "luxury" apartments from rent stabilization, based upon the rent level in effect at the time the ordinance was adopted.41 41 For example, a two -bedroom unit that rented for $588 per month or more in 1978 would not be subject to rent stabilization in Los Angeles. All County Departments September 23, 2015 Page 13 B. How are Rent Rates and Rent Increases Determined Under Rent Stabilization Ordinances? As described previously, State law allows for a form of rent stabilization called "vacancy decontrol," which prevents local governments from regulating the setting of the initial rent at the beginning of a tenancy. The initial rent is set by the landlord, typically at a market level. After that point, though, local rent stabilization ordinances typically limit a landlord's ability to raise the rents in covered units.42 Every rent stabilization jurisdiction, however, has some allowance for automatic periodic rent increases, and also for additional rent increases when required to ensure the landlord receives the constitutionally -required fair rate of return. 1. Automatic Rent Increases Each rent stabilization ordinance permits certain "automatic" rent increases that do not require prior agency approval. These increases typically fall into one of three categories: (1) annual or periodic increases; (2) increases to "pass through" landlord operating costs or registration fees; and (3) increases to market rent upon a unit vacancy. Examples of allowable annual or periodic rent increases for the various rent stabilization jurisdictions is provided in the chart attached to this memorandum. Some rent stabilization jurisdictions allow an annual increase that is tied to and limited by a corresponding increase in the regional Consumer Price Index ("CPI"). In addition, such jurisdictions often also cap annual rent increases by a certain percentage, regardless of the change in CPI. In San Francisco, for example, the automatic annual rent increase is 60 percent of the CPI increase in the year, but the maximum allowable increase is 7 percent regardless of the increase in CPI. Other rent stabilization jurisdictions allow greater annual rent increases that are not necessarily tied to changes in economic indicators. San Jose has such an ordinance, and allows annual increases of eight percent per year (or twenty-one percent if the last rent increase was more than twenty-four months prior). Many ordinances also provide mechanisms for landlords to pass increased operating costs on to their tenants ("pass -through" costs). Acceptable costs often include utilities, property taxes, or rent stabilization ordinance registration fees. Most jurisdictions limit the amount of the pass - through either to a portion of the increased cost or to a percentage of the overall rent. The last type of "automatic" rent increase is upon termination of a tenancy. As described previously, State law allows a landlord to set an initial rent (typically to market levels) at the start of a new tenancy. a2 California law would also allow for "permanent decontrol," which would result in units covered by the law at the time of its adoption becoming non -rent stabilized when the existing tenants depart. All County Departments September 23, 2015 Page 14 2. Rent Adjustments Requiring Agency Approval The constitutional implications of rent stabilization require that any ordinance include a procedure to allow a landlord to petition for an additional rent when necessary to ensure a fair return on the landlord's investment. These fair return requests must be considered on a case -by - case basis, but ordinances typically identify a non-exclusive list of factors that will be considered in determining whether an additional rent increase is justified. Common factors include atypical operating costs and maintenance expenses, physical condition or repair and improvements, level of housing services provided, taxes, and financing or debt service costs. "Fair return" increase approval procedures vary by jurisdiction. However, the general pattern is to require a written application to a rent board or other decision maker, subject to an initial staff determination and then an administrative appeal. The board's decision must be based on evidence presented, with an opportunity for the affected parties to be heard. In addition to case -by -case "fair return" increases, many cities allow landlords to separately apply for rent adjustments to recover capital improvement and renovation costs. These ordinances distinguish "capital improvements" from ordinary maintenance and repairs, which do not justify special rent adjustments. The details vary by jurisdiction, but an approved rent increase based on capital improvements is often spread among the tenants who benefit from the improvements, and the increase is amortized over the useful life of the improvements. Apart from setting maximum rent increases, most ordinances also provide a mechanism for rent reductions to reflect a decrease in housing services that would otherwise effectively allow landlords to increase rent by reducing services. A number of cities vest their rent boards with power to approve tenant requests for rent reductions, usually for reduced housing services or defective conditions, such as code violations or uninhabitable conditions. The procedure usually requires a tenant to petition the rent board and provide documentation of the reduced services and their claimed value. Personal financial hardship is typically not an acceptable reason for a tenant to request a rent reduction by a rent board.43 C. Eviction Controls Because landlords are allowed to set the initial rent at the beginning of a tenancy, rent stabilization in the absence of eviction controls can create an incentive for landlords to terminate existing tenancies in order to raise rents upon establishing a new tenancy. As a result, in addition to limiting rent increases, most rent stabilization jurisdictions include relatively extensive "just cause" eviction restrictions such as those we describe above. Other evictions controls are 43 However, San Jose allows a tenant to raise personal financial hardship as a defense when a landlord requests an additional rent increase above the automatic increase provided by ordinance. All County Departments September 23, 2015 Page 15 described below. 1. Ellis Act (Removing Property From Rental Use) Evictions The Ellis Act prohibits local governments from requiring residential property owners to offer or continue to offer a property for rent. (Gov. Code § 7060 et seq.) Subject to very limited exceptions, landlords have an absolute right to go out of the rental business and to evict tenants on that basis. As discussed above, local governments do have some ability to require payment of relocation assistance for Ellis Act evictions and to potentially regulate initial rents if a landlord later tries to re-enter the rental market. The mechanisms of these relocation assistance ordinances are described further below. 2. Evictions to Allow Owner to Occupy the Unit Eviction controls typically allow rental property owners to evict tenants so that the owner or the owner's immediate relative can occupy the unit. To reduce the possibility of fraudulent owner occupancy evictions, State law requires that the owner -occupant or owner's relative occupy the unit for at least six consecutive months after eviction of the prior tenant. (Civ. Code § 1947.10.) Some cities have adopted more stringent requirements, such as a requirement to move in within three months and remain for at least 36 months. Other cities prohibit corporate or partnership landlords from using this reason for eviction, and some cities prohibit these type of evictions altogether for certain sensitive populations (e.g., the terminally ill, disabled seniors, etc.). 3. Substantial Renovation Evictions Eviction of tenants to allow performance of substantial renovation work is often allowed, with limitations. For example, some cities require the landlord to demonstrate that clearing the property of renters is actually necessary for the type of work proposed, and others require that the displaced tenants have the right to return when the renovation is complete. In Oakland, where tenants are provided the right to return after the renovation is completed, the landlord is required to offer the same base rent with an increase amortizing the cost of approved capital improvement expenditure over time. 4. Condominium Conversion Evictions The conversion of apartment units to condominiums is subject to statewide regulation through the Subdivision Map Act. Local governments also often adopt conversion regulations to further protect their rental housing stock, and San Mateo County has such an ordinance in place. Sections 7108 and 7109 of the County's Subdivision Regulations prohibit conversion of multifamily rental housing to condominiums, except under circumstances where the County's overall housing vacancy, as determined by the California Department of Finance, exceeds 4.15 All County Departments September 23, 2015 Page 16 percent. D. Relocation Assistance Also, as mentioned, rent stabilization jurisdictions often require landlords to make relocation assistance payments to tenants when the reason for the eviction is not the fault of the tenant ("no- fault evictions"). As with eviction controls, many local agencies extend the relocation assistance requirements to tenants in units that are not subject to rent stabilization. E. Administration of Rent Stabilization Ordinances 1. Administration by Rent Board or Other Means of Administration Most rent stabilization ordinances are operated and implemented by a rent board or similar body, which discharges a variety of tasks, including publishing the annual general rent adjustments allowed under the ordinance, adjudicating requests for rent adjustments beyond the annual general adjustment, and conducting studies and publishing reports. However, there is nothing in the law that requires a jurisdiction to establish such a board in adopting a rent stabilization ordinance. Rather, a jurisdiction could instead task officials or employees of the jurisdiction to discharge duties under the ordinance. 2. Certification of Rents vs. Complaint -Based System Some jurisdictions operate on a complaint basis (San Francisco, Oakland, San Jose), which relies on tenants to raise concerns regarding rent increases that are alleged to violate the ordinance. Oakland's complaint -based model, for example, relies on tenants to challenge a rent increase that they believe to be in violation of the ordinance. A hearing officer then evaluates information from the tenant and landlord and makes an initial decision, which can be appealed to a rent board. In all cases, decisions of the local agency can ultimately be appealed to the courts. Other jurisdictions with a more robust administrative approach require landlords to register and certify initial rent amounts (e.g., East Palo Alto and Santa Monica) and to thereafter certify rent increases on covered units. In East Palo Alto, for example, landlords must register all rental units each year. The city charges an annual registration fee ($234 in fiscal year 2014-2015), half of which the landlord is allowed to pass on to the tenant. On an ongoing basis, landlords are required to submit documentation to the rent stabilization board for each vacancy and new tenancy, including copies of any new leases. The rent stabilization board sets the annual general rent adjustment and promulgates regulations to implement the city's rent stabilization ordinance. The rent stabilization board also All County Departments September 23, 2015 Page 17 issues a certificate of "maximum allowable rent" for each regulated unit upon initial rental of the unit and for each new tenant. The rent stabilization board then reviews any requests for rent adjustments against the certified maximum allowable rent. In addition to the proactive registration and certification component, East Palo Alto also provides for landlord and tenant petitions to challenge the rent stabilization board's determinations and to enforce the ordinance where landlords are not in compliance. JCB:jdn Detailed Comparison of Five Cities with Rent Stabilization IMIM Just Cause Eviction Relocation Assistance Berkeley Extensive Yes Condo Max 100 units/year Conversion Limits Annual Rent 65% of CPI, 7% max.; Increase 1.7% for 2014 Landlord None Cost Pass- Throughs Other Additional T: 10% Automatic increase; Additional Rent security deposit for Increases pet(s) where previously prohibited Registration $194/yr.; $4/month for Fees 12 months may be passed through to T; Penalties if late; Reimbursement for low-income Ts Rent Increases Requiring Official Approval Tenant Application for Rent Reduction To yield fair return on investment; Capital improvements, with limitations; T not in occupancy Yes Los Angeles Extensive Yes Notice requirements Equal to CPI; 3% min./8% max.; 3% for 7/1/14 to 6/30/15 Oakland Extensive No relocation aid Replacement unit requirement; notice San Francisco Extensive Yes First right of refusal to tenant Equal to CPI; 10% max; 1.9% 60% of CPI, max. 7%; 1.0% from from 7/1/14 to 6/30/15 Gas and electric up to 1% None of rent; capital improvement, rehab work Additional T: 10% increase; Smoke detectors; Rehab and capital improvement work $24.51/yr.; $12.25 may be passed through to T To yield fair return Yes Accumulate unused increases for up to 10 years 3/1/14 to 2/28/15 Generally allowed for utilites, with some restrictions Accumulate unused increases; Stormwater management; Property tax due to ballot measure approved between 11/1/96 & 11/30/98; 50% of property tax for bonds passed after 11/14/02; 50 percent of SFUSD or SFCCD bond costs One-half of $30 service fee $29 apartment registration fee; may be passed through to T half may be passed through to T Any ground (includes banking, capital improvements, uninsured repairs, housing service costs, or where necessary to meet fair return requirements); Enhanced notice required for capital improvements Yes 7% annual cap based on "need"; Capital improvement up to 10% of base rent; Rehabilitation Yes San Jose Minimal (dominant motive can't be retaliation) No relocation aid First right of refusal; notice; 2/3 tenants must agree 8% per year, or 21% if no increase in 2 years Only if charge is new and approved by Council resolution None Debt service costs deemed "reasonable" under circumstances" by hearing officer if denial is hardship to L; Any ground for increase beyond 8% where T petitions, hardship to T may be considered; Any reason not provided in ordinance Yes Santa Monica Extensive (inc. units not subject to rent control) Yes Permit req'd unless 2/3 tenants agree; right to remain 0.8% oe $14 per month effective 9/1/14; none if market rent set after Sept. 1, 2007 $7 for gas and electric upon application and approval Security deposit for additional Ts or new pets; School tax surcharges; Stormwater management, clean beaches, and ocean parcel tax surcharges $174.96/yr; $13/month may be passed through; Low-income, senior Ts exempt To yield fair return ; Street lighting; Capital improvement; Earthquake repairs; 12% cap for hardship Ts; To correct rent or amenities; T not in occupancy Yes West Hollywood Extensive Yes CUP req'd, with findings (no adverse effect and vacancy >5%) 75% of CPI; 1.25% from 9/1/14 to 8/31/15 Up to 0.5% for gas/electric None $120/yr.; $5/month may be passed through; Partial rebate for certain Ts To yield fair return, up to 12% increase in first 12 month period after decision Yes 1 Detailed Comparison of Five Cities with Rent Stabilization Berkeley Exempt Hotels <14 days; Single Units family residences; Duplexes if L occupies one; New construction (only as to rent increases) Evictions for Must require more Substatial than 60 days to repair; Renovation T refuses to vacate during repair Special Grounds and specific Eviction facts; 120 days' notice Notice Rules to T & city for removal from market Relocation Assistance Owner/relative occupancy: $4,500 if in unit 1 year or more; no eviction if elderly, disabled and in unit 5 years or more; Removal from market: $8,700; $13,700 if tenancy began prior to 1/1/99; additional $2,500 for Ts with minors. elderly. Los Angeles Hotels <30 days; Luxury units; Single family dwellings; Substantially renovated units; New construction; Nonofit housing; Voluntarily - vacated units; Mobile - homes, recreational vehicles & parks None for substantial renovation; Limited evictions permitted under Primary Renovation Program Grounds and specific facts; 60 days' notice to Ts in unit one year; Declaration with city for relative or owner - occupancy, major rehabilitation or permanent removal from rental use For elderly, disabled & Ts with minors, $16,350 if <3 years, $19,300 if >3 years or <80% AMI, $15,000 if "Mom & Pop" property; For others, $7,700 if <3 years, $10,200 if >3 years or <80% AMI, $7,450 if "Mom & Pop" property; L must pay tenant relocation assistance Oakland Hotels; New construction; Substantially renovated units; Owner -occupied buildings with up to 3 units; Nonprofit cooperatives Obtain building permit for repairs necessary to comply with law or correct violation; L to apply for extension beyond 3 months; T offered right to return at same rent; Special notice requirements Grounds, statement that advice re termination available from Board & other req'd info; Copy of notice filed with Board within 10 days of service on T None San Francisco Hotels <32 days; Substantially renovated units; New construction; Nonprofit cooperatives & units owned by nonprofit public benefit corporations Former T may rerent at controlled rent; No mininimum cost for nonmajor work; Permits necesary prior to serving notice; No ulterior motive Grounds; Inform T in writing that advice concerning notice may be obtained from Board; File copies of notice with Board w/in 10 days after service $5,261 to eligible Ts (incl. subtenants, minors), max. of $15,783 per unit; additional $3,508 for elderly, disabled & Ts with minors; Fees different for Ellis Act evictions San Jose Hotels <30 days; Voluntarily - vacated units; Prior T evicted for nonpayment of rent or breach of lease; New construction None 90 days' notice to Ts in unit one year; 120 days' notice where "severe housing shortage" (no "shortage" as of early 2014); Offer to arbitrate; Notice to city within 5 days None Santa Monica Hotels <14 days Retirement homes Owner -occupied 1, 2 or 3 -unit building Single family residences New construction "Incentive" unit Removal permit from city Grounds and specific facts; 60 days' notice to Ts in unit one year; Owner/relative evictions to include current T & rent, info on proposed T; notice to board within 3 days of service on T $8,300 to $17,350 depending on number of bedrooms; $9,500 to $19,950 depending on number of bedrooms for seniors, disabled & parents with minor child, OR city approval of displacement plan OR move T to comparable unit West Hollywood Hotels <30 days; New construction; Units first occupied after 7/1/79; Rooms rented to boarders where L occupies unit as principal residence; Dwelling units legally converted from nondwelling units Permitted where building must be permanently eradicated or demolished b/c uninhabitable or if building may not be inhabited while correcting violation notice by government agency Grounds and specific facts; 60 days' notice to Ts in unit 1 year; Relative/owner- evictions require 90 - day notice specifying proposed T, with copy to city; Written statement of alleged violations for breach of covenant or refusal to renew $5,100 to $12,800 depending on number of bedrooms; $13,500 for seniors, disabled, Ts with dependent children, moderate income; $17,00 for low- income; L must reimburse city for relocation aid POLICY ARGUMENTS REGARDING JUST CAUSE EVICTION Main Policy Features: Tenants may only be evicted for certain enumerated reasons (i.e. "just causes"). Just cause ordinances specify the permissible bases for eviction, including those due to the tenant's "fault" (e.g. nonpayment of rent, criminal activity, etc.) and those due to "no fault" of the tenant (e.g. landlord wishes to occupy the unit). Statewide Legal Baseline: Absent local regulation, state law provides that month -to -month tenants may be evicted for any or no reason (other than retaliation or discrimination) if served with 30 days' written notice (or 60 days' written notice if the tenant has resided in the unit for at least one year). Landlords may also initiate eviction proceedings with 3 -days' notice when a tenant fails to pay rent, creates a nuisance or otherwise violates the lease agreement. Examples: Several California cities have adopted just cause eviction ordinances. See, e.g., City of San Diego Municipal Code, § 98.07; City of East Palo Alto Municipal Code §14.04.160; City of Oakland Municipal Code, § 8.22.300, et seq.; City of Berkeley Municipal Code, § 13.76.130. Arguments in Support of and in Opposition to Policy: 1 PRO CON • • • • Limits the ability of landlords to evict existing tenants, especially in low -vacancy and expensive housing markets where landlords may have incentive to evict existing tenants in order to obtain higher rents. Protects tenants who have short-term (month -to -month) leases. Slows down rapid increases in rent. Stabilizes communities by slowing down evictions and decreasing turnover rates. • • • Generally restricts rights of property owners by limiting what they may do with their property, requiring additional legal process before taking action against a renter. May impact neighborhoods by making it harder for landlords to evict problematic tenants, including those suspected of involvement in criminal activity. Impacts surrounding neighborhood by making it difficult for landlord to remove "bad tenants." 1 The arguments listed here are among those that are commonly advanced for and against the tenant protection measures in question. This office has not analyzed, and does not offer an opinion regarding, their validity. POLICY ARGUMENTS REGARDING RELOCATION BENEFITS Main Policy Features: Tenants who face "no-fault" evictions are eligible for compensation from the landlord for moving costs and other costs of securing new housing. Statewide Legal Baseline: There is no state law mandate for landlords to assist displaced tenants by compensating for relocation costs. Examples: City of Mountain View has adopted a relocation assistance ordinance. See City of Mountain View Municipal Code, § 36.38. Arguments in Support of and in Opposition to Policy: PRO CON • • • Helps ensure that displaced households find affordable and comparable replacement housing by providing compensation for relocation costs, such as first and last months' rent and security deposit for new rental unit, enrollment for housing search services, moving costs and storage. Helps mitigate trauma and disruption to tenants and their families caused by unforeseen need for relocation (e.g. children leaving school mid -year) by addressing some financial impacts. Requires landlords to internalize relocation costs as part of their "costs of doing business." • • • • Amount of mandated compensation may be excessive relative to some tenants' needs; landlords may not be able to afford. Relocation assistance payments may be spent on anything as ordinances do not require that compensation provided to displaced tenants be spent on costs of moving and securing new housing. May create a perceived windfall to well-off tenants if relocation assistance not subject to stringent income -specific criteria. If required to absorb relocation costs as part of their "costs of doing business", landlords could build the cost of relocation benefits into rent structures. POLICY ARGUMENTS REGARDING RENT STABILIZATION Main Policy Features: Rent stabilization ordinances limit the amount that rents are allowed to increase each year as market values increase (usually based either on a fixed percentage or tied to inflation). Statewide Legal Baseline: Currently, under state law, there are no limits on the amount or frequency of rent increases. Landlords may set rent to market rate with every new tenancy ("vacancy decontrol"). Rent control may not be applied to units constructed after 1995, single family homes or condos. Examples: Thirteen cities in California have adopted rent stabilization ordinances. See, e.g., Santa Monica City Charter, Article XVIII; City of Los Gatos Municipal Code § 14.80; City of East Palo Alto Municipal Code, § 14.04.010, et seq. Arguments in Support of and in Opposition to Policy: PRO CON • Prevents landlords from imposing rent increases that cause displacement and accordingly, helps preserve income diverse, stable neighborhoods. • Substantial or frequent rent increases may adversely impact schools, youth groups and community organizations by displacing those who access these services. Long-term tenants who contribute to a community's stability have a legitimate interest in maintaining their tenancies. • Provides a basic form of consumer protection — once tenants move into a vacant unit at market rate rents that they can afford and establish lives in these homes, they won't have to renegotiate. • Helps correct power imbalance between landlords and tenants. Because of the high cost of moving, tenants may be pressured by landlords to accept rent increases. Tenants may also be unaware of the real conditions of units until they move in. If the tenant complains about the • Fundamentally unfair — why burden landlords for a broader societal problem? • Interferes with free market — landlord should be able to rent unit at amount that market bears. • May incentivize landlords to raise rents before any rent control ordinance takes effect in an attempt to evade impact of the regulation. • As a general matter, restricts rights of property owners as it limits what they may do with their property. • With a long line of potential tenants eager to move in at the ceiling price, discourages landlords from maintaining and repairing units until the end of a tenancy. Also, because rent increases are limited, the landlord's ability to recoup costs of improvement or maintenance is also curtailed. • Reduces "urban vitality" by discouraging mobility; decreases vacancy conditions, the landlord may threaten to increase the rent. • Allows tenants to share in the benefit of Proposition 13, which generally caps annual increases in the assessed value of real estate at 2%. In the campaign to enact Proposition 13, advocates claimed that landlords would pass property tax savings along to tenants; rent control helps to ensure that this occurs. • Housing is a positive human right that equals or exceeds the property rights of landlords. Without rent control, even tenants paying full rent can be forced unexpectedly from their homes through no fault of their own. • Prevents landlords from making speculative profits in strong markets, but also enables landlords to obtain fair returns on their rental properties while ensuring that tenants have the certainty that their rents will not increase more than a certain amount each year. • Can be structured in a way so as to minimize bureaucracy and administrative costs (i.e. complaint driven, instead of overseen by Rent Stabilization Board — "lean and mean" approach). rates/turnover in rental units because tenants want to keep their low -rents and are unwilling to leave. • Is not tailored to protect intended beneficiaries — i.e. poor or other vulnerable renters; rather, may incentivize landlord to create stringent standards for applications from prospective tenants (i.e. requiring resumes, credit reports and references) which poor or other vulnerable renters may have trouble meeting. • Incentivizes landlords to discriminate against prospective tenants likely to stay for a long time, like retiree or couples with children. • Triggers consequences such as bribes and a "shadow market" (e.g. prospective tenant offers landlord $5000 just to hold an $1800 -a -month one -bedroom apartment in an industrial neighborhood that he had yet to advertise; landlord offers existing tenant $5000 to vacate rent controlled unit so landlord can reset rent for vacant unit at amount that market will bear). • Encourages some owners to take their units off the market and sell properties, rather than rent. • Depending on how they are crafted, rent control ordinances may be extremely burdensome and expensive to administer. RENT STABILIZATION DECISION MATRIX UNITS COVERED ADDITIONAL EXEMPTIONS • • • Duplexes, small apartment buildings? Substantially renovated units? Temporary, non-traditional residential uses (dorms, hotels, hospitals, etc.) ANNUAL ADJUSTMENT • Economic indicator, such as regional CPI o With or without maximum percentage increase • Specify maximum percentage increase CONTROLS ON AMOUNT OF RENT CHARGED • Automatic o Utilities, property taxes, registration fees OTHER ADJUSTMENTS • Application for Fair Return/Adjudication o Capital improvements o Renovations o Reduction in housing services COMPLAINT -BASED OR REGISTRATION AND ADMINISTRATIVE STRUCTURE CERTIFICATION RENT BOARD OR OTHER STRUCTURE INDEFINITE TERM • Time -based (specified number of years) TEMPORARY • Production -based (specified number of affordable housing units) • Market -based (specified vacancy rate) UNITS COVERED • All housing units • Only rent -stabilized units JUST CAUSE EVICTION • Identify acceptable grounds for eviction and any special limitations ACCOMPANYING TENANT • Notice requirements PROTECTIONS • When is it required? RELOCATION ASSISTANCE • Who qualifies? o Income limits to qualify for assistance? • Amount of assistance? o Additional assistance for sensitive groups? RENT STABILIZATION DECISION MATRIX Attachment B City of Fremont Rent Control and Just -Cause Eviction: Review of Programs June 2017 Management Partners Management Partners June 9, 2017 Mr. Dan Schoenholz Deputy Community Development Director City of Fremont 3300 Capitol Avenue Fremont, CA 94538 Dear Mr. Schoenholz: Management Partners is pleased to transmit this report, which provides the results of our review of rent control/stabilization and just -cause eviction programs in California. This report provides information based on other cities' experience with such programs including analysis and context regarding a range of policy and program options. We look forward to further discussion on this topic with the City as it seeks to develop a strategy associated with landlord/tenant issues to assist in the development of solutions appropriate to community needs in Fremont. Sincerely, „I1 ILL Andrew S. Belknap Regional Vice President 1730 MADISON ROAD • CINCINNATI, OH 45206 • 513 8615400 • FAX 513 8613480 MANAGEMENTPARTNERS.COM 2107 NORTH FIRST STREET, SUITE 470 • SAN JOSE, CALIFORNIA 95131 • 408 437 5400 • FAX 408 453 6191 3152 RED HILL AVENUE, SUITE 210 • COSTA MESA, CALIFORNIA 92626 • 949 222 1082 • FAx 408 453 6191 Rent Control and Just -Cause Eviction: Review of Programs Table of Contents Management Partners Table of Contents Introduction 1 Background 3 November 2016 Election 3 Fremont Rental Housing Profile 6 Residential Rent Increase Dispute Resolution Ordinance 12 RRIDRO Challenges 13 Overview of Rent Control/Just-Cause Eviction Ordinances 15 Model A: (Berkeley/Santa Monica Style Rent Control) 17 Model B: (Alameda/West Hollywood Style Rent Regulation or Stabilization) 18 Just -Cause Eviction 18 Public Outreach and Education 20 Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements 21 Governance 21 Expenditures and Cost Recovery 22 Staffing 24 Technology Support 25 General Observations Regarding Program Impacts 25 Affordable Housing and Rent Control 26 Vacancy Rates/Displacement 27 Housing Supply and the Housing Market 28 Rent Intervention Alternatives — Three Options 29 Option 1: Modified Residential Rent Increase Dispute Resolution Ordinance Process 29 Option 1 Opportunities 31 Option 1 Challenges 32 Option 1 Cost Estimate 32 Option 2: Alameda/West Hollywood Style Rent Regulation or Stabilization 33 Option 2 Opportunities 34 Option 2 Challenges 35 Option 2 Cost Estimate 35 Option 3: Berkeley/Santa Monica Style Rent Control 35 Option 3 Opportunities 36 Option 3 Challenges 36 Option 3 Cost Estimate 37 i Rent Control and Just -Cause Eviction: Review of Programs Table of Contents Management Partners Conclusion 38 Attachment A: Rent Control and Just -Cause Eviction Program Options 39 Attachment B: Just -Cause Eviction Survey 44 Tables Table 1. Overview of November 2016 Rent Control Measures 4 Table 2. Overview of Recent Bay Area City Council Rent Control Activities 5 Table 3. Overview of Fremont Housing Stock for 2006 through 2010 and 2011 through 2015 6 Table 4. Overview of Fremont Vacancy Rates and Median Monthly Rent from 2011 to 2015 8 Table 5. Fremont Gross Rent as a Percent of Household Income from 2011 to 2015 8 Table 6. Summary of Peer Rental Housing for 2011 through 2015 (Five -Year Estimates) 9 Table 7. Summary of Peer Renter Financial Information for 2011 through 2015 11 Table 8. Average Rents for One and Two Bedroom Units in Fremont 11 Table 9. Rent Increase Case Reports from July 1, 2016 through December 31, 2016 13 Table 10. Rent Control and Just -Cause Eviction Program Cost and Fee Comparisons 24 Figures Figure 1. Fremont Percent of Occupied Housing Units Occupied by Owners versus Renters for 2011 through 2015 7 Figure 2. Peer Comparison of the Percent of Total Occupied Housing Units Occupied by Renters for 2011 through 2015 10 ii Rent Control and Just -Cause Eviction: Review of Programs Introduction Management Partners Introduction In 2016, the Fremont City Council considered preliminary research and information prepared by City staff regarding rent control and just -cause eviction programs in California and requested additional information about such programs to help inform their discussion of the issue. The City requested Management Partners' assistance in providing more in- depth information regarding rent control and just -cause eviction policies, options as well as program costs. City staff met with tenant and landlord organizations in 2016 to gather input from stakeholders concerning potential program changes. As stated in a report to the City Council on September 27, 2016, staff was unable to identify much common ground. The tenant group believes a much stronger and binding rent control and just cause eviction ordinance is necessary while the landlord group believes some improvements to the Residential Rental Increase Dispute Resolution Ordinance would be sufficient. At the September 27, 2016 meeting, Council directed staff to research rent control (also known as rent stabilization or rent regulation) and just -cause (or just) evictions and develop options for consideration. The City Council approved a motion directing staff to: • Investigate the operational impacts of rent control and just -cause ordinances, • Create optional models for an ordinance that meets City -specific needs, and • Present possible revisions to the existing Residential Rent Increase Dispute Resolution Ordinance (RRIDRO). The City of Fremont subsequently engaged Management Partners to assist in the analysis of rent control and just -cause eviction ordinances. Management Partners has undertaken this type of work for the cities of San Jose, Santa Rosa, Burlingame and Richmond in the past two years. 1 Rent Control and Just -Cause Eviction: Review of Programs Introduction Management Partners This report includes four major sections: 1. Background, which briefly sets the context for this report; 2. Overview of rent control/just-cause eviction ordinances, which provides a general overview of rent control and just -cause eviction ordinances; 3. Rent control and just -cause eviction program elements, which includes information on the costs and staffing requirements to operate rent control programs; and 4. Rent intervention alternatives (three options), which describes three possible options the City of Fremont may pursue as it determines next steps. 2 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Background Tenant displacement and issues related to the condition and availability of rental housing continue to be a focus of residents and local government officials in the Bay Area and various cities in Southern California. Rising rents in metropolitan regions have sparked discussions regarding local government roles and responsibilities in rental housing markets as well as actions by residents. November 2016 Election The November 2016 election had nine ballot measures related to apartment rent control in seven California cities and one mobile home rent stabilization measure. All of the apartment rent control measures were proposed in Bay Area cities. Table 1 below provides an overview of the nine rent control and tenant eviction ballot measures considered in the 2016 election. Most of the measures were placed on the ballot through a public petition; almost all of them included both rent stabilization and tenant eviction protections. Rent stabilization measures passed in five cities and failed in two cities. Roughly half of the measures were new, while half were modifications of existing rental programs. The cities of Alameda and Mountain View each had two different rent control and mediation ballot measures proposed. In both cities, the public initiated a rent stabilization and tenant eviction protection measure while the city councils placed a tenant -landlord mediation measure on the ballot as an alternative. The results were split, with Alameda voters favoring the mediation program and Mountain View establishing a rent control program. 3 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Table 1. Overview of November 2016 Rent Control Measures City Measure Components Initiated By New Measure or Pass? Modification Y/N Alameda Measure M1 Limits rent increases, provides eviction control, and requires certain relocation benefits Public Modification No Alameda Measure L1 Requires mediation for large rent increases, establishes eviction control, requires certain relocation benefits City Council Modification Yes Burlingame Measure R Repeals earlier ordinance prohibiting regulation of rents by the city and establishes rent control program Public New No East Palo Alto Measure J Streamlines administrative processes behind existing rent control ordinance City Council Modification Yes Mountain View Measure V Charter amendment establishing a rent and eviction control program Public New Yes Mountain View Measure W Alternative program requiring landlord -tenant mediation in lieu of rent control City Council New No Oakland Measure JJ Extends existing rent control program to cover all buildings occupied prior to 1996. Original ordinance covered units occupied prior to 1980. Public Modification Yes Richmond Measure L Establishes traditional rent and eviction control program under a rent board assigned by the City Council Public New Yes San Mateo Measure Q Rent and eviction control Public New No Source: Ballotpedia.org, City websites, and local newspapers and voter resources. Note: Table does not include mobile home rent measures. 4 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Table 2 summarizes City Council actions on rental housing issues over the past year in the Bay Area. Table 2. Overview of Recent Bay Area City Council Rent Control Activities City Components Date Pacifica Established an interim ordinance for rent and eviction control. A permanent measure is planned for the ballot in November 2017. April 2017 (Second reading of ordinance in May) San Jose Created interim ordinance modifying existing rent control ordinance to reduce maximum increase allowed. Staff was instructed to return with long- term options for rent control, eviction protection, and anti - retaliation ordinances. April 2016 San Jose Approved an ordinance that defines eviction controls for rent stabilized units only. (Other possible changes to existing rent control programs are under development.) April 2017 Santa Rosa Established a rent and eviction control program but placed it on hold pending a special election on a measure submitted by City Council in response to a referendum petition created by opponents. The special election was held on June 6, 2017 and voters rejected the measure. The election results ended the rent control program. August 2016 and June 2017 Union City Established eviction controls. Council instructed staff to return with a proposal providing non -binding mediation on large rent increases. April 2017 5 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Fremont Rental Housing Profile The Fremont City Council received the Report to Council on Rent Control, Just -Cause Eviction and Other Options for Promoting Affordable Rental Housing on September 27, 2016. In the report, staff provided a high-level overview of the advantages and disadvantages of implementing rent control and just -cause for eviction programs. Quoting from a report prepared by the Legislative Analyst's Office, Staff noted that between 2010 and 2016 the, "...imbalance between demand and supply has resulted in high costs for both rental and for -sale housing in the Bay Area and the rest of the State." After declines in rents in 2008 and 2009 the average rental cost of a two - bedroom, one -bathroom apartment in Fremont increased 64% (or almost 13% per year) between 2010 and 2015. More recently, between June 2015 and June 2016, rent increases moderated to an annual rate of 3.9%.1 Table 3 provides an overview of housing stock in Fremont. These five- year estimates are from the American Community Survey, which is a collection of population, housing, and workforce data provided by the U.S. Census Bureau. Estimates are based on 60 months of data during the periods of 2006 to 2010 and 2011 to 2015. The estimates show that the number of housing units has increased slightly between 2010 and 2015 across all categories except housing with three or more units. Table 3. Overview of Fremont Housing Stock for 2006 through 2010 and 2011 through 2015 American Community Survey 5 -Year Estimates Data M 20101 20152 1 Total Housing Units 74,218 75,420 Total Occupied Units 68,969 72,684 Owner Occupied Units 44,684 45,144 Renter Occupied Units 24,285 27,540 Housing with 3 or more units 19,643 19,151 Source: American Community Survey 5 -year estimates. 1The 2010 estimate includes data collected from 2006 through 2010. 2The 2015 estimate includes data collected from 2011 through 2015. Note: The American Community Survey estimates for housing units and housing tenure (owner or renter occupied) have a margin of error less than 4%. The data on housing with 3 or more units has a larger margin of error of 8% for both estimates. 1 City of Fremont, City Council Meeting, Report to Council on Rent Control, Just -Cause Eviction and Other Options for Promoting Affordable Rental Housing, dated September 27, 2016. 6 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Figure 1 shows the percentage of occupied housing units occupied by owners and renters according to the American Community Survey's 2015 five-year estimates. Renters occupy approximately 38% of total occupied housing in Fremont. Figure 1. Fremont Percent of Occupied Housing Units Occupied by Owners versus Renters for 2011 through 2015 Percent of Owner Occupied Housing Units Pecent of Renter Occupied Housing Units Source: American Community Survey 5 -year estimates. Table 4 shows homeowner and rental vacancy rates as well as median monthly gross rents for Fremont from 2011 to 2015. These statistics come from the American Community Survey one-year estimates, which are based on 12 months of data collected during each year shown in the table. For owner occupied housing units the vacancy rate has been below 2% over the five-year period. The rental vacancy rate has fluctuated over the last few years, hitting a low of 2.2 percent in 2012 and then steadily rising to 4.9 percent for 2015 with an average of 3.9. The median rent has increased at a constant rate over the last five years. 7 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Table 4. Overview of Fremont Vacancy Rates and Median Monthly Rent from 2011 to 2015 Data American Community Survey 1 -Year Estimates 2011 2012 2013 2014 2015 Homeowner vacancy rate (%) 1.2 1.6 0.8 0.3 1.0 Rental vacancy rate (%) 4.1 2.2 3.4 4.7 4.9 Median monthly gross rent $1,528 $1,613 $1,669 $1,832 $1,923 Source: American Community Survey 1 -year estimates. Table 5 below shows the gross monthly rent as a percentage of household income in Fremont over a five-year period. The United States Census Bureau considers households that pay over 30% of their monthly income to rent as cost burdened. Over this five-year period, an average of 41% of households paid 30% or more of their income for rent. The percent of households paying 30% or more of their income peaked in 2013 at 46% and has since remained around 40% or less. Table 5. Fremont Gross Rent as a Percent of Household Income from 2011 to 2015 Percent of American Community Household Income 2011 2012 Survey 1 -Year Estimates 5 -Year 2013 2014 2015 Average Less than 15% 10.0% 12.6% 16.0% 10.5% 13.9% 12.6% 15 to 19.9% 19.8% 15.7% 13.3% 20.1% 11.6% 16.1% 20 to 24.9% 16.1% 20.6% 15.9% 21.0% 16.8% 18.1% 25 to 29.9% 10.6% 11.7% 8.7% 10.4% 18.3% 11.9% 30% or more 43.6% 39.4% 46.0% 38.0% 39.3% 41.3% Source: American Community Survey 1 -year estimates. Table 6 provides a summary of rental housing information for the cities reviewed in this study of rent control and related programs. This American Community Survey data uses five-year estimates, which is the most comprehensive information available for all peer jurisdictions. The population information shows there is diversity in the size of cities that have adopted rent stabilization programs. Similarly, there is a wide range of housing units and tenure among this group of cities. The cities of Los Angeles and San Jose were excluded from the average calculation in this table because they are outliers to the dataset. Fremont's population is near the average for these cities. Fremont is also near the average for total housing units and total occupied housing units. However, Fremont has only half the number of renter -occupied units and housing structures 8 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners with three or more units as the average for those communities with rent control/stabilization and related programs. Table 6. Summary of Peer Rental Housing for 2011 through 2015 (Five -Year Estimates) Cities Population Total Housing Units Total Occupied Housing Units Renter Occupied Housing Units Housing structures with three or more units Alameda 76,733 32,244 30,708 16,240 12,677 Berkeley 117,384 49,671 45,917 26,334 21,971 East Palo Alto 29,198 7,455 7,065 4,589 3,003 Los Angeles 3,900,794 1,436,543 1,342,761 848,079 744,523 Oakland 408,073 171,087 158,424 95,402 77,216 Richmond 107,597 39,922 36,973 18,981 12,037 San Francisco 840,763 383,676 353,287 224,589 223,316 San Jose 1,000,860 325,256 314,297 134,488 97,408 Santa Monica 92,169 50,934 46,688 34,095 38,179 West Hollywood 35,332 23,997 22,077 17,643 20,473 Fremont 225,221 75,420 72,684 27,540 19,151 Average 213,406 94,873 87,642 54,734 51,109 Source: American Community Survey 5 -year estimates. Note: The American Community Survey estimates for housing units and housing tenure (owner or renter occupied) have a margin of error less than 5% for all the peers. Figure 2 shows the percent of total occupied housing units occupied by renters. The average percent of housing units occupied by renters is 61% for the cities with rent control or related programs. Fremont has the smallest proportion of occupied housing occupied by renters. At only 38%, Fremont is more than one third below the peer average. 9 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Figure 2. Peer Comparison of the Percent of Total Occupied Housing Units Occupied by Renters for 2011 through 2015 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 57% 65% 1 63% 60% I 64% as eJ ��o �� e`' a o Pale �e�e\ Qa\oP Fte�o o°�e\ a� � r�o� ta`` Q`� c,"6- Percent of Total Occupied Housing Occupied by Renters Source: American Community Survey 5 -year estimates. 43% 80% ,oc, ��a ooa c�a� 4\c) o� Sao y,`� Peer Average 1% Table 7 below provides a summary of peer renter financial information, including median household income, median monthly gross rent, and the percent of total renters with rent costing over 30% of their household income. It shows Fremont has the highest median renter household income. The median gross rents in Fremont are also greater than the average for the peers, which correlates with the income information. Fremont also has the smallest proportion of renters spending more than 30% of household income on rent and is 10% below the peer average. The figures reported below in Table 7 are estimates developed by the U.S. Department of Labor and reported in the American Community Survey. Care should be used in interpreting the rental rate information because of the multi -year nature of the estimate, which may not completely track market conditions. This data is available for all peer jurisdictions, however. 10 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Table 7. Summary of Peer Renter Financial Information for 2011 through 2015 Cities Median Renter Household Income Median Monthly Gross Rent Percent of Renters with Rent Costing over 30% of Income Alameda $55,311 $1,407 47% Berkeley $40,074 $1,362 56% East Palo Alto $43,527 $1,433 66% Los Angeles $36,489 $1,209 61% Oakland $38,222 $1,144 55% Richmond $40,355 $1,205 57% San Francisco $62,532 $1,558 44% San Jose $55,152 $1,585 54% Santa Monica $63,476 $1,593 49% West Hollywood $50,722 $1,399 53% Fremont $81,695 $1,743 42% Average $49,277 $1,390 54% Source: American Community Survey 5 -year estimates. Another source of more recent rental information is the Rent Jungle website, which bases estimates on rent sampling data. Table 8 is a summary of Rent Jungle's sampling data for one- and two -bedroom rentals in Fremont gathered in March of each year from 2011 through 2017. Over this six -year period, rents for one -bedroom units increased 79% and two -bedroom units increased by 64%. The increases peaked in the summer of 2015, with some moderation since. Table 8. Average Rents for One and Two Bedroom Units in Fremont Year One Bedroom Change From Prior Year Two Bedroom Change From Prior Year 2011 $1,190 $1,520 2012 $1,532 29% $1,792 18% 2013 $1,638 7% $1,911 7% 2014 $1,760 10% $2,177 14% 2015 $1,981 13% $2,408 11% 2016 $2,137 8% $2,561 6% 2017 $2,134 0% $2,498 -2% Source: https://www.rentjungle.com/average-rent-in fremont-rent-trends/. 11 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners The City has also experienced a decline in the number of Section 8 Federal Housing Program vouchers accepted by landlords from 1,363 in 2012 to 1,134 in 2015. This has impacted more than 200 of the lowest income residents. Residential Rent Increase Dispute Resolution Ordinance Fremont adopted a Residential Rental Increase Dispute Resolution Ordinance (RRIDRO) in 1997. The intent of the ordinance was to establish requirements for properly notifying tenants of rent increases and their rights regarding rent increases, and to provide formal processes for the resolution of complaints over rent increases. The RRIDRO allows one rent increase per year for all units and sets forth a three -step process for complaint resolution. All parties have the opportunity to resolve disputes over rent increases in the three -step process described below. 1. Conciliation. The tenant or landlord may work with an outside third party to assist with resolving any disagreement about a rent increase. The conciliator will work with the parties separately to resolve the disagreement. If successful, a written agreement is binding. 2. Mediation. If conciliation does not result in agreement, the parties move into formal mediation. The trained mediators generally work with the parties together. Any written agreement is binding. 3. Fact Finding. If conciliation and mediation are not successful, the remaining step in the process is fact finding by a panel appointed by the City. The panel includes a tenant representative, a landlord representative and an outside third party. The panel's role is to issue a fact-finding report regarding the reasonableness of the rent increases and the impact of the rental rate on the affected households. The conclusions or recommendations of the panel are not binding. Conciliation, mediation, and fact-finding services are provided by Fremont Fair Housing, the local division of "Project Sentinel," a U.S. Department of Housing and Urban Development approved housing counseling agency. Project Sentinel provides housing related services under contract for many cities in the Bay Area. Table 9 provides a summary of the rent increase cases processed by Fremont Fair Housing from July 1 through December 31, 2016. In addition to these cases opened, Fremont Fair Housing received 130 rent 12 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners increase related phone calls. The majority of the phone calls (113) were made by tenants. Table 9. Rent Increase Case Reports from July 1, 2016 through December 31, 2016 Activity Cases Tenant Landlord Opened Filed Filed Cases Sent to Dispute Resolution (Cases Opened) 31 31 0 Cases Resolved with Reduced Rent Increases 20 20 0 According to Fremont Fair Housing's Year End Report: Representatives from the Rental Housing Association (RHA) continued to volunteer to assist with the conciliation of RRIDRO cases by using "peer counseling." Fifteen cases, with increases ranging from 9.97% to 79.82%, were referred to RHA, and all cases were successfully resolved. In 13 cases, the landlords agreed to substantial rent increase reductions, and in the other two cases tenancies were preserved. Of the 31 cases opened, the increases ranged from a low of 2.23% to a high of 79.82%. In general, tenants reported that increases have been larger and more frequent (every year) than previously. In general, tenants also reported that the premium charged to rent on a month -to -month basis, rather than a fixed term lease, is higher than in previous years. In one case, the tenants were offered a 12 -month lease with an increase of $160 (6.0%), but if they wished to continue renting on a month -to -month basis, the increase was $2,827 (79.8%). The RHA successfully conciliated the case, resulting in a 1.6% rent increase as opposed to the proposed increase of 79.8%. RRIDRO Challenges As market rents began to climb in 2013, Fremont Fair Housing found it challenging to mediate rents. The Rental Housing Association serving southern Alameda County (RHA) sent an agent to assist in the process and reported to City staff that Fremont Fair Housing often was not able to navigate the frequently complex corporate relationships behind ownership of apartment complexes to identify the party having authority. In several cases, apparently, Fremont Fair Housing was not negotiating with people who had authority to reduce proposed rent increases, 13 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners resulting in the decision makers refusing mediated terms. In several cases the RHA agent was able to help negotiate moderate increases. Based on best practices adopted by other jurisdictions with rent mediation processes similar to RRIDRO, and on improved results achieved by RRIDRO with active landlord involvement, there are a number of potential changes to the program the City may wish to consider. These are discussed in Options section below. 14 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners Overview of Rent Control/Just-Cause Eviction Ordinances Of the 482 incorporated cities in California, the vast majority do not regulate rents. Still, whether by legislation or local petition, rent control and just -cause eviction ordinances have become part of the municipal regulatory environment in a number of cities in California. Until 2016 approximately a dozen cities in the State of California had rent control regulations. As was noted earlier, the 2016 elections resulted in a few more cities in the Bay Area establishing rent control regulations. Some California cities have some type of regulation regarding rents which stops short of control or stabilization. These are usually mediation type programs similar to Fremont's. Clearly there is more policy and community interest in this issue in the Bay Area than there has been in many years. Cities as well as stakeholders (sometimes through voter initiative) are trying to address rent control issues with a range of programs. The programs are typically designed to meet the needs of the local community, the economic and market environment as well as stakeholder interests. Programs vary in scope and degree of regulation, and are generally designed to address the following areas: • Rent control or stabilization, • Just -cause for eviction requirements, • Tenant protections against retaliation, and • Relocation assistance for non -fault tenant evictions in particular circumstances. Each program has unique elements, and there is a complex inter- relationship between government regulation and the market that almost always leads to unanticipated consequences. The analysis presented below reflects our best professional judgment, given these constraints and uncertainties. 15 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners As part of our work, we contacted the communities of Santa Monica, Berkeley, Los Angeles, San Jose, and East Palo Alto for information about their rent control and just -cause for eviction programs. In addition, we reviewed ordinances and operating practices currently in place in the cities of Hayward and West Hollywood. While these programs have some common features, it is important to understand that each jurisdiction's scope and implementation processes are unique to their experience of the issues and stakeholder interests. San Jose is currently operating under an interim ordinance while staff develop broad policy recommendations and a program to support a comprehensive program. (San Jose has had a rent control/stabilization program in place since the 1970s, but because rent increases of up to 8% were allowed per year, it rarely had an impact on rents.) Also noteworthy are programs adopted by the cities of Alameda and Santa Rosa in 2016, and the City of Richmond in 2017. However, the proposed ordinance in Santa Rosa was rejected by voters in a special election, in June 2017, so the program planned by the City will not be implemented. Therefore, these programs do not have data that can be used to inform discussions on this issue. Nevertheless, where appropriate we have used relevant information from these communities. Local ordinances to address rapidly escalating rents have existed in California since the late 1970s. Cities such as Santa Monica and Berkeley pioneered strong ordinances that strictly regulated rent increases. More typical are ordinances that provide for non -binding mediation of landlord/tenant disputes similar to Fremont's program. In response to the rent inflation experienced in the Bay Area since the end of the Great Recession, several cities are looking at their current programs or are considering developing a program to regulate rents and establish just - cause eviction procedures. The state has set some limits on the power of a local jurisdiction to address rent increases. In 1995, the California legislature passed the Costa -Hawkins Rental Housing Act (AB 1164) (Costa -Hawkins). Costa - Hawkins allows, among other things, property owners to set rental rates when there is a change in unit vacancy (known as "vacancy decontrol"). In addition, Costa -Hawkins prohibits interfering in a property owner's ability to set rents for any unit that received a certificate of occupancy after February 1, 1995, and any single-family home and condominium. 16 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners Fremont staff estimated in their September 2016 staff report that there are 16,782 rental housing units in multifamily developments in Fremont, with 2,840 built after February 1995 and an additional 1,491 that are income restricted affordable units. (These numbers do not include renter occupied units that would not be subject to regulation, or alternative regulation, such as mobile homes, condominiums and single-family homes.) Therefore, staff indicate that approximately 12,451 units may be covered by a rent control ordinance. 2 Today, these programs, also referred to as rent stabilization programs, generally take one of three forms. An overview of the elements of the three forms is provided in Attachment A. Model A: (Berkeley/Santa Monica Style Rent Control) Traditional or "Model A" rent control ordinances strictly regulate rent increases by providing the annual maximum rents for each unit rather than merely providing the maximum percentage allowed. Cities such as Berkeley and Santa Monica pioneered these types of ordinances, but ordinances that establish the allowed individual rent increases remain rare. Recently, the City of Richmond adopted a Model A rent control ordinance following a voter initiative. Model A rent control programs typically involve the city registering all eligible rental units. Limits on annual rent increases are generally defined in relation to either the Consumer Price Index (CPI) or a flat rate. Should a landlord believe increased operating costs justify a greater increase than permitted by regulation, they must petition for an individual rent adjustment. Similarly, tenants may petition to decrease rents if the services provided by the landlord are reduced. Individual petitions are typically heard by a hearing officer, with the ability of either party to appeal to some public body, usually a rent board, or ultimately the court. Rent boards may be independently elected (as in Berkeley), or appointed by the City Council (as in West Hollywood). Although they have been challenged in the courts, rent control ordinances in Berkeley, Santa Monica, East Palo Alto, West Hollywood and, very recently, Richmond have withstood legal challenge. 2 City of Fremont, City Council Meeting, Report to Council on Rent Control, Just -Cause Eviction and Other Options for Promoting Affordable Rental Housing, dated September 27, 2016. 17 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners Due to the extensive regulatory apparatus associated with Model A rent control programs, these are the most complex and expensive for cities to implement and operate. Also, litigation typically ensues following the enactment of such programs. Model 8: (Alameda/West Hollywood Style Rent Regulation or Stabilization) These programs are intended to address swings in the market that can lead to higher rent increases. They are triggered when a proposed rent increase exceeds some specified threshold (usually 5% to 10 %) and a tenant files a petition. Model B rent control programs typically try first to resolve issues through mediation, which can be a mandatory first step. If mediation fails, the next step is a hearing or arbitration that results in a binding decision. Most rent control programs provide for mediation as either a first step in the dispute resolution process, or as a required step. Some cities provide mediation services to address any type of landlord/tenant dispute before it escalates into formal hearings or court actions. These landlord/tenant dispute resolution programs are similar to Fremont's RRIDRO. Participation in the program is sometimes mandatory, and failure to participate in good faith can be grounds for disallowing a rent increase. A mandated mediation program is intended to provide a tenant access to a grievance process that meets program guidelines for mediation and addresses the issue of tenants being uninformed about how to process rent or service -related grievances. Mediation can be provided to resolve many landlord/tenant disputes on a "cost -to -the -parties" basis. However, many cities choose to fund the service or charge only a nominal fee. Mediation services are typically provided through a third -party contractor or non-profit organization, as Fremont currently is utilizing. Just -Cause Eviction State law allows a landlord to terminate a tenancy without cause at the end of a lease or other tenancy term by giving the tenant a 30- or 60 -day notice. A just -cause for eviction ordinance retains the state's noticing timelines, but also requires a landlord to provide written cause for the termination and evidence supporting the termination action. Typically, "just -cause" ordinances provide a limited range of allowable causes for 18 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners eviction. One of the primary impacts of these programs is that they shift the burden of proof for a tenant eviction from the tenant to the landlord, because failure to prove one of the allowable causes for eviction is an affirmative defense a tenant may use to contest the eviction. Just -cause for eviction rules are often part of a strong rent regulation ordinance to protect tenants from a landlord's ability to evict them without cause under civil procedures to gain potentially significant rent increases by creating a vacancy that allows greater market rents to be charged pursuant to the Costa -Hawkins Act. However, just -cause ordinances can also become problematic for a landlord seeking to evict a tenant for reasons other than to increase the rent. Because legitimately evicted tenants may use the appeals processes to delay the eviction, many landlords believe that just -cause ordinances make it difficult to evict bad tenants. The effectiveness of just -cause ordinances is difficult to track statewide because most of the cases are taken directly to the courts for resolution and the results are not published in a comprehensive way. However, to assess the effectiveness of such ordinances, Community Legal Services of East Palo Alto (CLSEPA) tracked their caseload over an eight -month test period in 2014. CLSEPA provides defense for tenants facing eviction in East Palo Alto and many other areas of San Mateo County. Currently, East Palo Alto is the only city in San Mateo County with a just -cause for eviction ordinance (it has also had a rent control ordinance since 2010). Over the test period CLSEPA obtained "pay and stay" settlements (where the tenant agrees to a rent increase and is not evicted) for 70% of cases in East Palo Alto. However, in all other San Mateo County cities pay and stay settlements were achieved in only 14% of cases. CLSEPA did not have the capacity to track cases beyond the test period. An important caveat to this example is that eviction in a rent control environment is different than in a non -regulated environment. As stated above when rents are controlled landlords may have in incentive to evict to obtain the economic benefit of vacancy decontrol. Therefore, comparing eviction settlements in a controlled environment like East Palo Alto may not yield a meaningful comparison in a mainly unregulated environment such as other areas in San Mateo County. 19 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners While typically paired with rent control or stabilization, a just -cause ordinance can be a stand-alone ordinance designed to protect tenants from unilateral landlord eviction decisions. They can apply to most tenants as well as to specific tenants, such as to tenants of rent stabilized units only. For example, the just -cause sections of ordinances for both Richmond and Berkeley apply to the rent -controlled units as well as to almost all other rental units. Just -cause ordinances also can be used to provide additional protections for certain classes of tenants, such as the disabled, elderly, infirm and families with children in school. Just -cause for eviction programs typically are designed so the city is not an active participant in the process. Instead, the eviction processes play out through the courts. Rent board staff in several of the California cities with rent control contacted by Management Partners reported they did not track just -cause eviction complaints so we were unable to determine the extent of such cases. A survey of just -cause eviction provisions is provided as Attachment B. Fremont's neighbor, Union City, recently enacted a just -cause ordinance in the absence of rent controls beyond a non -binding mediation program. The effect of such a just -cause ordinance on rents is not clear because it is too new to draw any conclusions from. Public Outreach and Education Although not strictly an element of rent control and just -cause eviction ordinances, rent control related public outreach typically includes a range of tenant and landlord education or information programs to make sure the parties understand their rights and responsibilities. Topics covered often include processes for allowing yearly rent increases and/or petitioning higher rent increases to cover higher capital or operating costs, vacancy decontrol, habitability standards, and retaliation or anti - harassment provisions. The most effective tenant protection programs use extensive outreach and education to reduce the number of petitions and ordinance violations over time. 20 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements The Fremont City Council directed staff to investigate operational impacts of rent control/rent stabilization and just -cause ordinances. As noted previously, each jurisdiction with rent control and just -cause for eviction ordinances has unique elements to meet specific community and stakeholder interests and needs. As such, programs vary widely among agencies. This section provides an overview of the major elements of rent control and just -cause eviction programs and their operational impacts in the following areas: • Governance, • Expenditures and cost recovery, • Staffing, and • Other observations. Governance Most cities, whether their programs are regulatory or non -binding, establish a board to provide oversight, to act as the final appeals body when parties fail to reach agreement after mediation, or to act as the hearing body for a decision by an arbiter or hearing officer for general landlord/tenant complaints such as excessive rent increases. These boards are generally appointed by a city council, although Berkeley and Santa Monica have an independently elected board. In most programs, initial decisions are made by trained hearing officers directly employed by the rent board or contracted by the board from independent organizations. These boards will typically hold public hearings to render a final binding decision on complaints. Although the board may be appointed by a council, we have not identified any ordinances where a board's decisions are appealable to the city council. Most appeals of board decisions are made directly to the courts. Rent control boards may also get involved in 21 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners other landlord/tenant issues, including providing informational and educational materials on landlord/tenant rights and other matters of interest to landlords and tenants. Although a board is typically created, we found two examples where governance is not being delegated to a rental control board. The City of Hayward's program calls for arbitration; the arbiter's decision is final (subject to court review should the matter be taken to court). Under San Jose's new program, disputes are arbitrated by hearing officers and appealed to the courts. However, policy decisions remain with the City Council or are delegated to staff. Expenditures and Cost Recovery The cost of rent control programs varies widely across the state. The costs are related to the cost of staff required to administer the program. Programs that require detailed administrative action over routine activity such as rent increases and tenancy changes are higher in cost on a per rental unit basis. The programs in Berkeley and Santa Monica programs are examples of such programs. Programs that require little routine administrative control and are primarily complaint driven, such as San Francisco's, are fairly inexpensive on a per unit basis. Scale reduces the per unit cost in the large cities dramatically. Some factors that influence costs are: • The level of policy control of the rent boards and their need for staff support; • The amount of information and frequency of reporting required by landlords; • The complexity of the petition processes, especially those related to fair -return on investment provisions; • Whether proactive enforcement of the ordinance is performed (i.e., analysis of reporting data is used to act on rents outside of complaints); and • The complexity of relocation programs. A city council is typically responsible for approving the budget for rent management programs. In at least three cities (Berkeley, Santa Monica and Richmond), the budget is set by the rent board with little oversight by the City Council (although the Council must set the associated rental housing fee). In cities with strong rent regulation reporting, most of the program budget is funded through a rental housing fee on each regulated unit charged to landlords. 22 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Fees for Model A rent control programs currently are as high as $238 per unit per year, and cover annual costs and reserves necessary to properly fund them. The fee is established on an annual basis. If program costs increase, the fee can be increased. In some cities, a portion of the rental housing fee can be passed through to tenants through rent increases. To properly track regulated units and payment of fees, these cities require that units be registered or enrolled in a "rent registry." In those cases where there is less rigorous rent control (i.e., with landlords only reporting on the occupied units), fees range from approximately $40 to $120 per year. Some cities support their rent control program through the general fund or through a combination of general fund support and fees. For non- binding mediation programs, a non-profit may provide the service either through its own grant funding, or by charging a fee. Table 10 below provides information on program cost and fee data collected from communities that operate rent management programs. While all of the programs in Table 10 include rent control and just -cause for eviction components, each of the cities' programs provide a range of services as well as staffing strategies which make cost comparisons challenging. As an example, the programs in the cities of Berkeley and East Palo Alto require rental unit registration of actual rents while the others do not. The level of service also varies. The City of Alameda's program includes mediation services for rental properties not subject to rent control while the now defunct City of Santa Rosa's program excluded these services. Finally, the City of Hayward's fees are significantly less than other communities due to its policy to recover only a portion of program costs. The Hayward program has limited administrative requirements and offers some unique program features, including those that allow a landlord to remove units from the rent control portion of the program if certain conditions are met. 23 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Table 10. Rent Control and Just -Cause Eviction Program Cost and Fee Comparisons City Number of Non -Exempt Housing Units Current Program Operating Budget Annual Per Unit Program Fee Number of Program FTEs Annual Allowable Rent Increase Alameda' 13,037 $1,900,000 $131 6.0 5% Berkeley 19,093 $4,550,000 $234 20.6 1.5% (CPI Formula) East Palo AIto2 2,400 $650,000 $234 2.0 2.40% (CPI Formula) Hayward' 3,000 $27,875 $2.77 0.5 5.00% Oakland N/A $1,773,209 $30 12.0 2% (CPI Formula) Santa Rosa4 11,076 $1,248,674 $113 4.5 3% Source: Annual budget documents, city websites and program reports. ' The City of Alameda information represents an estimated amount as the program has just recently been approved; however, the fee has not yet been adopted. 2 The City of East Palo Alto budget includes $206,000 City overhead charges. 3 The City of Hayward includes various conditions that allow rent increases greater than 5%, including rent carry-overs. Cost is based on 80% program recovery. A total of 20% is funded by the General Fund and 3,000 units are subject to the rent control portion of the program. 4 The City of Santa Rosa program fee was adopted on August 30, 2016 based on program cost and fee estimates. The Santa Rosa and Alameda programs were selected in part because they have just recently been adopted and include one-time costs anticipated in program start up. The Santa Rosa program no longer exists because it was rejected by voters in a special election on June 6, 2017. Staffing With respect to the provision of legal services to support the function, we observed that programs utilized either the city attorney's staff or employed their own attorneys to focus exclusively on the rent control program. For example, Alameda, East Palo Alto and Santa Rosa secure legal services for their program through their city attorneys' offices. The cost of this staff time is tracked and included in the program costs. Santa Monica and Berkeley both have staff attorneys who are solely responsible for the rent control program and related litigation. Periodically, the rent control program attorneys in both of those cities require supplemental assistance from the City Attorney. Several of the rent control programs also budget for additional contract services including additional legal services (e.g., East Palo Alto and Santa Monica). The level of staffing for rent control programs is highly dependent on the type of program. A non -binding mediation program can be managed with more limited staff resources. On the other hand, cities with highly regulatory programs may need a significant number of staff, including a 24 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners manager, administrative personnel, (e.g., support and accounting staff), analysts, legal services and hearing officers (which may be contracted). Staff may also conduct community outreach and education activities. The City of Berkeley's rent control program, governed by an independent and elected rent board, employs 22 full-time equivalent employees (FTEs) and has a budget of over $4.5 million. The City of Hayward's program, which is a complaint -based arbitration program for significant rent increases, is administered through the City Attorney's Office and uses a portion of two FTEs for program administration along with contractual support for mediation and arbitration. It does not utilize a board for program oversight. Technology Support Until this year there was no commercially available software that supported rent control programs. Cities with long term programs have all used custom software developed specifically for them. The City of San Jose is in the process of creating custom configurations of its Customer Resource Management software to provide such support. The San Jose Housing Department has used that application for several years but processes supporting the new ordinances being developed will require more sophisticated functionality. The City of Richmond is in the process of developing similar functionality using their development permit tracking and inspection system. Both cities have information technology staff with significant skills with these products and both will likely require additional assistance from their vendors. On January 3, 2017, the City of Los Angeles went online with a new application developed for them by a southern California software development company. This company just contracted with the City of Beverly Hills to provide a version of the Los Angeles software as a "cloud -based" service, but it is not yet installed. General Observations Regarding Program Impacts The degree to which there is an impact on the housing market from rent management programs will depend on the type of program adopted by the city, the market and general economic development conditions within a region. In general, there is limited research on the market impacts of any of the rent management programs as they currently exist in California after Costa -Hawkins. Interest groups representing landlords and tenants rarely, if ever, agree on market impacts. 25 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Objectively, concerns that local rent regulation would discourage new construction have largely been addressed by state law exempting new construction from rent regulation. There have been concerns that highly regulatory programs discourage investment and lead to deterioration in rental housing, but evidence of that is merely anecdotal. In reviewing the potential impacts of rental control programs, the following are some general observations about affordable housing, vacancy rates/displacement, and housing supply. Affordable Housing and Rent Control Defining housing affordability is a complex matter that is beyond the scope of this study. However, in the broadest sense, any definition of affordable housing typically includes a link between household income and the amount of income spent on rent and/or gross housing costs. As an example, HUD generally defines housing as being affordable if a median income household is paying no more than 30% of its income on housing -related costs. While the HUD definition is commonly cited when discussing housing issues overall, a city's affordable housing program is typically geared toward the development and maintenance of subsidized rental housing including eligibility requirements tied to household income, most commonly those households with an annual income less than 80% of the Area Median Income (AMI). Affordable housing and rent control are different in that the income of a tenant in a rent control environment is not used as a parameter in the rent setting process. We have not observed any affordability monitoring or control mechanism linking rents and household income in relation to the impact of rent regulation. Therefore, as a general observation rent control and just -cause eviction ordinances, at best, maintain some level of affordability for those already in rental housing subject to the ordinance, but do not lead to an expansion in the availability of affordable housing. Notwithstanding this, proponents of rent control programs and associated stakeholders often assert these programs assist in promoting tenant stabilization, with varying degrees of success, by establishing a more clearly defined rent adjustment amount and by providing an outlet for grievances related to what may be viewed as unreasonable rent increases without regard to a household's income or the amount of 26 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners household income dedicated to monthly housing costs. In addition, educating tenants and landlords about tenant rights and processes for rent adjustments and/or evictions are often components of affordable housing programs. Affordable housing issues are not directly targeted by rent regulation. Such issues are much broader and bigger, and the subject of a lot of discussion among stakeholders and the housing industry. However, rent control and just -cause eviction may provide additional public information and a process that may affect a subset of those impacted by high housing costs. Vacancy Rates/Displacement Management Partners has not found any current data indicating that rent control and just -cause for eviction programs will increase or decrease vacancy rates. Our observation is based on conversations with representatives from the peer cities and the results of a questionnaire regarding vacancy rates in cities with rent control programs. Because the surveyed cities are not collecting data to track tenant displacement and/or the root causes for displacement, which are complex, we have not found any specific evidence indicating these programs improve or worsen tenant displacement. Notwithstanding the lack of available data, it seems reasonable to conclude that tenants are displaced when rent increases exceed the general cost of living, leading to a tenant being priced out of a unit and potentially out of the community. A program that mitigates rent increases accompanied by a just -cause eviction ordinance may limit the impact of rent increases thereby preventing some displacement. Of course, the associated regulatory apparatus comes at a cost and landlords will oppose this intervention in the marketplace, and with respect to their property. As noted above, rent regulation programs are not targeted to those who may be most at risk of displacement. They provide a benefit to both those who may be displaced as well as others who can afford to pay market rents. For some tenants, the benefits of retaining a rent -regulated unit will encourage them to remain in the unit, even when their incomes rise and they can afford market rents. Some believe this may result in less turnover in the rental market, especially for those older units that tend to be most affordable, even in a high -cost area. While there is anecdotal evidence of this effect, we are not aware of any study that has quantified it. 27 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Housing Supply and the Housing Market As noted earlier, Costa -Hawkins has largely addressed the concern that local rent regulation would discourage new apartment construction. However, highly regulatory programs can lead to some loss of rental units to condominium conversion and to owners who choose to leave the rental market all together, usually by the owner or relative occupying a condo conversion or through demolition and major reconstruction. There is also a state law that allows evictions to remove a property from the rental market for a variety of reasons, commonly known as the Ellis Act. In response, some communities have adopted condominium conversion processes that require a rent board's review of these applications to ensure the rental unit conversion to owner occupancy is consistent with rent control and just -cause eviction program intent and practices. For example, the City of Berkeley requires a complex application review and payment of an affordable housing mitigation fee. Santa Monica reported in its 2015 Consolidated Annual Report that since 1986 a total of 2,019 units have been withdrawn from the rental housing market. The San Francisco Chronicle reported that there were more than 100 Ellis Act evictions each year between 2010 and 2013. Other cities that regulate rents have not reported significant losses of rental units through the Ellis Act or through condominium conversion. 28 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners Rent Intervention Alternatives — Three Options The City Council directed staff to generate a range of program options. Management Partners has prepared three possible options at staff's request. As part of these options, we defined program elements, administrative cost, and the potential advantages and disadvantages of each (also see Attachment A). These options represent a broad overview of program elements for City consideration. Should the City Council decide to pursue any of or a component of these options, additional research would be necessary to ensure that a program is drafted to address the unique needs, stakeholder interests and program objectives for the City of Fremont. Option 1: Modified Residential Rent Increase Dispute Resolution Ordinance Process The City Council directed staff to develop possible revisions or alternatives to the existing RRIDRO. A non -binding mediation approach is appropriate for most communities whose objective is primarily to resolve landlord/tenant disputes. When there is balance between supply and demand in the rental market, such programs can probably help reduce displacements of lower -income tenants. As market rents began to climb between 2013 and 2015, the City's contractor, Fremont Fair Housing, was not successful at mediating rents in the overheated rental market until the Rental Housing Association (RHA) sent an agent to assist. The agent reported to staff that Fremont Fair Housing was not able to navigate the frequently complex corporate relationships behind apartment complex ownership. This resulted in Fremont Fair Housing sometimes negotiating with people lacking the actual authority to reduce proposed rent increases, which then resulted in the decision makers refusing mediated terms. The RHA had greater resources and experience identifying the decision makers. In several cases the RHA agent was able to negotiate reductions in the proposed increases. 29 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners The City of San Leandro has a mediation -based program similar to Fremont's RRIDRO. San Leandro recently adopted an ordinance with program enhancements that may bolster the effectiveness of Fremont's current RRIDRO. Elements of San Leandro's ordinance that might be considered by Fremont include: • Replacing the Fact -Finding Panel under the current ordinance with a standing Rent Review Board consisting of two landlord representatives, two tenant representatives, and a neutral third party; • Establishing a rent increase threshold for eligibility; • Strengthening the mandatory participation provisions; and • Continued peer -to -peer counseling by landlords. Fremont staff shared several additional possible RRIDRO revisions with our team, including the following. 1. Establish a Rent Review Board for mediation/fact finding of rent disputes to include: a. Failure to participate (landlord) will render the rent increase invalid. b. Failure to participate (tenant) will render the rent increase valid. c. If the Rent Review Board finds retaliation, the most current rent increase becomes invalid and no further increases are permitted for 12 months from the date of the finding. 2. Revise noticing provisions (statements to be included in a notice of rent increase) to include: a. A statement on the reason for increase. b. A statement on Rent Review Board processes. c. A statement that no more than one rent increase every 12 months will be made (9.60.040 (d)). d. Require 90 days -notice of rent increases rather than encouraging landlords to provide at least 90 days -notice (9.60.040 (c)). e. Failure to give proper notice including all statements renders the rent increase invalid and no additional rent increase notice is permitted for at least 90 days. 3. Retaliation Measures a. Increase the penalty for retaliation to a larger amount (currently $1,000) that would deter landlords from retaliatory actions (9.60.100; see Civ. Code § 1942.5). 30 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners b. Any retaliation renders the recent rent increase invalid and no additional rent increase notice is allowed for next 12 months from the date of the finding. 4. Additional conciliation process requirements a. Require mediation on rent and other terms of tenancy b. Require the individual representing the landlord in the process to have the authority to make rent adjustments c. Require meaningful participation or rent increase is rendered invalid. d. Codify AR 10.7 to clarify that if parties agree to more than one rent increase in a 12 -month period, it must be documented in a separate agreement (not the rental agreement) that identifies the agreed upon rental increase. e. Agreements reached in mediation are binding. 5. Additional mediation process requirements a. Require participation by representatives or the rent increase is invalid. b. Agreements reached following mediation are binding. 6. Additional Fact -Finding Process Requirements a. Require participation or rent increase is invalid. b. Recommendations of the fact-finding panel are not binding. c. Agreements reached by parties following fact finding are binding. In addition, staff suggested a regular evaluation of the program could help ensure its effectiveness. Option 1 Opportunities As noted in Attachment A, this model has several components. It: • Creates an effective vehicle for addressing tenant concerns regarding significant rent increases, • Promotes tenant stability regarding lease terminations, • Improves landlord/tenant communication, • Provides certainty and stability for landlords • Reinforces non -retaliation provisions, and • Includes tenant relocation expenses in some programs. An additional rent mediation program element that has been used in the cities of Palo Alto and more recently Menlo Park is the requirement for 31 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners landlords to offer one-year leases to tenants each year. The tenant retains the right to refuse such leases but landlords must offer them. This eliminates the risk of tenants receiving multiple rent increases each year and provides some level of stability for both landlords and tenants, especially where student housing is an element of volatility in the local rental market. However, tenants in several South Bay communities have complained to housing support agencies of demands for very high month -to -month rents if longer term leases were refused by the tenants. Mediation programs provide tenants with an opportunity to present their concerns about a rent increase to a neutral third party who can work with both the landlord and tenant to see if an agreement can be reached. Mediation is also a less restrictive approach with respect to landlords and their property. Transitioning the existing "panel" to a rent review board and establishing a more transparent process may provide additional incentive for both parties to reach a compromise. Option 1 Challenges This model will not address concerns regarding affordable housing or financial hardship resulting from higher than historical or perceived "normal" rent adjustments. In addition, the overall impact on displacement is difficult to quantify. Moreover, the Rental Housing Organization (RHO) in Fremont, as reported in the September 27, 2016 staff report, has recommended a 7% to 10% yearly threshold for rent increases prior to being subject to the mediation process. At this threshold, the mediation process might not have much impact. For example, the City of San Jose rent control ordinance has been in place since 1979. It has allowed an 8% annual increase with other opportunities for larger rent increases under certain circumstances. In a January 27, 2017 report, the City Auditor reported that between 1980 and 2014, the average rent increase was 4.9% and the 8% yearly allowable increase did not become a constraint on rent spikes except in the early 1980s when inflation was very high. San Jose's 2015 interim apartment rent ordinance has reduced the threshold to 5%. Option 1 Cost Estimate This option has the advantage of having a relatively low program cost. The exact costs are difficult to determine precisely because the budgets for such programs are typically embedded in the budgets of larger housing departments or organizational units, which provide support for many other services such as placing low or moderate income tenants, 32 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners administering affordable mortgage programs, and assisting other housing functions. The City of San Leandro Housing Services Department offers broad housing services to low and moderate income residents and supports a Rent Board and binding mediation program at a cost of $874,963 in Fiscal Year 2016/2017. Of this, an estimated $100,000 is dedicated to the rent mediation program. As will be further explained, the cost of all three styles of rent control programs varies widely depending on sometimes small differences in the program policies and administrative processes supporting them, but Option 1 costs are typically the lowest. The volume of public education and outreach by each city or contract agency can have significant impact on the cost. Given the larger number of units subject to a program in Fremont suggests that even, a modest mediation program approach such as seen in San Leandro could approach $300,000 annually. With lower rent ceilings, more detailed administrative processes, and other support services being provided, the costs could approach $500,000. It is possible costs could be offset via a correctly designed fee that meets California nexus requirements, as seen with rent control programs. Option 2: Alameda/West Hollywood Style Rent Regulation or Stabilization A rent control and just -cause eviction program could have the features listed below for rental units not exempted by Costa -Hawkins (and City ordinance). • Landlord requirement to notify and supply tenants with a copy of the program ordinance and annual rent increases. • A threshold rent increase for accessing the program (5% to 10%). • Potential to opt out of the rent control program with minimum reinvestment per unit. • A complaint -based program, (i.e., no ongoing tracking of regulated rentals); although, should a fee be established, the City would need to determine a collection method. • A clear set of criteria for evaluating whether a rent increase over the threshold can be justified. • Voluntary or required mediation. • A fact-finding process followed by a hearing before a hearing examiner or arbiter, should mediation not lead to agreement. • An order from the hearing officer or arbiter is binding on the parties. 33 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners • An opportunity to appeal the order. • A hearing before a board appointed by the City Council (should the matter be appealed). Option 2 Opportunities As noted in Attachment A, this option can provide several benefits depending on the structure focusing on each community's needs. These include the potential to: • Stabilize rent increases, • Encourage habitability compliance, • Expand tenants' rights, • Attract investment, • Ensure a method to address landlord/tenant disputes, • Provide a fair return on investment, and • Encourage rental housing reinvestment. This type of program would insert the City's regulatory authority into the rental housing market to address above "normal" rent increases to some degree. Because the program includes the authority to order modifications, it may lead to more good -faith efforts for agreement. Depending on the threshold set for use of the program, it could also address only the most significant rent increases. It is important to remember that rent increases at the high levels experienced during the past few years have moderated. Over time, depending on the threshold, allowable rent levels may catch up to market rents. For example, assuming a 7% threshold and market rental inflation over four years of 13%, 9%, 4% and 2%, the permitted increases will have caught up to market rents by year four, but at a less impactful and more predictable rate. Because these programs are designed to address the specific housing type and needs of the respective jurisdiction, Fremont would need to consider its specific housing characteristics in the design process. Should the City move in the direction of some form of rent regulation, we suggest it also consider a just -cause ordinance to avoid evictions related to rent regulation. An interesting element in the City of Hayward's ordinance is the option for landlords to opt out of the rent control program by making certain capital improvements to the controlled properties. In this way, Hayward addressed a community interest in improving the condition of rental 34 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners stock. The City enacted an ordinance for rent control in 1983 but later repealed it. A new ordinance was enacted in 2003. Since the current rent control program went into effect in 2003, the number of rent -stabilized units has declined from roughly 11,000 units initially to 3,000 units today. Option 2 Challenges Even under these programs, the affordable housing gap will persist for residents at or below the Area Median Income (AMI). Further, Option 2 contemplates only short-term rent control, because voluntary vacancy and landlord compliance with permanent decontrol removes a unit from the program and rent increase limits. The program is designed to drive rental housing reinvestment, and since vacancy decontrol prohibits comprehensive application to all rental units (only units built before 1995 can be "controlled"), reinvestment is only encouraged for those units in the program. Option 2 Cost Estimate Option 2 would require significant staff resources and costs. Assuming just -cause provisions are adopted, landlords would have to expend considerably more effort to evict tenants and be subject to potential legal challenge. Landlord costs may also increase if the City chooses to require them to pay relocation costs for certain types of evictions. Should the City wish to consider this option further, a more detailed analysis of the potential staffing requirements and program costs would need to be undertaken. The current budget for the City of Alameda's program is $1,950,000, covering 14,699 units under rent control. The City of West Hollywood's rent control program budget is roughly $1,900,000 to cover 16,805 controlled units. This rent control program is part of a larger, comprehensive housing department budget and costs are an estimate provided by their staff in 2016. A reasonable range of costs for Fremont is expected to be between $1,900,000 and $2,100,000. Again, there is potential for additional costs depending on program elements but West Hollywood and Alameda both provide a reasonable threshold cost estimate, depending on the number of units included. Option 3: Berkeley/Santa Monica Style Rent Control A rent control and just -cause eviction program might include the following elements in relation to rental units not exempted by Costa - Hawkins. 35 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners • Requiring landlords to notify and supply tenants with a copy of the program ordinance and annual rent increases. • Establishing a board with the authority to set an annual general adjustment to rents, generally based on the Consumer Price Index or some flat maximum amount. • Establishing a procedure to apply for individual adjustments, and a set of criteria for evaluating requests for an individual adjustment. • Enrolling all regulated units and payment of a fee to cover the costs of the program. • Requiring voluntary or required mediation. • Establishing a fact-finding process followed by a hearing before a hearing examiner (should mediation not lead to agreement). • Requiring an order from the hearing officer or arbiter to be binding on the parties with an opportunity to appeal the order. • Requiring a hearing before a board appointed by the City Council (should the matter be appealed). As with the previous (Model B) program, should the City move in this direction, we would suggest it also consider a just -cause for eviction ordinance. Option 3 Opportunities This option provides for the tracking of program units; a mechanism to identify, inform, and engage landlords and tenants; reasonable rent increases while stabilizing tenant population in rental units; compliance with code (habitability) requirements; and an accessible and efficient method to address landlord/tenant disputes. Although most California cities with such programs do not track rents on an ongoing basis, property owners must submit justification when rent increases are requested beyond the yearly allowable ceiling, and program hearing officers render decisions on whether the increase is justified. Similarly, tenant complaints of excessive increases are investigated by program staff and resolved by the hearing officers. In the most rigorous programs, such as those in Berkeley and Santa Monica, rents are tracked on every change in tenancy and change in tenancy terms (typically any rent increase). Option 3 Challenges As noted in Attachment A, the affordable housing gap persists for residents at or below Area Median Income (AMI). The vacancy rate 36 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners impact in the short -run is negligible. There is a threat of reduction in rental units in the long -run through increased condominium conversion such as experienced in Santa Monica. Vacancy decontrol also prohibits comprehensive application to all rental units (only units built before 1995 can be "controlled"). Traditional rent control programs cost more and require greater administrative complexity than Model B rent control or mediated rent control programs. For example, the staffing levels of the Berkeley and Santa Monica programs are twice those of the average staffing level per unit in cities with Model B rent control "unit -registries." Both cities have elected rent boards and program staff who must support their policy development and legislative processes. The budgets in Berkeley and Santa Monica are $4,550,000 and $4,755,170 respectively, supporting 19,093 and 27,542 rent controlled units respectively. The City of Los Angeles launched a rent registry in January 2017 with a much lower staffing level per rental unit. Nevertheless, the Los Angeles rental rights department has almost four times as many total staff as Berkeley or Santa Monica and a total budget over $22 million. Between scale and current generation technology support, Los Angeles hopes to be able to operate with minimal staffing increases. Option 3 Cost Estimate Option 3 for Fremont may have an initial cost between $3,500,000 and $4,000,000 because of the fewer units potentially under a rent control program. Whether the relatively low staffing levels in Los Angeles can be maintained will have to be determined as the history develops —but any new Model A rent control and just -cause eviction programs would require a dedication of staff over a period of time to develop policies and processes and refine them for efficiency due to the high levels of control that characterize such programs. Los Angeles had lower levels of rent control for many years with a concerted focus on developing efficient policies and processes. For that reason, Fremont's startup costs for this option are expected to be in the same range as the Santa Monica and Berkeley programs with possibly some reductions in staffing needs as technologies and other efficient program elements are developed. 37 Rent Control and Just -Cause Eviction: Review of Programs Conclusion Management Partners Conclusion The goal of most rent control and just -cause eviction programs is to stabilize tenancy by moderating rent increases on existing tenants and by providing some due process protections for tenants to prevent rent spikes and landlord tenant relationship problems. The communities surveyed have each designed their programs, often with only subtle differences in the rules and regulations, to address problems specific to their local rental market and stakeholder interests. Program elements focus on each local housing market including the housing inventory, habitability challenges, and balancing the needs of tenants and landlords. Mediation and counseling do continue to play a critical role in stabilizing tenancy in all tenant protection models, even those that are highly controlled. The key to success in the communities we surveyed has been to identify the specific problems that are unique to the community and its rental housing and design or develop targeted approaches to resolve the problems. 38 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Attachment A: Rent Control and Just -Cause Eviction Program Options Program Features Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Units Subject to Program Typically applies to rental units with three or more units Property owners with three to five or more units. Hayward example: Residential unit occupied by payment of rent, provided the unit is one of at least five residential units in Hayward with common ownership. Residential rental dwelling units and rooming houses with at least five rooms (each room is counted as an individual unit) with separate leases are included in the program, along with single family homes with at least four bedrooms that are being rented separately (each bedroom is a unit). Unit Exemptions Hotels/motels, government- subsidized housing, hospitals, transient housing, etc. Single family homes, all units occupied after February 1996 hotels/motels, government- subsidized housing, hospitals, transient housing, etc. Single family homes, all units constructed after 1996 hotels/motels, government - subsidized housing, hospitals, transient housing, etc. Funding Mechanisms General fund or other City Fund, Arbitration Service Fees Programs funded through administration fees (50% passed on to tenant) and may include general fund and other fund support Programs funded through registration (50% passed on to tenant) and enforcement fees, and may include general or other fund subsidies, and grants 39 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Program Features Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Characteristics of Program • No ongoing tracking of rental units or rents paid is typically done • Due Process: Mandatory participation through conciliation, mediation and fact finding, mediated agreements are memorialized in writing. If fact-finding process is incorporated, decisions are advisory • Landlord must be current on all fees and in compliance with city requirements • Landlord must confirm substantial compliance with habitability of unit • All eligible rent units are loosely tracked. The rent policy body (rent board or city council) publish allowed yearly rent increase maximum • Due Process: Petition Process with Hearing Examiner providing decisions. Mediation may be a preliminary option • Housing quality standards maintained (owner/landlord compliance) • Includes just -cause eviction, anti -harassment, and tenant/landlord problem mediation • Active public education programs • Voluntary vacancies trigger landlord option to remove unit from rent increases compliance with habitability standards (Hayward's program). • All eligible rental units are tracked and have an established rent ceiling. Landlord must report all changes in tenancy and terms of tenancy (rent increases) • Due Process: Petition Process with Hearing Examiner providing decisions. Mediation may be a preliminary option for some petitions • Housing quality and housing services (owner/landlord compliance) • Includes just -cause eviction, anti - harassment, and tenant/landlord counseling and mediation • Active public outreach and training programs • Optional program suspension - 5% vacancy rate Required Tenant Notification of Program Eligibility and Features Yes, at time of initial rental, rent adjustments and notice of lease termination Yes, rent disputes and eviction for cause provisions Yes, rent disputes, terminate tenancy and good cause eviction provisions 40 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Program Features Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Required Tenant Notification of Rent Increases and Rent Increase Thresholds Yes, if required by state law. Rent increases greater than 10% trigger mediation Yes • Landlords provide notice to tenant of the ordinance and rent increase • Rents may not increase more than 3-5% per year (or some portion of CPI) and may not be raised more than once in 12 months • Rent increases of less than the maximum allowed in a year may be "banked" ("untaken" rent increases from prior years can be applied to current year up to a maximum defined by the ordinance) Yes • Rents can only be increased by the Annual General Adjustment (AGA) based on a standard percentage or percent of CPI as published by the Board each year Mediation Yes, but does not apply to just - cause evictions Yes Yes, staff provides counseling and mediation Arbitration Typically not Yes, Rent Review Officer decision is final Yes, hearing examiner decision is final unless appealed to the Rent Board Program Administration Contractor/non-profit agency City staff or contractor Independent Rent Board and staff City Appointed Board/ Elected Rent Board Yes, if program includes fact- finding process Yes Yes Staff .25-1 FTE planner or housing specialist 10-12 FTE estimate 20.+ FTE (administration, law, hearing, registration and public information and IT) 41 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Program Features Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Contract Services Used Contractor or non-profit agency for mediation services Mediation and arbitration services provider (unit -based charges $600 per mediation and $1,200 per arbitration), legal aid $300,000 for various professional services Annual Program Cost $100,000-$300,000 Approximately $1,900,000 $4-4.5 million ANTICIPATED OUTCOMES Expansion of Tenant Rights Yes Yes Yes Impact on Vacancy Rate No No data available. Program drives reinvestment in rental units and stabilizes rents for a limited period by setting a predictable increase. No data available. Program stabilizes rents by setting a predictable increase. Expansion of Affordable Housing No, however, will include some related components including JCE and tenant notification requirements. Program stabilizes rents of program units by setting a maximum allowable increase. Program stabilizes rents of program units by setting annual allowable rent increase. Effect on Tenant Displacement No data identified supporting impact on displacement. However, JCE should have some impact. Program monitors units not tenants. Program tracks units, not tenants. (Relocation assistance and demolition process can be included in ordinance.) 42 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Program Features ) Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Program Advantages • Creates an effective vehicle for • Stabilizes rent increases • Tracks controlled units addressing tenant grievances regarding significant rent • Units comply with code (habitability) • Mechanism to identify, inform, and engage landlords and tenant increases • Expands tenants' rights • Educates tenants of rights • Promotes tenant stability • Attracts investment • Provides for reasonable rent increases regarding lease terminations • Method to address and stabilizes tenant population in • Improves landlord/tenant landlord/tenant disputes rental units communication • Fair return (and "banking") • Units comply with code (habitability) • Reinforces non -retaliation provisions • Facilitate rental housing reinvestment • Accessible and efficient method to address landlord/tenant disputes • Some programs include tenant relocation expenses Program Disadvantages • Will not address concerns regarding affordable housing or financial hardship resulting • Affordable housing gap persists for residents at or below Area Median Income (AMI) • Affordable housing gap persists for residents at or below Area Median Income (AMI) from higher than normal rent adjustments • Neutral effect on vacancy rates in the short run • Neutral effect on vacancy rates in the short run • Have not identified data indicating impact on tenant displacement overall • • Contemplates only short-term rent control (voluntary vacancy and landlord compliance with permanent decontrol removes unit from program and rent increase limits) Program designed to drive reinvestment • • Threat of reduction in rental units in the long run through increased condominium conversion Vacancy decontrol prohibits comprehensive application to all rental units (only units built before 1995 can be "cost controlled") • Vacancy decontrol prohibits comprehensive application to all rental units (only units built before 1995 can be "controlled") 43 Rent Control and Just -Cause Eviction: Review of Programs Attachment B: Just -Cause Eviction Survey Management Partners Attachment B: Just -Cause Eviction Survey 44 Attachment B: Just -Cause for Eviction Survey Berkeley East Palo Alto Los Angeles Oakland San Diego San Francisco Santa Monica i _ ' • e • • • Sources Rent Stabilization and Good Cause for Eviction Chapter 13.76 and Guide to Rent Control Rent Stabilization Ordinance and Rent Stabilization Rules and Regulations Chapter XV Rent Stabilization Ordinance (See website forms and public information) Regulations for the Just Cause for Eviction Ordinance (Measure EE, Codified in the Oakland Municipal Code at 8.22.300, et.seq..) Chapter 9: Building, Housing and Sign Regulations Article 8: Housing, Division 7: Tenants' Right to Know Regulations Chapter 37 of the San Francisco Administrative Code the Residential Rent Stabilization and Arbitration Ordinance Rent Control Charter Amendment Article XVIII and Rent Control Regulations Chapter 9 Title 17 Rent Stabilization and Guide: Rent Stabilization Eligible for Just -cause eviction All rental units All single family and multiple family dwellings All rental units built before October 1, 1978 Any rental units (pre -1980) Any rental unit with tenancy of at least two years All rental units built before June 13, 1979; newer buildings not covered based on original certificate of occupancy All rental units All rental units Rental Units Exempt Units in existence before December 31, 1979 and hotel/motel occupancy less than 14 consecutive days, cooperatives, hospitals, nursing and assisted living facilities and units rented to higher learning faculty Hotel/motel, care facilities, resident owner non-profit housing, units exempt by state and federal law and units within a dwelling shared with the landlord Single family, except where two or more units are located on the same lot (excludes duplexes and condominiums); hotel/motel, boarding and rooming houses with occupancy 30 days or less; non -profits; hospital, convent/monastery, extended care facilities; housing owned and operated by Los Angeles City Housing Authority; housing with a certificate of occupancy after October 1, 1978; luxury housing (rent thresholds on May 31,1978; substantial renovation (i.e., defined investment based on bedroom completed after September 1, 1980); affordable housing with regulatory agreement; cooperatives; mobile homes and recreational vehicle in a park Hotels and motels; hospital, skilled nursing and health facilities; nonprofit substance abuse treatment; temporary homeless facilities; owner -occupied units with three or less units; owner -occupied units where owner and tenant share kitchen and bath; units in trust held on behalf of developmentally disabled; newly constructed units and first rented after October 1980 (the effective date of the Residential Rent, Relocation and Arbitration Ordinance) Institutional facilities, governmental housing, transient hotel/motel, mobile homes and rooms rented (owner and tenant share kitchen and bath) Hotel, motel and rooming houses occupied for 31 days or less; nonprofit cooperatives; hospital, convent, monastery, extended care and adult day health facility; some government owned and rental units constructed after June 13, 1979 Single family homes not used for residential rental purposes on July 1, 1984 and those that are occupied for two years by owner as principle residence after voluntary vacancy Units occupied by owner or close relative as primary resident and nonprofit accommodations Legal Reasons to Evict • Failure to pay rent • Violates terms of rental agreement • Willful damage to unit • Fixed term expires and tenant refuses to sign new lease • Disturbs peace • Repeated denial of entry • Landlord needs to bring unit into compliance with code • Permit to demolish • Owner with 50% or more ownership moves in • Failure to sign identical lease • Failure to pay rent and following notice from landlord • Tenant fails to cure a violation of the terms of tenancy following landlord notice • Tenant initiated nuisance with landlord notice • Refusal to agree to new lease substantially identical to current • Disorderly conduct that persists following notice • Continues denial of access to unit following notice • Refusal access for substantial habitability repairs (ten times the amount of monthly rent) unit consist with code • Landlord secures demolition permits to remove unit from rental market and is denied access • Landlord secures permits to remove unit from rental housing use under the Ellis Act • Owner move -in • Refusal to move under terms of temporary rental agreement • Failure to vacate under government order • Tenant no longer qualifies for tenancy with a government entity • Sub tenancy without Owner approval • Failure to pay rent • Violation of tenancy • Nuisance • Illegal use of rental unit • Refusal to execute new lease with consistent terms • Tenant at lease term is subtenant not approved by landlord • Owner, relative move -in or resident manager (where no alternate unit available) • Tenant interferes (fails to move temporarily or honor permanent relocation agreement) with rehabilitation and landlord has an approved Tenant Habitability Plan (THP) • Demolition of unit or permanently remove from rental housing use • Order to Vacate or Abate • HUD owns and operates and seeks to recover • Residential hotel converted or demolished with City approvals (Application of Clearance) • Convert to affordable housing with exemption by the Housing and Community Investment Department • Failure to pay rent • Violation of rental agreement • Substantial repairs/damage (3 months or less) • Disorderly conduct/destroying peace and quiet • Unlawful drugs or using unit for illegal purposes • Failure to provide access to unit • Owner or Owner's relative move -in • Owner previously occupied unit and has agreement with tenant to reoccupy as residence • Correct code violations • Refusal to renew lease • Remove unit from rental market (Ellis Act) • Nonpayment of rent • Violates terms of tenancy (pattern and substantial) • Illegal use • Refusal to sign new lease with similar terms • Nuisance • Refusal to provide access • Correct violation • Withdrawal of residential rental structure from rental market • Owner or relative move -in • Failure to pay rent • Violation of the terms of tenancy • Nuisance (pattern and substantial, including eviction protection of domestic violence, sexual assault and stalking victims) • Illegal use of rental unit • Failure to sign a new lease • Refusal of access to unit • Tenant at the end of the term is subtenant not approved by landlord • Owner move -in • Sale of unit per City approved condominium conversion • Demolish or remove unit from rental housing use • Landlord secures permits to temporarily remove unit from housing use for capital improvement or rehabilitation • Substantial rehabilitation • Withdrawal of rental units within any detached physical structure • Demolish or remove unit from rental housing use • Lead remediation (temporary) • Good Samaritan Status (i.e., natural disaster) G1:G7 • Failure to pay rent • Violates terms of rental agreement • Willful damage to unit - nuisance • Tenant uses unit for illegal purposes • Tenant refuses to sign new lease • Tenant holding lease at expiration not approved by landlord • Landlord needs to bring unit into compliance with code and denied access • Owner move -in (50% ownership, no available unit in other properties, etc.) • Permit to demolish • Landlord filed "going -out -of -business" documents • Failure to pay rent • Violates terms of rental agreement • Caregiver after death of primary tenant • Nuisance • Refusal to sign new lease • Refuses to provide access • Subtenant not approved by Landlord • Termination of Resident Manager or Employee • Pre-existing Tenant before becoming resident manager • Owners temporary absence (sabbatical, extended vacation) from principal residence with associated agreement • Owner or relative move -in • Correct violations • Foreclosure (30 day notice) • Withdrawal from rental market (120 day notice) • Transfer to a different unit • Inclusionary housing (tenant income exceeds maximum allowable) • Demolition of rental housing units for low- and Moderate -Income Housing • Renter's Insurance (if contained in lease) Notice: Landlord must provide proper notice of termination (three, thirty, sixty or ninety -day notices to quit. Landlord must provide a copy of the notice within five days after notice served to tenant to Rent Board. If Unlawful detainer served, copies must also be provided to the Rent Board within 5 calendar days. Landlord must file form of intention to evict with the City if police reports available or City Attorney engaged. Landlord required to file form of intention to evict with the City when taking possession to occupy, demolish, remove from rental use, or convert to affordable housing Landlord must file notice with Rent Adjustment Program within 10 days of service on the tenant. Landlord must provide proper notice. Tenant may raise landlord's noncompliance with Tenant's Right to Know Regulation as an affirmative defense. Landlord must disclose to prospective property purchaser the legal grounds to terminate tenancy. Copies of eviction notices and proof of tenant service must be filed with the Rent Board within ten days (see Ordinance for various time frames). Notice must also include the following information: tenant failed to respond, rental rate, eligibility for affordable housing, information provided in six languages. Rent Board reports of wrongful eviction. City contracts with legal aid service providers to assist with evictions to ensure law enforced. Landlord must file a copy of the tenant's notice of termination of tenancy to the Rent Board within 3 days. Landlord must provide a copy of unlawful detainers within 5 business days. 1 12/19/2016 COUNTY OF SAN MATEO INTERDEPARTMENTAL CORRESPONDENCE To: All County Departments From: John C. Beiers, County Counsel John D. Nibbelin, Chief Deputy County Counsel Subject: Continuum of Residential Tenant Protection Measures Date: September 23, 2015 I. Introduction and Executive Summary This memorandum provides legal and historical background for rent stabilization and other tenant protections (including just cause eviction and relocation assistance measures); surveys tenant protection measures that exist throughout the State; describes the legal powers of, and constraints on, local government agencies with respect to the adoption of rent stabilization and other tenant protection measures. Local jurisdictions throughout the area are confronting a housing affordability crisis and many of these cities and counties are considering a range of tools to address these circumstances. For example, at its meeting on August 5, 2015, the City of Richmond voted to adopt an ordinance that institutes rent stabilization and provides for "just cause evictions, for rental units in that city.' The ordinance also provides for an elected "rent board" to discharge various functions under the ordinance. The City contemplates adding several staff members to administer rent stabilization. This action by the City of Richmond implements some of the tenant protection tools available to local jurisdictions and this memorandum discusses these and others across the continuum of options available to the County. In preparing this memorandum, we have surveyed the history of local government tenant protections in California, reviewed statutory and case law and constitutional provisions bearing on such protections and analyzed existing local government tenant protections, with a particular focus on Bay Area jurisdictions. In addition, we met with local stakeholders, including Community Legal Services in East Palo The Richmond rent stabilization ordinance was the first new rent stabilization ordinance adopted in several decades. The ordinance was scheduled to go into effect on September 4, 2015, but the California Apattiuent Owners Association has submitted a sufficient number of signatures to require a referendum on the ordinance before it goes into effect. The Contra Costa County Elections Office is presently validating the signatures. [CCO-92427] All County Departments September 23, 2015 Page 2 Alto and the California Apartment Owners Association. Finally, we have included the following attachments to this memorandum to supplement our work: • Policy Arguments: a set of documents that briefly summarize the key characteristics of more common tenant protection measures and the policy arguments that are most commonly advanced for and against the measures • Rent Stabilization Table: a table that summarizes the key characteristics of existing rent stabilization ordinances from a selection of representative jurisdictions II. Existing Statewide Laws Relating to Residential Tenancies a. Notice of Rent Increases California law sets forth in the Civil Code the standard that landlords must comply with before raising a residential tenant's rent. If the tenant's lease is for a term of more than thirty days, the rent cannot be raised during the term, unless the lease specifically allows for an increase. In cases where rent increases are allowed, California law requires that tenants receive at least 30 days' advance notice before a rent increase goes into effect. Specifically, if a proposed rent increase is ten percent or less of the rent charged at any time during the preceding 12 months, the landlord must provide the tenant with at least 30 days advance written notice of the rent increase.2 If the proposed rent increase is more than ten percent of the rent charged at any time during the receding twelve months, the landlord must provide the tenant with at least sixty days' advance written notice of the increase.' In our research, we have found no jurisdictions that have attempted to impose, on a local basis, notice periods for rent increases longer than those required under the California Civil Code and, in our view, any such local efforts would be preempted by state law. 4 2 Ca1. Civil Code § 827(b)(2). 3 Ca1. Civil Code § 827(b)(3). 4 Subsection (c) of Civil Code section 827 states that "if a state or federal statute, state or federal regulation, recorded regulatory agreement or contract provides for a longer period of notice regarding a rent increase than that provided" by section 827, that longer period shall control Cal. Civil Code § 827(c) (emphasis added). This text strongly infers that only state and federal statutes or regulations may impose longer notice provisions than those set forth in section 827. All County Departments September 23, 2015 Page 3 b. Notice of Lease Termination Along similar lines, California law imposes certain notice obligations upon landlords who seek to end tenancies. If a lease is for a set term (e.g., one year), the tenancy ends on the last day of the lease term, unless the tenant does not vacate and the landlord allows the tenant to remain, in which case the tenancy is converted to a month -to -month periodic tenancy. To terminate a periodic (e.g., month to month) tenancy, the landlord must give either thirty or sixty days' prior written notice. If all tenants in the rental unit have resided in the unit for at least one year, the landlord must give at least sixty days' prior written notice of termination.5 If any tenant in the rental unit has resided there for less than one year or the landlord has contracted to sell the unit another person who intends to occupy it for at least a year after the tenancy ends, the landlord need provide only thirty days' prior written notice.6 As discussed below, some local jurisdictions, such as the City of San Jose, have adopted ordinances that provide for longer notice periods to terminate a tenancy than those set forth in state law. Many local jurisdictions have determined that these state law provisions do not afford an adequate degree of protection to residential tenants and they have therefore adopted ordinances that provide additional protections, which we will discuss in this memorandum. III. The Continuum of Tenant Protection Measures Local government agencies have available and have implemented tenant protection measures that run along a continuum, in terms of the amount of government regulation of the landlord - tenant relationship and the agency resources dedicated to implementation of the regulation. At one end are measures that mandate a minimum lease term with stable rents during the term, required notice periods in addition to or beyond those required under State law and mandatory (but non -binding) mediation of certain landlord -tenant disputes, including with respect to rent increases. Further along the continuum are measures that limit the basis upon which a tenant may be evicted from a tenancy (so-called "just cause eviction ordinances") and that may require a landlord to provide relocation assistance in some cases to displaced tenants. Finally, some jurisdictions have moved further along the continuum and adopted rent stabilization ordinances that limit, to some extent, the ability of a landlord to increase rents on covered units. The key characteristics of these ordinances vary among jurisdictions and many of them incorporate other tenant protection measures, such as just cause evictions and relocation 5 Ca1.Civil Code § 1946.1(b). 6 Cal Civil Code §§ 1946, 1946.1(c), 1946.(d). All County Departments September 23, 2015 Page 4 assistance. All of these ordinances are subject to limitations imposed by State law, including in the Costa -Hawkins Act. IV. Minimum Lease Term The City of Palo Alto has adopted a rental housing stabilization ordinance that provides, among other things, that a landlord must offer the prospective tenant of any rental unit (defined to include all multiple -family dwellings) a written lease for a minimum term of at least one year. The offered lease must set the rent for the unit at a rate certain for the entire one year term of the lease and the rent cannot be changed during that lease term, except as provided in the written lease. If the tenant rejects the offered one year lease, the parties are free to negotiate a lease term of less than one year. Requiring a landlord to offer a minimum one year term for a lease affords the tenant protection against rent increases during that term. However, while a landlord is required to offer a tenant a new one-year tenancy at the end of the succeeding one year lease term (if the landlord chooses to renew the lease with that tenant), the landlord is free to demand whatever rental rate the market will bear at the time of lease renewal. V. Enhanced Notice Provisions Other jurisdictions, while not requiring that landlords offer leases with specific minimum terms, do have ordinances requiring notice prior to termination of a tenancy in excess of the notice otherwise required by State law. San Jose, for example, requires 90 days' prior notice before termination of a tenancy if the tenant has resided in the unit for one year or more.8 If the city's housing director finds a "severe rental housing shortage," 120 days' notice is required. A shorter notice period (60 days; the amount of notice otherwise provided by State law) is allowed if the landlord agrees to arbitration on the termination date. As noted above, we believe that State law would preempt any local regulations that would purport to impose notice requirements for rent increases beyond the notice periods otherwise required under State law (i.e., thirty days notice for rent increases of ten percent or less and sixty days for rent increases of greater than ten percent). VI. Landlord -Tenant Mediation of Rent Increases We have also identified jurisdictions that have adopted ordinances that implement landlord - tenant mediation programs. These ordinances establish programs that offer or, in some cases, require, a mediation process before landlords are able to impose certain rent increases and, ' Palo Alto Ordinance Code, § 9.68.030. s San Jose Ordinance Code § 17.23.610. All County Departments September 23, 2015 Page 5 depending on the jurisdiction, such programs may also require mediation of other aspects of the landlord -tenant relationship. Most ordinances imposing mandatory mediation of rent increases limit the types of rental properties that are subject to the mediation requirement (e.g., units in buildings with multiple dwelling units).9 Likewise, these ordinances typically specify the types of disputes that are subject to mandatory mediation (e.g., proposed rent increases of a set percentage above "base rent," rent increases of more than a certain dollar amount per month, or multiple rent increases in any twelve-month period). Under many such ordinances, landlords are required to participate in a non -binding mediation process if a tenant requests mediation of a dispute within the scope of the ordinance and if a landlord fails to do so, the proposed rent increase is invalid. VII. Just Cause Eviction Ordinances Moving along the continuum of possible tenant protection measures, some jurisdictions have adopted ordinances that impose relatively extensive restrictions on the circumstances under which a landlord can evict a tenant. As noted below, jurisdictions with rent stabilization ordinances typically couple them with so- called "just cause eviction" ordinances. However, most such jurisdictions extend the just cause eviction protection of their ordinances to the tenants of rental units that are not themselves subject to rent stabilization, and the California courts have recognized that the Costa -Hawkins Act does not itself preempt just cause eviction ordinances. In fact, some jurisdictions have adopted just case eviction ordinances without instituting rent stabilization.") Under these just cause eviction ordinances, landlords may evict a tenant only for reasons that are specifically enumerated in the ordinance. Examples of permissible grounds for evicting a tenant typically include the following: • Failure to pay rent or habitually paying rent late; • Violation of a material term of rental agreement, where there has been notice and an opportunity to correct the violation; • Committing or allowing the existence of a nuisance; • Damaging the unit or common areas; • Unreasonably interfering with the comfort, safety or enjoyment of other tenants; • Committing or allowing an illegal activity or use; 9 Palo Alto Municipal Code, § 9.72.010. 10 See, e.g., City of Glendale Municipal Code, Chapter 9.30; City of Maywood Municipal Code, Title 8, Ch. 17. All County Departments September 23, 2015 Page 6 • Owner or family member occupancy; • Resident manager occupancy; • Substantial renovation; • Denying landlord lawful entry; or • Unauthorized subtenant in possession at the end of the lease term. In contrast, San Jose employs a narrower approach and only prohibits evictions where the landlord's dominant motive is retaliation against a tenant's exercise of his or her rights under the city's rent stabilization ordinance, or to evade the purposes of the ordinance. In jurisdictions with a just cause eviction ordinance, landlords are often required to satisfy special notice requirements. For example, a landlord might be required to identify the grounds for the eviction, including the facts that support that determination, and to describe the renter's rights and resources. Some jurisdictions require that a landlord give a former tenant notice when they are returning a property to the rental market where the eviction was based on owner occupancy. Tenant advocates maintain that just cause eviction ordinances afford tenants some degree of protection against arbitrary landlord actions, particularly in a tight rental market. Landlords often assert that such ordinances make it more difficult for them to act quickly to deal with problem tenants. VIII. Relocation Assistance Local jurisdictions often require landlords to provide relocation assistance payments to all tenants when the eviction is not the fault of the tenant ("no-fault evictions"). Other jurisdictions limit such mandated assistance based on the type of eviction or the status of the affected tenant; it is particularly common to require relocation assistance for evictions occurring when landlords require tenants to depart in order to occupy units themselves (so-called "owner -occupancy" evictions) or Ellis Act evictions (i.e., an eviction to remove a unit from the rental market). In addition to a lump sum payment, many cities require the landlord to pay for relocation assistance services. As with eviction controls, many local agencies extend the relocation assistance requirements to tenants in units that are not subject to rent stabilization. For example, in Mountain View, landlords are required to pay relocation assistance when evicting tenants under certain circumstances. The Mountain View ordinance applies only where a landlord vacates four or more rental units within a one-year period in order to (1) withdraw from the rental market (an Ellis Act eviction), (2) demolish the rental property, (3) perform substantial renovations, (4) convert to condominiums, or (5) change to a non-residential land use. Further, only tenants with a household income at or less than eighty percent of the area median All County Departments September 23, 2015 Page 7 household income are eligible for relocation assistance." Other jurisdictions require relocation assistance payments without reference to the income level of the affected tenants.12 Under the Mountain View ordinance, in covered eviction cases, the landlord is required to refund the tenant's security deposit (with limited exceptions), provide the affected tenants with a 60 -day subscription to a rental agency, and pay the equivalent of three months' rent, based on the median monthly rent for a similar -sized unit in Mountain View. Certain special -circumstances households, including seniors, persons with disabilities, and families with a dependent child, are entitled to an additional $3,000 payment. The ordinance also requires 90 days' notice of termination. Other ordinances, such as the City of Glendale's, require payment of "two times the amount of the fair market rent as established by the U.S. Department of Housing and Urban Development for a rental unit of similar size of that being vacated in Los Angeles County . . . plus one thousand dollars." Glendale Municipal Code § 9.30.035. IX. What is Rent Stabilization? A further step along the continuum of tenant protection measures is rent stabilization and the following sections describe rent stabilization and statutory/constitutional limits on rent stabilization ordinances and analyze existing rent stabilization ordinances. The cost of market -rate housing units fluctuates with changes in the housing market. For example, a recent report from the Housing Authority of the County of San Mateo states that the average cost of rent in the County has increased more than 45% over the last four years. The general purpose of rent stabilization is to protect tenants by limiting the amount that rents may increase as market rents increase. These ordinances provide tenants certainty that their rents will not increase above a certain amount each year, while also providing landlords with a fair return on their investments.13 a. Types of Rent Stabilization Ordinances Commentators typically speak of three general types of rent stabilization ordinances, two of which remain legal in California." 11 In 2014, 80 percent of the median income for Santa Clara County was $71,300 for a four -person household. 12 See, e.g., City of Glendale Municipal Code, § 9.30.035; City of Maywood Municipal Code § 8.17.035. 13 Pennell v. City of San Jose (1988) 485 U.S. 1, 13. 14 Friedman et al., Cal. Practice Guide: Landlord —Tenant (The Rutter Group 2014) ¶ 2:707, p. 2D-4. All County Departments September 23, 2015 Page 8 i. Vacancy Control The most restrictive type, known as "vacancy control," sets the maximum rental rate for a unit and maintains that rate when the unit is vacated and another tenant takes occupancy.15 Under "vacancy control" ordinances — which, as discussed below, California law no longer allows — the rent that can be charged for a unit remains subject to control at all times, including upon the occurrence of a vacancy and the establishment of a new tenancy. ii. Vacancy Decontol-Recontrol A less restrictive form of rent regulation, known as "vacancy decontrol-recontrol," allows a landlord to establish the initial rental rate for a vacated unit (typically at the then -prevailing market rate) but, after that rental rate is fixed, limits rent increases as long as the same tenant occupies the unit.16 For example, under such an ordinance, a landlord could set a monthly rent at the hypothetical prevailing market rate of $1,000 when a new tenant moves in and that amount would become the "base rent" during the term of that tenancy. During that tenancy, the limitations on rent increases would be applied against that $1,000 base rent. Thus, if the ordinance allowed for rent increases of up to 5% per year, the landlord could increase the rent to no more than $1,050 after the first year of the lease. However, if this tenant moves out and the landlord thereafter rents to a new tenant who is willing to pay rent of $1,500 per month, that $1,500 amount becomes the new "base rent" and the 5% limitation would be applied to this new base rent. iii. Permanent Decontrol The least restrictive type of rent control, known as "permanent decontrol," limits rent increases only on units occupied at the time the ordinance is adopted and when such units are vacated, they become unregulated and landlords are free to determine the initial rental rate and any future rent increases.17 Stated differently, under "permanent decontrol," rent stabilization would apply only to tenancies existing at the time that such an ordinance is adopted and, as these tenancies end when the tenants move out, the units would cease to be covered by the ordinance. iv. Scope Rent stabilization measures may be exhaustive in scope. In addition to capping permissible rent 15 Id., 112:708, p. 2D-4. 16 Id., ¶ 2:710, p. 2D-5. "Id., ¶ 2:711, p. 2D-5. All County Departments September 23, 2015 Page 9 increases, they may regulate landlord conduct that has the effect of imposing a rent increase (e.g., decrease in housing services without a corresponding decrease in rental rates).18 They may also impose "eviction controls," such as those described above, which protect tenants from arbitrary evictions while ensuring that landlords can lawfully evict tenants for good cause.19 Also, as noted, rent stabilization ordinances may be, and often are, coupled with relocation assistance provisions, which require landlords who evict tenants for certain reasons to pay tenants some of their displacement costs in advance.2° X. What Legal Standards Apply to Rent Stabilization Ordinances in California? a. Costa -Hawkins Rental Housing Act Prior to the enactment of the Costa -Hawkins Rental Housing Act in 199521, there was no statutory provision limiting local rent stabilization ordinances in California.22 Costa -Hawkins was the California Legislature's first major effort to limit local controls over rents chargeable to residential tenants.23 Proponents of the legislation viewed it as "a moderate approach to overturn extreme vacancy control ordinances . . . which deter construction of new rental housing and discourage new private investments . . . ." 24 Opponents, on the other hand, argued that the legislation was "an inappropriate intrusion into the right of local communities to enact housing policy to meet local needs" and that the law "would cause housing prices to spiral, with the result that affordable housing would be available to fewer households."25 Costa -Hawkins imposed the following limitations on local rent stabilization ordinances: 1. Housing constructed on or after February 1, 1995 is exempt from such local ordinances;26 2. Single-family homes and condominiums (units where title is held separately) are exempt from such ordinances;27 and 3. Such ordinances cannot regulate the initial rate at which a dwelling unit is offered once the previous tenants have vacated the unit.28 In other words, "vacancy control" ordinances have been abolished and, with limited exceptions, landlords may impose "whatever rent they choose at the commencement of a tenancy." Action Apartment Ass'n '8Id., ¶ 5:1, p. 5-1. '9 Id. 20 For further discussion regarding relocation 21 See Cal. Civ. Code § 1954.50 et seq. 22 Legis. Analyst, analysis of Assem. Bill No. 23 Legis. Analyst, analysis of Assem. Bill No. 24 Id. at p. 6. 25 Id. at p. 6. 26 Cal. Civ. Code § 1954.52(a)(1). 27 Id. at § 1954.52(a)(3) 28 Id. at § 1954.53(a). assistance mandates, see section IV.D of this memo. 1164 (1995-1996 Reg. Sess.) p. 1. 1164 (1995-1996 Reg. Sess.) p. 1. All County Departments September 23, 2015 Page 10 Inc. v. City of Santa Monica (2007) 41 Ca1. 4th 1232, 1237. Costa -Hawkins allowed local jurisdictions to continue to impose rent stabilization on units that are not otherwise exempt, provided that the rents may be reset to market levels by landlords upon a new tenancy (i.e. "vacancy recontrol-decontrol"). b. Constitutional Issues Both the United States and California Supreme Courts have held that rent stabilization is a proper exercise of a local government's police power if it is calculated to eliminate excessive rents and it provides landlords with just and reasonable returns on their property.29 Thus, in order to withstand constitutional scrutiny, a rent stabilization ordinance must provide a mechanism for ensuring landlords a "just and reasonable" return on their property.3° A "just and reasonable" return is one that is "sufficiently high to encourage and reward efficient management, discourage the flight of capital, maintain adequate services, and enable [landlords] to maintain and support their credit status."31 At the same time, the amount of return should not defeat the purpose of rent stabilization, which is to prevent excessive rents.32 A rent stabilization scheme would be vulnerable to constitutional challenge if, for instance, it indefinitely freezes landlord profits, imposes an absolute (inflexible) cap on rent increases, or prohibits a particular class of landlords from obtaining rent increases.33 On the other hand, even a narrowly -drawn ordinance will be valid so long as it grants the responsible body or authority discretion to provide a fair return by approving rent increases in extraordinary cases.34 In addition to ensuring that landlords are guaranteed a "just and reasonable" return on their investments, any rent stabilization measure must avoid classification as a "regulatory taking" under federal and state constitutional law principles. Depending on how a rent stabilization ordinance is drafted and/or applied, it may violate the Fifth and Fourteenth Amendments of the U.S. Constitution, which prohibit the taking of private property for public use without "just compensation."35 The "just compensation" provision is "designed to bar [g]overnment from forcing some people alone to bear public burdens which, in all fairness and justice, should be 29 See Birkenfeld v. City of Berkeley (1976) 17 Cal. 3d 129; Pennell v. City of San Jose, supra, 485 U.S. at 12; Santa Monica Beach, Ltd. v. Super. Ct (1999) 19 Ca1.4th 952, 962. 3o Birkenfeld v. City of Berkeley, supra, 17 Ca1.3d at 165; Galland v. City of Clovis (2001) 24 Ca1.4th 1003, 1021. 31 Carson Harbor Village, Ltd. v. City of Carson Mobilehome Park Rental Review Board (1999) 70 Ca1.App.4th 281, 288-289; TG Oceanside, L.P. v. City of Oceanside (2007) 156 Cal.App.4th 1355, 1372; MHC Operating Limited Partnership v. City of San Jose (2003) 106 Ca1.App.4th 204, 220. 32 Ibid. 33 Donohue v. Santa Paul West Mobile Home Park (1996) 47 Ca1.App.4th 1168, 1179. 34 Ibid. 3s See U.S.C.A. Const. Amend. 5, 14. All County Departments September 23, 2015 Page 11 borne by the public as a whole."36 A regulatory taking of private property occurs when a government regulation limits the uses of the property to such an extent that the regulation effectively deprives the owners of its economically reasonable use or value even though the regulation does not divest them of title to it.37 If the owners can show the value of their property has been diminished as a result of the regulation and that the diminution in value is so severe that the regulation has "essentially appropriated their property for public use[,]" then a regulatory taking has taken place and the local government which enacted the regulation must provide the owners "just compensation."38 XI. Overview of Local Rent Stabilization Ordinances in California As of July 2015, we have identified 14 cities in California — many of which are in the Bay Area — that have instituted some form of rent stabilization.39 News reports also indicate that a number of jurisdictions are currently considering adopting rent stabilization (Santa Rosa) or increasing the stringency of existing measures (San Jose). No county, other than the City and County of San Francisco, has, to date, adopted a rent stabilization ordinance.46 As noted, rent stabilization ordinances are price control mechanisms subject to State and Federal constitutional limitations. Therefore, rent stabilization laws tend to be complex and to vary by jurisdiction. Generally, however, rent stabilization measures address the following points: the type of housing subject to rent stabilization; the limits on and procedure for setting or raising rents; and eviction controls. The chart included as an exhibit to this memorandum compares the key features of rent stabilization ordinances adopted by various jurisdictions and a summary of these ordinances is provided below. 36 First English Evangelical Lutheran Church of Glendale v. County of Los Angeles (1987) 482 U.S. 304, 318-319 (internal quotations marks and citations omitted). 37 See Yee v. City of Escondido (1992) 503 U.S. 519, 522-523; Hensler v. City of Glendale (1994) 8 Ca1.4th 1, 10. 38 See Garneau v. City of Seattle (9th Cir. 1998) 147 F.3d 802, 807-808. The economic impact equation must also account for any valuable "quid pro quo" the property owners may have received as a result of the enactment. Id. Also, a temporary regulatory taking, consisting of the temporary deprivation of all economically viable use of the property, may require compensation for the period of time the regulation denied the owner all use of the land. See First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, supra, 482 U.S. 304, 318; Ali v. City of Los Angeles (1999) 77 Ca1.App.4th 246, 254-255. 39 California jurisdictions with rent stabilization ordinances include Richmond (which recently adopted a rent stabilization ordinance that may be subject to the referendum process), Berkeley, Oakland, San Francisco, San Jose, East Palo Alto, Hayward, Los Gatos, Beverly Hills, Los Angeles, Palm Springs, Santa Monica, Thousand Oaks, and West Hollywood. 40 Note that a number of counties (including San Mateo County) and many more cities have adopted rent control ordinances that apply only to mobilehome parks; although this type of rent control is subject to the same constitutional standards, mobilehome rent control is governed by a separate statutory scheme (California's Mobilehome Residency Law) and a review of mobilehome rent control is not included in this memorandum. All County Departments September 23, 2015 Page 12 A. What Type of Housing May be Subject to Rent Stabilization? As discussed above, State law preempts local ordinances that purport to apply rent stabilization to single-family housing units and to housing built after 1995, or that purport to limit the initial rent established at the beginning of a new tenancy. Likewise, residential units owned or managed by the government, and units with government subsidized rents are exempt under all ordinances. Federal law expressly preempts local rent stabilization on federally -assisted rental buildings. Beyond the limits imposed by State and federal law, however, local governments often create additional exemptions and limits on the applicability of rent stabilization ordinances. Many jurisdictions that imposed rent stabilization prior to the 1995 adoption of the Costa -Hawkins Act typically exempted from their own ordinances units constructed and initially occupied after the date the local ordinance was adopted. For example, San Francisco imposes rent stabilization only on units built before 1979, when the San Francisco ordinance was adopted. While it is less relevant to cities or counties considering rent stabilization post -Costa Hawkins, cities tended to impose rent stabilization only on existing housing stock in order to avoid discouraging production of new housing. Similarly, some cities (such as Oakland and San Francisco) allow substantially renovated units to become exempt from rent stabilization if they meet certain criteria. Presumably this type of provision is intended to encourage substantial renovations when necessary. In addition, most jurisdictions exempt temporary or non-traditional residential uses, such as hotels, hospitals and other medical care facilities, school dormitories, and, in some locations, retirement homes, from rent stabilization. Under Costa Hawkins, rent stabilization may not be applied to single-family residences, but many cities also exempt small -unit residential buildings such as duplexes or triplexes. We did not identify jurisdictions in California that limit the applicability of rent stabilization based on tenant income, although cities in other states have adopted such an approach. In New York City, for example, tenants must have a combined income under $200,000 to qualify for rent stabilization. While not focused on tenant income, Los Angeles exempts "luxury" apartments from rent stabilization, based upon the rent level in effect at the time the ordinance was adopted.41 41 For example, a two -bedroom unit that rented for $588 per month or more in 1978 would not be subject to rent stabilization in Los Angeles. All County Departments September 23, 2015 Page 13 B. How are Rent Rates and Rent Increases Determined Under Rent Stabilization Ordinances? As described previously, State law allows for a form of rent stabilization called "vacancy decontrol," which prevents local governments from regulating the setting of the initial rent at the beginning of a tenancy. The initial rent is set by the landlord, typically at a market level. After that point, though, local rent stabilization ordinances typically limit a landlord's ability to raise the rents in covered units.42 Every rent stabilization jurisdiction, however, has some allowance for automatic periodic rent increases, and also for additional rent increases when required to ensure the landlord receives the constitutionally -required fair rate of return. 1. Automatic Rent Increases Each rent stabilization ordinance permits certain "automatic" rent increases that do not require prior agency approval. These increases typically fall into one of three categories: (1) annual or periodic increases; (2) increases to "pass through" landlord operating costs or registration fees; and (3) increases to market rent upon a unit vacancy. Examples of allowable annual or periodic rent increases for the various rent stabilization jurisdictions is provided in the chart attached to this memorandum. Some rent stabilization jurisdictions allow an annual increase that is tied to and limited by a corresponding increase in the regional Consumer Price Index ("CPI"). In addition, such jurisdictions often also cap annual rent increases by a certain percentage, regardless of the change in CPI. In San Francisco, for example, the automatic annual rent increase is 60 percent of the CPI increase in the year, but the maximum allowable increase is 7 percent regardless of the increase in CPI. Other rent stabilization jurisdictions allow greater annual rent increases that are not necessarily tied to changes in economic indicators. San Jose has such an ordinance, and allows annual increases of eight percent per year (or twenty-one percent if the last rent increase was more than twenty-four months prior). Many ordinances also provide mechanisms for landlords to pass increased operating costs on to their tenants ("pass -through" costs). Acceptable costs often include utilities, property taxes, or rent stabilization ordinance registration fees. Most jurisdictions limit the amount of the pass - through either to a portion of the increased cost or to a percentage of the overall rent. The last type of "automatic" rent increase is upon termination of a tenancy. As described previously, State law allows a landlord to set an initial rent (typically to market levels) at the start of a new tenancy. a2 California law would also allow for "permanent decontrol," which would result in units covered by the law at the time of its adoption becoming non -rent stabilized when the existing tenants depart. All County Departments September 23, 2015 Page 14 2. Rent Adjustments Requiring Agency Approval The constitutional implications of rent stabilization require that any ordinance include a procedure to allow a landlord to petition for an additional rent when necessary to ensure a fair return on the landlord's investment. These fair return requests must be considered on a case -by - case basis, but ordinances typically identify a non-exclusive list of factors that will be considered in determining whether an additional rent increase is justified. Common factors include atypical operating costs and maintenance expenses, physical condition or repair and improvements, level of housing services provided, taxes, and financing or debt service costs. "Fair return" increase approval procedures vary by jurisdiction. However, the general pattern is to require a written application to a rent board or other decision maker, subject to an initial staff determination and then an administrative appeal. The board's decision must be based on evidence presented, with an opportunity for the affected parties to be heard. In addition to case -by -case "fair return" increases, many cities allow landlords to separately apply for rent adjustments to recover capital improvement and renovation costs. These ordinances distinguish "capital improvements" from ordinary maintenance and repairs, which do not justify special rent adjustments. The details vary by jurisdiction, but an approved rent increase based on capital improvements is often spread among the tenants who benefit from the improvements, and the increase is amortized over the useful life of the improvements. Apart from setting maximum rent increases, most ordinances also provide a mechanism for rent reductions to reflect a decrease in housing services that would otherwise effectively allow landlords to increase rent by reducing services. A number of cities vest their rent boards with power to approve tenant requests for rent reductions, usually for reduced housing services or defective conditions, such as code violations or uninhabitable conditions. The procedure usually requires a tenant to petition the rent board and provide documentation of the reduced services and their claimed value. Personal financial hardship is typically not an acceptable reason for a tenant to request a rent reduction by a rent board.43 C. Eviction Controls Because landlords are allowed to set the initial rent at the beginning of a tenancy, rent stabilization in the absence of eviction controls can create an incentive for landlords to terminate existing tenancies in order to raise rents upon establishing a new tenancy. As a result, in addition to limiting rent increases, most rent stabilization jurisdictions include relatively extensive "just cause" eviction restrictions such as those we describe above. Other evictions controls are 43 However, San Jose allows a tenant to raise personal financial hardship as a defense when a landlord requests an additional rent increase above the automatic increase provided by ordinance. All County Departments September 23, 2015 Page 15 described below. 1. Ellis Act (Removing Property From Rental Use) Evictions The Ellis Act prohibits local governments from requiring residential property owners to offer or continue to offer a property for rent. (Gov. Code § 7060 et seq.) Subject to very limited exceptions, landlords have an absolute right to go out of the rental business and to evict tenants on that basis. As discussed above, local governments do have some ability to require payment of relocation assistance for Ellis Act evictions and to potentially regulate initial rents if a landlord later tries to re-enter the rental market. The mechanisms of these relocation assistance ordinances are described further below. 2. Evictions to Allow Owner to Occupy the Unit Eviction controls typically allow rental property owners to evict tenants so that the owner or the owner's immediate relative can occupy the unit. To reduce the possibility of fraudulent owner occupancy evictions, State law requires that the owner -occupant or owner's relative occupy the unit for at least six consecutive months after eviction of the prior tenant. (Civ. Code § 1947.10.) Some cities have adopted more stringent requirements, such as a requirement to move in within three months and remain for at least 36 months. Other cities prohibit corporate or partnership landlords from using this reason for eviction, and some cities prohibit these type of evictions altogether for certain sensitive populations (e.g., the terminally ill, disabled seniors, etc.). 3. Substantial Renovation Evictions Eviction of tenants to allow performance of substantial renovation work is often allowed, with limitations. For example, some cities require the landlord to demonstrate that clearing the property of renters is actually necessary for the type of work proposed, and others require that the displaced tenants have the right to return when the renovation is complete. In Oakland, where tenants are provided the right to return after the renovation is completed, the landlord is required to offer the same base rent with an increase amortizing the cost of approved capital improvement expenditure over time. 4. Condominium Conversion Evictions The conversion of apartment units to condominiums is subject to statewide regulation through the Subdivision Map Act. Local governments also often adopt conversion regulations to further protect their rental housing stock, and San Mateo County has such an ordinance in place. Sections 7108 and 7109 of the County's Subdivision Regulations prohibit conversion of multifamily rental housing to condominiums, except under circumstances where the County's overall housing vacancy, as determined by the California Department of Finance, exceeds 4.15 All County Departments September 23, 2015 Page 16 percent. D. Relocation Assistance Also, as mentioned, rent stabilization jurisdictions often require landlords to make relocation assistance payments to tenants when the reason for the eviction is not the fault of the tenant ("no- fault evictions"). As with eviction controls, many local agencies extend the relocation assistance requirements to tenants in units that are not subject to rent stabilization. E. Administration of Rent Stabilization Ordinances 1. Administration by Rent Board or Other Means of Administration Most rent stabilization ordinances are operated and implemented by a rent board or similar body, which discharges a variety of tasks, including publishing the annual general rent adjustments allowed under the ordinance, adjudicating requests for rent adjustments beyond the annual general adjustment, and conducting studies and publishing reports. However, there is nothing in the law that requires a jurisdiction to establish such a board in adopting a rent stabilization ordinance. Rather, a jurisdiction could instead task officials or employees of the jurisdiction to discharge duties under the ordinance. 2. Certification of Rents vs. Complaint -Based System Some jurisdictions operate on a complaint basis (San Francisco, Oakland, San Jose), which relies on tenants to raise concerns regarding rent increases that are alleged to violate the ordinance. Oakland's complaint -based model, for example, relies on tenants to challenge a rent increase that they believe to be in violation of the ordinance. A hearing officer then evaluates information from the tenant and landlord and makes an initial decision, which can be appealed to a rent board. In all cases, decisions of the local agency can ultimately be appealed to the courts. Other jurisdictions with a more robust administrative approach require landlords to register and certify initial rent amounts (e.g., East Palo Alto and Santa Monica) and to thereafter certify rent increases on covered units. In East Palo Alto, for example, landlords must register all rental units each year. The city charges an annual registration fee ($234 in fiscal year 2014-2015), half of which the landlord is allowed to pass on to the tenant. On an ongoing basis, landlords are required to submit documentation to the rent stabilization board for each vacancy and new tenancy, including copies of any new leases. The rent stabilization board sets the annual general rent adjustment and promulgates regulations to implement the city's rent stabilization ordinance. The rent stabilization board also All County Departments September 23, 2015 Page 17 issues a certificate of "maximum allowable rent" for each regulated unit upon initial rental of the unit and for each new tenant. The rent stabilization board then reviews any requests for rent adjustments against the certified maximum allowable rent. In addition to the proactive registration and certification component, East Palo Alto also provides for landlord and tenant petitions to challenge the rent stabilization board's determinations and to enforce the ordinance where landlords are not in compliance. JCB:jdn Detailed Comparison of Five Cities with Rent Stabilization IMIM Just Cause Eviction Relocation Assistance Berkeley Extensive Yes Condo Max 100 units/year Conversion Limits Annual Rent 65% of CPI, 7% max.; Increase 1.7% for 2014 Landlord None Cost Pass- Throughs Other Additional T: 10% Automatic increase; Additional Rent security deposit for Increases pet(s) where previously prohibited Registration $194/yr.; $4/month for Fees 12 months may be passed through to T; Penalties if late; Reimbursement for low-income Ts Rent Increases Requiring Official Approval Tenant Application for Rent Reduction To yield fair return on investment; Capital improvements, with limitations; T not in occupancy Yes Los Angeles Extensive Yes Notice requirements Equal to CPI; 3% min./8% max.; 3% for 7/1/14 to 6/30/15 Oakland Extensive No relocation aid Replacement unit requirement; notice San Francisco Extensive Yes First right of refusal to tenant Equal to CPI; 10% max; 1.9% 60% of CPI, max. 7%; 1.0% from from 7/1/14 to 6/30/15 Gas and electric up to 1% None of rent; capital improvement, rehab work Additional T: 10% increase; Smoke detectors; Rehab and capital improvement work $24.51/yr.; $12.25 may be passed through to T To yield fair return Yes Accumulate unused increases for up to 10 years 3/1/14 to 2/28/15 Generally allowed for utilites, with some restrictions Accumulate unused increases; Stormwater management; Property tax due to ballot measure approved between 11/1/96 & 11/30/98; 50% of property tax for bonds passed after 11/14/02; 50 percent of SFUSD or SFCCD bond costs One-half of $30 service fee $29 apartment registration fee; may be passed through to T half may be passed through to T Any ground (includes banking, capital improvements, uninsured repairs, housing service costs, or where necessary to meet fair return requirements); Enhanced notice required for capital improvements Yes 7% annual cap based on "need"; Capital improvement up to 10% of base rent; Rehabilitation Yes San Jose Minimal (dominant motive can't be retaliation) No relocation aid First right of refusal; notice; 2/3 tenants must agree 8% per year, or 21% if no increase in 2 years Only if charge is new and approved by Council resolution None Debt service costs deemed "reasonable" under circumstances" by hearing officer if denial is hardship to L; Any ground for increase beyond 8% where T petitions, hardship to T may be considered; Any reason not provided in ordinance Yes Santa Monica Extensive (inc. units not subject to rent control) Yes Permit req'd unless 2/3 tenants agree; right to remain 0.8% oe $14 per month effective 9/1/14; none if market rent set after Sept. 1, 2007 $7 for gas and electric upon application and approval Security deposit for additional Ts or new pets; School tax surcharges; Stormwater management, clean beaches, and ocean parcel tax surcharges $174.96/yr; $13/month may be passed through; Low-income, senior Ts exempt To yield fair return ; Street lighting; Capital improvement; Earthquake repairs; 12% cap for hardship Ts; To correct rent or amenities; T not in occupancy Yes West Hollywood Extensive Yes CUP req'd, with findings (no adverse effect and vacancy >5%) 75% of CPI; 1.25% from 9/1/14 to 8/31/15 Up to 0.5% for gas/electric None $120/yr.; $5/month may be passed through; Partial rebate for certain Ts To yield fair return, up to 12% increase in first 12 month period after decision Yes 1 Detailed Comparison of Five Cities with Rent Stabilization Berkeley Exempt Hotels <14 days; Single Units family residences; Duplexes if L occupies one; New construction (only as to rent increases) Evictions for Must require more Substatial than 60 days to repair; Renovation T refuses to vacate during repair Special Grounds and specific Eviction facts; 120 days' notice Notice Rules to T & city for removal from market Relocation Assistance Owner/relative occupancy: $4,500 if in unit 1 year or more; no eviction if elderly, disabled and in unit 5 years or more; Removal from market: $8,700; $13,700 if tenancy began prior to 1/1/99; additional $2,500 for Ts with minors. elderly. Los Angeles Hotels <30 days; Luxury units; Single family dwellings; Substantially renovated units; New construction; Nonofit housing; Voluntarily - vacated units; Mobile - homes, recreational vehicles & parks None for substantial renovation; Limited evictions permitted under Primary Renovation Program Grounds and specific facts; 60 days' notice to Ts in unit one year; Declaration with city for relative or owner - occupancy, major rehabilitation or permanent removal from rental use For elderly, disabled & Ts with minors, $16,350 if <3 years, $19,300 if >3 years or <80% AMI, $15,000 if "Mom & Pop" property; For others, $7,700 if <3 years, $10,200 if >3 years or <80% AMI, $7,450 if "Mom & Pop" property; L must pay tenant relocation assistance Oakland Hotels; New construction; Substantially renovated units; Owner -occupied buildings with up to 3 units; Nonprofit cooperatives Obtain building permit for repairs necessary to comply with law or correct violation; L to apply for extension beyond 3 months; T offered right to return at same rent; Special notice requirements Grounds, statement that advice re termination available from Board & other req'd info; Copy of notice filed with Board within 10 days of service on T None San Francisco Hotels <32 days; Substantially renovated units; New construction; Nonprofit cooperatives & units owned by nonprofit public benefit corporations Former T may rerent at controlled rent; No mininimum cost for nonmajor work; Permits necesary prior to serving notice; No ulterior motive Grounds; Inform T in writing that advice concerning notice may be obtained from Board; File copies of notice with Board w/in 10 days after service $5,261 to eligible Ts (incl. subtenants, minors), max. of $15,783 per unit; additional $3,508 for elderly, disabled & Ts with minors; Fees different for Ellis Act evictions San Jose Hotels <30 days; Voluntarily - vacated units; Prior T evicted for nonpayment of rent or breach of lease; New construction None 90 days' notice to Ts in unit one year; 120 days' notice where "severe housing shortage" (no "shortage" as of early 2014); Offer to arbitrate; Notice to city within 5 days None Santa Monica Hotels <14 days Retirement homes Owner -occupied 1, 2 or 3 -unit building Single family residences New construction "Incentive" unit Removal permit from city Grounds and specific facts; 60 days' notice to Ts in unit one year; Owner/relative evictions to include current T & rent, info on proposed T; notice to board within 3 days of service on T $8,300 to $17,350 depending on number of bedrooms; $9,500 to $19,950 depending on number of bedrooms for seniors, disabled & parents with minor child, OR city approval of displacement plan OR move T to comparable unit West Hollywood Hotels <30 days; New construction; Units first occupied after 7/1/79; Rooms rented to boarders where L occupies unit as principal residence; Dwelling units legally converted from nondwelling units Permitted where building must be permanently eradicated or demolished b/c uninhabitable or if building may not be inhabited while correcting violation notice by government agency Grounds and specific facts; 60 days' notice to Ts in unit 1 year; Relative/owner- evictions require 90 - day notice specifying proposed T, with copy to city; Written statement of alleged violations for breach of covenant or refusal to renew $5,100 to $12,800 depending on number of bedrooms; $13,500 for seniors, disabled, Ts with dependent children, moderate income; $17,00 for low- income; L must reimburse city for relocation aid POLICY ARGUMENTS REGARDING JUST CAUSE EVICTION Main Policy Features: Tenants may only be evicted for certain enumerated reasons (i.e. "just causes"). Just cause ordinances specify the permissible bases for eviction, including those due to the tenant's "fault" (e.g. nonpayment of rent, criminal activity, etc.) and those due to "no fault" of the tenant (e.g. landlord wishes to occupy the unit). Statewide Legal Baseline: Absent local regulation, state law provides that month -to -month tenants may be evicted for any or no reason (other than retaliation or discrimination) if served with 30 days' written notice (or 60 days' written notice if the tenant has resided in the unit for at least one year). Landlords may also initiate eviction proceedings with 3 -days' notice when a tenant fails to pay rent, creates a nuisance or otherwise violates the lease agreement. Examples: Several California cities have adopted just cause eviction ordinances. See, e.g., City of San Diego Municipal Code, § 98.07; City of East Palo Alto Municipal Code §14.04.160; City of Oakland Municipal Code, § 8.22.300, et seq.; City of Berkeley Municipal Code, § 13.76.130. Arguments in Support of and in Opposition to Policy: 1 PRO CON • • • • Limits the ability of landlords to evict existing tenants, especially in low -vacancy and expensive housing markets where landlords may have incentive to evict existing tenants in order to obtain higher rents. Protects tenants who have short-term (month -to -month) leases. Slows down rapid increases in rent. Stabilizes communities by slowing down evictions and decreasing turnover rates. • • • Generally restricts rights of property owners by limiting what they may do with their property, requiring additional legal process before taking action against a renter. May impact neighborhoods by making it harder for landlords to evict problematic tenants, including those suspected of involvement in criminal activity. Impacts surrounding neighborhood by making it difficult for landlord to remove "bad tenants." 1 The arguments listed here are among those that are commonly advanced for and against the tenant protection measures in question. This office has not analyzed, and does not offer an opinion regarding, their validity. POLICY ARGUMENTS REGARDING RELOCATION BENEFITS Main Policy Features: Tenants who face "no-fault" evictions are eligible for compensation from the landlord for moving costs and other costs of securing new housing. Statewide Legal Baseline: There is no state law mandate for landlords to assist displaced tenants by compensating for relocation costs. Examples: City of Mountain View has adopted a relocation assistance ordinance. See City of Mountain View Municipal Code, § 36.38. Arguments in Support of and in Opposition to Policy: PRO CON • • • Helps ensure that displaced households find affordable and comparable replacement housing by providing compensation for relocation costs, such as first and last months' rent and security deposit for new rental unit, enrollment for housing search services, moving costs and storage. Helps mitigate trauma and disruption to tenants and their families caused by unforeseen need for relocation (e.g. children leaving school mid -year) by addressing some financial impacts. Requires landlords to internalize relocation costs as part of their "costs of doing business." • • • • Amount of mandated compensation may be excessive relative to some tenants' needs; landlords may not be able to afford. Relocation assistance payments may be spent on anything as ordinances do not require that compensation provided to displaced tenants be spent on costs of moving and securing new housing. May create a perceived windfall to well-off tenants if relocation assistance not subject to stringent income -specific criteria. If required to absorb relocation costs as part of their "costs of doing business", landlords could build the cost of relocation benefits into rent structures. POLICY ARGUMENTS REGARDING RENT STABILIZATION Main Policy Features: Rent stabilization ordinances limit the amount that rents are allowed to increase each year as market values increase (usually based either on a fixed percentage or tied to inflation). Statewide Legal Baseline: Currently, under state law, there are no limits on the amount or frequency of rent increases. Landlords may set rent to market rate with every new tenancy ("vacancy decontrol"). Rent control may not be applied to units constructed after 1995, single family homes or condos. Examples: Thirteen cities in California have adopted rent stabilization ordinances. See, e.g., Santa Monica City Charter, Article XVIII; City of Los Gatos Municipal Code § 14.80; City of East Palo Alto Municipal Code, § 14.04.010, et seq. Arguments in Support of and in Opposition to Policy: PRO CON • Prevents landlords from imposing rent increases that cause displacement and accordingly, helps preserve income diverse, stable neighborhoods. • Substantial or frequent rent increases may adversely impact schools, youth groups and community organizations by displacing those who access these services. Long-term tenants who contribute to a community's stability have a legitimate interest in maintaining their tenancies. • Provides a basic form of consumer protection — once tenants move into a vacant unit at market rate rents that they can afford and establish lives in these homes, they won't have to renegotiate. • Helps correct power imbalance between landlords and tenants. Because of the high cost of moving, tenants may be pressured by landlords to accept rent increases. Tenants may also be unaware of the real conditions of units until they move in. If the tenant complains about the • Fundamentally unfair — why burden landlords for a broader societal problem? • Interferes with free market — landlord should be able to rent unit at amount that market bears. • May incentivize landlords to raise rents before any rent control ordinance takes effect in an attempt to evade impact of the regulation. • As a general matter, restricts rights of property owners as it limits what they may do with their property. • With a long line of potential tenants eager to move in at the ceiling price, discourages landlords from maintaining and repairing units until the end of a tenancy. Also, because rent increases are limited, the landlord's ability to recoup costs of improvement or maintenance is also curtailed. • Reduces "urban vitality" by discouraging mobility; decreases vacancy conditions, the landlord may threaten to increase the rent. • Allows tenants to share in the benefit of Proposition 13, which generally caps annual increases in the assessed value of real estate at 2%. In the campaign to enact Proposition 13, advocates claimed that landlords would pass property tax savings along to tenants; rent control helps to ensure that this occurs. • Housing is a positive human right that equals or exceeds the property rights of landlords. Without rent control, even tenants paying full rent can be forced unexpectedly from their homes through no fault of their own. • Prevents landlords from making speculative profits in strong markets, but also enables landlords to obtain fair returns on their rental properties while ensuring that tenants have the certainty that their rents will not increase more than a certain amount each year. • Can be structured in a way so as to minimize bureaucracy and administrative costs (i.e. complaint driven, instead of overseen by Rent Stabilization Board — "lean and mean" approach). rates/turnover in rental units because tenants want to keep their low -rents and are unwilling to leave. • Is not tailored to protect intended beneficiaries — i.e. poor or other vulnerable renters; rather, may incentivize landlord to create stringent standards for applications from prospective tenants (i.e. requiring resumes, credit reports and references) which poor or other vulnerable renters may have trouble meeting. • Incentivizes landlords to discriminate against prospective tenants likely to stay for a long time, like retiree or couples with children. • Triggers consequences such as bribes and a "shadow market" (e.g. prospective tenant offers landlord $5000 just to hold an $1800 -a -month one -bedroom apartment in an industrial neighborhood that he had yet to advertise; landlord offers existing tenant $5000 to vacate rent controlled unit so landlord can reset rent for vacant unit at amount that market will bear). • Encourages some owners to take their units off the market and sell properties, rather than rent. • Depending on how they are crafted, rent control ordinances may be extremely burdensome and expensive to administer. RENT STABILIZATION DECISION MATRIX UNITS COVERED ADDITIONAL EXEMPTIONS • • • Duplexes, small apartment buildings? Substantially renovated units? Temporary, non-traditional residential uses (dorms, hotels, hospitals, etc.) ANNUAL ADJUSTMENT • Economic indicator, such as regional CPI o With or without maximum percentage increase • Specify maximum percentage increase CONTROLS ON AMOUNT OF RENT CHARGED • Automatic o Utilities, property taxes, registration fees OTHER ADJUSTMENTS • Application for Fair Return/Adjudication o Capital improvements o Renovations o Reduction in housing services COMPLAINT -BASED OR REGISTRATION AND ADMINISTRATIVE STRUCTURE CERTIFICATION RENT BOARD OR OTHER STRUCTURE INDEFINITE TERM • Time -based (specified number of years) TEMPORARY • Production -based (specified number of affordable housing units) • Market -based (specified vacancy rate) UNITS COVERED • All housing units • Only rent -stabilized units JUST CAUSE EVICTION • Identify acceptable grounds for eviction and any special limitations ACCOMPANYING TENANT • Notice requirements PROTECTIONS • When is it required? RELOCATION ASSISTANCE • Who qualifies? o Income limits to qualify for assistance? • Amount of assistance? o Additional assistance for sensitive groups? RENT STABILIZATION DECISION MATRIX CITY OF PALO ALTO DATE: October 16, 2017 City of Palo Alto COLLEAGUES MEMO TO: City Council Members FROM: Council Member Holman, Councilwoman Kou, Council Member DuBois SUBJECT: COLLEAGUES MEMO FROM COUNCIL MEMBERS DUBOIS, HOLMAN AND KOU REGARDING STRENGTHENING RENTER PROTECTION FOR PALO ALTO RESIDENTS Issue: The cost of rental housing in Palo Alto and the region has soared in recent years as the pace of job growth has tripled the rate of housing growth. Housing that has been built is predominantly high -end or, to a lesser extent, subsidized, low-income housing. The needs of moderate -income workers and families too often have been ignored. These trends undermine our social and economic health and cannot be sustained. Goals: • Support retention of a healthy, diverse community, an action that also supports our local economy; • Moderate the rate of rent increases; • Provide protections from unjust evictions by means that are fair to both renters and landlords; • Continue to promote construction of new multi -unit rental developments. Background and Discussion: Approximately 44 percent of Palo Alto residents are renters who are predominantly long- term members of our community, contributing to our social balance and economy. In recognition of the vital importance that renters have on our civic vitality and economic health, past Palo Alto city councils have adopted long-standing renter protection ordinances. Those ordinances offer renters greater protection than under California State law and include provisions that: • Require a sixty-day notice of large rent increases at multi -family rental units; • Prevent discrimination against families by prohibiting landlords from requiring that fewer than two people per bedroom occupy a unit; • Provide Tenant — Landlord mediation services; • Require one-year leases to be offered. October 16, 2017 (ID # 8563) Page 1 of 3 Although the growth in our tech economy has been a boon to many, that growth has been accompanied by negative disruptions, including a steep increase in demand that has severely degraded our housing affordability and resulted in many long-term renters being forced out or having to spend inordinate amounts of their incomes on housing. Since 2011, the average monthly rent in Palo Alto has soared 50 percent while the county median income has risen less at 1/10 that rate. These trends are clearly not sustainable. Our affordable housing supply is far below demand while the cost of building new affordable units dwarfs our available resources. Furthermore, many vital members of our community have moderate incomes and are not eligible for our limited affordable housing; teachers, policemen, service and retail workers, nurses and health care providers are continuing to be priced out of their homes and are being forced to leave our community. To encourage new housing construction, cities that enact renter protections are required to do so within the framework of State law, restricting renter protections to multi -unit developments built on or before February 1, 1995. Recognizing the severity of the problem, Mountain View voters and the San Jose City Council recently passed renter protection measures. Other cities have recognized that the issue has reached a near crisis level and are considering similar measures. Palo Alto's rental housing problems are even more severe than these other cities. Current and future economic forces have made additional renter protections necessary for the well-being of our community, its valuable diversity, and a viable economy. In addition, the Council's Healthy City, Healthy Community priority identifies diversity as a key component. Renter protections are only one part of protecting our existing housing supply. This initiative is not intended to substitute for other measures that may be addressed separately from this memo including short-term rental abuses, loss of existing housing units, and investment homes left vacant for long periods of time. Recommendation: We recommend that Council refer this proposal to the Policy and Services Committee for review. The review should consider the following: • An annual percentage cap on rent increases for buildings of 5 or more housing units built before Feb. 1, 1995. This removes any disincentive for new construction. • Measures to protect tenants against termination without just cause while protecting the fair rights of property owners. • Other updates to our existing renter protections as needed to continue a healthy community. In addition, the council may elect to refer the item to the Human Relations Commission as part of the review process. Staff Impact: October 16, 2017 (ID # 8563) Page 2 of 3 The breadth, diversity and complexity of policy, fiscal and legal issues implicated by this initiative will mean that fairly substantial staff resources could be needed, depending on the Council's direction, to analyze and support the Council's consideration of the issues. Staff from Planning & Community Environment, Administrative Services/Management & Budget, the City Manager's Office and the City Attorney's Office will be involved. As an initial step, staff has added a supplemental Memorandum from the City Attorney to this Colleagues' Memorandum (see attached), which transmits two background reports from other jurisdictions regarding renter protection programs. These materials provide an overview of state and federal laws relating to municipal renter protection regulations; describe renter protection measures adopted by a number of California cities; and list key areas for policy determination. If Council adopts additional renter protection regulations, staff resources will be required to implement and administer the program. The resources required will vary widely depending on the program elements selected by the Council. The background reports attached to the City Attorney's Memorandum describe staffing requirements typically associated with the various approaches to regulation in this area. Those range from very little or no staffing, to significant additional staffing including administrative boards and investigative, analytical, enforcement and legal personnel. October 16, 2017 (ID # 8563) Page 3 of 3 PALO ALTO Office Memorandum Office of the City Attorney City of Palo Alto Date: October 4, 2017 To: The Honorable City Council From: Molly Stump City Attorney Subject: Background Material on Municipal Renter Protection Programs Renter protection measures vary significantly between jurisdictions. Some programs are limited in scope and straightforward to administer. Others are complex, involving numerous program elements and raising potential legal and administrative challenges. As background material to assist the Council in its initial consideration of this topic, staff is attaching two reports prepared by Bay Area jurisdictions in recent years: 1. City of Fremont, Rent Control and Just -Cause Eviction: Review of Programs, Management Partners, June 2017 2. Continuum of Residential Tenant Protection Measures, County of San Mateo Interdepartmental Correspondence from County Counsel John C. Bieirs to All County Departments, September 23, 2015 These reports survey programs in cities throughout California, identifying trends and program options. The reports describe staffing requirements associated with implementation and enforcement of various types of programs. The San Mateo report provides a basic explanation of state and federal laws that constrain municipal regulation in this area. Finally, the San Mateo report includes a list of policy areas for discussion by jurisdictions considering additional renter protection measures. Depending on the Council's direction, these reports will need to be updated to include recent developments in California and our region. City of Fremont Rent Control and Just -Cause Eviction: Review of Programs June 2017 Management Partners June 9, 2017 Mr. Dan Schoenholz Deputy Community Development Director City of Fremont 3300 Capitol Avenue Fremont, CA 94538 Dear Mr. Schoenholz: Management Partners is pleased to transmit this report, which provides the results of our review of rent control/stabilization and just -cause eviction programs in California. This report provides information based on other cities' experience with such programs including analysis and context regarding a range of policy and program options. We look forward to further discussion on this topic with the City as it seeks to develop a strategy associated with landlord/tenant issues to assist in the development of solutions appropriate to community needs in Fremont. Sincerely, „I1 ILL Andrew S. Belknap Regional Vice President 1730 MADISON ROAD • CINCINNATI, OH 45206 • 513 8615400 • FAX 513 8613480 MANAGEMENTPARTNERS.COM 2107 NORTH FIRST STREET, SUITE 470 • SAN JOSE, CALIFORNIA 95131 • 408 437 5400 • FAX 408 453 6191 3152 RED HILL AVENUE, SUITE 210 • COSTA MESA, CALIFORNIA 92626 • 949 222 1082 • FAx 408 453 6191 Rent Control and Just -Cause Eviction: Review of Programs Table of Contents Management Partners Table of Contents Introduction 1 Background 3 November 2016 Election 3 Fremont Rental Housing Profile 6 Residential Rent Increase Dispute Resolution Ordinance 12 RRIDRO Challenges 13 Overview of Rent Control/Just-Cause Eviction Ordinances 15 Model A: (Berkeley/Santa Monica Style Rent Control) 17 Model B: (Alameda/West Hollywood Style Rent Regulation or Stabilization) 18 Just -Cause Eviction 18 Public Outreach and Education 20 Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements 21 Governance 21 Expenditures and Cost Recovery 22 Staffing 24 Technology Support 25 General Observations Regarding Program Impacts 25 Affordable Housing and Rent Control 26 Vacancy Rates/Displacement 27 Housing Supply and the Housing Market 28 Rent Intervention Alternatives — Three Options 29 Option 1: Modified Residential Rent Increase Dispute Resolution Ordinance Process 29 Option 1 Opportunities 31 Option 1 Challenges 32 Option 1 Cost Estimate 32 Option 2: Alameda/West Hollywood Style Rent Regulation or Stabilization 33 Option 2 Opportunities 34 Option 2 Challenges 35 Option 2 Cost Estimate 35 Option 3: Berkeley/Santa Monica Style Rent Control 35 Option 3 Opportunities 36 Option 3 Challenges 36 Option 3 Cost Estimate 37 i Rent Control and Just -Cause Eviction: Review of Programs Table of Contents Management Partners Conclusion 38 Attachment A: Rent Control and Just -Cause Eviction Program Options 39 Attachment B: Just -Cause Eviction Survey 44 Tables Table 1. Overview of November 2016 Rent Control Measures 4 Table 2. Overview of Recent Bay Area City Council Rent Control Activities 5 Table 3. Overview of Fremont Housing Stock for 2006 through 2010 and 2011 through 2015 6 Table 4. Overview of Fremont Vacancy Rates and Median Monthly Rent from 2011 to 2015 8 Table 5. Fremont Gross Rent as a Percent of Household Income from 2011 to 2015 8 Table 6. Summary of Peer Rental Housing for 2011 through 2015 (Five -Year Estimates) 9 Table 7. Summary of Peer Renter Financial Information for 2011 through 2015 11 Table 8. Average Rents for One and Two Bedroom Units in Fremont 11 Table 9. Rent Increase Case Reports from July 1, 2016 through December 31, 2016 13 Table 10. Rent Control and Just -Cause Eviction Program Cost and Fee Comparisons 24 Figures Figure 1. Fremont Percent of Occupied Housing Units Occupied by Owners versus Renters for 2011 through 2015 7 Figure 2. Peer Comparison of the Percent of Total Occupied Housing Units Occupied by Renters for 2011 through 2015 10 ii Rent Control and Just -Cause Eviction: Review of Programs Introduction Management Partners Introduction In 2016, the Fremont City Council considered preliminary research and information prepared by City staff regarding rent control and just -cause eviction programs in California and requested additional information about such programs to help inform their discussion of the issue. The City requested Management Partners' assistance in providing more in- depth information regarding rent control and just -cause eviction policies, options as well as program costs. City staff met with tenant and landlord organizations in 2016 to gather input from stakeholders concerning potential program changes. As stated in a report to the City Council on September 27, 2016, staff was unable to identify much common ground. The tenant group believes a much stronger and binding rent control and just cause eviction ordinance is necessary while the landlord group believes some improvements to the Residential Rental Increase Dispute Resolution Ordinance would be sufficient. At the September 27, 2016 meeting, Council directed staff to research rent control (also known as rent stabilization or rent regulation) and just -cause (or just) evictions and develop options for consideration. The City Council approved a motion directing staff to: • Investigate the operational impacts of rent control and just -cause ordinances, • Create optional models for an ordinance that meets City -specific needs, and • Present possible revisions to the existing Residential Rent Increase Dispute Resolution Ordinance (RRIDRO). The City of Fremont subsequently engaged Management Partners to assist in the analysis of rent control and just -cause eviction ordinances. Management Partners has undertaken this type of work for the cities of San Jose, Santa Rosa, Burlingame and Richmond in the past two years. 1 Rent Control and Just -Cause Eviction: Review of Programs Introduction Management Partners This report includes four major sections: 1. Background, which briefly sets the context for this report; 2. Overview of rent control/just-cause eviction ordinances, which provides a general overview of rent control and just -cause eviction ordinances; 3. Rent control and just -cause eviction program elements, which includes information on the costs and staffing requirements to operate rent control programs; and 4. Rent intervention alternatives (three options), which describes three possible options the City of Fremont may pursue as it determines next steps. 2 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Background Tenant displacement and issues related to the condition and availability of rental housing continue to be a focus of residents and local government officials in the Bay Area and various cities in Southern California. Rising rents in metropolitan regions have sparked discussions regarding local government roles and responsibilities in rental housing markets as well as actions by residents. November 2016 Election The November 2016 election had nine ballot measures related to apartment rent control in seven California cities and one mobile home rent stabilization measure. All of the apartment rent control measures were proposed in Bay Area cities. Table 1 below provides an overview of the nine rent control and tenant eviction ballot measures considered in the 2016 election. Most of the measures were placed on the ballot through a public petition; almost all of them included both rent stabilization and tenant eviction protections. Rent stabilization measures passed in five cities and failed in two cities. Roughly half of the measures were new, while half were modifications of existing rental programs. The cities of Alameda and Mountain View each had two different rent control and mediation ballot measures proposed. In both cities, the public initiated a rent stabilization and tenant eviction protection measure while the city councils placed a tenant -landlord mediation measure on the ballot as an alternative. The results were split, with Alameda voters favoring the mediation program and Mountain View establishing a rent control program. 3 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Table 1. Overview of November 2016 Rent Control Measures City Measure Components Initiated By New Measure or Pass? Modification Y/N Alameda Measure M1 Limits rent increases, provides eviction control, and requires certain relocation benefits Public Modification No Alameda Measure L1 Requires mediation for large rent increases, establishes eviction control, requires certain relocation benefits City Council Modification Yes Burlingame Measure R Repeals earlier ordinance prohibiting regulation of rents by the city and establishes rent control program Public New No East Palo Alto Measure J Streamlines administrative processes behind existing rent control ordinance City Council Modification Yes Mountain View Measure V Charter amendment establishing a rent and eviction control program Public New Yes Mountain View Measure W Alternative program requiring landlord -tenant mediation in lieu of rent control City Council New No Oakland Measure JJ Extends existing rent control program to cover all buildings occupied prior to 1996. Original ordinance covered units occupied prior to 1980. Public Modification Yes Richmond Measure L Establishes traditional rent and eviction control program under a rent board assigned by the City Council Public New Yes San Mateo Measure Q Rent and eviction control Public New No Source: Ballotpedia.org, City websites, and local newspapers and voter resources. Note: Table does not include mobile home rent measures. 4 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Table 2 summarizes City Council actions on rental housing issues over the past year in the Bay Area. Table 2. Overview of Recent Bay Area City Council Rent Control Activities City Components Date Pacifica Established an interim ordinance for rent and eviction control. A permanent measure is planned for the ballot in November 2017. April 2017 (Second reading of ordinance in May) San Jose Created interim ordinance modifying existing rent control ordinance to reduce maximum increase allowed. Staff was instructed to return with long- term options for rent control, eviction protection, and anti - retaliation ordinances. April 2016 San Jose Approved an ordinance that defines eviction controls for rent stabilized units only. (Other possible changes to existing rent control programs are under development.) April 2017 Santa Rosa Established a rent and eviction control program but placed it on hold pending a special election on a measure submitted by City Council in response to a referendum petition created by opponents. The special election was held on June 6, 2017 and voters rejected the measure. The election results ended the rent control program. August 2016 and June 2017 Union City Established eviction controls. Council instructed staff to return with a proposal providing non -binding mediation on large rent increases. April 2017 5 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Fremont Rental Housing Profile The Fremont City Council received the Report to Council on Rent Control, Just -Cause Eviction and Other Options for Promoting Affordable Rental Housing on September 27, 2016. In the report, staff provided a high-level overview of the advantages and disadvantages of implementing rent control and just -cause for eviction programs. Quoting from a report prepared by the Legislative Analyst's Office, Staff noted that between 2010 and 2016 the, "...imbalance between demand and supply has resulted in high costs for both rental and for -sale housing in the Bay Area and the rest of the State." After declines in rents in 2008 and 2009 the average rental cost of a two - bedroom, one -bathroom apartment in Fremont increased 64% (or almost 13% per year) between 2010 and 2015. More recently, between June 2015 and June 2016, rent increases moderated to an annual rate of 3.9%.1 Table 3 provides an overview of housing stock in Fremont. These five- year estimates are from the American Community Survey, which is a collection of population, housing, and workforce data provided by the U.S. Census Bureau. Estimates are based on 60 months of data during the periods of 2006 to 2010 and 2011 to 2015. The estimates show that the number of housing units has increased slightly between 2010 and 2015 across all categories except housing with three or more units. Table 3. Overview of Fremont Housing Stock for 2006 through 2010 and 2011 through 2015 American Community Survey 5 -Year Estimates Data M 20101 20152 1 Total Housing Units 74,218 75,420 Total Occupied Units 68,969 72,684 Owner Occupied Units 44,684 45,144 Renter Occupied Units 24,285 27,540 Housing with 3 or more units 19,643 19,151 Source: American Community Survey 5 -year estimates. 1The 2010 estimate includes data collected from 2006 through 2010. 2The 2015 estimate includes data collected from 2011 through 2015. Note: The American Community Survey estimates for housing units and housing tenure (owner or renter occupied) have a margin of error less than 4%. The data on housing with 3 or more units has a larger margin of error of 8% for both estimates. 1 City of Fremont, City Council Meeting, Report to Council on Rent Control, Just -Cause Eviction and Other Options for Promoting Affordable Rental Housing, dated September 27, 2016. 6 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Figure 1 shows the percentage of occupied housing units occupied by owners and renters according to the American Community Survey's 2015 five-year estimates. Renters occupy approximately 38% of total occupied housing in Fremont. Figure 1. Fremont Percent of Occupied Housing Units Occupied by Owners versus Renters for 2011 through 2015 Percent of Owner Occupied Housing Units Pecent of Renter Occupied Housing Units Source: American Community Survey 5 -year estimates. Table 4 shows homeowner and rental vacancy rates as well as median monthly gross rents for Fremont from 2011 to 2015. These statistics come from the American Community Survey one-year estimates, which are based on 12 months of data collected during each year shown in the table. For owner occupied housing units the vacancy rate has been below 2% over the five-year period. The rental vacancy rate has fluctuated over the last few years, hitting a low of 2.2 percent in 2012 and then steadily rising to 4.9 percent for 2015 with an average of 3.9. The median rent has increased at a constant rate over the last five years. 7 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Table 4. Overview of Fremont Vacancy Rates and Median Monthly Rent from 2011 to 2015 Data American Community Survey 1 -Year Estimates 2011 2012 2013 2014 2015 Homeowner vacancy rate (%) 1.2 1.6 0.8 0.3 1.0 Rental vacancy rate (%) 4.1 2.2 3.4 4.7 4.9 Median monthly gross rent $1,528 $1,613 $1,669 $1,832 $1,923 Source: American Community Survey 1 -year estimates. Table 5 below shows the gross monthly rent as a percentage of household income in Fremont over a five-year period. The United States Census Bureau considers households that pay over 30% of their monthly income to rent as cost burdened. Over this five-year period, an average of 41% of households paid 30% or more of their income for rent. The percent of households paying 30% or more of their income peaked in 2013 at 46% and has since remained around 40% or less. Table 5. Fremont Gross Rent as a Percent of Household Income from 2011 to 2015 Percent of American Community Household Income 2011 2012 Survey 1 -Year Estimates 5 -Year 2013 2014 2015 Average Less than 15% 10.0% 12.6% 16.0% 10.5% 13.9% 12.6% 15 to 19.9% 19.8% 15.7% 13.3% 20.1% 11.6% 16.1% 20 to 24.9% 16.1% 20.6% 15.9% 21.0% 16.8% 18.1% 25 to 29.9% 10.6% 11.7% 8.7% 10.4% 18.3% 11.9% 30% or more 43.6% 39.4% 46.0% 38.0% 39.3% 41.3% Source: American Community Survey 1 -year estimates. Table 6 provides a summary of rental housing information for the cities reviewed in this study of rent control and related programs. This American Community Survey data uses five-year estimates, which is the most comprehensive information available for all peer jurisdictions. The population information shows there is diversity in the size of cities that have adopted rent stabilization programs. Similarly, there is a wide range of housing units and tenure among this group of cities. The cities of Los Angeles and San Jose were excluded from the average calculation in this table because they are outliers to the dataset. Fremont's population is near the average for these cities. Fremont is also near the average for total housing units and total occupied housing units. However, Fremont has only half the number of renter -occupied units and housing structures 8 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners with three or more units as the average for those communities with rent control/stabilization and related programs. Table 6. Summary of Peer Rental Housing for 2011 through 2015 (Five -Year Estimates) Cities Population Total Housing Units Total Occupied Housing Units Renter Occupied Housing Units Housing structures with three or more units Alameda 76,733 32,244 30,708 16,240 12,677 Berkeley 117,384 49,671 45,917 26,334 21,971 East Palo Alto 29,198 7,455 7,065 4,589 3,003 Los Angeles 3,900,794 1,436,543 1,342,761 848,079 744,523 Oakland 408,073 171,087 158,424 95,402 77,216 Richmond 107,597 39,922 36,973 18,981 12,037 San Francisco 840,763 383,676 353,287 224,589 223,316 San Jose 1,000,860 325,256 314,297 134,488 97,408 Santa Monica 92,169 50,934 46,688 34,095 38,179 West Hollywood 35,332 23,997 22,077 17,643 20,473 Fremont 225,221 75,420 72,684 27,540 19,151 Average 213,406 94,873 87,642 54,734 51,109 Source: American Community Survey 5 -year estimates. Note: The American Community Survey estimates for housing units and housing tenure (owner or renter occupied) have a margin of error less than 5% for all the peers. Figure 2 shows the percent of total occupied housing units occupied by renters. The average percent of housing units occupied by renters is 61% for the cities with rent control or related programs. Fremont has the smallest proportion of occupied housing occupied by renters. At only 38%, Fremont is more than one third below the peer average. 9 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Figure 2. Peer Comparison of the Percent of Total Occupied Housing Units Occupied by Renters for 2011 through 2015 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 57% 65% 1 63% 60% I 64% as eJ ��o �� e`' a o Pale �e�e\ Qa\oP Fte�o o°�e\ a� � r�o� ta`` Q`� c,"6- Percent of Total Occupied Housing Occupied by Renters Source: American Community Survey 5 -year estimates. 43% 80% ,oc, ��a ooa c�a� 4\c) o� Sao y,`� Peer Average 1% Table 7 below provides a summary of peer renter financial information, including median household income, median monthly gross rent, and the percent of total renters with rent costing over 30% of their household income. It shows Fremont has the highest median renter household income. The median gross rents in Fremont are also greater than the average for the peers, which correlates with the income information. Fremont also has the smallest proportion of renters spending more than 30% of household income on rent and is 10% below the peer average. The figures reported below in Table 7 are estimates developed by the U.S. Department of Labor and reported in the American Community Survey. Care should be used in interpreting the rental rate information because of the multi -year nature of the estimate, which may not completely track market conditions. This data is available for all peer jurisdictions, however. 10 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners Table 7. Summary of Peer Renter Financial Information for 2011 through 2015 Cities Median Renter Household Income Median Monthly Gross Rent Percent of Renters with Rent Costing over 30% of Income Alameda $55,311 $1,407 47% Berkeley $40,074 $1,362 56% East Palo Alto $43,527 $1,433 66% Los Angeles $36,489 $1,209 61% Oakland $38,222 $1,144 55% Richmond $40,355 $1,205 57% San Francisco $62,532 $1,558 44% San Jose $55,152 $1,585 54% Santa Monica $63,476 $1,593 49% West Hollywood $50,722 $1,399 53% Fremont $81,695 $1,743 42% Average $49,277 $1,390 54% Source: American Community Survey 5 -year estimates. Another source of more recent rental information is the Rent Jungle website, which bases estimates on rent sampling data. Table 8 is a summary of Rent Jungle's sampling data for one- and two -bedroom rentals in Fremont gathered in March of each year from 2011 through 2017. Over this six -year period, rents for one -bedroom units increased 79% and two -bedroom units increased by 64%. The increases peaked in the summer of 2015, with some moderation since. Table 8. Average Rents for One and Two Bedroom Units in Fremont Year One Bedroom Change From Prior Year Two Bedroom Change From Prior Year 2011 $1,190 $1,520 2012 $1,532 29% $1,792 18% 2013 $1,638 7% $1,911 7% 2014 $1,760 10% $2,177 14% 2015 $1,981 13% $2,408 11% 2016 $2,137 8% $2,561 6% 2017 $2,134 0% $2,498 -2% Source: https://www.rentjungle.com/average-rent-in fremont-rent-trends/. 11 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners The City has also experienced a decline in the number of Section 8 Federal Housing Program vouchers accepted by landlords from 1,363 in 2012 to 1,134 in 2015. This has impacted more than 200 of the lowest income residents. Residential Rent Increase Dispute Resolution Ordinance Fremont adopted a Residential Rental Increase Dispute Resolution Ordinance (RRIDRO) in 1997. The intent of the ordinance was to establish requirements for properly notifying tenants of rent increases and their rights regarding rent increases, and to provide formal processes for the resolution of complaints over rent increases. The RRIDRO allows one rent increase per year for all units and sets forth a three -step process for complaint resolution. All parties have the opportunity to resolve disputes over rent increases in the three -step process described below. 1. Conciliation. The tenant or landlord may work with an outside third party to assist with resolving any disagreement about a rent increase. The conciliator will work with the parties separately to resolve the disagreement. If successful, a written agreement is binding. 2. Mediation. If conciliation does not result in agreement, the parties move into formal mediation. The trained mediators generally work with the parties together. Any written agreement is binding. 3. Fact Finding. If conciliation and mediation are not successful, the remaining step in the process is fact finding by a panel appointed by the City. The panel includes a tenant representative, a landlord representative and an outside third party. The panel's role is to issue a fact-finding report regarding the reasonableness of the rent increases and the impact of the rental rate on the affected households. The conclusions or recommendations of the panel are not binding. Conciliation, mediation, and fact-finding services are provided by Fremont Fair Housing, the local division of "Project Sentinel," a U.S. Department of Housing and Urban Development approved housing counseling agency. Project Sentinel provides housing related services under contract for many cities in the Bay Area. Table 9 provides a summary of the rent increase cases processed by Fremont Fair Housing from July 1 through December 31, 2016. In addition to these cases opened, Fremont Fair Housing received 130 rent 12 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners increase related phone calls. The majority of the phone calls (113) were made by tenants. Table 9. Rent Increase Case Reports from July 1, 2016 through December 31, 2016 Activity Cases Tenant Landlord Opened Filed Filed Cases Sent to Dispute Resolution (Cases Opened) 31 31 0 Cases Resolved with Reduced Rent Increases 20 20 0 According to Fremont Fair Housing's Year End Report: Representatives from the Rental Housing Association (RHA) continued to volunteer to assist with the conciliation of RRIDRO cases by using "peer counseling." Fifteen cases, with increases ranging from 9.97% to 79.82%, were referred to RHA, and all cases were successfully resolved. In 13 cases, the landlords agreed to substantial rent increase reductions, and in the other two cases tenancies were preserved. Of the 31 cases opened, the increases ranged from a low of 2.23% to a high of 79.82%. In general, tenants reported that increases have been larger and more frequent (every year) than previously. In general, tenants also reported that the premium charged to rent on a month -to -month basis, rather than a fixed term lease, is higher than in previous years. In one case, the tenants were offered a 12 -month lease with an increase of $160 (6.0%), but if they wished to continue renting on a month -to -month basis, the increase was $2,827 (79.8%). The RHA successfully conciliated the case, resulting in a 1.6% rent increase as opposed to the proposed increase of 79.8%. RRIDRO Challenges As market rents began to climb in 2013, Fremont Fair Housing found it challenging to mediate rents. The Rental Housing Association serving southern Alameda County (RHA) sent an agent to assist in the process and reported to City staff that Fremont Fair Housing often was not able to navigate the frequently complex corporate relationships behind ownership of apartment complexes to identify the party having authority. In several cases, apparently, Fremont Fair Housing was not negotiating with people who had authority to reduce proposed rent increases, 13 Rent Control and Just -Cause Eviction: Review of Programs Background Management Partners resulting in the decision makers refusing mediated terms. In several cases the RHA agent was able to help negotiate moderate increases. Based on best practices adopted by other jurisdictions with rent mediation processes similar to RRIDRO, and on improved results achieved by RRIDRO with active landlord involvement, there are a number of potential changes to the program the City may wish to consider. These are discussed in Options section below. 14 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners Overview of Rent Control/Just-Cause Eviction Ordinances Of the 482 incorporated cities in California, the vast majority do not regulate rents. Still, whether by legislation or local petition, rent control and just -cause eviction ordinances have become part of the municipal regulatory environment in a number of cities in California. Until 2016 approximately a dozen cities in the State of California had rent control regulations. As was noted earlier, the 2016 elections resulted in a few more cities in the Bay Area establishing rent control regulations. Some California cities have some type of regulation regarding rents which stops short of control or stabilization. These are usually mediation type programs similar to Fremont's. Clearly there is more policy and community interest in this issue in the Bay Area than there has been in many years. Cities as well as stakeholders (sometimes through voter initiative) are trying to address rent control issues with a range of programs. The programs are typically designed to meet the needs of the local community, the economic and market environment as well as stakeholder interests. Programs vary in scope and degree of regulation, and are generally designed to address the following areas: • Rent control or stabilization, • Just -cause for eviction requirements, • Tenant protections against retaliation, and • Relocation assistance for non -fault tenant evictions in particular circumstances. Each program has unique elements, and there is a complex inter- relationship between government regulation and the market that almost always leads to unanticipated consequences. The analysis presented below reflects our best professional judgment, given these constraints and uncertainties. 15 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners As part of our work, we contacted the communities of Santa Monica, Berkeley, Los Angeles, San Jose, and East Palo Alto for information about their rent control and just -cause for eviction programs. In addition, we reviewed ordinances and operating practices currently in place in the cities of Hayward and West Hollywood. While these programs have some common features, it is important to understand that each jurisdiction's scope and implementation processes are unique to their experience of the issues and stakeholder interests. San Jose is currently operating under an interim ordinance while staff develop broad policy recommendations and a program to support a comprehensive program. (San Jose has had a rent control/stabilization program in place since the 1970s, but because rent increases of up to 8% were allowed per year, it rarely had an impact on rents.) Also noteworthy are programs adopted by the cities of Alameda and Santa Rosa in 2016, and the City of Richmond in 2017. However, the proposed ordinance in Santa Rosa was rejected by voters in a special election, in June 2017, so the program planned by the City will not be implemented. Therefore, these programs do not have data that can be used to inform discussions on this issue. Nevertheless, where appropriate we have used relevant information from these communities. Local ordinances to address rapidly escalating rents have existed in California since the late 1970s. Cities such as Santa Monica and Berkeley pioneered strong ordinances that strictly regulated rent increases. More typical are ordinances that provide for non -binding mediation of landlord/tenant disputes similar to Fremont's program. In response to the rent inflation experienced in the Bay Area since the end of the Great Recession, several cities are looking at their current programs or are considering developing a program to regulate rents and establish just - cause eviction procedures. The state has set some limits on the power of a local jurisdiction to address rent increases. In 1995, the California legislature passed the Costa -Hawkins Rental Housing Act (AB 1164) (Costa -Hawkins). Costa - Hawkins allows, among other things, property owners to set rental rates when there is a change in unit vacancy (known as "vacancy decontrol"). In addition, Costa -Hawkins prohibits interfering in a property owner's ability to set rents for any unit that received a certificate of occupancy after February 1, 1995, and any single-family home and condominium. 16 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners Fremont staff estimated in their September 2016 staff report that there are 16,782 rental housing units in multifamily developments in Fremont, with 2,840 built after February 1995 and an additional 1,491 that are income restricted affordable units. (These numbers do not include renter occupied units that would not be subject to regulation, or alternative regulation, such as mobile homes, condominiums and single-family homes.) Therefore, staff indicate that approximately 12,451 units may be covered by a rent control ordinance. 2 Today, these programs, also referred to as rent stabilization programs, generally take one of three forms. An overview of the elements of the three forms is provided in Attachment A. Model A: (Berkeley/Santa Monica Style Rent Control) Traditional or "Model A" rent control ordinances strictly regulate rent increases by providing the annual maximum rents for each unit rather than merely providing the maximum percentage allowed. Cities such as Berkeley and Santa Monica pioneered these types of ordinances, but ordinances that establish the allowed individual rent increases remain rare. Recently, the City of Richmond adopted a Model A rent control ordinance following a voter initiative. Model A rent control programs typically involve the city registering all eligible rental units. Limits on annual rent increases are generally defined in relation to either the Consumer Price Index (CPI) or a flat rate. Should a landlord believe increased operating costs justify a greater increase than permitted by regulation, they must petition for an individual rent adjustment. Similarly, tenants may petition to decrease rents if the services provided by the landlord are reduced. Individual petitions are typically heard by a hearing officer, with the ability of either party to appeal to some public body, usually a rent board, or ultimately the court. Rent boards may be independently elected (as in Berkeley), or appointed by the City Council (as in West Hollywood). Although they have been challenged in the courts, rent control ordinances in Berkeley, Santa Monica, East Palo Alto, West Hollywood and, very recently, Richmond have withstood legal challenge. 2 City of Fremont, City Council Meeting, Report to Council on Rent Control, Just -Cause Eviction and Other Options for Promoting Affordable Rental Housing, dated September 27, 2016. 17 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners Due to the extensive regulatory apparatus associated with Model A rent control programs, these are the most complex and expensive for cities to implement and operate. Also, litigation typically ensues following the enactment of such programs. Model 8: (Alameda/West Hollywood Style Rent Regulation or Stabilization) These programs are intended to address swings in the market that can lead to higher rent increases. They are triggered when a proposed rent increase exceeds some specified threshold (usually 5% to 10 %) and a tenant files a petition. Model B rent control programs typically try first to resolve issues through mediation, which can be a mandatory first step. If mediation fails, the next step is a hearing or arbitration that results in a binding decision. Most rent control programs provide for mediation as either a first step in the dispute resolution process, or as a required step. Some cities provide mediation services to address any type of landlord/tenant dispute before it escalates into formal hearings or court actions. These landlord/tenant dispute resolution programs are similar to Fremont's RRIDRO. Participation in the program is sometimes mandatory, and failure to participate in good faith can be grounds for disallowing a rent increase. A mandated mediation program is intended to provide a tenant access to a grievance process that meets program guidelines for mediation and addresses the issue of tenants being uninformed about how to process rent or service -related grievances. Mediation can be provided to resolve many landlord/tenant disputes on a "cost -to -the -parties" basis. However, many cities choose to fund the service or charge only a nominal fee. Mediation services are typically provided through a third -party contractor or non-profit organization, as Fremont currently is utilizing. Just -Cause Eviction State law allows a landlord to terminate a tenancy without cause at the end of a lease or other tenancy term by giving the tenant a 30- or 60 -day notice. A just -cause for eviction ordinance retains the state's noticing timelines, but also requires a landlord to provide written cause for the termination and evidence supporting the termination action. Typically, "just -cause" ordinances provide a limited range of allowable causes for 18 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners eviction. One of the primary impacts of these programs is that they shift the burden of proof for a tenant eviction from the tenant to the landlord, because failure to prove one of the allowable causes for eviction is an affirmative defense a tenant may use to contest the eviction. Just -cause for eviction rules are often part of a strong rent regulation ordinance to protect tenants from a landlord's ability to evict them without cause under civil procedures to gain potentially significant rent increases by creating a vacancy that allows greater market rents to be charged pursuant to the Costa -Hawkins Act. However, just -cause ordinances can also become problematic for a landlord seeking to evict a tenant for reasons other than to increase the rent. Because legitimately evicted tenants may use the appeals processes to delay the eviction, many landlords believe that just -cause ordinances make it difficult to evict bad tenants. The effectiveness of just -cause ordinances is difficult to track statewide because most of the cases are taken directly to the courts for resolution and the results are not published in a comprehensive way. However, to assess the effectiveness of such ordinances, Community Legal Services of East Palo Alto (CLSEPA) tracked their caseload over an eight -month test period in 2014. CLSEPA provides defense for tenants facing eviction in East Palo Alto and many other areas of San Mateo County. Currently, East Palo Alto is the only city in San Mateo County with a just -cause for eviction ordinance (it has also had a rent control ordinance since 2010). Over the test period CLSEPA obtained "pay and stay" settlements (where the tenant agrees to a rent increase and is not evicted) for 70% of cases in East Palo Alto. However, in all other San Mateo County cities pay and stay settlements were achieved in only 14% of cases. CLSEPA did not have the capacity to track cases beyond the test period. An important caveat to this example is that eviction in a rent control environment is different than in a non -regulated environment. As stated above when rents are controlled landlords may have in incentive to evict to obtain the economic benefit of vacancy decontrol. Therefore, comparing eviction settlements in a controlled environment like East Palo Alto may not yield a meaningful comparison in a mainly unregulated environment such as other areas in San Mateo County. 19 Rent Control and Just -Cause Eviction: Review of Programs Overview of Rent Control/Just-Cause Eviction Ordinances Management Partners While typically paired with rent control or stabilization, a just -cause ordinance can be a stand-alone ordinance designed to protect tenants from unilateral landlord eviction decisions. They can apply to most tenants as well as to specific tenants, such as to tenants of rent stabilized units only. For example, the just -cause sections of ordinances for both Richmond and Berkeley apply to the rent -controlled units as well as to almost all other rental units. Just -cause ordinances also can be used to provide additional protections for certain classes of tenants, such as the disabled, elderly, infirm and families with children in school. Just -cause for eviction programs typically are designed so the city is not an active participant in the process. Instead, the eviction processes play out through the courts. Rent board staff in several of the California cities with rent control contacted by Management Partners reported they did not track just -cause eviction complaints so we were unable to determine the extent of such cases. A survey of just -cause eviction provisions is provided as Attachment B. Fremont's neighbor, Union City, recently enacted a just -cause ordinance in the absence of rent controls beyond a non -binding mediation program. The effect of such a just -cause ordinance on rents is not clear because it is too new to draw any conclusions from. Public Outreach and Education Although not strictly an element of rent control and just -cause eviction ordinances, rent control related public outreach typically includes a range of tenant and landlord education or information programs to make sure the parties understand their rights and responsibilities. Topics covered often include processes for allowing yearly rent increases and/or petitioning higher rent increases to cover higher capital or operating costs, vacancy decontrol, habitability standards, and retaliation or anti - harassment provisions. The most effective tenant protection programs use extensive outreach and education to reduce the number of petitions and ordinance violations over time. 20 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements The Fremont City Council directed staff to investigate operational impacts of rent control/rent stabilization and just -cause ordinances. As noted previously, each jurisdiction with rent control and just -cause for eviction ordinances has unique elements to meet specific community and stakeholder interests and needs. As such, programs vary widely among agencies. This section provides an overview of the major elements of rent control and just -cause eviction programs and their operational impacts in the following areas: • Governance, • Expenditures and cost recovery, • Staffing, and • Other observations. Governance Most cities, whether their programs are regulatory or non -binding, establish a board to provide oversight, to act as the final appeals body when parties fail to reach agreement after mediation, or to act as the hearing body for a decision by an arbiter or hearing officer for general landlord/tenant complaints such as excessive rent increases. These boards are generally appointed by a city council, although Berkeley and Santa Monica have an independently elected board. In most programs, initial decisions are made by trained hearing officers directly employed by the rent board or contracted by the board from independent organizations. These boards will typically hold public hearings to render a final binding decision on complaints. Although the board may be appointed by a council, we have not identified any ordinances where a board's decisions are appealable to the city council. Most appeals of board decisions are made directly to the courts. Rent control boards may also get involved in 21 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners other landlord/tenant issues, including providing informational and educational materials on landlord/tenant rights and other matters of interest to landlords and tenants. Although a board is typically created, we found two examples where governance is not being delegated to a rental control board. The City of Hayward's program calls for arbitration; the arbiter's decision is final (subject to court review should the matter be taken to court). Under San Jose's new program, disputes are arbitrated by hearing officers and appealed to the courts. However, policy decisions remain with the City Council or are delegated to staff. Expenditures and Cost Recovery The cost of rent control programs varies widely across the state. The costs are related to the cost of staff required to administer the program. Programs that require detailed administrative action over routine activity such as rent increases and tenancy changes are higher in cost on a per rental unit basis. The programs in Berkeley and Santa Monica programs are examples of such programs. Programs that require little routine administrative control and are primarily complaint driven, such as San Francisco's, are fairly inexpensive on a per unit basis. Scale reduces the per unit cost in the large cities dramatically. Some factors that influence costs are: • The level of policy control of the rent boards and their need for staff support; • The amount of information and frequency of reporting required by landlords; • The complexity of the petition processes, especially those related to fair -return on investment provisions; • Whether proactive enforcement of the ordinance is performed (i.e., analysis of reporting data is used to act on rents outside of complaints); and • The complexity of relocation programs. A city council is typically responsible for approving the budget for rent management programs. In at least three cities (Berkeley, Santa Monica and Richmond), the budget is set by the rent board with little oversight by the City Council (although the Council must set the associated rental housing fee). In cities with strong rent regulation reporting, most of the program budget is funded through a rental housing fee on each regulated unit charged to landlords. 22 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Fees for Model A rent control programs currently are as high as $238 per unit per year, and cover annual costs and reserves necessary to properly fund them. The fee is established on an annual basis. If program costs increase, the fee can be increased. In some cities, a portion of the rental housing fee can be passed through to tenants through rent increases. To properly track regulated units and payment of fees, these cities require that units be registered or enrolled in a "rent registry." In those cases where there is less rigorous rent control (i.e., with landlords only reporting on the occupied units), fees range from approximately $40 to $120 per year. Some cities support their rent control program through the general fund or through a combination of general fund support and fees. For non- binding mediation programs, a non-profit may provide the service either through its own grant funding, or by charging a fee. Table 10 below provides information on program cost and fee data collected from communities that operate rent management programs. While all of the programs in Table 10 include rent control and just -cause for eviction components, each of the cities' programs provide a range of services as well as staffing strategies which make cost comparisons challenging. As an example, the programs in the cities of Berkeley and East Palo Alto require rental unit registration of actual rents while the others do not. The level of service also varies. The City of Alameda's program includes mediation services for rental properties not subject to rent control while the now defunct City of Santa Rosa's program excluded these services. Finally, the City of Hayward's fees are significantly less than other communities due to its policy to recover only a portion of program costs. The Hayward program has limited administrative requirements and offers some unique program features, including those that allow a landlord to remove units from the rent control portion of the program if certain conditions are met. 23 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Table 10. Rent Control and Just -Cause Eviction Program Cost and Fee Comparisons City Number of Non -Exempt Housing Units Current Program Operating Budget Annual Per Unit Program Fee Number of Program FTEs Annual Allowable Rent Increase Alameda' 13,037 $1,900,000 $131 6.0 5% Berkeley 19,093 $4,550,000 $234 20.6 1.5% (CPI Formula) East Palo AIto2 2,400 $650,000 $234 2.0 2.40% (CPI Formula) Hayward' 3,000 $27,875 $2.77 0.5 5.00% Oakland N/A $1,773,209 $30 12.0 2% (CPI Formula) Santa Rosa4 11,076 $1,248,674 $113 4.5 3% Source: Annual budget documents, city websites and program reports. ' The City of Alameda information represents an estimated amount as the program has just recently been approved; however, the fee has not yet been adopted. 2 The City of East Palo Alto budget includes $206,000 City overhead charges. 3 The City of Hayward includes various conditions that allow rent increases greater than 5%, including rent carry-overs. Cost is based on 80% program recovery. A total of 20% is funded by the General Fund and 3,000 units are subject to the rent control portion of the program. 4 The City of Santa Rosa program fee was adopted on August 30, 2016 based on program cost and fee estimates. The Santa Rosa and Alameda programs were selected in part because they have just recently been adopted and include one-time costs anticipated in program start up. The Santa Rosa program no longer exists because it was rejected by voters in a special election on June 6, 2017. Staffing With respect to the provision of legal services to support the function, we observed that programs utilized either the city attorney's staff or employed their own attorneys to focus exclusively on the rent control program. For example, Alameda, East Palo Alto and Santa Rosa secure legal services for their program through their city attorneys' offices. The cost of this staff time is tracked and included in the program costs. Santa Monica and Berkeley both have staff attorneys who are solely responsible for the rent control program and related litigation. Periodically, the rent control program attorneys in both of those cities require supplemental assistance from the City Attorney. Several of the rent control programs also budget for additional contract services including additional legal services (e.g., East Palo Alto and Santa Monica). The level of staffing for rent control programs is highly dependent on the type of program. A non -binding mediation program can be managed with more limited staff resources. On the other hand, cities with highly regulatory programs may need a significant number of staff, including a 24 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners manager, administrative personnel, (e.g., support and accounting staff), analysts, legal services and hearing officers (which may be contracted). Staff may also conduct community outreach and education activities. The City of Berkeley's rent control program, governed by an independent and elected rent board, employs 22 full-time equivalent employees (FTEs) and has a budget of over $4.5 million. The City of Hayward's program, which is a complaint -based arbitration program for significant rent increases, is administered through the City Attorney's Office and uses a portion of two FTEs for program administration along with contractual support for mediation and arbitration. It does not utilize a board for program oversight. Technology Support Until this year there was no commercially available software that supported rent control programs. Cities with long term programs have all used custom software developed specifically for them. The City of San Jose is in the process of creating custom configurations of its Customer Resource Management software to provide such support. The San Jose Housing Department has used that application for several years but processes supporting the new ordinances being developed will require more sophisticated functionality. The City of Richmond is in the process of developing similar functionality using their development permit tracking and inspection system. Both cities have information technology staff with significant skills with these products and both will likely require additional assistance from their vendors. On January 3, 2017, the City of Los Angeles went online with a new application developed for them by a southern California software development company. This company just contracted with the City of Beverly Hills to provide a version of the Los Angeles software as a "cloud -based" service, but it is not yet installed. General Observations Regarding Program Impacts The degree to which there is an impact on the housing market from rent management programs will depend on the type of program adopted by the city, the market and general economic development conditions within a region. In general, there is limited research on the market impacts of any of the rent management programs as they currently exist in California after Costa -Hawkins. Interest groups representing landlords and tenants rarely, if ever, agree on market impacts. 25 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Objectively, concerns that local rent regulation would discourage new construction have largely been addressed by state law exempting new construction from rent regulation. There have been concerns that highly regulatory programs discourage investment and lead to deterioration in rental housing, but evidence of that is merely anecdotal. In reviewing the potential impacts of rental control programs, the following are some general observations about affordable housing, vacancy rates/displacement, and housing supply. Affordable Housing and Rent Control Defining housing affordability is a complex matter that is beyond the scope of this study. However, in the broadest sense, any definition of affordable housing typically includes a link between household income and the amount of income spent on rent and/or gross housing costs. As an example, HUD generally defines housing as being affordable if a median income household is paying no more than 30% of its income on housing -related costs. While the HUD definition is commonly cited when discussing housing issues overall, a city's affordable housing program is typically geared toward the development and maintenance of subsidized rental housing including eligibility requirements tied to household income, most commonly those households with an annual income less than 80% of the Area Median Income (AMI). Affordable housing and rent control are different in that the income of a tenant in a rent control environment is not used as a parameter in the rent setting process. We have not observed any affordability monitoring or control mechanism linking rents and household income in relation to the impact of rent regulation. Therefore, as a general observation rent control and just -cause eviction ordinances, at best, maintain some level of affordability for those already in rental housing subject to the ordinance, but do not lead to an expansion in the availability of affordable housing. Notwithstanding this, proponents of rent control programs and associated stakeholders often assert these programs assist in promoting tenant stabilization, with varying degrees of success, by establishing a more clearly defined rent adjustment amount and by providing an outlet for grievances related to what may be viewed as unreasonable rent increases without regard to a household's income or the amount of 26 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners household income dedicated to monthly housing costs. In addition, educating tenants and landlords about tenant rights and processes for rent adjustments and/or evictions are often components of affordable housing programs. Affordable housing issues are not directly targeted by rent regulation. Such issues are much broader and bigger, and the subject of a lot of discussion among stakeholders and the housing industry. However, rent control and just -cause eviction may provide additional public information and a process that may affect a subset of those impacted by high housing costs. Vacancy Rates/Displacement Management Partners has not found any current data indicating that rent control and just -cause for eviction programs will increase or decrease vacancy rates. Our observation is based on conversations with representatives from the peer cities and the results of a questionnaire regarding vacancy rates in cities with rent control programs. Because the surveyed cities are not collecting data to track tenant displacement and/or the root causes for displacement, which are complex, we have not found any specific evidence indicating these programs improve or worsen tenant displacement. Notwithstanding the lack of available data, it seems reasonable to conclude that tenants are displaced when rent increases exceed the general cost of living, leading to a tenant being priced out of a unit and potentially out of the community. A program that mitigates rent increases accompanied by a just -cause eviction ordinance may limit the impact of rent increases thereby preventing some displacement. Of course, the associated regulatory apparatus comes at a cost and landlords will oppose this intervention in the marketplace, and with respect to their property. As noted above, rent regulation programs are not targeted to those who may be most at risk of displacement. They provide a benefit to both those who may be displaced as well as others who can afford to pay market rents. For some tenants, the benefits of retaining a rent -regulated unit will encourage them to remain in the unit, even when their incomes rise and they can afford market rents. Some believe this may result in less turnover in the rental market, especially for those older units that tend to be most affordable, even in a high -cost area. While there is anecdotal evidence of this effect, we are not aware of any study that has quantified it. 27 Rent Control and Just -Cause Eviction: Review of Programs Rent Control/Rent Stabilization and Just -Cause Eviction Program Elements Management Partners Housing Supply and the Housing Market As noted earlier, Costa -Hawkins has largely addressed the concern that local rent regulation would discourage new apartment construction. However, highly regulatory programs can lead to some loss of rental units to condominium conversion and to owners who choose to leave the rental market all together, usually by the owner or relative occupying a condo conversion or through demolition and major reconstruction. There is also a state law that allows evictions to remove a property from the rental market for a variety of reasons, commonly known as the Ellis Act. In response, some communities have adopted condominium conversion processes that require a rent board's review of these applications to ensure the rental unit conversion to owner occupancy is consistent with rent control and just -cause eviction program intent and practices. For example, the City of Berkeley requires a complex application review and payment of an affordable housing mitigation fee. Santa Monica reported in its 2015 Consolidated Annual Report that since 1986 a total of 2,019 units have been withdrawn from the rental housing market. The San Francisco Chronicle reported that there were more than 100 Ellis Act evictions each year between 2010 and 2013. Other cities that regulate rents have not reported significant losses of rental units through the Ellis Act or through condominium conversion. 28 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners Rent Intervention Alternatives — Three Options The City Council directed staff to generate a range of program options. Management Partners has prepared three possible options at staff's request. As part of these options, we defined program elements, administrative cost, and the potential advantages and disadvantages of each (also see Attachment A). These options represent a broad overview of program elements for City consideration. Should the City Council decide to pursue any of or a component of these options, additional research would be necessary to ensure that a program is drafted to address the unique needs, stakeholder interests and program objectives for the City of Fremont. Option 1: Modified Residential Rent Increase Dispute Resolution Ordinance Process The City Council directed staff to develop possible revisions or alternatives to the existing RRIDRO. A non -binding mediation approach is appropriate for most communities whose objective is primarily to resolve landlord/tenant disputes. When there is balance between supply and demand in the rental market, such programs can probably help reduce displacements of lower -income tenants. As market rents began to climb between 2013 and 2015, the City's contractor, Fremont Fair Housing, was not successful at mediating rents in the overheated rental market until the Rental Housing Association (RHA) sent an agent to assist. The agent reported to staff that Fremont Fair Housing was not able to navigate the frequently complex corporate relationships behind apartment complex ownership. This resulted in Fremont Fair Housing sometimes negotiating with people lacking the actual authority to reduce proposed rent increases, which then resulted in the decision makers refusing mediated terms. The RHA had greater resources and experience identifying the decision makers. In several cases the RHA agent was able to negotiate reductions in the proposed increases. 29 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners The City of San Leandro has a mediation -based program similar to Fremont's RRIDRO. San Leandro recently adopted an ordinance with program enhancements that may bolster the effectiveness of Fremont's current RRIDRO. Elements of San Leandro's ordinance that might be considered by Fremont include: • Replacing the Fact -Finding Panel under the current ordinance with a standing Rent Review Board consisting of two landlord representatives, two tenant representatives, and a neutral third party; • Establishing a rent increase threshold for eligibility; • Strengthening the mandatory participation provisions; and • Continued peer -to -peer counseling by landlords. Fremont staff shared several additional possible RRIDRO revisions with our team, including the following. 1. Establish a Rent Review Board for mediation/fact finding of rent disputes to include: a. Failure to participate (landlord) will render the rent increase invalid. b. Failure to participate (tenant) will render the rent increase valid. c. If the Rent Review Board finds retaliation, the most current rent increase becomes invalid and no further increases are permitted for 12 months from the date of the finding. 2. Revise noticing provisions (statements to be included in a notice of rent increase) to include: a. A statement on the reason for increase. b. A statement on Rent Review Board processes. c. A statement that no more than one rent increase every 12 months will be made (9.60.040 (d)). d. Require 90 days -notice of rent increases rather than encouraging landlords to provide at least 90 days -notice (9.60.040 (c)). e. Failure to give proper notice including all statements renders the rent increase invalid and no additional rent increase notice is permitted for at least 90 days. 3. Retaliation Measures a. Increase the penalty for retaliation to a larger amount (currently $1,000) that would deter landlords from retaliatory actions (9.60.100; see Civ. Code § 1942.5). 30 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners b. Any retaliation renders the recent rent increase invalid and no additional rent increase notice is allowed for next 12 months from the date of the finding. 4. Additional conciliation process requirements a. Require mediation on rent and other terms of tenancy b. Require the individual representing the landlord in the process to have the authority to make rent adjustments c. Require meaningful participation or rent increase is rendered invalid. d. Codify AR 10.7 to clarify that if parties agree to more than one rent increase in a 12 -month period, it must be documented in a separate agreement (not the rental agreement) that identifies the agreed upon rental increase. e. Agreements reached in mediation are binding. 5. Additional mediation process requirements a. Require participation by representatives or the rent increase is invalid. b. Agreements reached following mediation are binding. 6. Additional Fact -Finding Process Requirements a. Require participation or rent increase is invalid. b. Recommendations of the fact-finding panel are not binding. c. Agreements reached by parties following fact finding are binding. In addition, staff suggested a regular evaluation of the program could help ensure its effectiveness. Option 1 Opportunities As noted in Attachment A, this model has several components. It: • Creates an effective vehicle for addressing tenant concerns regarding significant rent increases, • Promotes tenant stability regarding lease terminations, • Improves landlord/tenant communication, • Provides certainty and stability for landlords • Reinforces non -retaliation provisions, and • Includes tenant relocation expenses in some programs. An additional rent mediation program element that has been used in the cities of Palo Alto and more recently Menlo Park is the requirement for 31 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners landlords to offer one-year leases to tenants each year. The tenant retains the right to refuse such leases but landlords must offer them. This eliminates the risk of tenants receiving multiple rent increases each year and provides some level of stability for both landlords and tenants, especially where student housing is an element of volatility in the local rental market. However, tenants in several South Bay communities have complained to housing support agencies of demands for very high month -to -month rents if longer term leases were refused by the tenants. Mediation programs provide tenants with an opportunity to present their concerns about a rent increase to a neutral third party who can work with both the landlord and tenant to see if an agreement can be reached. Mediation is also a less restrictive approach with respect to landlords and their property. Transitioning the existing "panel" to a rent review board and establishing a more transparent process may provide additional incentive for both parties to reach a compromise. Option 1 Challenges This model will not address concerns regarding affordable housing or financial hardship resulting from higher than historical or perceived "normal" rent adjustments. In addition, the overall impact on displacement is difficult to quantify. Moreover, the Rental Housing Organization (RHO) in Fremont, as reported in the September 27, 2016 staff report, has recommended a 7% to 10% yearly threshold for rent increases prior to being subject to the mediation process. At this threshold, the mediation process might not have much impact. For example, the City of San Jose rent control ordinance has been in place since 1979. It has allowed an 8% annual increase with other opportunities for larger rent increases under certain circumstances. In a January 27, 2017 report, the City Auditor reported that between 1980 and 2014, the average rent increase was 4.9% and the 8% yearly allowable increase did not become a constraint on rent spikes except in the early 1980s when inflation was very high. San Jose's 2015 interim apartment rent ordinance has reduced the threshold to 5%. Option 1 Cost Estimate This option has the advantage of having a relatively low program cost. The exact costs are difficult to determine precisely because the budgets for such programs are typically embedded in the budgets of larger housing departments or organizational units, which provide support for many other services such as placing low or moderate income tenants, 32 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners administering affordable mortgage programs, and assisting other housing functions. The City of San Leandro Housing Services Department offers broad housing services to low and moderate income residents and supports a Rent Board and binding mediation program at a cost of $874,963 in Fiscal Year 2016/2017. Of this, an estimated $100,000 is dedicated to the rent mediation program. As will be further explained, the cost of all three styles of rent control programs varies widely depending on sometimes small differences in the program policies and administrative processes supporting them, but Option 1 costs are typically the lowest. The volume of public education and outreach by each city or contract agency can have significant impact on the cost. Given the larger number of units subject to a program in Fremont suggests that even, a modest mediation program approach such as seen in San Leandro could approach $300,000 annually. With lower rent ceilings, more detailed administrative processes, and other support services being provided, the costs could approach $500,000. It is possible costs could be offset via a correctly designed fee that meets California nexus requirements, as seen with rent control programs. Option 2: Alameda/West Hollywood Style Rent Regulation or Stabilization A rent control and just -cause eviction program could have the features listed below for rental units not exempted by Costa -Hawkins (and City ordinance). • Landlord requirement to notify and supply tenants with a copy of the program ordinance and annual rent increases. • A threshold rent increase for accessing the program (5% to 10%). • Potential to opt out of the rent control program with minimum reinvestment per unit. • A complaint -based program, (i.e., no ongoing tracking of regulated rentals); although, should a fee be established, the City would need to determine a collection method. • A clear set of criteria for evaluating whether a rent increase over the threshold can be justified. • Voluntary or required mediation. • A fact-finding process followed by a hearing before a hearing examiner or arbiter, should mediation not lead to agreement. • An order from the hearing officer or arbiter is binding on the parties. 33 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners • An opportunity to appeal the order. • A hearing before a board appointed by the City Council (should the matter be appealed). Option 2 Opportunities As noted in Attachment A, this option can provide several benefits depending on the structure focusing on each community's needs. These include the potential to: • Stabilize rent increases, • Encourage habitability compliance, • Expand tenants' rights, • Attract investment, • Ensure a method to address landlord/tenant disputes, • Provide a fair return on investment, and • Encourage rental housing reinvestment. This type of program would insert the City's regulatory authority into the rental housing market to address above "normal" rent increases to some degree. Because the program includes the authority to order modifications, it may lead to more good -faith efforts for agreement. Depending on the threshold set for use of the program, it could also address only the most significant rent increases. It is important to remember that rent increases at the high levels experienced during the past few years have moderated. Over time, depending on the threshold, allowable rent levels may catch up to market rents. For example, assuming a 7% threshold and market rental inflation over four years of 13%, 9%, 4% and 2%, the permitted increases will have caught up to market rents by year four, but at a less impactful and more predictable rate. Because these programs are designed to address the specific housing type and needs of the respective jurisdiction, Fremont would need to consider its specific housing characteristics in the design process. Should the City move in the direction of some form of rent regulation, we suggest it also consider a just -cause ordinance to avoid evictions related to rent regulation. An interesting element in the City of Hayward's ordinance is the option for landlords to opt out of the rent control program by making certain capital improvements to the controlled properties. In this way, Hayward addressed a community interest in improving the condition of rental 34 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners stock. The City enacted an ordinance for rent control in 1983 but later repealed it. A new ordinance was enacted in 2003. Since the current rent control program went into effect in 2003, the number of rent -stabilized units has declined from roughly 11,000 units initially to 3,000 units today. Option 2 Challenges Even under these programs, the affordable housing gap will persist for residents at or below the Area Median Income (AMI). Further, Option 2 contemplates only short-term rent control, because voluntary vacancy and landlord compliance with permanent decontrol removes a unit from the program and rent increase limits. The program is designed to drive rental housing reinvestment, and since vacancy decontrol prohibits comprehensive application to all rental units (only units built before 1995 can be "controlled"), reinvestment is only encouraged for those units in the program. Option 2 Cost Estimate Option 2 would require significant staff resources and costs. Assuming just -cause provisions are adopted, landlords would have to expend considerably more effort to evict tenants and be subject to potential legal challenge. Landlord costs may also increase if the City chooses to require them to pay relocation costs for certain types of evictions. Should the City wish to consider this option further, a more detailed analysis of the potential staffing requirements and program costs would need to be undertaken. The current budget for the City of Alameda's program is $1,950,000, covering 14,699 units under rent control. The City of West Hollywood's rent control program budget is roughly $1,900,000 to cover 16,805 controlled units. This rent control program is part of a larger, comprehensive housing department budget and costs are an estimate provided by their staff in 2016. A reasonable range of costs for Fremont is expected to be between $1,900,000 and $2,100,000. Again, there is potential for additional costs depending on program elements but West Hollywood and Alameda both provide a reasonable threshold cost estimate, depending on the number of units included. Option 3: Berkeley/Santa Monica Style Rent Control A rent control and just -cause eviction program might include the following elements in relation to rental units not exempted by Costa - Hawkins. 35 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners • Requiring landlords to notify and supply tenants with a copy of the program ordinance and annual rent increases. • Establishing a board with the authority to set an annual general adjustment to rents, generally based on the Consumer Price Index or some flat maximum amount. • Establishing a procedure to apply for individual adjustments, and a set of criteria for evaluating requests for an individual adjustment. • Enrolling all regulated units and payment of a fee to cover the costs of the program. • Requiring voluntary or required mediation. • Establishing a fact-finding process followed by a hearing before a hearing examiner (should mediation not lead to agreement). • Requiring an order from the hearing officer or arbiter to be binding on the parties with an opportunity to appeal the order. • Requiring a hearing before a board appointed by the City Council (should the matter be appealed). As with the previous (Model B) program, should the City move in this direction, we would suggest it also consider a just -cause for eviction ordinance. Option 3 Opportunities This option provides for the tracking of program units; a mechanism to identify, inform, and engage landlords and tenants; reasonable rent increases while stabilizing tenant population in rental units; compliance with code (habitability) requirements; and an accessible and efficient method to address landlord/tenant disputes. Although most California cities with such programs do not track rents on an ongoing basis, property owners must submit justification when rent increases are requested beyond the yearly allowable ceiling, and program hearing officers render decisions on whether the increase is justified. Similarly, tenant complaints of excessive increases are investigated by program staff and resolved by the hearing officers. In the most rigorous programs, such as those in Berkeley and Santa Monica, rents are tracked on every change in tenancy and change in tenancy terms (typically any rent increase). Option 3 Challenges As noted in Attachment A, the affordable housing gap persists for residents at or below Area Median Income (AMI). The vacancy rate 36 Rent Control and Just -Cause Eviction: Review of Programs Rent Intervention Alternatives — Three Options Management Partners impact in the short -run is negligible. There is a threat of reduction in rental units in the long -run through increased condominium conversion such as experienced in Santa Monica. Vacancy decontrol also prohibits comprehensive application to all rental units (only units built before 1995 can be "controlled"). Traditional rent control programs cost more and require greater administrative complexity than Model B rent control or mediated rent control programs. For example, the staffing levels of the Berkeley and Santa Monica programs are twice those of the average staffing level per unit in cities with Model B rent control "unit -registries." Both cities have elected rent boards and program staff who must support their policy development and legislative processes. The budgets in Berkeley and Santa Monica are $4,550,000 and $4,755,170 respectively, supporting 19,093 and 27,542 rent controlled units respectively. The City of Los Angeles launched a rent registry in January 2017 with a much lower staffing level per rental unit. Nevertheless, the Los Angeles rental rights department has almost four times as many total staff as Berkeley or Santa Monica and a total budget over $22 million. Between scale and current generation technology support, Los Angeles hopes to be able to operate with minimal staffing increases. Option 3 Cost Estimate Option 3 for Fremont may have an initial cost between $3,500,000 and $4,000,000 because of the fewer units potentially under a rent control program. Whether the relatively low staffing levels in Los Angeles can be maintained will have to be determined as the history develops —but any new Model A rent control and just -cause eviction programs would require a dedication of staff over a period of time to develop policies and processes and refine them for efficiency due to the high levels of control that characterize such programs. Los Angeles had lower levels of rent control for many years with a concerted focus on developing efficient policies and processes. For that reason, Fremont's startup costs for this option are expected to be in the same range as the Santa Monica and Berkeley programs with possibly some reductions in staffing needs as technologies and other efficient program elements are developed. 37 Rent Control and Just -Cause Eviction: Review of Programs Conclusion Management Partners Conclusion The goal of most rent control and just -cause eviction programs is to stabilize tenancy by moderating rent increases on existing tenants and by providing some due process protections for tenants to prevent rent spikes and landlord tenant relationship problems. The communities surveyed have each designed their programs, often with only subtle differences in the rules and regulations, to address problems specific to their local rental market and stakeholder interests. Program elements focus on each local housing market including the housing inventory, habitability challenges, and balancing the needs of tenants and landlords. Mediation and counseling do continue to play a critical role in stabilizing tenancy in all tenant protection models, even those that are highly controlled. The key to success in the communities we surveyed has been to identify the specific problems that are unique to the community and its rental housing and design or develop targeted approaches to resolve the problems. 38 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Attachment A: Rent Control and Just -Cause Eviction Program Options Program Features Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Units Subject to Program Typically applies to rental units with three or more units Property owners with three to five or more units. Hayward example: Residential unit occupied by payment of rent, provided the unit is one of at least five residential units in Hayward with common ownership. Residential rental dwelling units and rooming houses with at least five rooms (each room is counted as an individual unit) with separate leases are included in the program, along with single family homes with at least four bedrooms that are being rented separately (each bedroom is a unit). Unit Exemptions Hotels/motels, government- subsidized housing, hospitals, transient housing, etc. Single family homes, all units occupied after February 1996 hotels/motels, government- subsidized housing, hospitals, transient housing, etc. Single family homes, all units constructed after 1996 hotels/motels, government - subsidized housing, hospitals, transient housing, etc. Funding Mechanisms General fund or other City Fund, Arbitration Service Fees Programs funded through administration fees (50% passed on to tenant) and may include general fund and other fund support Programs funded through registration (50% passed on to tenant) and enforcement fees, and may include general or other fund subsidies, and grants 39 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Program Features Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Characteristics of Program • No ongoing tracking of rental units or rents paid is typically done • Due Process: Mandatory participation through conciliation, mediation and fact finding, mediated agreements are memorialized in writing. If fact-finding process is incorporated, decisions are advisory • Landlord must be current on all fees and in compliance with city requirements • Landlord must confirm substantial compliance with habitability of unit • All eligible rent units are loosely tracked. The rent policy body (rent board or city council) publish allowed yearly rent increase maximum • Due Process: Petition Process with Hearing Examiner providing decisions. Mediation may be a preliminary option • Housing quality standards maintained (owner/landlord compliance) • Includes just -cause eviction, anti -harassment, and tenant/landlord problem mediation • Active public education programs • Voluntary vacancies trigger landlord option to remove unit from rent increases compliance with habitability standards (Hayward's program). • All eligible rental units are tracked and have an established rent ceiling. Landlord must report all changes in tenancy and terms of tenancy (rent increases) • Due Process: Petition Process with Hearing Examiner providing decisions. Mediation may be a preliminary option for some petitions • Housing quality and housing services (owner/landlord compliance) • Includes just -cause eviction, anti - harassment, and tenant/landlord counseling and mediation • Active public outreach and training programs • Optional program suspension - 5% vacancy rate Required Tenant Notification of Program Eligibility and Features Yes, at time of initial rental, rent adjustments and notice of lease termination Yes, rent disputes and eviction for cause provisions Yes, rent disputes, terminate tenancy and good cause eviction provisions 40 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Program Features Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Required Tenant Notification of Rent Increases and Rent Increase Thresholds Yes, if required by state law. Rent increases greater than 10% trigger mediation Yes • Landlords provide notice to tenant of the ordinance and rent increase • Rents may not increase more than 3-5% per year (or some portion of CPI) and may not be raised more than once in 12 months • Rent increases of less than the maximum allowed in a year may be "banked" ("untaken" rent increases from prior years can be applied to current year up to a maximum defined by the ordinance) Yes • Rents can only be increased by the Annual General Adjustment (AGA) based on a standard percentage or percent of CPI as published by the Board each year Mediation Yes, but does not apply to just - cause evictions Yes Yes, staff provides counseling and mediation Arbitration Typically not Yes, Rent Review Officer decision is final Yes, hearing examiner decision is final unless appealed to the Rent Board Program Administration Contractor/non-profit agency City staff or contractor Independent Rent Board and staff City Appointed Board/ Elected Rent Board Yes, if program includes fact- finding process Yes Yes Staff .25-1 FTE planner or housing specialist 10-12 FTE estimate 20.+ FTE (administration, law, hearing, registration and public information and IT) 41 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Program Features Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Contract Services Used Contractor or non-profit agency for mediation services Mediation and arbitration services provider (unit -based charges $600 per mediation and $1,200 per arbitration), legal aid $300,000 for various professional services Annual Program Cost $100,000-$300,000 Approximately $1,900,000 $4-4.5 million ANTICIPATED OUTCOMES Expansion of Tenant Rights Yes Yes Yes Impact on Vacancy Rate No No data available. Program drives reinvestment in rental units and stabilizes rents for a limited period by setting a predictable increase. No data available. Program stabilizes rents by setting a predictable increase. Expansion of Affordable Housing No, however, will include some related components including JCE and tenant notification requirements. Program stabilizes rents of program units by setting a maximum allowable increase. Program stabilizes rents of program units by setting annual allowable rent increase. Effect on Tenant Displacement No data identified supporting impact on displacement. However, JCE should have some impact. Program monitors units not tenants. Program tracks units, not tenants. (Relocation assistance and demolition process can be included in ordinance.) 42 Rent Control and Just -Cause Eviction: Review of Programs Attachment A: Rent Control and Just -Cause Eviction Program Options Management Partners Program Features ) Option 1 Enhanced Mediation Program Option 2 Alameda/West Hollywood Style Rent Regulation/Stabilization Option 3 Berkeley/Santa Monica Style Rent Control Program Advantages • Creates an effective vehicle for • Stabilizes rent increases • Tracks controlled units addressing tenant grievances regarding significant rent • Units comply with code (habitability) • Mechanism to identify, inform, and engage landlords and tenant increases • Expands tenants' rights • Educates tenants of rights • Promotes tenant stability • Attracts investment • Provides for reasonable rent increases regarding lease terminations • Method to address and stabilizes tenant population in • Improves landlord/tenant landlord/tenant disputes rental units communication • Fair return (and "banking") • Units comply with code (habitability) • Reinforces non -retaliation provisions • Facilitate rental housing reinvestment • Accessible and efficient method to address landlord/tenant disputes • Some programs include tenant relocation expenses Program Disadvantages • Will not address concerns regarding affordable housing or financial hardship resulting • Affordable housing gap persists for residents at or below Area Median Income (AMI) • Affordable housing gap persists for residents at or below Area Median Income (AMI) from higher than normal rent adjustments • Neutral effect on vacancy rates in the short run • Neutral effect on vacancy rates in the short run • Have not identified data indicating impact on tenant displacement overall • • Contemplates only short-term rent control (voluntary vacancy and landlord compliance with permanent decontrol removes unit from program and rent increase limits) Program designed to drive reinvestment • • Threat of reduction in rental units in the long run through increased condominium conversion Vacancy decontrol prohibits comprehensive application to all rental units (only units built before 1995 can be "cost controlled") • Vacancy decontrol prohibits comprehensive application to all rental units (only units built before 1995 can be "controlled") 43 Rent Control and Just -Cause Eviction: Review of Programs Attachment B: Just -Cause Eviction Survey Management Partners Attachment B: Just -Cause Eviction Survey 44 Attachment B: Just -Cause for Eviction Survey Berkeley East Palo Alto Los Angeles Oakland San Diego San Francisco Santa Monica i _ ' • e • • • Sources Rent Stabilization and Good Cause for Eviction Chapter 13.76 and Guide to Rent Control Rent Stabilization Ordinance and Rent Stabilization Rules and Regulations Chapter XV Rent Stabilization Ordinance (See website forms and public information) Regulations for the Just Cause for Eviction Ordinance (Measure EE, Codified in the Oakland Municipal Code at 8.22.300, et.seq..) Chapter 9: Building, Housing and Sign Regulations Article 8: Housing, Division 7: Tenants' Right to Know Regulations Chapter 37 of the San Francisco Administrative Code the Residential Rent Stabilization and Arbitration Ordinance Rent Control Charter Amendment Article XVIII and Rent Control Regulations Chapter 9 Title 17 Rent Stabilization and Guide: Rent Stabilization Eligible for Just -cause eviction All rental units All single family and multiple family dwellings All rental units built before October 1, 1978 Any rental units (pre -1980) Any rental unit with tenancy of at least two years All rental units built before June 13, 1979; newer buildings not covered based on original certificate of occupancy All rental units All rental units Rental Units Exempt Units in existence before December 31, 1979 and hotel/motel occupancy less than 14 consecutive days, cooperatives, hospitals, nursing and assisted living facilities and units rented to higher learning faculty Hotel/motel, care facilities, resident owner non-profit housing, units exempt by state and federal law and units within a dwelling shared with the landlord Single family, except where two or more units are located on the same lot (excludes duplexes and condominiums); hotel/motel, boarding and rooming houses with occupancy 30 days or less; non -profits; hospital, convent/monastery, extended care facilities; housing owned and operated by Los Angeles City Housing Authority; housing with a certificate of occupancy after October 1, 1978; luxury housing (rent thresholds on May 31,1978; substantial renovation (i.e., defined investment based on bedroom completed after September 1, 1980); affordable housing with regulatory agreement; cooperatives; mobile homes and recreational vehicle in a park Hotels and motels; hospital, skilled nursing and health facilities; nonprofit substance abuse treatment; temporary homeless facilities; owner -occupied units with three or less units; owner -occupied units where owner and tenant share kitchen and bath; units in trust held on behalf of developmentally disabled; newly constructed units and first rented after October 1980 (the effective date of the Residential Rent, Relocation and Arbitration Ordinance) Institutional facilities, governmental housing, transient hotel/motel, mobile homes and rooms rented (owner and tenant share kitchen and bath) Hotel, motel and rooming houses occupied for 31 days or less; nonprofit cooperatives; hospital, convent, monastery, extended care and adult day health facility; some government owned and rental units constructed after June 13, 1979 Single family homes not used for residential rental purposes on July 1, 1984 and those that are occupied for two years by owner as principle residence after voluntary vacancy Units occupied by owner or close relative as primary resident and nonprofit accommodations Legal Reasons to Evict • Failure to pay rent • Violates terms of rental agreement • Willful damage to unit • Fixed term expires and tenant refuses to sign new lease • Disturbs peace • Repeated denial of entry • Landlord needs to bring unit into compliance with code • Permit to demolish • Owner with 50% or more ownership moves in • Failure to sign identical lease • Failure to pay rent and following notice from landlord • Tenant fails to cure a violation of the terms of tenancy following landlord notice • Tenant initiated nuisance with landlord notice • Refusal to agree to new lease substantially identical to current • Disorderly conduct that persists following notice • Continues denial of access to unit following notice • Refusal access for substantial habitability repairs (ten times the amount of monthly rent) unit consist with code • Landlord secures demolition permits to remove unit from rental market and is denied access • Landlord secures permits to remove unit from rental housing use under the Ellis Act • Owner move -in • Refusal to move under terms of temporary rental agreement • Failure to vacate under government order • Tenant no longer qualifies for tenancy with a government entity • Sub tenancy without Owner approval • Failure to pay rent • Violation of tenancy • Nuisance • Illegal use of rental unit • Refusal to execute new lease with consistent terms • Tenant at lease term is subtenant not approved by landlord • Owner, relative move -in or resident manager (where no alternate unit available) • Tenant interferes (fails to move temporarily or honor permanent relocation agreement) with rehabilitation and landlord has an approved Tenant Habitability Plan (THP) • Demolition of unit or permanently remove from rental housing use • Order to Vacate or Abate • HUD owns and operates and seeks to recover • Residential hotel converted or demolished with City approvals (Application of Clearance) • Convert to affordable housing with exemption by the Housing and Community Investment Department • Failure to pay rent • Violation of rental agreement • Substantial repairs/damage (3 months or less) • Disorderly conduct/destroying peace and quiet • Unlawful drugs or using unit for illegal purposes • Failure to provide access to unit • Owner or Owner's relative move -in • Owner previously occupied unit and has agreement with tenant to reoccupy as residence • Correct code violations • Refusal to renew lease • Remove unit from rental market (Ellis Act) • Nonpayment of rent • Violates terms of tenancy (pattern and substantial) • Illegal use • Refusal to sign new lease with similar terms • Nuisance • Refusal to provide access • Correct violation • Withdrawal of residential rental structure from rental market • Owner or relative move -in • Failure to pay rent • Violation of the terms of tenancy • Nuisance (pattern and substantial, including eviction protection of domestic violence, sexual assault and stalking victims) • Illegal use of rental unit • Failure to sign a new lease • Refusal of access to unit • Tenant at the end of the term is subtenant not approved by landlord • Owner move -in • Sale of unit per City approved condominium conversion • Demolish or remove unit from rental housing use • Landlord secures permits to temporarily remove unit from housing use for capital improvement or rehabilitation • Substantial rehabilitation • Withdrawal of rental units within any detached physical structure • Demolish or remove unit from rental housing use • Lead remediation (temporary) • Good Samaritan Status (i.e., natural disaster) G1:G7 • Failure to pay rent • Violates terms of rental agreement • Willful damage to unit - nuisance • Tenant uses unit for illegal purposes • Tenant refuses to sign new lease • Tenant holding lease at expiration not approved by landlord • Landlord needs to bring unit into compliance with code and denied access • Owner move -in (50% ownership, no available unit in other properties, etc.) • Permit to demolish • Landlord filed "going -out -of -business" documents • Failure to pay rent • Violates terms of rental agreement • Caregiver after death of primary tenant • Nuisance • Refusal to sign new lease • Refuses to provide access • Subtenant not approved by Landlord • Termination of Resident Manager or Employee • Pre-existing Tenant before becoming resident manager • Owners temporary absence (sabbatical, extended vacation) from principal residence with associated agreement • Owner or relative move -in • Correct violations • Foreclosure (30 day notice) • Withdrawal from rental market (120 day notice) • Transfer to a different unit • Inclusionary housing (tenant income exceeds maximum allowable) • Demolition of rental housing units for low- and Moderate -Income Housing • Renter's Insurance (if contained in lease) Notice: Landlord must provide proper notice of termination (three, thirty, sixty or ninety -day notices to quit. Landlord must provide a copy of the notice within five days after notice served to tenant to Rent Board. If Unlawful detainer served, copies must also be provided to the Rent Board within 5 calendar days. Landlord must file form of intention to evict with the City if police reports available or City Attorney engaged. Landlord required to file form of intention to evict with the City when taking possession to occupy, demolish, remove from rental use, or convert to affordable housing Landlord must file notice with Rent Adjustment Program within 10 days of service on the tenant. Landlord must provide proper notice. Tenant may raise landlord's noncompliance with Tenant's Right to Know Regulation as an affirmative defense. Landlord must disclose to prospective property purchaser the legal grounds to terminate tenancy. Copies of eviction notices and proof of tenant service must be filed with the Rent Board within ten days (see Ordinance for various time frames). Notice must also include the following information: tenant failed to respond, rental rate, eligibility for affordable housing, information provided in six languages. Rent Board reports of wrongful eviction. City contracts with legal aid service providers to assist with evictions to ensure law enforced. Landlord must file a copy of the tenant's notice of termination of tenancy to the Rent Board within 3 days. Landlord must provide a copy of unlawful detainers within 5 business days. 1 12/19/2016 COUNTY OF SAN MATEO INTERDEPARTMENTAL CORRESPONDENCE To: All County Departments From: John C. Beiers, County Counsel John D. Nibbelin, Chief Deputy County Counsel Subject: Continuum of Residential Tenant Protection Measures Date: September 23, 2015 I. Introduction and Executive Summary This memorandum provides legal and historical background for rent stabilization and other tenant protections (including just cause eviction and relocation assistance measures); surveys tenant protection measures that exist throughout the State; describes the legal powers of, and constraints on, local government agencies with respect to the adoption of rent stabilization and other tenant protection measures. Local jurisdictions throughout the area are confronting a housing affordability crisis and many of these cities and counties are considering a range of tools to address these circumstances. For example, at its meeting on August 5, 2015, the City of Richmond voted to adopt an ordinance that institutes rent stabilization and provides for "just cause evictions, for rental units in that city.' The ordinance also provides for an elected "rent board" to discharge various functions under the ordinance. The City contemplates adding several staff members to administer rent stabilization. This action by the City of Richmond implements some of the tenant protection tools available to local jurisdictions and this memorandum discusses these and others across the continuum of options available to the County. In preparing this memorandum, we have surveyed the history of local government tenant protections in California, reviewed statutory and case law and constitutional provisions bearing on such protections and analyzed existing local government tenant protections, with a particular focus on Bay Area jurisdictions. In addition, we met with local stakeholders, including Community Legal Services in East Palo The Richmond rent stabilization ordinance was the first new rent stabilization ordinance adopted in several decades. The ordinance was scheduled to go into effect on September 4, 2015, but the California Apattiuent Owners Association has submitted a sufficient number of signatures to require a referendum on the ordinance before it goes into effect. The Contra Costa County Elections Office is presently validating the signatures. [CCO-92427] All County Departments September 23, 2015 Page 2 Alto and the California Apartment Owners Association. Finally, we have included the following attachments to this memorandum to supplement our work: • Policy Arguments: a set of documents that briefly summarize the key characteristics of more common tenant protection measures and the policy arguments that are most commonly advanced for and against the measures • Rent Stabilization Table: a table that summarizes the key characteristics of existing rent stabilization ordinances from a selection of representative jurisdictions II. Existing Statewide Laws Relating to Residential Tenancies a. Notice of Rent Increases California law sets forth in the Civil Code the standard that landlords must comply with before raising a residential tenant's rent. If the tenant's lease is for a term of more than thirty days, the rent cannot be raised during the term, unless the lease specifically allows for an increase. In cases where rent increases are allowed, California law requires that tenants receive at least 30 days' advance notice before a rent increase goes into effect. Specifically, if a proposed rent increase is ten percent or less of the rent charged at any time during the preceding 12 months, the landlord must provide the tenant with at least 30 days advance written notice of the rent increase.2 If the proposed rent increase is more than ten percent of the rent charged at any time during the receding twelve months, the landlord must provide the tenant with at least sixty days' advance written notice of the increase.' In our research, we have found no jurisdictions that have attempted to impose, on a local basis, notice periods for rent increases longer than those required under the California Civil Code and, in our view, any such local efforts would be preempted by state law. 4 2 Ca1. Civil Code § 827(b)(2). 3 Ca1. Civil Code § 827(b)(3). 4 Subsection (c) of Civil Code section 827 states that "if a state or federal statute, state or federal regulation, recorded regulatory agreement or contract provides for a longer period of notice regarding a rent increase than that provided" by section 827, that longer period shall control Cal. Civil Code § 827(c) (emphasis added). This text strongly infers that only state and federal statutes or regulations may impose longer notice provisions than those set forth in section 827. All County Departments September 23, 2015 Page 3 b. Notice of Lease Termination Along similar lines, California law imposes certain notice obligations upon landlords who seek to end tenancies. If a lease is for a set term (e.g., one year), the tenancy ends on the last day of the lease term, unless the tenant does not vacate and the landlord allows the tenant to remain, in which case the tenancy is converted to a month -to -month periodic tenancy. To terminate a periodic (e.g., month to month) tenancy, the landlord must give either thirty or sixty days' prior written notice. If all tenants in the rental unit have resided in the unit for at least one year, the landlord must give at least sixty days' prior written notice of termination.5 If any tenant in the rental unit has resided there for less than one year or the landlord has contracted to sell the unit another person who intends to occupy it for at least a year after the tenancy ends, the landlord need provide only thirty days' prior written notice.6 As discussed below, some local jurisdictions, such as the City of San Jose, have adopted ordinances that provide for longer notice periods to terminate a tenancy than those set forth in state law. Many local jurisdictions have determined that these state law provisions do not afford an adequate degree of protection to residential tenants and they have therefore adopted ordinances that provide additional protections, which we will discuss in this memorandum. III. The Continuum of Tenant Protection Measures Local government agencies have available and have implemented tenant protection measures that run along a continuum, in terms of the amount of government regulation of the landlord - tenant relationship and the agency resources dedicated to implementation of the regulation. At one end are measures that mandate a minimum lease term with stable rents during the term, required notice periods in addition to or beyond those required under State law and mandatory (but non -binding) mediation of certain landlord -tenant disputes, including with respect to rent increases. Further along the continuum are measures that limit the basis upon which a tenant may be evicted from a tenancy (so-called "just cause eviction ordinances") and that may require a landlord to provide relocation assistance in some cases to displaced tenants. Finally, some jurisdictions have moved further along the continuum and adopted rent stabilization ordinances that limit, to some extent, the ability of a landlord to increase rents on covered units. The key characteristics of these ordinances vary among jurisdictions and many of them incorporate other tenant protection measures, such as just cause evictions and relocation 5 Ca1.Civil Code § 1946.1(b). 6 Cal Civil Code §§ 1946, 1946.1(c), 1946.(d). All County Departments September 23, 2015 Page 4 assistance. All of these ordinances are subject to limitations imposed by State law, including in the Costa -Hawkins Act. IV. Minimum Lease Term The City of Palo Alto has adopted a rental housing stabilization ordinance that provides, among other things, that a landlord must offer the prospective tenant of any rental unit (defined to include all multiple -family dwellings) a written lease for a minimum term of at least one year. The offered lease must set the rent for the unit at a rate certain for the entire one year term of the lease and the rent cannot be changed during that lease term, except as provided in the written lease. If the tenant rejects the offered one year lease, the parties are free to negotiate a lease term of less than one year. Requiring a landlord to offer a minimum one year term for a lease affords the tenant protection against rent increases during that term. However, while a landlord is required to offer a tenant a new one-year tenancy at the end of the succeeding one year lease term (if the landlord chooses to renew the lease with that tenant), the landlord is free to demand whatever rental rate the market will bear at the time of lease renewal. V. Enhanced Notice Provisions Other jurisdictions, while not requiring that landlords offer leases with specific minimum terms, do have ordinances requiring notice prior to termination of a tenancy in excess of the notice otherwise required by State law. San Jose, for example, requires 90 days' prior notice before termination of a tenancy if the tenant has resided in the unit for one year or more.8 If the city's housing director finds a "severe rental housing shortage," 120 days' notice is required. A shorter notice period (60 days; the amount of notice otherwise provided by State law) is allowed if the landlord agrees to arbitration on the termination date. As noted above, we believe that State law would preempt any local regulations that would purport to impose notice requirements for rent increases beyond the notice periods otherwise required under State law (i.e., thirty days notice for rent increases of ten percent or less and sixty days for rent increases of greater than ten percent). VI. Landlord -Tenant Mediation of Rent Increases We have also identified jurisdictions that have adopted ordinances that implement landlord - tenant mediation programs. These ordinances establish programs that offer or, in some cases, require, a mediation process before landlords are able to impose certain rent increases and, ' Palo Alto Ordinance Code, § 9.68.030. s San Jose Ordinance Code § 17.23.610. All County Departments September 23, 2015 Page 5 depending on the jurisdiction, such programs may also require mediation of other aspects of the landlord -tenant relationship. Most ordinances imposing mandatory mediation of rent increases limit the types of rental properties that are subject to the mediation requirement (e.g., units in buildings with multiple dwelling units).9 Likewise, these ordinances typically specify the types of disputes that are subject to mandatory mediation (e.g., proposed rent increases of a set percentage above "base rent," rent increases of more than a certain dollar amount per month, or multiple rent increases in any twelve-month period). Under many such ordinances, landlords are required to participate in a non -binding mediation process if a tenant requests mediation of a dispute within the scope of the ordinance and if a landlord fails to do so, the proposed rent increase is invalid. VII. Just Cause Eviction Ordinances Moving along the continuum of possible tenant protection measures, some jurisdictions have adopted ordinances that impose relatively extensive restrictions on the circumstances under which a landlord can evict a tenant. As noted below, jurisdictions with rent stabilization ordinances typically couple them with so- called "just cause eviction" ordinances. However, most such jurisdictions extend the just cause eviction protection of their ordinances to the tenants of rental units that are not themselves subject to rent stabilization, and the California courts have recognized that the Costa -Hawkins Act does not itself preempt just cause eviction ordinances. In fact, some jurisdictions have adopted just case eviction ordinances without instituting rent stabilization.") Under these just cause eviction ordinances, landlords may evict a tenant only for reasons that are specifically enumerated in the ordinance. Examples of permissible grounds for evicting a tenant typically include the following: • Failure to pay rent or habitually paying rent late; • Violation of a material term of rental agreement, where there has been notice and an opportunity to correct the violation; • Committing or allowing the existence of a nuisance; • Damaging the unit or common areas; • Unreasonably interfering with the comfort, safety or enjoyment of other tenants; • Committing or allowing an illegal activity or use; 9 Palo Alto Municipal Code, § 9.72.010. 10 See, e.g., City of Glendale Municipal Code, Chapter 9.30; City of Maywood Municipal Code, Title 8, Ch. 17. All County Departments September 23, 2015 Page 6 • Owner or family member occupancy; • Resident manager occupancy; • Substantial renovation; • Denying landlord lawful entry; or • Unauthorized subtenant in possession at the end of the lease term. In contrast, San Jose employs a narrower approach and only prohibits evictions where the landlord's dominant motive is retaliation against a tenant's exercise of his or her rights under the city's rent stabilization ordinance, or to evade the purposes of the ordinance. In jurisdictions with a just cause eviction ordinance, landlords are often required to satisfy special notice requirements. For example, a landlord might be required to identify the grounds for the eviction, including the facts that support that determination, and to describe the renter's rights and resources. Some jurisdictions require that a landlord give a former tenant notice when they are returning a property to the rental market where the eviction was based on owner occupancy. Tenant advocates maintain that just cause eviction ordinances afford tenants some degree of protection against arbitrary landlord actions, particularly in a tight rental market. Landlords often assert that such ordinances make it more difficult for them to act quickly to deal with problem tenants. VIII. Relocation Assistance Local jurisdictions often require landlords to provide relocation assistance payments to all tenants when the eviction is not the fault of the tenant ("no-fault evictions"). Other jurisdictions limit such mandated assistance based on the type of eviction or the status of the affected tenant; it is particularly common to require relocation assistance for evictions occurring when landlords require tenants to depart in order to occupy units themselves (so-called "owner -occupancy" evictions) or Ellis Act evictions (i.e., an eviction to remove a unit from the rental market). In addition to a lump sum payment, many cities require the landlord to pay for relocation assistance services. As with eviction controls, many local agencies extend the relocation assistance requirements to tenants in units that are not subject to rent stabilization. For example, in Mountain View, landlords are required to pay relocation assistance when evicting tenants under certain circumstances. The Mountain View ordinance applies only where a landlord vacates four or more rental units within a one-year period in order to (1) withdraw from the rental market (an Ellis Act eviction), (2) demolish the rental property, (3) perform substantial renovations, (4) convert to condominiums, or (5) change to a non-residential land use. Further, only tenants with a household income at or less than eighty percent of the area median All County Departments September 23, 2015 Page 7 household income are eligible for relocation assistance." Other jurisdictions require relocation assistance payments without reference to the income level of the affected tenants.12 Under the Mountain View ordinance, in covered eviction cases, the landlord is required to refund the tenant's security deposit (with limited exceptions), provide the affected tenants with a 60 -day subscription to a rental agency, and pay the equivalent of three months' rent, based on the median monthly rent for a similar -sized unit in Mountain View. Certain special -circumstances households, including seniors, persons with disabilities, and families with a dependent child, are entitled to an additional $3,000 payment. The ordinance also requires 90 days' notice of termination. Other ordinances, such as the City of Glendale's, require payment of "two times the amount of the fair market rent as established by the U.S. Department of Housing and Urban Development for a rental unit of similar size of that being vacated in Los Angeles County . . . plus one thousand dollars." Glendale Municipal Code § 9.30.035. IX. What is Rent Stabilization? A further step along the continuum of tenant protection measures is rent stabilization and the following sections describe rent stabilization and statutory/constitutional limits on rent stabilization ordinances and analyze existing rent stabilization ordinances. The cost of market -rate housing units fluctuates with changes in the housing market. For example, a recent report from the Housing Authority of the County of San Mateo states that the average cost of rent in the County has increased more than 45% over the last four years. The general purpose of rent stabilization is to protect tenants by limiting the amount that rents may increase as market rents increase. These ordinances provide tenants certainty that their rents will not increase above a certain amount each year, while also providing landlords with a fair return on their investments.13 a. Types of Rent Stabilization Ordinances Commentators typically speak of three general types of rent stabilization ordinances, two of which remain legal in California." 11 In 2014, 80 percent of the median income for Santa Clara County was $71,300 for a four -person household. 12 See, e.g., City of Glendale Municipal Code, § 9.30.035; City of Maywood Municipal Code § 8.17.035. 13 Pennell v. City of San Jose (1988) 485 U.S. 1, 13. 14 Friedman et al., Cal. Practice Guide: Landlord —Tenant (The Rutter Group 2014) ¶ 2:707, p. 2D-4. All County Departments September 23, 2015 Page 8 i. Vacancy Control The most restrictive type, known as "vacancy control," sets the maximum rental rate for a unit and maintains that rate when the unit is vacated and another tenant takes occupancy.15 Under "vacancy control" ordinances — which, as discussed below, California law no longer allows — the rent that can be charged for a unit remains subject to control at all times, including upon the occurrence of a vacancy and the establishment of a new tenancy. ii. Vacancy Decontol-Recontrol A less restrictive form of rent regulation, known as "vacancy decontrol-recontrol," allows a landlord to establish the initial rental rate for a vacated unit (typically at the then -prevailing market rate) but, after that rental rate is fixed, limits rent increases as long as the same tenant occupies the unit.16 For example, under such an ordinance, a landlord could set a monthly rent at the hypothetical prevailing market rate of $1,000 when a new tenant moves in and that amount would become the "base rent" during the term of that tenancy. During that tenancy, the limitations on rent increases would be applied against that $1,000 base rent. Thus, if the ordinance allowed for rent increases of up to 5% per year, the landlord could increase the rent to no more than $1,050 after the first year of the lease. However, if this tenant moves out and the landlord thereafter rents to a new tenant who is willing to pay rent of $1,500 per month, that $1,500 amount becomes the new "base rent" and the 5% limitation would be applied to this new base rent. iii. Permanent Decontrol The least restrictive type of rent control, known as "permanent decontrol," limits rent increases only on units occupied at the time the ordinance is adopted and when such units are vacated, they become unregulated and landlords are free to determine the initial rental rate and any future rent increases.17 Stated differently, under "permanent decontrol," rent stabilization would apply only to tenancies existing at the time that such an ordinance is adopted and, as these tenancies end when the tenants move out, the units would cease to be covered by the ordinance. iv. Scope Rent stabilization measures may be exhaustive in scope. In addition to capping permissible rent 15 Id., 112:708, p. 2D-4. 16 Id., ¶ 2:710, p. 2D-5. "Id., ¶ 2:711, p. 2D-5. All County Departments September 23, 2015 Page 9 increases, they may regulate landlord conduct that has the effect of imposing a rent increase (e.g., decrease in housing services without a corresponding decrease in rental rates).18 They may also impose "eviction controls," such as those described above, which protect tenants from arbitrary evictions while ensuring that landlords can lawfully evict tenants for good cause.19 Also, as noted, rent stabilization ordinances may be, and often are, coupled with relocation assistance provisions, which require landlords who evict tenants for certain reasons to pay tenants some of their displacement costs in advance.2° X. What Legal Standards Apply to Rent Stabilization Ordinances in California? a. Costa -Hawkins Rental Housing Act Prior to the enactment of the Costa -Hawkins Rental Housing Act in 199521, there was no statutory provision limiting local rent stabilization ordinances in California.22 Costa -Hawkins was the California Legislature's first major effort to limit local controls over rents chargeable to residential tenants.23 Proponents of the legislation viewed it as "a moderate approach to overturn extreme vacancy control ordinances . . . which deter construction of new rental housing and discourage new private investments . . . ." 24 Opponents, on the other hand, argued that the legislation was "an inappropriate intrusion into the right of local communities to enact housing policy to meet local needs" and that the law "would cause housing prices to spiral, with the result that affordable housing would be available to fewer households."25 Costa -Hawkins imposed the following limitations on local rent stabilization ordinances: 1. Housing constructed on or after February 1, 1995 is exempt from such local ordinances;26 2. Single-family homes and condominiums (units where title is held separately) are exempt from such ordinances;27 and 3. Such ordinances cannot regulate the initial rate at which a dwelling unit is offered once the previous tenants have vacated the unit.28 In other words, "vacancy control" ordinances have been abolished and, with limited exceptions, landlords may impose "whatever rent they choose at the commencement of a tenancy." Action Apartment Ass'n '8Id., ¶ 5:1, p. 5-1. '9 Id. 20 For further discussion regarding relocation 21 See Cal. Civ. Code § 1954.50 et seq. 22 Legis. Analyst, analysis of Assem. Bill No. 23 Legis. Analyst, analysis of Assem. Bill No. 24 Id. at p. 6. 25 Id. at p. 6. 26 Cal. Civ. Code § 1954.52(a)(1). 27 Id. at § 1954.52(a)(3) 28 Id. at § 1954.53(a). assistance mandates, see section IV.D of this memo. 1164 (1995-1996 Reg. Sess.) p. 1. 1164 (1995-1996 Reg. Sess.) p. 1. All County Departments September 23, 2015 Page 10 Inc. v. City of Santa Monica (2007) 41 Ca1. 4th 1232, 1237. Costa -Hawkins allowed local jurisdictions to continue to impose rent stabilization on units that are not otherwise exempt, provided that the rents may be reset to market levels by landlords upon a new tenancy (i.e. "vacancy recontrol-decontrol"). b. Constitutional Issues Both the United States and California Supreme Courts have held that rent stabilization is a proper exercise of a local government's police power if it is calculated to eliminate excessive rents and it provides landlords with just and reasonable returns on their property.29 Thus, in order to withstand constitutional scrutiny, a rent stabilization ordinance must provide a mechanism for ensuring landlords a "just and reasonable" return on their property.3° A "just and reasonable" return is one that is "sufficiently high to encourage and reward efficient management, discourage the flight of capital, maintain adequate services, and enable [landlords] to maintain and support their credit status."31 At the same time, the amount of return should not defeat the purpose of rent stabilization, which is to prevent excessive rents.32 A rent stabilization scheme would be vulnerable to constitutional challenge if, for instance, it indefinitely freezes landlord profits, imposes an absolute (inflexible) cap on rent increases, or prohibits a particular class of landlords from obtaining rent increases.33 On the other hand, even a narrowly -drawn ordinance will be valid so long as it grants the responsible body or authority discretion to provide a fair return by approving rent increases in extraordinary cases.34 In addition to ensuring that landlords are guaranteed a "just and reasonable" return on their investments, any rent stabilization measure must avoid classification as a "regulatory taking" under federal and state constitutional law principles. Depending on how a rent stabilization ordinance is drafted and/or applied, it may violate the Fifth and Fourteenth Amendments of the U.S. Constitution, which prohibit the taking of private property for public use without "just compensation."35 The "just compensation" provision is "designed to bar [g]overnment from forcing some people alone to bear public burdens which, in all fairness and justice, should be 29 See Birkenfeld v. City of Berkeley (1976) 17 Cal. 3d 129; Pennell v. City of San Jose, supra, 485 U.S. at 12; Santa Monica Beach, Ltd. v. Super. Ct (1999) 19 Ca1.4th 952, 962. 3o Birkenfeld v. City of Berkeley, supra, 17 Ca1.3d at 165; Galland v. City of Clovis (2001) 24 Ca1.4th 1003, 1021. 31 Carson Harbor Village, Ltd. v. City of Carson Mobilehome Park Rental Review Board (1999) 70 Ca1.App.4th 281, 288-289; TG Oceanside, L.P. v. City of Oceanside (2007) 156 Cal.App.4th 1355, 1372; MHC Operating Limited Partnership v. City of San Jose (2003) 106 Ca1.App.4th 204, 220. 32 Ibid. 33 Donohue v. Santa Paul West Mobile Home Park (1996) 47 Ca1.App.4th 1168, 1179. 34 Ibid. 3s See U.S.C.A. Const. Amend. 5, 14. All County Departments September 23, 2015 Page 11 borne by the public as a whole."36 A regulatory taking of private property occurs when a government regulation limits the uses of the property to such an extent that the regulation effectively deprives the owners of its economically reasonable use or value even though the regulation does not divest them of title to it.37 If the owners can show the value of their property has been diminished as a result of the regulation and that the diminution in value is so severe that the regulation has "essentially appropriated their property for public use[,]" then a regulatory taking has taken place and the local government which enacted the regulation must provide the owners "just compensation."38 XI. Overview of Local Rent Stabilization Ordinances in California As of July 2015, we have identified 14 cities in California — many of which are in the Bay Area — that have instituted some form of rent stabilization.39 News reports also indicate that a number of jurisdictions are currently considering adopting rent stabilization (Santa Rosa) or increasing the stringency of existing measures (San Jose). No county, other than the City and County of San Francisco, has, to date, adopted a rent stabilization ordinance.46 As noted, rent stabilization ordinances are price control mechanisms subject to State and Federal constitutional limitations. Therefore, rent stabilization laws tend to be complex and to vary by jurisdiction. Generally, however, rent stabilization measures address the following points: the type of housing subject to rent stabilization; the limits on and procedure for setting or raising rents; and eviction controls. The chart included as an exhibit to this memorandum compares the key features of rent stabilization ordinances adopted by various jurisdictions and a summary of these ordinances is provided below. 36 First English Evangelical Lutheran Church of Glendale v. County of Los Angeles (1987) 482 U.S. 304, 318-319 (internal quotations marks and citations omitted). 37 See Yee v. City of Escondido (1992) 503 U.S. 519, 522-523; Hensler v. City of Glendale (1994) 8 Ca1.4th 1, 10. 38 See Garneau v. City of Seattle (9th Cir. 1998) 147 F.3d 802, 807-808. The economic impact equation must also account for any valuable "quid pro quo" the property owners may have received as a result of the enactment. Id. Also, a temporary regulatory taking, consisting of the temporary deprivation of all economically viable use of the property, may require compensation for the period of time the regulation denied the owner all use of the land. See First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, supra, 482 U.S. 304, 318; Ali v. City of Los Angeles (1999) 77 Ca1.App.4th 246, 254-255. 39 California jurisdictions with rent stabilization ordinances include Richmond (which recently adopted a rent stabilization ordinance that may be subject to the referendum process), Berkeley, Oakland, San Francisco, San Jose, East Palo Alto, Hayward, Los Gatos, Beverly Hills, Los Angeles, Palm Springs, Santa Monica, Thousand Oaks, and West Hollywood. 40 Note that a number of counties (including San Mateo County) and many more cities have adopted rent control ordinances that apply only to mobilehome parks; although this type of rent control is subject to the same constitutional standards, mobilehome rent control is governed by a separate statutory scheme (California's Mobilehome Residency Law) and a review of mobilehome rent control is not included in this memorandum. All County Departments September 23, 2015 Page 12 A. What Type of Housing May be Subject to Rent Stabilization? As discussed above, State law preempts local ordinances that purport to apply rent stabilization to single-family housing units and to housing built after 1995, or that purport to limit the initial rent established at the beginning of a new tenancy. Likewise, residential units owned or managed by the government, and units with government subsidized rents are exempt under all ordinances. Federal law expressly preempts local rent stabilization on federally -assisted rental buildings. Beyond the limits imposed by State and federal law, however, local governments often create additional exemptions and limits on the applicability of rent stabilization ordinances. Many jurisdictions that imposed rent stabilization prior to the 1995 adoption of the Costa -Hawkins Act typically exempted from their own ordinances units constructed and initially occupied after the date the local ordinance was adopted. For example, San Francisco imposes rent stabilization only on units built before 1979, when the San Francisco ordinance was adopted. While it is less relevant to cities or counties considering rent stabilization post -Costa Hawkins, cities tended to impose rent stabilization only on existing housing stock in order to avoid discouraging production of new housing. Similarly, some cities (such as Oakland and San Francisco) allow substantially renovated units to become exempt from rent stabilization if they meet certain criteria. Presumably this type of provision is intended to encourage substantial renovations when necessary. In addition, most jurisdictions exempt temporary or non-traditional residential uses, such as hotels, hospitals and other medical care facilities, school dormitories, and, in some locations, retirement homes, from rent stabilization. Under Costa Hawkins, rent stabilization may not be applied to single-family residences, but many cities also exempt small -unit residential buildings such as duplexes or triplexes. We did not identify jurisdictions in California that limit the applicability of rent stabilization based on tenant income, although cities in other states have adopted such an approach. In New York City, for example, tenants must have a combined income under $200,000 to qualify for rent stabilization. While not focused on tenant income, Los Angeles exempts "luxury" apartments from rent stabilization, based upon the rent level in effect at the time the ordinance was adopted.41 41 For example, a two -bedroom unit that rented for $588 per month or more in 1978 would not be subject to rent stabilization in Los Angeles. All County Departments September 23, 2015 Page 13 B. How are Rent Rates and Rent Increases Determined Under Rent Stabilization Ordinances? As described previously, State law allows for a form of rent stabilization called "vacancy decontrol," which prevents local governments from regulating the setting of the initial rent at the beginning of a tenancy. The initial rent is set by the landlord, typically at a market level. After that point, though, local rent stabilization ordinances typically limit a landlord's ability to raise the rents in covered units.42 Every rent stabilization jurisdiction, however, has some allowance for automatic periodic rent increases, and also for additional rent increases when required to ensure the landlord receives the constitutionally -required fair rate of return. 1. Automatic Rent Increases Each rent stabilization ordinance permits certain "automatic" rent increases that do not require prior agency approval. These increases typically fall into one of three categories: (1) annual or periodic increases; (2) increases to "pass through" landlord operating costs or registration fees; and (3) increases to market rent upon a unit vacancy. Examples of allowable annual or periodic rent increases for the various rent stabilization jurisdictions is provided in the chart attached to this memorandum. Some rent stabilization jurisdictions allow an annual increase that is tied to and limited by a corresponding increase in the regional Consumer Price Index ("CPI"). In addition, such jurisdictions often also cap annual rent increases by a certain percentage, regardless of the change in CPI. In San Francisco, for example, the automatic annual rent increase is 60 percent of the CPI increase in the year, but the maximum allowable increase is 7 percent regardless of the increase in CPI. Other rent stabilization jurisdictions allow greater annual rent increases that are not necessarily tied to changes in economic indicators. San Jose has such an ordinance, and allows annual increases of eight percent per year (or twenty-one percent if the last rent increase was more than twenty-four months prior). Many ordinances also provide mechanisms for landlords to pass increased operating costs on to their tenants ("pass -through" costs). Acceptable costs often include utilities, property taxes, or rent stabilization ordinance registration fees. Most jurisdictions limit the amount of the pass - through either to a portion of the increased cost or to a percentage of the overall rent. The last type of "automatic" rent increase is upon termination of a tenancy. As described previously, State law allows a landlord to set an initial rent (typically to market levels) at the start of a new tenancy. a2 California law would also allow for "permanent decontrol," which would result in units covered by the law at the time of its adoption becoming non -rent stabilized when the existing tenants depart. All County Departments September 23, 2015 Page 14 2. Rent Adjustments Requiring Agency Approval The constitutional implications of rent stabilization require that any ordinance include a procedure to allow a landlord to petition for an additional rent when necessary to ensure a fair return on the landlord's investment. These fair return requests must be considered on a case -by - case basis, but ordinances typically identify a non-exclusive list of factors that will be considered in determining whether an additional rent increase is justified. Common factors include atypical operating costs and maintenance expenses, physical condition or repair and improvements, level of housing services provided, taxes, and financing or debt service costs. "Fair return" increase approval procedures vary by jurisdiction. However, the general pattern is to require a written application to a rent board or other decision maker, subject to an initial staff determination and then an administrative appeal. The board's decision must be based on evidence presented, with an opportunity for the affected parties to be heard. In addition to case -by -case "fair return" increases, many cities allow landlords to separately apply for rent adjustments to recover capital improvement and renovation costs. These ordinances distinguish "capital improvements" from ordinary maintenance and repairs, which do not justify special rent adjustments. The details vary by jurisdiction, but an approved rent increase based on capital improvements is often spread among the tenants who benefit from the improvements, and the increase is amortized over the useful life of the improvements. Apart from setting maximum rent increases, most ordinances also provide a mechanism for rent reductions to reflect a decrease in housing services that would otherwise effectively allow landlords to increase rent by reducing services. A number of cities vest their rent boards with power to approve tenant requests for rent reductions, usually for reduced housing services or defective conditions, such as code violations or uninhabitable conditions. The procedure usually requires a tenant to petition the rent board and provide documentation of the reduced services and their claimed value. Personal financial hardship is typically not an acceptable reason for a tenant to request a rent reduction by a rent board.43 C. Eviction Controls Because landlords are allowed to set the initial rent at the beginning of a tenancy, rent stabilization in the absence of eviction controls can create an incentive for landlords to terminate existing tenancies in order to raise rents upon establishing a new tenancy. As a result, in addition to limiting rent increases, most rent stabilization jurisdictions include relatively extensive "just cause" eviction restrictions such as those we describe above. Other evictions controls are 43 However, San Jose allows a tenant to raise personal financial hardship as a defense when a landlord requests an additional rent increase above the automatic increase provided by ordinance. All County Departments September 23, 2015 Page 15 described below. 1. Ellis Act (Removing Property From Rental Use) Evictions The Ellis Act prohibits local governments from requiring residential property owners to offer or continue to offer a property for rent. (Gov. Code § 7060 et seq.) Subject to very limited exceptions, landlords have an absolute right to go out of the rental business and to evict tenants on that basis. As discussed above, local governments do have some ability to require payment of relocation assistance for Ellis Act evictions and to potentially regulate initial rents if a landlord later tries to re-enter the rental market. The mechanisms of these relocation assistance ordinances are described further below. 2. Evictions to Allow Owner to Occupy the Unit Eviction controls typically allow rental property owners to evict tenants so that the owner or the owner's immediate relative can occupy the unit. To reduce the possibility of fraudulent owner occupancy evictions, State law requires that the owner -occupant or owner's relative occupy the unit for at least six consecutive months after eviction of the prior tenant. (Civ. Code § 1947.10.) Some cities have adopted more stringent requirements, such as a requirement to move in within three months and remain for at least 36 months. Other cities prohibit corporate or partnership landlords from using this reason for eviction, and some cities prohibit these type of evictions altogether for certain sensitive populations (e.g., the terminally ill, disabled seniors, etc.). 3. Substantial Renovation Evictions Eviction of tenants to allow performance of substantial renovation work is often allowed, with limitations. For example, some cities require the landlord to demonstrate that clearing the property of renters is actually necessary for the type of work proposed, and others require that the displaced tenants have the right to return when the renovation is complete. In Oakland, where tenants are provided the right to return after the renovation is completed, the landlord is required to offer the same base rent with an increase amortizing the cost of approved capital improvement expenditure over time. 4. Condominium Conversion Evictions The conversion of apartment units to condominiums is subject to statewide regulation through the Subdivision Map Act. Local governments also often adopt conversion regulations to further protect their rental housing stock, and San Mateo County has such an ordinance in place. Sections 7108 and 7109 of the County's Subdivision Regulations prohibit conversion of multifamily rental housing to condominiums, except under circumstances where the County's overall housing vacancy, as determined by the California Department of Finance, exceeds 4.15 All County Departments September 23, 2015 Page 16 percent. D. Relocation Assistance Also, as mentioned, rent stabilization jurisdictions often require landlords to make relocation assistance payments to tenants when the reason for the eviction is not the fault of the tenant ("no- fault evictions"). As with eviction controls, many local agencies extend the relocation assistance requirements to tenants in units that are not subject to rent stabilization. E. Administration of Rent Stabilization Ordinances 1. Administration by Rent Board or Other Means of Administration Most rent stabilization ordinances are operated and implemented by a rent board or similar body, which discharges a variety of tasks, including publishing the annual general rent adjustments allowed under the ordinance, adjudicating requests for rent adjustments beyond the annual general adjustment, and conducting studies and publishing reports. However, there is nothing in the law that requires a jurisdiction to establish such a board in adopting a rent stabilization ordinance. Rather, a jurisdiction could instead task officials or employees of the jurisdiction to discharge duties under the ordinance. 2. Certification of Rents vs. Complaint -Based System Some jurisdictions operate on a complaint basis (San Francisco, Oakland, San Jose), which relies on tenants to raise concerns regarding rent increases that are alleged to violate the ordinance. Oakland's complaint -based model, for example, relies on tenants to challenge a rent increase that they believe to be in violation of the ordinance. A hearing officer then evaluates information from the tenant and landlord and makes an initial decision, which can be appealed to a rent board. In all cases, decisions of the local agency can ultimately be appealed to the courts. Other jurisdictions with a more robust administrative approach require landlords to register and certify initial rent amounts (e.g., East Palo Alto and Santa Monica) and to thereafter certify rent increases on covered units. In East Palo Alto, for example, landlords must register all rental units each year. The city charges an annual registration fee ($234 in fiscal year 2014-2015), half of which the landlord is allowed to pass on to the tenant. On an ongoing basis, landlords are required to submit documentation to the rent stabilization board for each vacancy and new tenancy, including copies of any new leases. The rent stabilization board sets the annual general rent adjustment and promulgates regulations to implement the city's rent stabilization ordinance. The rent stabilization board also All County Departments September 23, 2015 Page 17 issues a certificate of "maximum allowable rent" for each regulated unit upon initial rental of the unit and for each new tenant. The rent stabilization board then reviews any requests for rent adjustments against the certified maximum allowable rent. In addition to the proactive registration and certification component, East Palo Alto also provides for landlord and tenant petitions to challenge the rent stabilization board's determinations and to enforce the ordinance where landlords are not in compliance. JCB:jdn Detailed Comparison of Five Cities with Rent Stabilization IMIM Just Cause Eviction Relocation Assistance Berkeley Extensive Yes Condo Max 100 units/year Conversion Limits Annual Rent 65% of CPI, 7% max.; Increase 1.7% for 2014 Landlord None Cost Pass- Throughs Other Additional T: 10% Automatic increase; Additional Rent security deposit for Increases pet(s) where previously prohibited Registration $194/yr.; $4/month for Fees 12 months may be passed through to T; Penalties if late; Reimbursement for low-income Ts Rent Increases Requiring Official Approval Tenant Application for Rent Reduction To yield fair return on investment; Capital improvements, with limitations; T not in occupancy Yes Los Angeles Extensive Yes Notice requirements Equal to CPI; 3% min./8% max.; 3% for 7/1/14 to 6/30/15 Oakland Extensive No relocation aid Replacement unit requirement; notice San Francisco Extensive Yes First right of refusal to tenant Equal to CPI; 10% max; 1.9% 60% of CPI, max. 7%; 1.0% from from 7/1/14 to 6/30/15 Gas and electric up to 1% None of rent; capital improvement, rehab work Additional T: 10% increase; Smoke detectors; Rehab and capital improvement work $24.51/yr.; $12.25 may be passed through to T To yield fair return Yes Accumulate unused increases for up to 10 years 3/1/14 to 2/28/15 Generally allowed for utilites, with some restrictions Accumulate unused increases; Stormwater management; Property tax due to ballot measure approved between 11/1/96 & 11/30/98; 50% of property tax for bonds passed after 11/14/02; 50 percent of SFUSD or SFCCD bond costs One-half of $30 service fee $29 apartment registration fee; may be passed through to T half may be passed through to T Any ground (includes banking, capital improvements, uninsured repairs, housing service costs, or where necessary to meet fair return requirements); Enhanced notice required for capital improvements Yes 7% annual cap based on "need"; Capital improvement up to 10% of base rent; Rehabilitation Yes San Jose Minimal (dominant motive can't be retaliation) No relocation aid First right of refusal; notice; 2/3 tenants must agree 8% per year, or 21% if no increase in 2 years Only if charge is new and approved by Council resolution None Debt service costs deemed "reasonable" under circumstances" by hearing officer if denial is hardship to L; Any ground for increase beyond 8% where T petitions, hardship to T may be considered; Any reason not provided in ordinance Yes Santa Monica Extensive (inc. units not subject to rent control) Yes Permit req'd unless 2/3 tenants agree; right to remain 0.8% oe $14 per month effective 9/1/14; none if market rent set after Sept. 1, 2007 $7 for gas and electric upon application and approval Security deposit for additional Ts or new pets; School tax surcharges; Stormwater management, clean beaches, and ocean parcel tax surcharges $174.96/yr; $13/month may be passed through; Low-income, senior Ts exempt To yield fair return ; Street lighting; Capital improvement; Earthquake repairs; 12% cap for hardship Ts; To correct rent or amenities; T not in occupancy Yes West Hollywood Extensive Yes CUP req'd, with findings (no adverse effect and vacancy >5%) 75% of CPI; 1.25% from 9/1/14 to 8/31/15 Up to 0.5% for gas/electric None $120/yr.; $5/month may be passed through; Partial rebate for certain Ts To yield fair return, up to 12% increase in first 12 month period after decision Yes 1 Detailed Comparison of Five Cities with Rent Stabilization Berkeley Exempt Hotels <14 days; Single Units family residences; Duplexes if L occupies one; New construction (only as to rent increases) Evictions for Must require more Substatial than 60 days to repair; Renovation T refuses to vacate during repair Special Grounds and specific Eviction facts; 120 days' notice Notice Rules to T & city for removal from market Relocation Assistance Owner/relative occupancy: $4,500 if in unit 1 year or more; no eviction if elderly, disabled and in unit 5 years or more; Removal from market: $8,700; $13,700 if tenancy began prior to 1/1/99; additional $2,500 for Ts with minors. elderly. Los Angeles Hotels <30 days; Luxury units; Single family dwellings; Substantially renovated units; New construction; Nonofit housing; Voluntarily - vacated units; Mobile - homes, recreational vehicles & parks None for substantial renovation; Limited evictions permitted under Primary Renovation Program Grounds and specific facts; 60 days' notice to Ts in unit one year; Declaration with city for relative or owner - occupancy, major rehabilitation or permanent removal from rental use For elderly, disabled & Ts with minors, $16,350 if <3 years, $19,300 if >3 years or <80% AMI, $15,000 if "Mom & Pop" property; For others, $7,700 if <3 years, $10,200 if >3 years or <80% AMI, $7,450 if "Mom & Pop" property; L must pay tenant relocation assistance Oakland Hotels; New construction; Substantially renovated units; Owner -occupied buildings with up to 3 units; Nonprofit cooperatives Obtain building permit for repairs necessary to comply with law or correct violation; L to apply for extension beyond 3 months; T offered right to return at same rent; Special notice requirements Grounds, statement that advice re termination available from Board & other req'd info; Copy of notice filed with Board within 10 days of service on T None San Francisco Hotels <32 days; Substantially renovated units; New construction; Nonprofit cooperatives & units owned by nonprofit public benefit corporations Former T may rerent at controlled rent; No mininimum cost for nonmajor work; Permits necesary prior to serving notice; No ulterior motive Grounds; Inform T in writing that advice concerning notice may be obtained from Board; File copies of notice with Board w/in 10 days after service $5,261 to eligible Ts (incl. subtenants, minors), max. of $15,783 per unit; additional $3,508 for elderly, disabled & Ts with minors; Fees different for Ellis Act evictions San Jose Hotels <30 days; Voluntarily - vacated units; Prior T evicted for nonpayment of rent or breach of lease; New construction None 90 days' notice to Ts in unit one year; 120 days' notice where "severe housing shortage" (no "shortage" as of early 2014); Offer to arbitrate; Notice to city within 5 days None Santa Monica Hotels <14 days Retirement homes Owner -occupied 1, 2 or 3 -unit building Single family residences New construction "Incentive" unit Removal permit from city Grounds and specific facts; 60 days' notice to Ts in unit one year; Owner/relative evictions to include current T & rent, info on proposed T; notice to board within 3 days of service on T $8,300 to $17,350 depending on number of bedrooms; $9,500 to $19,950 depending on number of bedrooms for seniors, disabled & parents with minor child, OR city approval of displacement plan OR move T to comparable unit West Hollywood Hotels <30 days; New construction; Units first occupied after 7/1/79; Rooms rented to boarders where L occupies unit as principal residence; Dwelling units legally converted from nondwelling units Permitted where building must be permanently eradicated or demolished b/c uninhabitable or if building may not be inhabited while correcting violation notice by government agency Grounds and specific facts; 60 days' notice to Ts in unit 1 year; Relative/owner- evictions require 90 - day notice specifying proposed T, with copy to city; Written statement of alleged violations for breach of covenant or refusal to renew $5,100 to $12,800 depending on number of bedrooms; $13,500 for seniors, disabled, Ts with dependent children, moderate income; $17,00 for low- income; L must reimburse city for relocation aid POLICY ARGUMENTS REGARDING JUST CAUSE EVICTION Main Policy Features: Tenants may only be evicted for certain enumerated reasons (i.e. "just causes"). Just cause ordinances specify the permissible bases for eviction, including those due to the tenant's "fault" (e.g. nonpayment of rent, criminal activity, etc.) and those due to "no fault" of the tenant (e.g. landlord wishes to occupy the unit). Statewide Legal Baseline: Absent local regulation, state law provides that month -to -month tenants may be evicted for any or no reason (other than retaliation or discrimination) if served with 30 days' written notice (or 60 days' written notice if the tenant has resided in the unit for at least one year). Landlords may also initiate eviction proceedings with 3 -days' notice when a tenant fails to pay rent, creates a nuisance or otherwise violates the lease agreement. Examples: Several California cities have adopted just cause eviction ordinances. See, e.g., City of San Diego Municipal Code, § 98.07; City of East Palo Alto Municipal Code §14.04.160; City of Oakland Municipal Code, § 8.22.300, et seq.; City of Berkeley Municipal Code, § 13.76.130. Arguments in Support of and in Opposition to Policy: 1 PRO CON • • • • Limits the ability of landlords to evict existing tenants, especially in low -vacancy and expensive housing markets where landlords may have incentive to evict existing tenants in order to obtain higher rents. Protects tenants who have short-term (month -to -month) leases. Slows down rapid increases in rent. Stabilizes communities by slowing down evictions and decreasing turnover rates. • • • Generally restricts rights of property owners by limiting what they may do with their property, requiring additional legal process before taking action against a renter. May impact neighborhoods by making it harder for landlords to evict problematic tenants, including those suspected of involvement in criminal activity. Impacts surrounding neighborhood by making it difficult for landlord to remove "bad tenants." 1 The arguments listed here are among those that are commonly advanced for and against the tenant protection measures in question. This office has not analyzed, and does not offer an opinion regarding, their validity. POLICY ARGUMENTS REGARDING RELOCATION BENEFITS Main Policy Features: Tenants who face "no-fault" evictions are eligible for compensation from the landlord for moving costs and other costs of securing new housing. Statewide Legal Baseline: There is no state law mandate for landlords to assist displaced tenants by compensating for relocation costs. Examples: City of Mountain View has adopted a relocation assistance ordinance. See City of Mountain View Municipal Code, § 36.38. Arguments in Support of and in Opposition to Policy: PRO CON • • • Helps ensure that displaced households find affordable and comparable replacement housing by providing compensation for relocation costs, such as first and last months' rent and security deposit for new rental unit, enrollment for housing search services, moving costs and storage. Helps mitigate trauma and disruption to tenants and their families caused by unforeseen need for relocation (e.g. children leaving school mid -year) by addressing some financial impacts. Requires landlords to internalize relocation costs as part of their "costs of doing business." • • • • Amount of mandated compensation may be excessive relative to some tenants' needs; landlords may not be able to afford. Relocation assistance payments may be spent on anything as ordinances do not require that compensation provided to displaced tenants be spent on costs of moving and securing new housing. May create a perceived windfall to well-off tenants if relocation assistance not subject to stringent income -specific criteria. If required to absorb relocation costs as part of their "costs of doing business", landlords could build the cost of relocation benefits into rent structures. POLICY ARGUMENTS REGARDING RENT STABILIZATION Main Policy Features: Rent stabilization ordinances limit the amount that rents are allowed to increase each year as market values increase (usually based either on a fixed percentage or tied to inflation). Statewide Legal Baseline: Currently, under state law, there are no limits on the amount or frequency of rent increases. Landlords may set rent to market rate with every new tenancy ("vacancy decontrol"). Rent control may not be applied to units constructed after 1995, single family homes or condos. Examples: Thirteen cities in California have adopted rent stabilization ordinances. See, e.g., Santa Monica City Charter, Article XVIII; City of Los Gatos Municipal Code § 14.80; City of East Palo Alto Municipal Code, § 14.04.010, et seq. Arguments in Support of and in Opposition to Policy: PRO CON • Prevents landlords from imposing rent increases that cause displacement and accordingly, helps preserve income diverse, stable neighborhoods. • Substantial or frequent rent increases may adversely impact schools, youth groups and community organizations by displacing those who access these services. Long-term tenants who contribute to a community's stability have a legitimate interest in maintaining their tenancies. • Provides a basic form of consumer protection — once tenants move into a vacant unit at market rate rents that they can afford and establish lives in these homes, they won't have to renegotiate. • Helps correct power imbalance between landlords and tenants. Because of the high cost of moving, tenants may be pressured by landlords to accept rent increases. Tenants may also be unaware of the real conditions of units until they move in. If the tenant complains about the • Fundamentally unfair — why burden landlords for a broader societal problem? • Interferes with free market — landlord should be able to rent unit at amount that market bears. • May incentivize landlords to raise rents before any rent control ordinance takes effect in an attempt to evade impact of the regulation. • As a general matter, restricts rights of property owners as it limits what they may do with their property. • With a long line of potential tenants eager to move in at the ceiling price, discourages landlords from maintaining and repairing units until the end of a tenancy. Also, because rent increases are limited, the landlord's ability to recoup costs of improvement or maintenance is also curtailed. • Reduces "urban vitality" by discouraging mobility; decreases vacancy conditions, the landlord may threaten to increase the rent. • Allows tenants to share in the benefit of Proposition 13, which generally caps annual increases in the assessed value of real estate at 2%. In the campaign to enact Proposition 13, advocates claimed that landlords would pass property tax savings along to tenants; rent control helps to ensure that this occurs. • Housing is a positive human right that equals or exceeds the property rights of landlords. Without rent control, even tenants paying full rent can be forced unexpectedly from their homes through no fault of their own. • Prevents landlords from making speculative profits in strong markets, but also enables landlords to obtain fair returns on their rental properties while ensuring that tenants have the certainty that their rents will not increase more than a certain amount each year. • Can be structured in a way so as to minimize bureaucracy and administrative costs (i.e. complaint driven, instead of overseen by Rent Stabilization Board — "lean and mean" approach). rates/turnover in rental units because tenants want to keep their low -rents and are unwilling to leave. • Is not tailored to protect intended beneficiaries — i.e. poor or other vulnerable renters; rather, may incentivize landlord to create stringent standards for applications from prospective tenants (i.e. requiring resumes, credit reports and references) which poor or other vulnerable renters may have trouble meeting. • Incentivizes landlords to discriminate against prospective tenants likely to stay for a long time, like retiree or couples with children. • Triggers consequences such as bribes and a "shadow market" (e.g. prospective tenant offers landlord $5000 just to hold an $1800 -a -month one -bedroom apartment in an industrial neighborhood that he had yet to advertise; landlord offers existing tenant $5000 to vacate rent controlled unit so landlord can reset rent for vacant unit at amount that market will bear). • Encourages some owners to take their units off the market and sell properties, rather than rent. • Depending on how they are crafted, rent control ordinances may be extremely burdensome and expensive to administer. RENT STABILIZATION DECISION MATRIX UNITS COVERED ADDITIONAL EXEMPTIONS • • • Duplexes, small apartment buildings? Substantially renovated units? Temporary, non-traditional residential uses (dorms, hotels, hospitals, etc.) ANNUAL ADJUSTMENT • Economic indicator, such as regional CPI o With or without maximum percentage increase • Specify maximum percentage increase CONTROLS ON AMOUNT OF RENT CHARGED • Automatic o Utilities, property taxes, registration fees OTHER ADJUSTMENTS • Application for Fair Return/Adjudication o Capital improvements o Renovations o Reduction in housing services COMPLAINT -BASED OR REGISTRATION AND ADMINISTRATIVE STRUCTURE CERTIFICATION RENT BOARD OR OTHER STRUCTURE INDEFINITE TERM • Time -based (specified number of years) TEMPORARY • Production -based (specified number of affordable housing units) • Market -based (specified vacancy rate) UNITS COVERED • All housing units • Only rent -stabilized units JUST CAUSE EVICTION • Identify acceptable grounds for eviction and any special limitations ACCOMPANYING TENANT • Notice requirements PROTECTIONS • When is it required? RELOCATION ASSISTANCE • Who qualifies? o Income limits to qualify for assistance? • Amount of assistance? o Additional assistance for sensitive groups? RENT STABILIZATION DECISION MATRIX r � CITY OF PALO ALTO CITY OF PALO ALTO CITY COUNCIL EXCERPT ACTION MINUTES Special Meeting October 16, 2017 The City Council of the City of Palo Alto met on this date in the Council Chambers at 5:12 P.M. Present: DuBois, Filseth, Fine, Holman, Kniss, Kou, Scharff, Tanaka, Wolbach Absent: Action Items 13. Colleagues' Memo From Council Members DuBois, Holman, and Kou Regarding Strengthening Renter Protection for Palo Alto Residents. MOTION: Council Member DuBois moved, seconded by Council Member Holman to refer this proposal to Staff to bring back to Council for one or more discussions of an Ordinance to increase renter protections that considers the following: A. An annual percentage cap on rent increases for buildings of 5 or more housing units built before February 1, 1995 (to remove any disincentive for new construction); and B. Measures to protect residents against termination without just cause while protecting the fair rights of property owners; and C. Other updates to our existing renter protections as needed to continue a healthy community; and D. Include the Human Relations Commission as part of the review process. MOTION FAILED: 3-6 DuBois, Holman, Kou yes Adjournment: The meeting was adjourned at 12:27 P.M. Page 1 of 1 CITY OF PALO ALTO City of Palo Alto (ID # 9533) City Council Staff Report Report Type: State/Federal Legislation Update/Action Meeting Date: 9/10/2018 Summary Title: Authorizing voting delegates and positions for the League of Cities resolutions Title: Review and Approval of the Recommended City Positions for the 2018 League of California Cities Resolutions From: City Manager Lead Department: City Manager Recommendation Staff recommends that Council authorize the City's voting delegates to vote on the two resolutions up for consideration at the annual League of California Cities conference in Long Beach from September 12 — 14, 2018, and approve the recommended positions provided below. Background Each year, the League of California Cities accepts resolutions from member cities and elected officials for approval at its annual conference. These resolutions affect the policy, direction and/or work of the League of California Cities. This year, two resolutions have been introduced and will be voted on during the Business Meeting held during the annual conference. The League of California Cities provides instruction to member cities regarding voting: "in order to vote at the Annual Business Meeting, your city council must designate a voting delegate. Your city may also appoint up to two alternate voting delegates, one of whom may vote in the event that the designated voting delegate is unable to serve in that capacity." Discussion Today's action authorizes Council Member Wolbach to act as voting delegate for the resolutions noted below. Additionally, as the resolutions are subject to change, Council Member Wolbach is authorized to vote on any amendments in the manner he deems to be in the best interest of the City. Attached for review is the 2018 League of California Cities Annual Conference Resolution Packet. The packet contains the resolutions in their current form along with analyses and letters of support. Below for your convenience is a table containing the City of Palo Alto Page 1 resolution title, the recommended City positions, relevant guidance, and the impact to the City of any passed resolutions. Resolution Title Resolution of the League of California Cities calling upon the League to respond to the increasing vulnerabilities to local municipal authority, control and revenue and explore the preparation of a ballot measure and/or constitutional amendment that would further strengthen local democracy and authority. Recommended vote Yes Relevant Council or City guidance 2018 Legislative Priorities, Foundation/ principle 3: Protect and increase local government discretion. Oppose items that preempt or reduce the authority or ability of local government to determine how to effectively operate local programs, services, and activities. Potential City impact(s) As this resolution merely requires League of California Cities staff to "explore the preparation" of a ballot measure, passage of the resolution would not immediately impact the City. If such exploration leads to the creation of a ballot measure that reaffirms and/or strengthens local control, such a measure may benefit the City and is in line with Council's guidance to preserve local government discretion. Resolution Title A resolution of the League of California Cities declaring its commitment to support the repeal of preemption in California food and agriculture code § 11501.1 that prevents local governments from regulating pesticides. Recommended vote Yes Relevant Council or City guidance The City has an Integrated Pest Management policy that calls for reducing the use of chemicals to the fullest extent possible. Pest management chemicals of any kind are to be used only as a last resort. The specific types of pesticide noted in the resolution are anticoagulant rodenticides; the Public Works Department notes that neither the City nor our contractors have used anticoagulant baits in many years. Additionally, repealing a State statute that restricts local control is in line with current legislative priorities, as noted above. Potential City impact(s) If this resolution passes, there is no direct impact to the City's operations or policies. Resource Impact There is no resource impact associated with this action, in that the action requires no City of Palo Alto Page 2 financing, no modifcaitions in operations, and no policy adjustment. Environmental Review The Council's adoption of this item is not a project requiring California Environmental Quality Act review, because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment. Attachments: • Attachment A: 2018 Annual Conference Resolution Packet City of Palo Alto Page 3 120 LEAGUE® YEARS OF CALIFORNIA CITIES 1898 - 2018 Annual Conference Resolutions Packet 2018 Annual Conference Resolutions CO N JP -_ RF4' c LEAGUE �0`\ OF CALIFORNIA CITIES Long Beach, California September 12 —14, 2018 INFORMATION AND PROCEDURES RESOLUTIONS CONTAINED IN THIS PACKET: The League bylaws provide that resolutions shall be referred by the president to an appropriate policy committee for review and recommendation. Resolutions with committee recommendations shall then be considered by the General Resolutions Committee at the Annual Conference. This year, two resolutions have been introduced for consideration at the Annual Conference and referred to League policy committees. POLICY COMMITTEES: Five policy committees will meet at the Annual Conference to consider and take action on the resolutions referred to them. The committees are: Environmental Quality, Governance, Transparency & Labor Relations; Housing, Community & Economic Development; Revenue and Taxation; and Transportation, Communication & Public Works. The committees will meet from 9:00 — 11:00 a.m. on Wednesday, September 12, at the Hyatt Regency Long Beach. The sponsors of the resolutions have been notified of the time and location of the meeting. GENERAL RESOLUTIONS COMMITTEE: This committee will meet at 1:00 p.m. on Thursday, September 13, at the Hyatt Long Beach, to consider the reports of the policy committees regarding the resolutions. This committee includes one representative from each of the League's regional divisions, functional departments and standing policy committees, as well as other individuals appointed by the League president. Please check in at the registration desk for room location. ANNUAL LUNCHEON/BUSINESS MEETING/GENERAL ASSEMBLY: This meeting will be held at 12:30 p.m. on Friday, September 14, at the Long Beach Convention Center. PETITIONED RESOLUTIONS: For those issues that develop after the normal 60 -day deadline, a resolution may be introduced at the Annual Conference with a petition signed by designated voting delegates of 10 percent of all member cities (48 valid signatures required) and presented to the Voting Delegates Desk at least 24 hours prior to the time set for convening the Annual Business Meeting of the General Assembly. This year, that deadline is 12:30 p.m., Thursday, September 13. Resolutions can be viewed on the League's Web site: www.cacities.org/resolutions. Any questions concerning the resolutions procedures may be directed to Meg Desmond at the League office: mdesmond@cacities.org or (916) 658-8224 1 GUIDELINES FOR ANNUAL CONFERENCE RESOLUTIONS Policy development is a vital and ongoing process within the League. The principal means for deciding policy on the important issues facing cities is through the League's seven standing policy committees and the board of directors. The process allows for timely consideration of issues in a changing environment and assures city officials the opportunity to both initiate and influence policy decisions. Annual conference resolutions constitute an additional way to develop League policy. Resolutions should adhere to the following criteria. Guidelines for Annual Conference Resolutions 1. Only issues that have a direct bearing on municipal affairs should be considered or adopted at the Annual Conference. 2. The issue is not of a purely local or regional concern. 3. The recommended policy should not simply restate existing League policy. 4. The resolution should be directed at achieving one of the following objectives: (a) Focus public or media attention on an issue of major importance to cities. (b) Establish a new direction for League policy by establishing general principals around which more detailed policies may be developed by policy committees and the board of directors. (c) Consider important issues not adequately addressed by the policy committees and board of directors. (d) Amend the League bylaws (requires 2/3 vote at General Assembly). 2 LOCATION OF MEETINGS Policy Committee Meetings Wednesday, September 12, 9:00 — 11:00 a.m. Hyatt Regency Long Beach 200 South Pine Avenue, Long Beach The following committees will be meeting: 1. Environmental Quality 2. Governance, Transparency & Labor Relations 3. Housing, Community & Economic Development 4. Revenue & Taxation 5. Transportation, Communication & Public Works General Resolutions Committee Thursday, September 13, 1:00 p.m. Hyatt Regency Long Beach 200 South Pine Avenue, Long Beach Annual Business Meeting and General Assembly Luncheon Friday, September 14, 12:30 p.m. Long Beach Convention Center 300 East Ocean Boulevard, Long Beach KEY TO ACTIONS TAKEN ON RESOLUTIONS Resolutions have been grouped by policy committees to which they have been assigned. Number Key Word Index Reviewing Body Action 1 2 3 1 - Policy Committee Recommendation to General Resolutions Committee 2 - General Resolutions Committee 3 - General Assembly ENVIRONMENTAL QUALITY POLICY COMMITTEE 1 2 3 GOVERNANCE, TRANSPARENCY & LABOR RELATIONS POLICY COMMITTEE 1 2 3 1 Local Municipal Authority, Control, and Revenue HOUSING, COMMUNITY & ECONOMIC DEVELOPMENT POLICY COMMITTEE 1 2 3 1 Local Municipal Authority, Control, and Revenue REVENUE & TAXATION POLICY COMMITTEE 2 3 1 Local Municipal Authority, Control, and Revenue TRANSPORTATION, COMMUNICATION & PUBLIC WORKS POLICY COMMITTEE 1 2 3 Information pertaining to the Annual Conference Resolutions will also be posted on each committee's page on the League website: www.cacities.org. The entire Resolutions Packet will be posted at: www.cacities.org/resolutions. 4 KEY TO ACTIONS TAKEN ON RESOLUTIONS (Continued) Resolutions have been grouped by policy committees to which they have been assigned. KEY TO REVIEWING BODIES 1. Policy Committee 2. General Resolutions Committee 3. General Assembly ACTION FOOTNOTES * Subject matter covered in another resolution ** Existing League policy *** Local authority presently exists KEY TO ACTIONS TAKEN A Approve D Disapprove N No Action R Refer to appropriate policy committee for study a Amend+ Aa Approve as amended+ Aaa Approve with additional amendment(s)+ Ra Refer as amended to appropriate policy committee for study+ Raa Additional amendments and refer+ Da Amend (for clarity or brevity) and Disapprove+ Na Amend (for clarity or brevity) and take No Action+ W Withdrawn by Sponsor Procedural Note: The League of California Cities resolution process at the Annual Conference is guided by the League Bylaws. A helpful explanation of this process can be found on the League's website by clicking on this link: Resolution Process. 5 1. RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES CALLING UPON THE LEAGUE TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL AND REVENUE AND EXPLORE THE PREPARATION OF A BALLOT MEASURE AND/OR CONSTITUTIONAL AMENDMENT THAT WOULD FURTHER STRENGTHEN LOCAL DEMOCRACY AND AUTHORITY Source: City of Beverly Hills Concurrence of five or more cities/city officials: Cities: Arcadia, Burbank, Cupertino; Duarte; Oceanside; Ontario; Palo Alto; Redondo Beach; Santa Cruz; Sunnyvale; Torrance; West Hollywood Referred to: Governance, Transparency & Labor Relations; Housing, Community & Economic Development; Revenue and Taxation; and Transportation, Communication & Public Works Policy Committees WHEREAS, the State of California is comprised of diverse communities that are home to persons of differing backgrounds, needs, and aspirations; yet united by the vision that the most accessible, responsive, effective, and transparent form of democratic government is found at the local level and in their own communities; and WHEREAS, subsidiarity is the principle that democratic decisions are best made at the most local level best suited to address the needs of the People, and suggests that local governments should be allowed to find solutions at the local level before the California Legislature imposes uniform and overreaching measures throughout the State; and WHEREAS, the California Constitution recognizes that local self-government is the cornerstone of democracy by empowering cities to enact local laws and policies designed to protect the local public health, safety and welfare of their residents and govern the municipal affairs of charter cities; and WHEREAS, over recent years there have been an increasing number of measures introduced within the Legislature or proposed for the state ballot, often sponsored by powerful interest groups and corporations, aimed at undermining the authority, control and revenue options for local governments and their residents; and WHEREAS, powerful interest groups and corporations are willing to spend millions in political contributions to legislators to advance legislation, or to hire paid signature gatherers to qualify deceptive ballot proposals attempting to overrule or silence the voices of local residents and their democratically -elected local governments affected by their proposed policies; and WHEREAS, powerful interest groups and corporations propose and advance such measures because they view local democracy as an obstacle that disrupts the efficiency of implementing corporate plans and increasing profits and therefore object when local residents — either through their elected city councils, boards of supervisors, special district boards, or by action of local voters —enact local ordinances and policies tailored to fit the needs of their individual communities; and 6 WHEREAS, public polling repeatedly demonstrates that local residents and voters have the highest levels of confidence in levels of government that are closest to the people, and thus would be likely to strongly support a ballot measure that would further strengthen the ability of communities to govern themselves without micromanagement from the state or having their authority undermined by deep -pocketed and powerful interests and corporations. RESOLVED that the League of California Cities should assess the increasing vulnerabilities to local authority, control and revenue and explore the preparation of a ballot measure and/or constitutional amendment that would give the state's voters an opportunity to further strengthen local authority and preserve the role of local democracy to best preserve their local quality of life. 7 Background Information on Resolution No. 1 Source: City of Beverly Hills Background: The relationship between the state and cities functions best as a partnership where major policy issues are approached by the state with careful consideration of the varied conditions among the state's 482 cities and 58 counties. There should be an appreciation of the importance of retaining local flexibility to tailor policies to reflect the needs and circumstances of the local community. Still, cities have had to respond to state legislation that undermines the principle of "local control" over important issues such as land use, housing, finance, infrastructure, elections, labor relations and other issues directly affecting cities. Alexis de Tocqueville's "Democracy in America" examined the operation of the principle of subsidiarity in the early 19th century. Subsidiarity is an organizing principle that states matters should be handled by the smallest, lowest or least centralized competent authority. Tocqueville wrote that "Decentralization has not only an administrative value, but also a civic dimension, since it increases the opportunities for citizens to take interest in public affairs; it makes them get accustomed to using freedom." Tocqueville's works were first published in 1835 with a second volume published in 1840. The United States had a population of just 17 million people in 1840, less than 50% of the population of California today and yet there was value found in decentralization. Another consideration is to examine how the European Union ("EU") operates. There are two prime guiding principles for the EU. The first is principle of conferral, which states that the EU should act only within the limits of the competences conferred on it by the treaties. The second, which is relevant to this resolution, is the principle of subsidiarity, which states that the EU should act only where an objective cannot be sufficiently achieved by the member states acting alone. Sacramento should operate in a similar manner and only govern when objectives need to be achieved at a much larger level than a local government. For years, Governor Jerry Brown himself has spoken on the principle of "subsidiarity." Governor Brown has asserted for numerous years that local officials should have the flexibility to act without micromanagement from Sacramento. Legislation introduced in both 2017 and 2018 by the state legislature has continually threatened local control in flagrant opposition to the principle of subsidiarity. This has included, but not been limited to, Senate Bill 649 (Hueso) Wireless Telecommunications Facilities ("SB 649") in 2017; AB 252 (Ridley -Thomas) Local government: taxation: prohibition: video streaming services ("AB 252") in 2017; and Senate Bill 827 (Wiener) Planning and Zoning: Transit -Rich Housing Bonus ("SB 827") in 2018. SB 649 would have applied to all telecommunications providers and the equipment they use, including "micro -wireless," "small cell," and "macro -towers," as well as a range of video and cable services. The bill would have allowed the use of "small cell" wireless 8 antennas and related equipment without a local discretionary permit in all zoning districts as a use by -right, subject only to an administrative permit. Additionally, SB 649 provided a de facto CEQA exemption for the installation of such facilities and precluded consideration by the public for the aesthetic, nuisance, and environmental impacts of these facilities. SB 649 would have also removed the ability for cities to obtain fair and reasonable compensation when authorizing the use of public property and rights of way from a "for profit" company for this type of use. SB 649 passed out of the State Assembly by a vote of 46-16-17 and out of the State Senate by a vote of 22-10-8 despite over 300 cities and 47 counties in California providing letters of opposition. Ultimately, Governor Brown vetoed the bill as he believed "that the interest which localities have in managing rights of way requires a more balanced solution than the one achieved in this bill." It is strongly believed that the issue of wireless telecommunications facilities is not over and it is anticipated that legislation will be introduced on this topic in January 2019. Another example of an incursion into local control was AB 252, which would have prohibited any tax on the sale or use of video streaming services, including sales and use taxes and utility user taxes. Over the last two decades, voters in 107 cities and 3 counties have adopted measures to modernize their Utility User Tax ("UUT") ordinances. Of these jurisdictions, 87 cities and 1 county approved ordinances to allow a UUT on video providers. Prior to its first Committee hearing, AB 252 received opposition letters from 37 cities, the League of California Cities, South Bay Council of Governments, California Contract Cities Association, and nine other organizations. This bill failed in the Assembly Revenue and Taxation Committee 8-0-2, which the author of the Committee chaired. More recently, SB 827 would have overridden local control on housing development that was within %2 mile of a major transit stop or 1/4 mile from a high -quality bus corridor as defined by the legislation with some limitations. On April 17, 2018, SB 827 failed in the Senate Transportation and Housing Committee 4-6-3 but was granted reconsideration. State legislators have indicated they will continue to introduce legislation that will override local zoning ordinances for the development of affordable housing in conjunction with mixed use and/or luxury condominium/apartment housing. These are just three examples of the increasing attempts by Sacramento to supersede local control. Presently, there are discussions occurring in Sacramento to ban cities from creating their own municipal broadband or to prohibit local ordinances over the regulation of shared mobility devices such as dockless electric scooters. These decisions should remain with each individual jurisdiction to decide based on the uniqueness of their community and the constituents that live in each city. Often fueled by the actions of special interest groups, Sacramento is continually attempting to overreach their authority with various incursions on local control. The desire in Sacramento to strip communities of their ability to make decisions over issues which should remain at the local level seems to intensify each state legislative cycle. Increasingly, legislation is being introduced with a "one -size -fits -all" approach which is detrimental in a 9 state with over 40 million residents that have extremely diverse communities from the desert to the sea, from the southern to the northern borders. Loren King in the book "Cities, Subsidiarity and Federalism" states, "Decisions should be made at the lowest feasible scale possible". The proposed resolution directs the League of California Cities to assess the increasing vulnerabilities to local authority, control and revenue. It also directs the League of California Cities to explore the preparation of a ballot measure and/or constitutional amendment which would aim to ensure that decisions are made as close to home as possible. Local government, when done right, is the best form of democracy precisely because it is closest to home. A ballot measure and/or constitutional amendment would provide the state's voters an opportunity to further strengthen local authority and maintain the role of local democracy to best preserve their local quality of life while still leaving the appropriate issues at the county, regional or state legislature depending on the topic. Any ballot measure and/or constitutional amendment should institutionalize the principle of subsidiarity, while encouraging inclusive regional cooperation that recognizes the diversity of California's many individual communities. The time has come to allow the residents of California's voters to decide if they prefer top down governance from Sacramento or bottom up governing from their own locally elected officials. 10 League of California Cities Staff Analysis on Resolution No. 1 Staff: Dan Carrigg, Johnnie Pina Committees: Governance, Transparency and Labor Relations Housing, Community & Economic Development Revenue & Taxation Transportation, Communication and Public Works Summary: This Resolution states that the League of California Cities should assess the vulnerabilities to local authority, control and revenue and explore the preparation of a ballot measure and or constitutional amendment that would give the state's voters an opportunity to further strengthen local authority and preserve the role of local democracy. Background: The City of Beverly Hills is sponsoring this resolution in reaction to their concerns over measures coming from the Legislature and the initiative process attempting to roll back local control and hinder cities from providing optimal services to their residents. As examples, the city cites the 2017-2018 legislative cycle, the Legislature introduced bills such as Senate Bill 649 (Hueso) Wireless Telecommunications Facilities, and AB 252 (Ridley - Thomas) proposing to prohibit taxes on video streaming services, and more recently Senate Bill 827 (Wiener) Planning and Zoning: Transit -Rich Housing. SB 649 was vetoed by the Governor and SB 827 died in policy committee, however if these measures had been signed into law they would have impinged on the ability of a local government to be responsive to the needs of their constituents. The city maintains that "local government, when done right, is the best form of democracy precisely because it is closest to home. A ballot measure and/or constitutional amendment would provide the state's voters an opportunity to further strengthen local authority and maintain the role of local democracy to best preserve their local quality of life while still leaving the appropriate issues at the county, regional or state legislature depending on the topic." Fiscal Impact: By requesting the League to "assess" vulnerabilities and "explore" the preparation of a ballot measure that would further protect local authority, there are no proposals to be quantified. But it is presumed that the League would not pursue a measure that did not have positive impacts of further protecting local authority. For the League as an organization, however, the fiscal impact of sponsoring a ballot measure can be very expensive. It can take several million dollars to qualify a measure via signature gathering, and much more to fund an effective campaign and overcome organized opposition. Comments: 1) Ballot measure advocacy is a settled aspect of California's political process. This year's November ballot is an example of that, with proposals ranging from dividing California 11 into three states, restoring rent control, repealing transportation funding, to funding housing and water bonds. Three other measures are not on the November ballot after their sponsors spent millions gathering signatures to qualify measures, then leveraged last-minute legislative deals in exchange for pulling them from the ballot. 2) Most major stakeholder organizations in Sacramento have realized that they cannot rely on legislative advocacy alone to protect their interests, but must develop and maintain the capacity to protect their interests in the ballot process as well. 3) The League has been engaged in ballot advocacy for nearly 20 years. In the early 2000's, city officials were angered by repeated state raids of local revenues. These concerns led to the League --for the first time in its then 100 -year history —developing a ballot advocacy infrastructure that included forming and fundraising for an issues political action committee (PAC), establishing a network of regional managers, and building a coalition with other organizations that ultimately led to the passage of Prop. lA of 2004. Over the years, the League's successful campaigns include the passage of Proposition 1A and Proposition 99 and the defeat of Propositions 90 and 98. a. Yes on Proposition 1A (2004) As a result of the passage of Prop 1A, local government revenues that otherwise would have been raided by the state legislature were kept in local coffers. This resulted in increased funding for public safety, health, libraries, parks and other locally delivered services. Proposition 1A PASSED WITH 83.7% OF THE VOTE. b. No on Proposition 90 (2006) Prop. 90 was a well -financed special interest -backed initiative that sought to eliminate most of local governments' land use decision making authority. Led by the League, the opposition educated voters on how this measure's far reaching provisions would have cost taxpayers billions of dollars by driving up the cost of infrastructure projects, prevented voters and state and local agencies from enacting environmental protections, jeopardized public safety services and more. Proposition 90 FAILED WITH 52.4% OF THE VOTERS VOTING NO. c. No on Proposition 98 Yes on Proposition 99 (2008) Given the hidden agendas within Prop 98, our message was not always an easy one to communicate to the electorate. The No on 98/ Yes on 99 campaign was able to educate voters on the important differences between both measures. As a result, important eminent domain reforms were enacted and both land use decision making and rent control were preserved within our communities. Proposition 98 FAILED WITH 61.6% OF THE VOTERS VOTING NO. Proposition 99 PASSED BY 61% OF THE VOTE. d. Yes on Proposition 22 (2010) As a result of the passage, local governments have been able to pay for infrastructure investment, create local jobs and avoid devastating cuts in our communities. Proposition 22 APPROVED BY 60.7% OF VOTERS. 12 4) While the League has been able to recently defeat several major legislative proposals aimed and undermining local authority, and avoid a battle over the Business Roundtable's measure in November due to the "soda tax" deal, the threats to local authority and revenue remain a constant concern. Other interest groups may be emboldened by some of the recent "deals" cut by ballot proponents and seek to implement similar strategies for the 2020 ballot. The next Governor may also have different philosophies then Governor Jerry Brown on "subsidiarity." 5) The League's President opted to send this resolution to four policy committees for several reasons: (a) the recent major threats to local control covered broad policy areas: telecom, land use, contracting, and revenue; and (b) having this issue vetted broadly within the League policy process will provide a better assessment of the depth of concern for the vulnerability to local control within the membership 6) If the membership chooses to approve this measure, it is strongly advisable to retain continued flexibility for the League to "assess" vulnerabilities and "explore" options. Any ballot initiative consideration must be approached very carefully by the organization. It is a difficult and very expensive endeavor that can have additional political ramifications. For 120 years the League's core mission has been to protect local control - - and it has gone to the ballot successfully before to do so -- but any such effort must be approached thoughtfully, prudently and cautiously. Existing League Policy: Related to this Resolution, existing policy provides: • The League of California Cities' Mission Statement is, "To expand and protect local control for cities through education and advocacy. To enhance the quality of life for all Californians" • The League of California Cities' Summary of Existing Policy and Guidelines states, "We Believe o Local self -governance is the cornerstone of democracy. o Our strength lies in the unity of our diverse communities of interest. o In the involvement of all stakeholders in establishing goals and in solving problems. o In conducting the business of government with openness, respect, and civility. o The spirit of public service is what builds communities. o Open decision -making that is of the highest ethical standards honors the public trust. o Cities are the economic engine of California. o The vitality of cities is dependent upon their fiscal stability and local autonomy. o The active participation of all city officials increases the League's effectiveness. o Focused advocacy and lobbying is most effective through partnerships and collaboration. o Well-informed city officials mean responsive, visionary leadership, and effective and efficient o city operations." • Click here to view the Summary of Existing Policy and Guiding Principles 2018. 13 Support: The following letters of concurrence were received: Steven Scharf, Cupertino City Council Member; Michael S. Goldman, Sunnyvale City Council; Lydia Kou, Palo Alto City Council Member; David Terrazas, Mayor of Santa Cruz; Peter Weiss, Mayor of Oceanside; Alan D. Wapner, Mayor pro Tem of Ontario; Patrick Furey, Mayor of Torrance; Lauren Meister, West Hollywood Council Member; Liz Reilly, Duarte Mayor Pro Tem; Bill Brand, Mayor of Redondo Beach; Sho Tay, Mayor of Arcadia; Emily Gabel-Luddy, Mayor of Burbank. 14 2. A RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES DECLARING ITS COMMITMENT TO SUPPORT THE REPEAL OF PREEMPTION IN CALIFORNIA FOOD AND AGRICULTURE CODE § 11501.1 THAT PREVENTS LOCAL GOVERNMENTS FROM REGULATING PESTICIDES Source: City of Malibu Concurrence of five or more cities/city officials: Cities: Agoura Hills; Calabasas; Davis; Menlo Park; Moorpark; Ojai; Oxnard; Richmond; West Hollywood Referred to: Environmental Quality WHEREAS, anticoagulant rodenticides are poisonous bait products that are poisoning 80 to 90% of predator wildlife in California. These poisons cause painful, internal hemorrhaging in non -target animals, including pets, that accidentally ingest the products. Approximately 10,000 children under the age of six are accidentally poisoned by anticoagulant rodenticides each year nationwide; and WHEREAS, in response to these harms, the California Department of Pesticide Regulation banned the consumer purchase and use of second -generation anticoagulant rodenticides in July 2014. Despite collecting data for almost four years after this ban, the Department of Fish and Wildlife found no evidence supporting a decrease in poisonings by anticoagulant rodenticides; and WHEREAS, the state of California currently only recognizes the harm posed by second - generation anticoagulant rodenticides, which are prohibited in state wildlife habitat areas but are still available for agricultural purposes and by certified applicators throughout the state of California; and WHEREAS, first -generation anticoagulant rodenticides are still available to the public and used throughout California without limitation; and WHEREAS, nonpoisonous rodent control methods, such as controlling trash, sealing buildings, setting traps, erecting raptor poles and owl boxes, and removing rodent nesting areas are also effective rodent control methods; and WHEREAS, the state of California preempts cities from regulating pesticides; and WHEREAS, many cities across California have passed resolutions restricting pesticide use on city property and have expressed the desire to ban the use of pesticides within their jurisdictions. NOW, THEREFORE, BE IT RESOLVED by the General Assembly of the League of California Cities, assembled in Long Beach, California on September 14, 2018, to do as follows: 1. Encourage the state of California to fund and sponsor further research into the negative impacts of anticoagulant rodenticides to determine whether the use of these products should be further restricted or banned statewide. 15 2. Direct the League of California Cities staff to consider creating a task force with other organizations and jointly commission a report on the unintended negative impact of anticoagulant rodenticides; 3. Encourage cities throughout California to eliminate use of anticoagulant rodenticides as part of their maintenance program in city -owned parks, lands, and facilities and to report on the effectiveness of other rodent control methods used in in their maintenance program; 4. Encourage property owners throughout California to eliminate use of anticoagulant rodenticides on their properties; 5. Encourage cities throughout California to join in these advocacy efforts to mitigate the unintended negative impacts of anticoagulant rodenticides; 6. Endorse a repeal of California Food and Agriculture Code § 11501.1 to end local preemption of regulating pesticides; and 7. Call for the Governor and the Legislature to work with the League of California Cities and other stakeholders to consider and implement this reform. 16 Background Information on Resolution Source: City of Malibu Background: A. Anticoagulant rodenticides are unnecessarily destructive and dangerous Anticoagulant rodenticides contain lethal agents that disrupt the normal blood clotting or coagulation process causing dosed rodents to die from uncontrolled bleeding or hemorrhaging. Deaths typically occur between four days and two weeks after rodents begin to feed on the bait. Animals commonly targeted by anticoagulant rodenticides include rats, mice, gophers and squirrels. Non -target predator wildlife victims, which are exposed to an 80-90% risk of poisoning, include owls, hawks, bobcats, bears, foxes, coyotes, and mountain lions. The endangered species at risk of poisoning include fishers, spotted owls, and San Joaquin foxes. The use of anticoagulant rodenticides not only harms rodents, but it commonly harms pets, such as dogs, cats, and bunnies, and other wildlife that mistakenly eat the bait through primary poisoning or that unknowingly consume animals that have ingested the anticoagulant rodenticide through secondary poisoning. Children also suffer poisoning by mistakenly ingesting anticoagulant rodenticides. California recognizes the grave harm that can be caused by anticoagulant rodenticides and has partially restricted access to second -generation anticoagulant rodenticides by the public: Because of documented hazards to wildlife, pets and children, the California Department of Pesticide Regulation has restricted public access to some of these materials in California. As of July 1, 2014, rodenticide products containing the active ingredients brodifacoum, bromadiolone, difethialone and difenacoum are only to be used by licensed applicators (professional exterminators).1 California has also prohibited the use of these ingredients in any "wildlife habitat area," which is defined as "any state park, state wildlife refuge, or state conservancy."2 The United State Environmental Protection Agency3 and the California Department of Pesticide Regulation4 have both documented in detail the damage to wildlife from second -generation anticoagulant rodenticides in support of the 2014 consumer ban on the purchase and use of the products. While first -generation anticoagulant rodenticides are less toxic, they are far more abundant due to their continued availability to all members of public.4 The California Department of Fish & Wildlife was tasked with collecting data on poisoning incidents to ascertain the effectiveness of the restrictions on second -generation anticoagulant rodenticides. After almost four years of collecting data, there was no evidence supporting a reduction in the number of poisonings. ' https://www.wildlife.ca.gov/living-with-wildlife/rodenticides. 2 Cal. Food and Agric. Code § 12978.7. 3 https://www.epa.gov/rodenticides/restrictions-rodenticide-products 4 https://www.cdpr.ca.gov/docs/registration/reevaluation/chemicals/brodifacoum final_assess.pdf 17 Recent studies by the University of California, Los Angeles and the National Park Service on bobcats have shown that first -generation anticoagulant rodenticide poisoning levels similar to the second -generation anticoagulant rodenticides poisoning levels.' A comprehensive study of 111 mountain lions in 37 California counties found first -generation anticoagulant rodenticides in the liver tissue of 81 mountain lions (73% of those studied) across 33 of the 37 counties, and second - generation anticoagulant rodenticides in 102 mountain lions (92% of those studied) across 35 of the 37 counties.6 First -generation anticoagulant rodenticides were identified as contributing to the poisoning of Griffith Park mountain lion, P-22, (who was rescued), and the deaths of Newbury Park mountain lion, P-34, and Verdugo Hills mountain lion, P-41. This data demonstrates the inadequacy of current legislative measures to ameliorate the documented problem caused by both second -generation and first -generation anticoagulant rodenticides. B. State law preempts general law cities from regulating the use of pesticides, including anticoagulant rodenticides A general law city may not enact local laws that conflict with general state law.7 Local legislation that conflicts with state law is void.8 A local law conflicts with state law if it (1) duplicates, (2) contradicts, or (3) enters a field that has been fully occupied by state law, whether expressly or by implication. A local law falling into any of these categories is "preempted" and is unenforceable. State law expressly bars local governments from regulating or prohibiting pesticide use. This bar is codified in the California Food and Agricultural Code § 11501.1(a): This division and Division 7 . . . are of statewide concern and occupy the whole field of regulation regarding the registration, sale, transportation, or use of pesticides to the exclusion of all local regulation. Except as otherwise specifically provided in this code, no ordinance or regulation of local government, including, but not limited to, an action by a local governmental agency or department, a county board of supervisors, or a city council, or a local regulation adopted by the use of an initiative measure, may prohibit or in any way attempt to regulate any matter relating to the registration, transportation, or use of pesticides, and any of these ordinances, laws or regulations are void and of no force or effect. State law also authorizes the state to take action against any local entity that promulgates an ordinance or regulation that violates § 11501.1(a).9 The statute was specifically adopted to overrule a 30 year old court decision in People v. County of Mendocino,10 which had held that a 5 L. E. K. Serieys, et al, "Anticoagulant rodenticides in urban bobcats: exposure, risk factors and potential effects based on a 16 -year study," Ecotoxicology (2015) 24:844-862. 6 J. Rudd, et al, "Prevalence of First -Generation and Second -Generation Rodenticide Exposure in California Mountain Lions," Proceeding of the 28th Vertebrate Pest Conference, February 2018. Cal. Const. art. XI § 7. 8 City of Riverside v. Inland Empire Patients Health and Wellness Center, Inc. (2013) 56 Cal. 4th 729, 743. 9 Cal. Food and Agric. Code § 11501.1, subd. (b). 10 People ex rel. Deukmejian v. County of Mendocino (1984) 36 Cal. 3d 476. 18 local regulation prohibiting aerial application of phenoxy herbicides was not then preempted by state or federal law.11 The use of pesticides is broadly regulated by state law. In the language of preemption law, the state "occupies the field," leaving no room for additional local law on the subject. Accordingly, a city's ban on the use of anticoagulant rodenticides would be unenforceable. C. California should repeal the preemption in Cal. Food and Agric. Code § 11501.1 to provide cities with the authority to decide how to regulate pesticides within their own jurisdictions based on local concerns The state of California should provide cities with the authority to regulate the use of pesticides in their own jurisdictions based on their own individual local needs. Recognizing that cities' power to "make and enforce within its limits all local, police, sanitary, and other ordinances and regulations" is presently preempted by the general laws of the state, cities throughout California request that the state provide cities with the authority to decide how to deal with rodents based on their land use. Depending on such land use, cities may decide to allow the use of nonpoisonous control methods, non -anticoagulant rodenticides, or anticoagulant rodenticides, if necessary. Nonpoisonous methods to control rodent pests, include sealing entrances to buildings, sanitizing property, removing rodent habitats, such as ivy or wood piles, setting traps, and erecting raptor poles or owl boxes. For example, a recent landmark study by Ventura County established that installing raptor poles for hawks and owls was more effective than anticoagulant rodenticides in reducing the damage to water control levees caused by ground squirrel burrows. Burrows decreased by 66% with the change.12 The ultimate goal is to allow cities to address their local concerns with the input of community members at open and public meetings. Presently, cities are unable to adequately address local concerns; they are limited to encouraging or discouraging behavior. D. Conclusion The negative effects from the use of anticoagulant rodenticides across California has garnered the interest of cities and community members to remedy the problem. By presenting this resolution to the League of California Cities, the City of Malibu hopes to organize support and gain interest at the state level to repeal the preemption in Cal. Food and Agric. Code § 11501.1 to provide cities with the authority to regulate pesticides based on individual, local concerns. 11 IT Corp. v. Solano County Bd. Of Supervisors (1991) 1 Ca1. 4th 81, fn. 9; Turner v. Chevron USA Inc., 2006 WL 1314013, fn. 14 (unpublished). 12 http://vcportal.ventura.org/BOS/District2/RaptorPilotStudy.pdf 19 League of California Cities Staff Analysis on Resolution No. 2 Staff: Erin Evans-Fudem Committee: Environmental Quality Summary: This resolution seeks to have the state and the League study the negative impacts of anticoagulant rodenticides and address the inability of cities to regulate the use of rodenticides and pesticides. Specifically related to anticoagulant rodenticides, the resolution would encourage the state to fund research into the negative impacts and a potential restriction or ban; direct the League to consider creating a task force to study and report on the unintended negative consequences; encourage cities and property owners to eliminate use; and encourage cities to join advocacy efforts. In addition, the resolution would direct the League to endorse repeal of a statute that preempts local regulation of pesticides. Background: The City of Malibu is sponsoring this resolution out of concern about the effect of a certain type of rodent control (anticoagulant rodenticides) has on other wildlife. According to the City, anticoagulant rodenticides disrupt the blood clotting process and therefore cause rodents to die from bleeding or hemorrhaging. This rodenticide is commonly used on rats, mice, gophers, and squirrels. Predator animals that eat rodents can be exposed to anticoagulant rodenticides if they consume animals that have eaten the bait. These animals include owls, hawks, bobcats, bears, foxes, coyotes, and mountain lions. Furthermore, pets can also be exposed to anticoagulant rodenticides if they eat the bait or consume animals that have eaten the bait. Some cities have passed "ceremonial resolutions" locally. For example, the City of Malibu has two ordinances in place to discontinue use of rodenticides and traps in city -owned parks, roads, and facilities, as well as encourage businesses and property owners not to use anticoagulant rodenticides on their property. Fiscal Impact: Costs to cities would include using alternative methods of rodent control and studying the efficacy. Since the resolution encourages, but does not mandate action by cities, city costs would be taken on voluntarily. Fiscal impact to the League would include costs associated with the task force, scientific research, and educating League staff and members. For the task force, the League may incur costs associated with staffing, convening, and educating a task force to study anticoagulant rodenticides, as well as the cost of writing a report. This could include a need for outside experts with knowledge of pesticides and their ecological impacts. League resources would also be utilized to support proposals to repeal the statute preempting local regulation of pesticides; however, this cost may be absorbed with existing staff resources. 20 Comments: Pesticides are regulated by federal and state governments. The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) reserves for the federal government authority over pesticide labeling. States can adopt stricter labeling requirements and can effectively ban sale and use of pesticides that do not meet state health or safety standards.' For 51 years, California has reserved regulation of pesticides for the state only, preempting local regulation.2 This preemption has been ratified and confirmed in subsequent court decisions and legislation. However, County Agricultural Commissioners work to enforce the state laws. Local governments may regulate or restrict pesticide use in their own operations, including use in municipal buildings or parks.34 Broad direction. This resolution would direct the League to take a position allowing broad local discretion over pesticide regulation in general. Because the regulation of anticoagulant rodenticides is largely based in science, additional or outside expertise may be needed to ensure full understanding of the science behind rodent control methods. The resolution itself is not limited to allowing local governments to regulate anticoagulant rodenticides, which this resolution otherwise targets. Rodent control methods. There are numerous methods of controlling rodents, including lethal traps, live traps, and poison baits. There are two generations of rodenticide poisons because after rodents became resistant to the first generation, the second was developed. The U.S. Environmental Protection Agency (U.S. EPA) provides the following information below related to the science and use of anticoagulant rodenticides: Most of the rodenticides used today are anticoagulant compounds that interfere with blood clotting and cause death from excessive bleeding. Deaths typically occur between four days and two weeks after rodents begin to feed on the bait. First -generation anticoagulants include the anticoagulants that were developed as rodenticides before 1970. These compounds are much more toxic when feeding occurs on several successive days rather than on one day only. Chlorpophacinone, diphacinone and warfarin are first -generation anticoagulants that are registered to control rats and mice in the United States. Second -generation anticoagulants were developed beginning in the 1970s to control rodents that are resistant to first -generation anticoagulants. Second -generation anticoagulants also are more likely than first -generation anticoagulants to be able to kill after a single night's feeding. These compounds kill over a similar course of time but tend to remain in animal tissues longer than do first -generation ones. These properties mean that second -generation products pose greater risks to nontarget species that might feed on bait only once or that might feed upon animals that have eaten the bait. Due to these ' California Department of Pesticide Regulation (CDPR), A Guide to Pesticide Regulation in California: 2017 Update, pg. 9, https://www.cdpr.ca.gov/docs/pressrls/dprguide/dprguide.pdf. 2 California Food and Agriculture Code § 11501.1 (1967). CDPR, A Guide to Pesticide Regulation in California: 2017 Update, pg. 9, https://www.cdpr.ca.gov/docs/pressrls/dprguide/dprguide.pdf. 4 County Agricultural Commissioners work with CDPR to enforce state laws. CDPR, A Guide to Pesticide Regulation in California: 2017 Update, pg. 13, https://www.cdpr.ca.gov/docs/pressrls/dprguide/dprguide.pdf. 21 risks, second -generation anticoagulant rodenticides no longer are registered for use in products geared toward consumers and are registered only for the commercial pest control and structural pest control markets. Second -generation anticoagulants registered in the United States include brodifacoum, bromadiolone, difenacoum, and difethialone. Other rodenticides that currently are registered to control mice include bromethalin, cholecalciferol and zinc phosphide. These compounds are not anticoagulants. Each is toxic in other ways.5 Legislative attempts to ban. Several legislative measures have been introduced to ban the use of certain anticoagulant rodenticides (AB 1687, Bloom, 2017. AB 2596, Bloom, 2016). However, neither of these measures were heard and failed to pass key legislative deadlines. Existing League Policy: The League does not have policy related to pesticides or rodenticides. Related to federal regulation, League policy states: • The League supports flexibility for state and local government to enact environmental and other standard or mandates that are stronger than the federal standards. However, the League reserves the right to question or oppose stronger standards on the merits. The League also opposes legislation that prohibits state and local governments from enacting stricter standards. Support: The following letters of concurrence were received: William Koehler, Mayor of Agoura Hills; Fred Gaines, Mayor of Calabasas; Brett Lee, Mayor Pro Tem of Davis; Catherine Carlton, Menlo Park City Council Member; Janice Parvin, Mayor of Moorpark; Suza Francina, Ojai City Council Member; Carmen Ramirez, Oxnard City Council Member; Tom Butt, Mayor of Richmond; Lindsey Horvath, West Hollywood City Council Member 5 U.S. EPA, Restrictions on Rodenticide Products, https://www.epa.gov/rodenticides/restrictions-rodenticide- products 22 LETTERS OF CONCURRENCE Resolution No. 1 Local Municipal Authority, Control and Revenue 23 City of Arcadia Office of the City Council Sho Tay Mayor April A. Verlato Mayor Pro 7em Peter M. Amundson Council Member Tom Beck Council Member Roger Chandler Council Member 240 West Huntington Drive Post Office Box 60021 Arcadia, CA 91066-6021 (626) 574-5403 City Hall (626) 446-5729 Fax www.ArcadiaCA.gov July 10, 2018 General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 SUBJECT: 2018 CONFERENCE RESOLUTION TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL AND REVENUE Dear Committee: As the Mayor of the City of Arcadia, I support the League of California Cities ("League") Annual Conference Resolution proposed by the City of Beverly Hills calling for the League to explore the preparation of a ballot measure and/or constitutional amendment that would provide the state's voters an opportunity to further strengthen local authority and preserve the role of local democracy. State legislation introduced in both 2017 and 2018 by the legislature has continually threatened to erode local control. Whether this was Senate Bill 649 (Hueso) Wireless Telecommunications Facilities or the more recently introduced Senate Bill 827 (Wiener) Planning and Zoning: Transit -Rich Housing Bonus that was defeated in Committee, legislatures are continually introducing proposals that impinge on the ability of a local government to institute discretionary legislation that is responsive to the needs of their constituents. More recently, a state ballot initiative was introduced that would have made increasing fees and passing taxes more onerous on local jurisdictions due to the interest of powerful interest groups. This interest group successfully negotiated an Assembly Bill that prohibits constituents in local jurisdictions from passing a soda tax for twelve years; trumping the will of the people should they wish to support such a measure. However, as a result the passage of that Assembly Bill, the state ballot initiative was pulled from the November 2018 ballot. These continual incursions into local control by the state legislature, and powerful interest groups, should be prohibited in areas where it is unwarranted and does not best serve the unique communities that make up the state of California, The passage of the proposed resolution by the City of Beverly Hills would provide direction to the League to pursue a ballot measure and/or constitutional amendment that would strengthen local democracy and authority. For these reasons, I strongly support this resolution. Mayor, City of Arcadia cc: City of Arcadia City Council Vice Mayor John Mirisch, City of Beverly Hills 24 CITY OF BURBANK 4, OFFICE OF THE IVIAYOR July 11, 2018 General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 SUBJECT: 2018 CONFERENCE RESOLUTION TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL AND REVENUE Dear Committee: As the Mayor of the City of Burbank, on my own behalf, I support the League of California Cities ("League") Annual Conference Resolution proposed by the City of Beverly Hills calling for the League to explore the preparation of a ballot measure and/or constitutional amendment that would provide the state's voters an opportunity to further strengthen local authority and preserve the role of local democracy. State legislation introduced in both 2017 and 2018 by the legislature has continually threatened to erode local control. Whether this was Senate Bill 649 (Hueso) Wireless Telecommunications Facilities or the more recently introduced Senate Bill 827 (Wiener) Planning and Zoning: Transit - Rich Housing Bonus that was defeated in Committee, legislatures are continually introducing proposals that impinge on the ability of a local government to institute discretionary legislation that is responsive to the needs of their constituents. More recently, a state ballot initiative was introduced that would have made increasing fees and passing taxes more onerous on local jurisdictions due to the interest of powerful interest groups. This interest group successfully negotiated an Assembly Bill that banned on constituents in local jurisdictions from passing a soda tax for twelve years; trumping the will of the people should they wish to support such a measure. However, as a result the passage of that Assembly Bill, the state ballot initiative was pulled from the November 2018 ballot. 275 E. Olive Avenue • P.Q. Box 6459 • Burbank, Califor 91510-6459 (818) 238-5751 • FAX (818) 238-5757 c.1 Emily Gabel-Luddy Mayor, City of Burbank These continual incursions into local control by the state legislature, and powerful interest groups, should be prohibited in areas where it is unwarranted and does not best serve the unique communities that make up the state of California. The passage of the proposed resolution by the City of Beverly Hills would provide direction to the League to pursue a ballot measure and/or constitutional amendment that would strengthen local democracy and authority. For these reasons I strongly support this resolution. Sincerely, Lttiur- cc: Vice Mayor John Mirisch, City of Beverly Hills Jennifer Quan, League Regional Public Affairs Manager (via email) 26 From: Steven Scharf <scharf.steven@gmail.com> Sent: Sunday, July 08, 2018 8:34 PM To: Cindy Owens Subject: Letter of Support for California League of Cities Resolution Dear Ms. Cowens, I was forwarded your email requesting support for a resolution in support of "the preparation of a ballot measure and/or state constitutional amendment that would strengthen local authority and preserve the role of local democracy at the local level as the state legislature is continually attempting to override the local authority of cities." Speaking only for myself, and not on behalf of the City of Cupertino or other Cupertino City Council Members, I hereby give my support for such a measure. You may use my name as a supporter. Sincerely, Steven Scharf Cupertino City Council Member City of 1600 Huntington Drive Duarte, CA 91010 I Bus. 626.357.7931 Fax 626.358.0018 I wvw.accessduarte.com July 10, 2018 General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 2018 CONFERENCE RESOLUTION TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL, AND REVENUE Dear Committee: Mayor John Fasana Mayor Pro Tern Liz Reilly Councilmembers Margaret E. Finlay Samuel Kang Tzeitel Paras-Caracci City Manager Darrell J. George The City of Duarte supports the League of California Cities ("League") Annual Conference Resolution proposed by the City of Beverly Hills calling for the League to explore the preparation of a ballot measure that would provide the State's voters an opportunity to further strengthen local authority and preserve the role of local democracy. State legislation introduced in both 2017 and 2018 by the legislature has continually threatened to erode local control. Whether this was Senate Bill 649 (Hueso) (Wireless Telecommunications Facilities) or the more recently introduced Senate Bill 827 (Wiener) (Planning and Zoning: Transit -Rich Housing Bonus) that was defeated in Committee, legislatures are continually introducing proposals that impinge on the ability of a local government to institute discretionary legislation that is responsive to the needs of their constituents. More recently, a State ballot initiative was introduced that would have made increasing fees and passing taxes more onerous on local jurisdictions due to the interest of powerful interest groups. This interest group successfully negotiated an Assembly Bill that banned constituents in local jurisdictions from passing a soda tax for twelve years, trumping the will of the people should they wish to support such a measure. However, as a result of the passage of that Assembly Bill, the State ballot initiative was pulled from the November 2018 ballot. These continual incursions into local control by the State legislature and powerful interest groups should be prohibited in areas where it is unwarranted, and does not best serve the unique communities that make up the State of California. The passage of the proposed resolution by the City of Beverly Hills would provide direction to the League to pursue a ballot measure and/or constitutional amendment that would strengthen local democracy and authority. For these reasons, the City of Duarte strongly supports this resolution. Sincerely, Liz Reilly Mayor Pro Tem cc: Vice Mayor John Mirisch, City of Beverly Hills 28 CITY OF OCEANSIDE MAYOR PETER WEISS July 10, 2018 General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 COUNCIL MEMBERS JACK FELLER JEROME KERN CHARLES "CHUCK" LOWERY ESTHER SANCHEZ SUBJECT: 2018 CONFERENCE RESOLUTION TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL AND REVENUE Dear Committee: I'm writing on behalf of the City of Oceanside to support the League of California Cities' ("League") Annual Conference Resolution proposed by the City of Beverly Hills calling for the League to explore the preparation of a ballot measure and/or constitutional amendment that would provide the State's voters an opportunity to further strengthen local authority and preserve the role of local democracy. State legislation introduced in both 2017 and 2018 by the legislature has continually threatened to erode local control. Whether this was Senate Bill 649 (Hueso) Wireless Telecommunications Facilities, or the more recently introduced Senate Bill 827 (Wiener) Planning and Zoning: Transit -Rich Housing Bonus that was defeated in Committee, legislatures are continually introducing proposals that impinge on the ability of a local government to institute discretionary legislation that is responsive to the needs of their constituents. More recently, a state ballot initiative was introduced that would have made increasing fees and passing taxes more onerous on local jurisdictions due to the interest of powerful interest groups. This interest group successfully negotiated an Assembly Bill that banned constituents in local jurisdictions from passing a soda tax for twelve years, trumping the will of the people should they wish to support such a measure. However, as a result the passage of that Assembly Bill, the state ballot initiative was pulled from the November 2018 ballot. These continual incursions into local control by the state legislature and powerful interest groups should be prohibited in areas where it is unwarranted and does not best serve the unique communities that make up the state of California. CIVIC CENTER • 300 NORTH COAST HIGHWAY • QCEANSIDE, CA 92054-2885 • TELEPHONE (760) 435-4500 The passage of the proposed resolution by the City of Beverly Hills would provide direction to the League to pursue a ballot measure and/or constitutional amendment that would strengthen local democracy and authority. For these reasons, I strongly support this resolution. Sincerely, JCS, hk,, Peter Weiss MAYOR cc: Vice Mayor John Mirisch, City of Beverly Hills 30 I T Y 303 EAST "B" STREET, CIVIC CENTER PAUL S. LEON MAYOR ALAN D. WAPNER MAYOR PRO TEM JIM W. BOWMAN DEBRA DORST-PORADA RUBEN VALENCIA COUNCIL MEMBERS General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Re: 4C)INF 'UP A1ZI0 ONTARIO CALIFORNIA4;0kPoRATED 7- 1s9/ 91764-4105 (909) 395-2000 July 10, 2018 FAX (909) 395-2070 SCOTT OCHOA CITY MANAGER SHEILA MAUTZ CITY CLERK JAMES R. MILHISER TREASURER 2018 CONFERENCE RESOLUTION TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL AND REVENUE Dear Committee Members, As Mayor pro Tem for the City of Ontario, I support the Annual Conference Resolution proposed by the City of Beverly Hills calling for the League of California Cities to explore the preparation of a ballot measure and/or constitutional amendment that would provide the state' s voters an opportunity to further strengthen local authority and preserve the role of local democracy. In recent years, the state legislature has aggressively ramped up its efforts to wrestle authority away from local government. In the past session alone, we saw egregious and unprecedented attacks on local control with several bills that strike at the heart of local government. These bills, including Senate Bill 649 (Hueso — Wireless Telecommunications Facilities) and Senate Bill 827 (Wiener — Planning and Zoning: Transit -Rich Housing Bonus) show a blatant contempt for the ability of local governments to meet the needs of the local community. Unfortunately, these bills are likely only the beginning. As such, there is a need for a ballot measure and/or constitutional amendment to clearly enshrine the role of local government in regulating local issues. The passage of the proposed resolution by the City of Beverly Hills recognizes that it is local government, not the state legislature, that best understands the local community and is therefore best -situated to regulate and respond to local issues. For these reasons, I strongly support this resolution. lan D. Wapner Mayor pro Tem — City of Ontario cc: Vice Mayor John Mirisch, City of Beverly Hills www.ontarioca.gov 31 e Printed on recycled paper. DocuSign Envelope ID: 48D4AEF4-48B3-442A-A3E1-12DFA5002A14 City of Palo Alto July 11, 2018 General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Office of the Mayor and City Council Re: EXPLORING A RESOLUTION TO RESPOND TO INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY Dear Committee Members: As one Councilmember of the City of Palo Alto, and in my individual capacity and not on behalf of the Council as a body, or the City, I write to support the League of California Cities ("League") Annual Conference Resolution proposed by the City of Beverly Hills. This resolution asks the League to explore the preparation of a ballot measure and/or constitutional amendment that would provide voters an opportunity to further strengthen local authority and preserve the role of local democracy. If the resolution passes, I encourage the League to ensure any potential measure includes both charter and general law cities. State legislation introduced in both 2017 and 2018 has continually threatened to erode local control. Whether this was SB 649 (Hueso) Wireless Telecommunications Facilities or the more recently introduced SB 827 (Wiener) Planning and Zoning: Transit -Rich Housing Bonus that was defeated in Committee, legislatures are continually introducing proposals that impinge on the ability of a local government to institute discretionary legislation that is responsive to the needs of their constituents. More recently, a state ballot initiative was introduced that would have made increasing fees and passing taxes more onerous on local jurisdictions due to the interest of powerful interest groups. This interest group successfully negotiated an Assembly Bill that banned on constituents in local jurisdictions from passing a soda tax for twelve years; trumping the will of the people should they wish to support such a measure. However, as a result the passage of that Assembly Bill, the state ballot initiative was pulled from the November 2018 ballot. These continual incursions into local control by state legislature, and powerful interest groups, should be prohibited in areas where it is unwarranted and does not best serve the unique communities that make up the state of California. The passage of the proposed resolution by the City of Beverly Hills would provide direction to the League to pursue a ballot measure and/or constitutional amendment that would strengthen local democracy and authority. For these reasons I support this resolution. Sincerely, Focue.ar»ae, Lydia Kou Councilmember, City of Palo Alto cc: Palo Alto City Council Mayor John Mirisch, City of Beverly Hills James Keene, Palo Alto City Manager 32 P.O. Box 10250 Palo Alto, CA 94303 650.329.2477 650.328.3631 fax Printed with soy -based inks on 100% recycled paper processed without chlorine. redondo B E A C H Bill Brand Mayor July 9, 2018 415 Diamond Street, P.O. BOX 270 Redondo Beach, California 90277-0270 www.redondo.org General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 tel 310 372-1171 ext. 2260 fax 310 374-2039 SUBJECT: 2018 CONFERENCE RESOLUTION TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL AND REVENUE Dear Committee: As Mayor of Redondo Beach, I support the League of California Cities Annual Conference Resolution proposed by the City of Beverly Hills calling for the LCC to explore the preparation of a ballot measure and/or constitutional amendment that would provide the State's voters an opportunity to further strengthen local authority and preserve the role of local democracy. State legislation introduced in both 2017 and 2018 by the Legislature has continually threatened to erode local control. Whether this was Senate Bill 649 (Hueso) Wireless Telecommunications Facilities, or the more recently introduced Senate Bill 827 (Wiener) Planning and Zoning: Transit -Rich Housing Bonus that was defeated in Committee, The State Legislature is continuing to introduce proposals that impinge on the ability of local governments to institute discretionary legislation that is responsive to the needs of their communities. These continual incursions into local control by the State Legislature, and powerful special interest groups, should be prohibited in areas where it is unwarranted and does not best serve the unique communities that make up the State of California. The passage of the proposed resolution by the City of Beverly Hills would provide direction to the League to pursue a ballot measure and/or constitutional amendment that would strengthen local democracy and authority. For these reasons I strongly support this resolution. Sincerely, Bill Brand cc: Vice Mayor John Mirisch, City of Beverly Hills 33 CITY OF S11 Y J_1 1 CRUZ MAYOR AND CITY COUNCIL 809 Center Street, Room 10, Santa Cruz, CA 95060 • (831) 420-5020 • Fax: (831) 420-5011 • citycouncilOt cityofsantacruz.com July 9, 2018 General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: 2018 CONFERENCE RESOLUTION TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL, AND REVENUE Dear General Resolutions Committee Members: As Mayor of the City of Santa Cruz, 1 support the League of California Cities ("League") Annual Conference Resolution proposed by the City of Beverly Hills calling for the League to explore the preparation of a ballot measure andlor constitutional amendment that would provide the State's voters an opportunity to further strengthen local authority and preserve the role of local democracy. State legislation introduced in both 2017 and 2018 by the Legislature has continually threatened to erode local control. Whether this was Senate Bill 649 (Hueso) Wireless Telecommunications Facilities or the more recently introduced Senate Bill 827 (Wiener) Planning and Zoning: Transit -Rich Housing Bonus that was defeated in Committee, legislatures are continually introducing proposals that impinge on the ability of a local government to institute discretionary legislation that is responsive to the needs of their constituents. More recently, a State ballot initiative was introduced that would have made increasing fees and passing taxes more onerous on local jurisdictions due to the interest of powerful interest groups. This interest group successfully negotiated an Assembly Bill that banned constituents of local jurisdictions from passing a soda tax for twelve years, trumping the will of the people should they wish to support such a measure. However, as a result the passage of that Assembly Bill, the State ballot initiative was pulled from the November 2018 Ballot. These continual incursions into local control by the State Legislature and powerful interest groups should be prohibited in areas where it is unwarranted and does not best serve the unique communities that make up the State of California. The passage of the proposed resolution by the City of Beverly Hills would provide direction to the League to pursue a ballot measure andlor constitutional amendment that would strengthen local democracy and authority. For these reasons I strongly support this resolution. Sincerely, David Terrazas Mayor cc: Vice Mayor John Mirisch, City of Beverly Hills P:\CMADIWord(Wpfiles)1SUZANNEU\Mayordt 2017-20181Letters\LOCC34 - Annual Conference Resolution.docx From: Michael Goldman <miklg@yahoo.com> Sent: Saturday, July 07, 2018 4:37 PM To: Cindy Owens Subject: Letter of Support for California League of Cities Resolution Dear Ms. Cowens, I was forwarded your email requesting support for a resolution in support of "the preparation of a ballot measure and/or state constitutional amendment that would strengthen local authority and preserve the role of local democracy at the local level as the state legislature is continually attempting to override the local authority of cities." Speaking solely on my own behalf, I hereby give my whole -hearted support for such a measure. The essence of democracy is the control by the people of their community. As public servants, we elected officials serve the democratically expressed will of the public. Sincerely, Michael S. Goldman Sunnyvale City Council, Seat 7 35 a C t PATRICK J. FUREY MAYOR CITY OF TORRANCE General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 July 5, 2018 SUBJECT: 2018 CONFERENCE RESOLUTION TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL AND REVENUE Dear Committee: As Mayor of the City of Torrance, I support the League of California Cities ("League") Annual Conference Resolution proposed by the City of Beverly Hills calling for the League to explore the preparation of a ballot measure that would provide the state's voters an opportunity to further strengthen local authority and preserve the role of local democracy. State legislation introduced in both 2017 and 2018 by the legislature has continually threatened to erode local control. Whether this was Senate Bill 649 (Hueso) Wireless Telecommunications Facilities or the more recently introduced Senate Bill 827 (Wiener) Planning and Zoning: Transit - Rich Housing Bonus that was defeated in Committee, legislatures are continually introducing proposals that impinge on the ability of a local government to institute discretionary legislation that is responsive to the needs of their constituents. More recently, a state ballot initiative was introduced that would have made increasing fees and passing taxes more onerous on local jurisdictions due to the interest of powerful interest groups. This interest group successfully negotiated an Assembly Bill that banned on constituents in local jurisdictions from passing a soda tax for twelve years; trumping the will of the people should they wish to support such a measure. However, as a result the passage of that Assembly Bill, the state ballot initiative was pulled from the November 2018 ballot. These continually incursions into local control by the state legislature, and powerful interest groups, should be prohibited in areas where it is unwarranted and does not best serve the unique communities that make up the state of California. The passage of the proposed resolution by the City of Beverly Hills would provide direction to the League to pursue a ballot measure and/or constitutional amendment that would strengthen local democracy and authority. For these reasons I strongly support this resolution. cc: Vice Mayor John Mirisch, City of Beverly Hills 3031 Torrance Boulevard • Torrance, California 90503 • Telephone 310/618-2801 Printed on Recycled .. MMMMMM MN 1E■ 1 ■■ ■uu ■... ■•■ City of west Hollywood Celdnmie 1984 CITYOF VIEST HOLLYWOOD CITY HALL 8300 SANTA MONICA BLVD. W BST HOLLYWOOD. CA 90069-6216 16 TEL: 023) ii4/4-(4 if1 FAX: {323) TTY: For hearing impaired 31 x44-6496 CITY COUNCIL JOHN J. DLIRAN Mayor JOHN D'AMICO Mayor Pro Tempore JOHN HEILMAN Coi m•ilme,nber LINDSi Y P. HORVATH Colou'ilruerrrber LAUREN MEISTER Cnrrrrrihnemher - July 11, 2018 General Resolutions Committee League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 SUBJECT: 2018 CONFERENCE RESOLUTION TO RESPOND TO THE INCREASING VULNERABILITIES TO LOCAL MUNICIPAL AUTHORITY, CONTROL AND REVENUE Dear Committee: As a Councilmember of the City of West Hollywood, I support the League of California Cities ("League") Annual Conference Resolution proposed by the City of Beverly Hills calling for the League to explore the preparation of a ballot measure and/or constitutional amendment that would provide the state's voters an opportunity to further strengthen local authority and preserve the role of local democracy. During the current 2017-2018 regular session of the California Legislature, legislators introduced several pieces of legislation that have attempted to erode local control. Whether this was Senate Bill (56) 649 (Hueso) Wireless Telecommunications Facilities, or more recently SB 827 (Wiener) Planning and Zoning: Transit -Rich Housing Bonus, which was defeated in Committee, legislators continue to introduce proposals that impinge on the ability of local governments to self -determine. Another good example of how the Legislature takes actions that are detrimental to local governments' control is the legislative compromise between the Legislature and beverages' manufacturers who agreed to withdraw their ballot initiative in exchange for the approval of Assembly Bill (AB) 1838 (Committee on Budget): Local government: taxation: prohibition: groceries, (Chapter 61, Statutes of 2016). As you know, AB 1838 basically prohibited the adoption of a local "soda tax" by any municipality for the next twelve years. WEST 1111,011000 37 Orly N WM *tyw.1 C10 ..aega11 CITYD' WET I1OL{Y DDD General Resolutions Committee League of California Cities July 11, 2018 Page two of two These incursions into local control by the Legislature, and powerful interest groups, should be prohibited in areas where it is unwarranted and does not best serve the unique communities that make up the state of California. The passage of the proposed resolution by the City of Beverly Hills would provide direction to the League to pursue a ballot measure and/or constitutional amendment that would strengthen local democracy and authority. For these reasons I strongly support this resolution. Sincerely, Lauren Meister, Councilrnember cc: Vice Mayor John Mirisch, City of Beverly Hills WEST TIILLEWIn 38 LETTERS OF CONCURRENCE Resolution No. 2 Repeal Preemption of Regulating Pesticides 39 CITY OF AGG URA HILLS "Gateway to the Santa Monica Mountains National Recreation Area" July 10, 2018 The Honorable Rich Garbarino League of California Cities 1400 K Street Sacramento, CA 95814 Re: RESOLUTION OF LEAGUE OF CALIFORNIA CITIES DECLARING ITS CONTRACT TO SUPPORT THE REPEAL OF PREEMPTION IN CALIFORNIA FOOD AND AGRICULTURE CODE §11501.1 THAT PREVENTS LOCAL GOVERNMENTS FROM REGULATING PESTICIDES Dear President Garbarino: The City of Agoura Hills supports the proposed above referenced resolution that supports the repeal of preemption in California Food and Agriculture Code §111501.1 that prevents local Governments from regulating pesticides. Accordingly, we concur in the submission of the resolution for consideration by the League of Cities General Assembly at its annual meeting on September 14, 2018. As the gateway to the Santa Monica Mountains we have been witness to the harmful effects of anticoagulant rodenticides on wildlife in our community, and surrounding areas. For this reason, the City of Agoura Hills is supportive of this resolution, and requests the league's support. WILLIAM D. KOEHLER Mayor - City of Agoura Hills cc: Ms. Meg Desmond - mdesmond@cacities.orq Ms. Mary Linden - mlinden@malibucity.orq Mr. Greg Ramirez - gramirez( ci.agoura-hills.ca.us 30001 Ladyface Court, Agoura Hills, CA 91301-2583 • Telephone (818) 597-7300 • Fax (818) 597-7352 e-mail: ciao �a-hills.ca.as Illarli°1111 CITY of CALABASAS FRED GAINES Mayor July 9, 2018 ORIGINAL BY U.S. MAIL VIA EMAIL mdesmond@cacities.org The Honorable Rich Garbarino, President League of California Cities 1400 K Street Sacramento, CA 95814 Re: RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES DECLARING ITS COMMITMENT TO SUPPORT THE REPEAL OF PREEMPTION IN CALIFORNIA FOOD AND AGRICULTURE CODE §11501.1 THAT PREVENTS LOCAL GOVERNMENTS FROM REGULATING PESTICIDES Dear President Garbarino: The City of Calabasas supports the proposed resolution to support the repeal of the preemption clause in California Food and Agriculture Code Section 11501.1 regarding pesticide use and regulation so that each city in the State of California is able to decide how to regulate pesticides within their own jurisdiction to adequately address local concerns. Accordingly, we concur in the submission by the City of Malibu of the above -referenced resolution for consideration by the League of Cities General Assembly at its annual meeting on September 14, 2018. The City of Calabasas has identified the devastating effect of anticoagulent rodenticides on wildlife in our community and on the ecosystem in our native Santa Monica Mountains. While our City has adopted resolutions and implemented programs to discourage the use of the pesticides by our residents and businesses, we are limited by State law from taking more effective actions. 100 Civic Center Way Calabasas, CA 91302 (818) 224-1600 Fax (818) 2 7324 The Honorable Rich Garbarino, President League of California Cities July 9, 2018 Page 2 The City of Calabasas is in strong support of providing cities across the State of California with the authority to regulate pesticides based on local concerns in the communities and supports the proposed Resolution. Sincerely, cc: Mary Linden (MLinden@malibucity.org) Fred G Mayor 42 California Davis July 13, 2018 The Honorable Rich Garbarino, President League of California Cities 1400 K Street Sacramento, California 95814 RE: A Resolution of the League of California Cities Declaring Its Commitment to Support the Repeal of Preemption in California Food and Agriculture Code § 11501.1 That Prevents Local Governments from Regulating Pesticides Dear President Garbarino: Anticoagulant rodenticides poison unintended targets, including predator wildlife in California and pets that ingest the products. These poisons cause painful, internal hemorrhaging in non - target animals. In addition, approximately 10,000 children under the age of six are accidentally poisoned each year nationwide. The California Depaiinient of Pesticide Regulation banned the consumer purchase and use of second -generation anticoagulant rodenticides in July 2014. Despite collecting data for almost four years after this ban, the Department of Fish and Wildlife found no evidence supporting a decrease in poisonings by anticoagulant rodenticides due to this partial restriction of the supply. Currently, State law preempts general law cities from regulating the use of pesticides, including anticoagulant rodenticides. In my official capacity as a city councilmember I support the proposed resolution to repeal the preemptive clause in California Food and Agriculture Code Section 11501.1 to provide cities across the state of California with the authority to regulate pesticides based on the local concerns in their communities. The State of California should provide cities with the authority to regulate the use of pesticides in their own jurisdictions based on their own individual local needs. I concur with the submission of this resolution at the League of California Cities General Assembly at its annual meeting in Long Beach on September 14, 2018. Sincerely, Brett Lee Mayor Pro Tem 43 July 5, 2018 The Honorable Rich Garbarino, President League of California Cities 1400 K Street Sacramento, California 95814 RE: RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES DECLARING ITS COMMITMENT TO SUPPORT THE REPEAL OF PREEMPTION IN CALIFORNIA FOOD AND AGRICULTURE CODE § 11501.1 THAT PREVENTS LOCAL GOVERNMENTS FROM REGULATING PESTICIDES Dear President Garbarino, Anticoagulant rodenticides are products that are poisoning 80% to 90% of predator wildlife in our cities and throughout California. These poisons cause painful, internal hemorrhaging in non -target animals - including pets - that ingest the products either directly or from consuming poisoned rodents. In addition, approximately 10,000 children under the age of six are accidentally poisoned each year nationwide. My own mother lost a dearly loved pet dog, who was poisoned when it ate a poisoned rat! The California Department of Pesticide Regulation banned the consumer purchase and use of second -generation anticoagulant rodenticides in July 2014. Despite collecting data for almost four years after this ban, the Department of Fish and Wildlife found no evidence supporting a decrease in poisonings by anticoagulant rodenticides due to this partial restriction of the supply. State law now preempts general law cities from regulating the use of pesticides, including anticoagulant rodenticides. I support the proposed resolution to repeal the preemptive clause in California Food and Agriculture Code Section 11501.1 to provide cities across the state of California with the authority to regulate pesticides based on the local concerns in their communities. The State of California should provide cities with the authority to regulate the use of pesticides in their own jurisdictions based on their own individual local needs. I concur with the submission of this resolution at the League of California Cities General Assembly at its annual meeting in Long Beach on September 14, 2018. Sincerely, Catherine Carlton Environmental Committee Vice Chair for the League of California Cities 44 July 12, 2018 CITY OF MOORPARK 799 Moorpark Avenue, Moorpark, California 93021 Main City Phone Number (805) 517-6200 Fax (805) 532-2205 The Honorable Rich Garbarino, President League of California Cities 1400 K Street Sacramento, CA 95814 moorpark@moorparkca.gov RE: RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES DECLARING ITS COMMITMENT TO SUPPORT THE REPEAL OF PREEMPTION IN CALIFORNIA FOOD AND AGRICULTURE CODE § 11501.1 THAT PREVENTS LOCAL GOVERNMENTS FROM REGULATING PESTICIDES Dear President Garbarino: The City of Moorpark supports the above referenced resolution being brought to a vote at the upcoming League of California Cities Conference on September 14, 2018. As a community surrounded by the beauty of the Santa Monica Mountains and its wildlife, the City adopted a resolution in 2013 urging Moorpark residents and businesses to not use anticoagulant rodenticides in Moorpark. In 2014, the City applauded passage of AB 2657, which removed many second generation anticoagulant rodenticides from the state. However, as we are all unfortunately aware, scientific research continues to find anticoagulant rodenticides in non -target animals, including the natural predators that help regulate rodent populations and endangered species throughout California. Accordingly, the City has supported subsequent legislative proposals to ban all anticoagulant rodenticides statewide, including AB 2422, which is currently stalled in the state legislature. The City further believes that local governments should have the opportunity to regulate pesticide usage within their jurisdictions if the communities they represent desire to do so. Therefore, the City supports the above referenced resolution being brought to a vote. Yours truly, Janice Parvin Mayor JANICE S. PARVIN Mayor ROSEANN MIKOS, Ph.D. DAVID POLLOCK KEN SIMONS Councilmember Coyigilmember Councilmember MARK VAN DAM Councilmember Resolution of the League of California Cities re: Anticoagulant Rodenticides Page 2 cc: City Council City Manager Assistant City Manager Assistant to the City Manager League of California Cities, Meg Desmond (mdesmond@cacities.org) City of Malibu, Mary Linden (MLinden@malibucity.org) Councilmember Suza Francina City of Ojai 401 South Ventura Street, Ojai, CA 93023 Email: Suzaojaicitycouncil@gmail.com Cell: 805 603 8635 July 9, 2018 The Honorable Rich Garbarino, President League of California Cities 1400 K Street Sacramento, California 95814 RE: A RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES DECLARING ITS COMMITMENT TO SUPPORT THE REPEAL OF PREEMPTION IN CALIFORNIA FOOD AND AGRICULTURE CODE § 11501.1 THAT PREVENTS LOCAL GOVERNMENTS FROM REGULATING PESTICIDES Dear President Garbarino, Anticoagulant rodenticides are products that are poisoning 80 to 90% of predator wildlife in California. These poisons cause painful, internal hemorrhaging in non -target animals including pets that ingest the products either directly or from consuming poisoned rodents. In addition, approximately 10,000 children under the age of six are accidentally poisoned each year nationwide. The California Department of Pesticide Regulation banned the consumer purchase and use of second -generation anticoagulant rodenticides in July 2014. Despite collecting data for almost four years after this ban, the Department of Fish and Wildlife found no evidence supporting a decrease in poisonings by anticoagulant rodenticides due to this partial restriction of the supply. Currently, State law preempts general law cities from regulating the use of pesticides, including anticoagulant rodenticides. In my official capacity as a city councilmember I support the proposed resolution to repeal the preemptive clause in California Food and Agriculture Code Section 11501.1 to provide cities across the state of California with the authority to regulate pesticides based on the local concerns in their communities. The State of California should provide cities with the authority to regulate the use of pesticides in their own jurisdictions based on their own individual local needs. I concur with the submission of this resolution at the League of California Cities General Assembly at its annual meeting in Long Beach on September 14, 2018. Sincerely, Suza Francina Councilmember, City of Ojai 47 July 12, 2018 The Honorable Rich Garbarino, President League of California Cities 1400 K Street Sacramento, California 95814 RE: A RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES DECLARING ITS COMMITMENT TO SUPPORT THE REPEAL OF PREEMPTION IN CALIFORNIA FOOD AND AGRICULTURE CODE § 11501.1 THAT PREVENTS LOCAL GOVERNMENTS FROM REGULATING PESTICIDES Dear President Garbarino, I write as one council member of the City of Oxnard regarding the state law that preempts general law cities such as ours from regulating the use of pesticides. Our city is heavily impacted with environmental burdens associated with pesticide use as well as other industrial toxins, which affect the health of the people, wildlife and our environment. Oxnard residents are requesting that the use of pesticides in our public spaces be curtailed and restricted. This would include anticoagulant rodenticides, products that are poisoning 80 to 90% of predator wildlife in California. These poisons cause painful, internal hemorrhaging in non -target animals including pets that ingest the products either directly or from consuming poisoned rodents. In addition, approximately 10,000 children under the age of six are accidentally poisoned each year nationwide. The California Department of Pesticide Regulation banned the consumer purchase and use of second -generation anticoagulant rodenticides in July 2014. Despite collecting data for almost four years after this ban, the Department of Fish and Wildlife found no evidence supporting a decrease in poisonings by anticoagulant rodenticides due to this partial restriction of the supply. Currently, State law preempts general law cities from regulating the use of pesticides, including anticoagulant rodenticides. In my official capacity as a city councilmember I support the proposed resolution to repeal the preemptive clause in California Food and Agriculture Code Section 11501.1 to provide cities across the state of California with the authority to regulate pesticides based on the local concerns in their communities. The State of California should provide cities with the authority to regulate the use of pesticides in their own jurisdictions based on their own individual local needs. 48 Letter to President Garbarino July 12, 2018 Page two I concur with the submission of this resolution at the League of California Cities General Assembly at its annual meeting in Long Beach on September 14, 2018. Thank you very much for your attention to this. Sincerely, Carmen Ramirez 49 July 6, 2018 8,/ o Horne x t Oar/writ. The Honorable Rich Garbarino President, League of California Cities 1400 K Street Sacramento, California 95814 Re: In Support to Repeal the Preemption in California Food and Agriculture Code § 11501.1 that Prevents Local Governments from regulating pesticides Dear President Garbarino, Anticoagulant rodenticides poison 80% to 90% of predator wildlife in California. These poisons cause painful, internal hemorrhaging in non -target animals including pets that ingest the products either directly or from consuming poisoned rodents. In addition, approximately 10,000 children under the age of six are accidentally poisoned each year nationwide. The California Department of Pesticide Regulation banned the consumer purchase and use of second - generation anticoagulant rodenticides in July 2014. Currently, State law preempts general law cities from regulating the use of pesticides, including anticoagulant rodenticides, which has minimized the impact of the State's ban. Despite collecting data for almost four years, the Department of Fish and Wildlife found no evidence supporting a decrease in poisonings by anticoagulant rodenticides due to the partial restriction of the supply. As a member of the League of California Cities' Environmental Quality Policy Committee, I support the proposed resolution to repeal the preemptive clause in California Food and Agriculture Code Section 11501.1 to provide cities across the state of California with the authority to regulate pesticides based on the local concerns in their communities. The State of California should provide cities with the authority to regulate the use of pesticides in their own jurisdictions based on their own individual local needs. I concur with the submission of this resolution at the League of California Cities General Assembly at its annual meeting in Long Beach on September 14, 2018. Sincerely, Mayor Tom Butt Richmond, California 50 ... 1 ■■ ... ..R. ... City of Wes! Hollywood California 1994 CITYOF WEST HOLLYWOOD CrrY HALL 8300 SANTA MONICA BLVD. WEST IInLLYwooD, CA 90069-6216 TEL: (323) 848-6460 FAX: 023) 848-6562 TTY: For hearing impaired (323) 648-6496 CITY COUNCIL JOIIN J. DURAN Manor JOHN D'AMICO Mayor Pro Tempore JOHN HER MAN Councilmeanber LINDSEY P. HORVATH Councibneanber LAUREN MEISTER Couacilmernber July 13, 2018 The Honorable Rich Garbarino, President League of California Cities 1400 K Street Sacramento, CA 95814 RE: A Resolution of the League of California Cities Declaring its Commitment to Support the Repeal of Preemption in California Food and Agriculture Code § 11501.1 that Prevents Local Governments from Regulating Pesticides Dear President Garbarino, am writing to express my support for the above -mentioned resolution to repeal the preemptive clause in California Food and Agriculture Code Section 11501.1 in order to give cities across California the authority to regulate and/or prohibit the use of pesticides in their local communities. I concur with the submission of the proposed resolution to the League of California Cities General Assembly annual meeting on September 14, 2018. Granting local governments the ability to self -regulate pesticide use better enables cities to protect the health and safety of the public, animals, and the environment. Given that no two cities are identical, local governments must have the power to take a systematic approach to pesticide use and regulation that fits the specific needs of their city. Repealing this section of the code will provide cities the opportunity to act in the best interest of their jurisdiction to set a standard of regulation that offers comprehensive protection, better formulated to protect a community's individual needs. The City of West Hollywood is in strong support of environmentally -sensitive pest management practices that minimize risk to people, companion and wild animals, resources, and the environment. As the proposed resolution explains, anticoagulant rodenticides have devastating effects on wildlife. The City of West Hollywood has implemented an Integrated Pest Management Program that supports environmentally - sensitive pest management while protecting the health and safety of the public. This policy is in compliance with the State and Federal regulations while catering to and prioritizing the needs of the City of West Hollywood. Sir}ergly, Lindsey Horvath Councilmember cc: Meg Desmond, League of CA Cities Councilmember Laura Z. Rosenthal, City of Malibu Elizabeth Shavelson, Assistant to the City Manager, City of Malibu Mary Linden, Executive Assistant, City of Malibu �I 1 WEST' -; WOLIA000 51 CITY OF PALO ALTO 16 City of Palo Alto (ID # 9589) City Council Staff Report Report Type: State/Federal Legislation Update/Action Meeting Date: 9/10/2018 Summary Title: Review of local and state measures on the November 2018 ballot Title: Review and Potential Adoption of Positions on State and Local Measures on the November 6, 2018 Ballot From: City Manager Lead Department: City Manager Recommendation Staff recommends that Council review and, as appropriate, take positions on State and local measures on the November 6, 2018 ballot. City Councils may take a position on ballot measures in a public meeting; use of government resources or funds for other types of advocacy or campaigning is prohibited.' Discussion On November 6, 2018, Palo Alto voters will be presented with the following measures: • Eleven statewide measures; • One Santa Clara County measure; • Two City measures; and • Two Palo Alto Unified School District measures. Below, staff summarizes three statewide measures that appear to be particularly impactful to the City of Palo Alto, and provides suggested positions. Additionally, staff provides a summary of the two local measures, with a link to the City Attorney's analysis of each. A complete list of the statewide, County, City of Palo Alto and Palo Alto School District measures can be found at Attachment A. The Council may take positions on any of the measures that will appear on the ballot in Palo Alto. 1 See The Institute for Local Government's Ballot Measures and Public Agencies document, citing Vargas v. City of Salinas: Public agencies "taking a position on a ballot measure in an open and public meeting where all perspectives may be shared is permissible." (Page 2) City of Palo Alto Page 1 STATE BALLOT MEASURES WITH A POTENTIAL IMPACT TO PALO ALTO Prop 3: Water Infrastructure and Watershed Conservation Bond Initiative Ballot summary • Authorizes over $8 billion in state general obligation bonds for various infrastructure projects related to safe drinking water, watershed and fisheries improvements, habitat protection, groundwater sustainability and storage, and more. • Most of the money will be distributed through grants; priority is given to disadvantaged communities. Summary of the fiscal impact, from the State's Legislative Analyst's Office • Savings to local governments, likely averaging a couple hundred million dollars annually over the next few decades. • Increased state costs to repay bonds averaging about $430 million per year over the next 40 years. The League of California Cities supports this measure, as does the California Municipal Utilities Association, of which the City is a member. The California League of Women Voters opposes. The League of Women Voters notes that while it supports the use of long-term debt to finance capital projects, they believe (in part) that this measure shifts the cost for water from the end users to taxpayers and does not provide sufficient project oversight. Recommended Council position: Support. If passed, Bay Area water agencies will be eligible for millions of dollars of funding for projects such as wastewater recycling, flood control reservoir repair, storm water management, and more. The City should be able to seek grant funding for our water -related infrastructure projects. Lastly, Council has 2018 legislative priorities related to this measure, including: • Improving San Francisquito Creek, including seeking grant funding • Protecting, seeking and/or increasing funding for projects, programs and services • Promoting, among other items, the flexible use of resources to support a healthy watershed Prop 6: 2017 "Gas tax" repeal and voter approval for future gas and vehicle taxes Ballot summary • Repeals a 2017 transportation law's tax and fee provisions that pay for repairs and improvements to local roads, state highways, and public transportation. • Requires the Legislature to submit any measure enacting specified taxes or fees on gas or diesel fuel, or on the privilege to operate a vehicle on public highways, to the electorate for approval City of Palo Alto Page 2 Summary of the fiscal impact, from the State's Legislative Analyst's Office • Reduced ongoing state revenues of $5.1 billion from the elimination of fuel and vehicle taxes passed by the Legislature. These revenues mainly would have paid for highway and road maintenance and repairs, as well as transit programs. • The requirement that voters approve new or increased fuel and vehicle taxes passed by the Legislature in the future could result in lower revenues from such taxes than otherwise would have been available. The League of California Cities and the California League of Women Voters both oppose. The League of Cities notes that passage would eliminate funding for more than 6,500 bridge and road, transportation, and public transit improvement projects currently underway. Recommended Council position: Oppose. In the 2017 bill appropriating money to transportation infrastructure projects, funds were set aside specifically for maintenance of state highways and for cities and counties. Passage of this measure eliminates the funding and, as noted above, will stop existing and future projects, including the various highway 101 improvement projects currently in the pre -construction phase. Prop 10: Expands local governments' authority to enact rent control on residential property Ballot summary • Repeals the Costa -Hawkins Rental Housing Act, the state law that, among other provisions, limits local rent control laws. • Allows cities to adopt rent -control restrictions. • Requires that rent control laws allow landlords a fair rate of return. Summary of the fiscal impact, from the State's Legislative Analyst's Office • Passing the measure has no fiscal effect, as it simply repeals a state law • If communities respond to this measure by expanding their rent control laws it could lead to several economic effects. The most likely effects are: o To avoid rent regulation, some landlords would sell their rental housing to new owners who would live there. o The value of rental housing would decline because potential landlords would not want to pay as much for these properties. o Some renters would spend less on rent and some landlords would receive less rental income. o Some renters would move less often. Recommended Council position: Support. Passage only allows cities like Palo Alto to create local laws; there is no mandate. And Council has a legislative priority of protecting and increasing local government discretion, which is the aim of this measure. City of Palo Alto Page 3 Palo Alto City ballot measures Measure E: Transient occupancy tax Through a City ordinance, increases the transient occupancy tax paid for by hotels, motels, and short-term rental guests by 1.5% to provide funding for vital City services. Estimated to raise approximately $2.55 million annually. This measure was placed on the ballot by the City Council. The City Attorney's impartial analysis is here. Recommended Council position: Support. This measure is sponsored by the City. Measure F: Health Care Would amend the City's municipal code to regulate and limit the amount hospitals, clinics, and other health care providers may charge patients and insurers, excluding government payers. This measure was placed on the ballot through the initiative process. The City Attorney's impartial analysis is here. Recommended Council position: Oppose. Given the anticipated substantial program costs and absence of City expertise in this area, staff recommends Council approve an oppose position. Resource Impact There is no resource impact associated with this action, in that voting on the recommendations will not appropriate funds, require operational or policy changes, or mandate action. The potential fiscal impact associated with each proposition is noted above. Environmental Review The Council's adoption of this item is not a project requiring California Environmental Quality Act review, because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment. Attachments: • Attachment A: State, County, City and School measures City of Palo Alto Page 4 STATE MEASURES Proposition 1 Authorizes Bonds to Fund Specified Housing Assistance Programs. Veterans and Affordable Housing Bond Act of 2018. Authorizes the sale of $4 billion in bonds to finance existing housing programs, as well as infrastructure work and grants to match a local housing trust fund. One -quarter of this $4 billion would help veterans purchase farms, homes and mobile homes. Proposition 2 Authorizes Bonds to Fund Existing Housing Program for Individuals with Mental Illness. No Place Like Home Act of 2018. Would free up $2 billion in bonds to pay to build housing that includes mental health services for chronically homeless people. Proposition 3 Authorizes Bonds to Fund Projects for Water Supply and Quality, Watershed, Fish, Wildlife, Water Conveyance, and Groundwater Sustainability and Storage. Initiative Statute. Please see the Staff Report for more information. Proposition 4 Authorizes Bonds Funding Construction at Hospitals Providing Children's Health Care. Initiative Statute.(PDF) Would approve $1.5 billion of bonds to build, expand, renovate and equip qualifying children's hospitals. Proposition 5 Changes Requirements for Certain Property Owners to Transfer their Property Tax Base to Replacement Property. Initiative Constitutional Amendment and Statute. Grants a property tax break to property owners who are over 55 years old or severely disabled. Proposition 6 Eliminates Certain Road Repair and Transportation Funding. Requires Certain Fuel Taxes and Vehicle Fees be Approved by The Electorate. Initiative Constitutional Amendment. Please see the Staff Report for more information. Proposition 7 Conforms California Daylight Saving Time to Federal Law. Allows Legislature to Change Daylight Saving Time Period. Legislative Statute. Allows the Legislature to decide how the state's time should be set. Proposition 8 Regulates Amounts Outpatient Kidney Dialysis Clinics Charge for Dialysis Treatment. Initiative Statute. Cap how much outpatient kidney dialysis clinics may charge patients. Also prohibits clinics from discriminating against patients based on their method of payment. Proposition 9 On July 18, 2018, Proposition 9 was removed from the ballot by order of the California Supreme Court. (PDF) Proposition 10 Expands Local Governments' Authority to Enact Rent Control on Residential Property. Initiative Statute. Please see the Staff Report for more information. Proposition 11 Requires Private -Sector Emergency Ambulance Employees to Remain On -Call During Work Breaks. Eliminates Certain Employer Liability. Initiative Statute. Requires ambulance workers at for-profit medical -response companies to be on -call during meal and rest breaks. Proposition 12 Establishes New Standards for Confinement of Specified Farm Animals; Bans Sale of Noncomplying Products. Initiative Statute. Bans the sale of meat derived from animals and their food products that are confined within certain areas. LOCAL MEASURES MEASURE A County of Santa Clara Sales Tax Majority Vote Without increasing current taxes, to fund local priorities such as: • law enforcement and public safety; • trauma and emergency care; • affordable housing; • supportive services for the homeless; • transit for seniors and the disabled; • children and family services; • agricultural preservation; and • mental health services, shall the County of Santa Clara continue its existing one -eighth cent sales tax on an ongoing basis, estimated to raise $50,000,000 annually, with annual public reports for fiscal accountability? Funds will be used for County purposes. MEASURE E City of Palo Alto Transient Occupancy Tax Majority Vote To provide funding for vital City services such as ensuring modern, stable 911 emergency communications, earthquake safe fire stations and emergency command center; improving pedestrian and bicyclist safety; ensuring safe routes to schools; maintaining City streets and sidewalks; and other city services, shall the City of Palo Alto adopt an ordinance increasing the transient occupancy tax paid by hotel, motel, short-term rental guests by 1.5%, providing approximately $2.55 million annually until ended by voters, subject to annual audits? MEASURE F City of Palo Alto Health Care Measure Majority Vote Shall the Palo Alto Municipal Code be amended to regulate and limit the amount that hospitals, medical clinics and other health care providers in Palo Alto may charge patients or other individuals, primary insurers, secondary insurers, and other payers, excluding government payers? MEASURE Y Palo Alto Unified School District Term Limits Majority Vote Shall the Members of the Palo Alto Unified School District Board of Education be limited to two consecutive terms of office? MEASURE Z Palo Alto Unified School District School Bond 55% Vote To provide safe/modern schools; upgrade aging classrooms, libraries, science labs, school facilities; improve accessibility for students with disabilities; enhance student safety/security by upgrading seismic safety, fire alarms, door locks, emergency communication; provide classrooms/labs supporting science, technology, engineering, arts programs, shall Palo Alto Unified School District issue $460,000,000 in bonds at legal rates, levy approximately $39.40 per $100,000 of assessed value, generating approximately $29,500,000 annually for 28 years, with independent oversight and all funds benefitting local schools? CITY OF PALO ALTO 16 TO: HONORABLE CITY COUNCIL FROM: JAMES KEENE, CITY MANAGER DATE: SEPTEMBER 10, 2018 SUBJECT: AGENDA ITEM NUMBER 16 - REVIEW AND POTENTIAL ADOPTION OF POSITIONS ON STATE AND LOCAL MEASURES ON THE NOVEMBER 6, 2018 BALLOT 1. Proposition 10: Staff withdraws the support recommendation on Prop. 10. The original recommendation was based on our general guidelines related to local control. The issues raised by the measure though are various and complex. We would note that the League of California Cities has not taken a position on the measure; that it could be argued that Costa -Hawkins originally corrected some unintended consequences of then - existing rent control; and that the implications of this new measure may have unintended consequences, which staff has not been able to fully explore. Staff makes no recommendation and would suggest Council discussion and deliberation prior to any other course of action. 2. Measure F: Health Care. The Council had indicated interest in City Staff looking at the detailed impacts of the proposal on the City. The complex implications of this measure are such that we were not able to design and undertake that detailed analysis. We simply do not have the capacity to have effectively done so in the timeframe we had and given the existing demands on our staff. Our recommendation remains: Oppose. Given the anticipated substantial program costs and absence of City expertise in this area, staff recommends Council approve an oppose position. Heather Dauler Intergovernmental Affairs Officer s Keene City Manager 1 of 1 CITY OF PALO ALTO CITY OF PALO ALTO OFFICE OF THE CITY CLERK September 10, 2018 The Honorable City Council Palo Alto, California Conflict of Interest Code Biennial Notice ATTACHMENTS: • Attachment A: 2018 Local Agency Biennial Notice (PDF) • Attachment B: Notice 2018 (DOC) Department Head: Beth Minor, City Clerk Page 2 DocuSign Envelope ID: 5346B745-4C67-498C-8D92-AC963AFDABOD 2018 Local Agency Biennial Notice Name of Agency: City of Palo Alto g Y� City Clerk's Office, 250 Hamilton Avenue, Palo Alto, CA 94301 Mailing Address: Beth Minor (650) 329-2379 Contact Person: Phone No. beth.minor@cityofpaloalto.org city.clerk@cityofpaloalto.org Email: Alternate Email: Accurate disclosure is essential to monitor whether officials have conflicts of interest and to help ensure public trust in government. The biennial review examines current programs to ensure that the agency's code includes disclosure by those agency officials who make or participate in making governmental decisions. This agency has reviewed its conflict of interest code and has determined that (check one BOX): 21 An amendment is required. The following amendments are necessary: (Check all that apply.) • Include new positions • Revise disclosure categories • Revise the titles of existing positions • Delete titles of positions that have been abolished and/or positions that no longer make or participate in making governmental decisions O Other (describe) ❑ The code is currently under review by the code reviewing body. ❑ No amendment is required. (If your code is over five years old, amendments may be necessary.) Verification (to be completed if no amendment is required) This agency's code accurately designates all positions that make or participate in the making of governmental decisions. The disclosure assigned to those positions accurately requires that all investments, business positions, interests in real property, and sources of income that may foreseeably be affected materially by the decisions made by those holding designated positions are reported. The code includes all other provisions required by Government Code Section 87302. gal N e 7/19/2018 Signature of Chief Executive Officer Date All agencies must complete and return this notice regardless of how recently your code was approved or amended. Please return this notice no later than October 1, 2018, or by the date specified by your agency, if earlier, to: (PLACE RETURN ADDRESS OF CODE REVIEWING BODY HERE) PLEASE DO NOT RETURN THIS FORM TO THE FPPC. www.fppc.ca.gov FPPC Advice: advice@fppc.ca.gov (866.275.3772) Page 1 of 1 Docu i SECURED Certificate Of Completion Envelope Id: 5346B7454C67498C8D92AC963AFDABOD Subject: Please DocuSign: 2018 Local Agency Biennial Notice - UNSIGNED.pdf Source Envelope: Document Pages: 1 Signatures: 1 Certificate Pages: 1 Initials: 0 AutoNav: Enabled Envelopeld Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) Status: Completed Envelope Originator: David Carnahan 250 Hamilton Ave Palo Alto , CA 94301 david.carnahan@cityofpaloalto.org IP Address: 12.220.157.20 Record Tracking Status: Original Holder: David Carnahan 7/19/2018 3:39:24 PM david.carnahan@cityofpaloalto.org Location: DocuSign Signer Events Signature Timestamp Beth Minor Beth.minor@cityofpaloalto.org City Clerk City of Palo Alto Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign t-occu8ipne4 by: $a M4.04 —2?523n7DR804D7 Using IP Address: 97.84.70.59 Signed using mobile Sent: 7/19/2018 3:39:59 PM Viewed: 7/19/2018 5:33:19 PM Signed: 7/19/2018 5:33:34 PM In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Certified Delivered Signing Complete Completed Hashed/Encrypted Security Checked Security Checked Security Checked 7/19/2018 3:39:59 PM 7/19/2018 5:33:19 PM 7/19/2018 5:33:34 PM 7/19/2018 5:33:34 PM Payment Events Status Timestamps r � CITY OF PALO ALTO NOTICE OF INTENTION TO AMEND THE CITY OF PALO ALTO CONFLICT OF INTEREST CODE NOTICE IS HEREBY GIVEN that the Council of City of Palo Alto intends to adopt or amend a conflict -of -interest code pursuant to Government Code Section 87302, the code will designate employees who must disclose certain investments, income, interests in real property, and business positions, and who must disqualify themselves from making or participating in the making of governmental decisions affecting those interests. A written comment period has been established commencing on September 10, 2018 and terminating on November 19, 2018. Any interested person may present written comments concerning the proposed code no later than November 19, 2018 to the City of Palo Alto, 250 Hamilton Avenue, Palo Alto, CA 94301. No public hearing on this matter will be held unless any interested person or his or her representative requests a public hearing no later than 15 days prior to the close of the written comment period. The City of Palo Alto has prepared a written explanation of the reasons for the designations and the disclosure responsibilities and has available all of the information upon which its proposal is based. A conflict of interest code designates those employees, members, officers, or consultants who make or participate in the making of decisions which may affect financial interests and who must disclose those interests on financial disclosure statements. A copy of the proposed conflict of interest code will be available in the City Clerk's office on September 10, 2018, for inspection during normal business hours. Copies of the proposed code and all of the information upon which it is based may be obtained from the City of Palo Alto, 250 Hamilton Avenue, Palo Alto, CA 94301. Any inquiries concerning the proposed code should be directed to the City Clerk's Office at 250 Hamilton Avenue, Palo Alto, CA 94301, City.Clerk@cityofpaloalto.com, 650-329-2571. BETH D. MINOR City Clerk CITY OF PALO ALTO City of Palo Alto (ID # 9519) City Council Staff Report Report Type: Informational Report Meeting Date: 9/10/2018 Summary Title: Investment Activity Report Title: City of Palo Alto Investment Activity Report for the Fourth Quarter, Fiscal Year 2018 From: City Manager Lead Department: Administrative Services Background The purpose of this report is to inform Council of the City's investment portfolio status as of the end of the fourth quarter; ending June 30, 2018. The City's investment policy requires that staff report quarterly to Council on the City's portfolio composition compared to Council -adopted policy, portfolio performance, and other key investment and cash flow information. Sale of Investments Prior to Maturity Staff forecast both short-term and long-term cash needs and ladders the investments accordingly so there is enough cash on hand or maturing investments to meet the forecasted liquidity needs. In late fourth quarter (Q4) of Fiscal Year 2018, due to significant increased infrastructure investments spending and electric utilities commodity purchases, staff needed to sell investments prior to maturity. The regular warrant (Accounts Payable) payments in Q4 increased, over the prior year, by $16.3 million or 51.7 percent, attributable to payments for infrastructure projects like the upgrade downtown improvements and sanitary sewer rehabilitation, Fire Station 3 replacement, Page Mill Road Expressway intersection improvement, water main replacement, Wastewater Treatment sludge dewatering and loadout facility construction, Airport's apron reconstruction, and capital contributions to Avenidas, Inc. and Friends of the Palo Alto Jr. Museum. In addition, electric commodity purchases in Q4 increased by $8.4 million or 32.1 percent over the prior year. Since 2017 was a wet year the City received more (cheaper) hydro power while in 2018 rain fall was normal -to -slightly -dry resulting in less hydro power so there was a need to use (more expensive) electric power sources. The electric volume usage was flat during this period. Though increases in these expenditures were anticipated, the extraordinary magnitude of the increases occurring over a very short period was greater than expected. As a result, a one-time sale of $12 million (par value) in securities was done with the City Manager's and the Acting Chief Financial Officers approval in July 2018. Since all of these securities had a market value greater than the par value, a principal gain of $248 thousand was realized. City of Palo Alto Page 1 Additional security sales are not anticipated. In order to prevent this from happening again, the cash on hand is being increased and deeper outreach to departments that manager major capital projects are being made so unusual expenditure spikes can be anticipated in a timely manner and addressed. Discussion The City's investment portfolio is detailed in Attachment B. It is grouped by investment type and includes the investment issuer, date of maturity, current market value, the book and face (par) value, and the weighted average maturity of each type of investment and of the entire portfolio. The par value of the City's portfolio is $522.3 million; in comparison, last quarter it was $531.4 million. The decline in the portfolio of $9.1 million since the last quarter results from timing of cash flows, higher level of capital infrastructure spending, and higher electrical commodity costs. Contributing factors include timing and seasonality of payroll periods, for example fourth quarter had seven payrolls versus the six in the prior quarter. The higher outlay was partially offset with not having to pay the bi-weekly pensions to the Public Employers' Retirement System (PERS) because the annual employer contribution of $22.1 million was paid in July 2017, property tax receipts, and special assessments for University Avenue Parking and General Obligation (Library) bonds. By prepaying PERS instead of making payments with each payroll period, the City expects savings of $0.8 million in PERS payments; however, the savings will be offset by the loss of approximately $0.2 million in interest income. This results in net citywide savings of $0.6 million. The saving is a consequence of PERS' ability to earn interest earlier and at a higher rate than the City could realize. Property taxes are primarily paid around December/January and April/May. The portfolio consists of $27.7 million in liquid accounts and $494.6 million in U. S. government treasury investments, agency securities, bonds of State of California local government agencies, bonds of some of the fifty United States, medium -term corporate notes, and certificates of deposit. The $494.6 million includes $127.1 million in investments maturing in less than two years, comprising 25.7 percent of the City's investment in notes and securities. The investment policy requires that at least $50 million be maintained in securities maturing in less than two years. The current market value of the portfolio is 97.7 percent of the book value. The market value of securities fluctuates, depending on how interest rates perform. When interest rates decrease, the market value of the securities in the City's portfolio will likely increase; likewise, when interest rates increase, the market value of the securities will likely decrease. Understanding and showing market values is not only a reporting requirement, but essential to knowing the principal risks in actively buying and selling securities. It is important to note, however, that the City's practice is to buy and hold investments until they mature so changes in market price do not affect the City's investment principal. The market valuation is provided by City of Palo Alto Page 2 Union Bank of California, which is the City's safekeeping agent. The average life to maturity of the investment portfolio is 3.83 years compared to 3.96 years last quarter. Investments Made During the Fourth Quarter During the fourth quarter, $32.0 million of government agency securities with an average yield of 1.2% percent matured. During the same period, government securities totaling $3.7 million with an average yield of 3.2% percent were purchased. The expectation is interest rates and City's portfolio's average yield will continue to gradually rise. The City's short-term money market and pool account increased by $19.2 million compared to the third quarter. Investment staff continually monitors the City's short-term cash flow needs and adjusts liquid funds to meet them. Availability of Funds for the Next Six Months Normally, the flow of revenues from the City's utility billings and General Fund sources is sufficient to provide funds for ongoing expenditures in those respective funds. Projections indicate receipts will be $257.7 million and expenditures will be $265.0 million over the next six months, indicating an overall decline in the portfolio of $7.3 million. The expected decline is attributable to pre -paying a portion of the Fiscal Year 2019 Public Employers' Retirement System's (PERS) employer contribution of $25.9 million, representing the actuarial determined contribution (ADC) payment for FY 2019. By prepaying PERS instead of making payments with each payroll period, the City is expected to save $0.94 million in PERS payment; however, the savings will be offset by the loss of approximately $0.27 million in interest income. This results in net citywide savings of $0.67 million. The savings is a consequence of PERS' ability to earn interest earlier and at a higher rate than the City could realize. Without this prepayment, the portfolio would have increased by $18.5 million. As of June 30, 2018, the City had $27.7 million deposited in the Local Agency Investment Fund (LAIF) and a money market account that could be withdrawn on a daily basis. In addition, investments totaling $18.0 million will mature between July 1, 2018 and December 31, 2018. As already mentioned, to due the extraordinary capital and electrical commodity costs, it was necessary to sell $12 million in investment securities to meet July's liquidity needs. On the basis of the above projections and sale of the $12 million in investments, staff is confident that the City will have more than sufficient funds or liquidity to meet expenditure requirements for the next six months. Compliance with City Investment Policy During the fourth quarter, staff complied with all aspects of the investment policy. Attachment C lists the major restrictions in the City's investment policy compared with the portfolio's actual performance. Investment Yields Interest income on an accrual basis for the fourth quarter was $2.9 million. As of June 30, 2018, the yield to maturity of the City's portfolio was 2.20 percent. The rising interest rate is City of Palo Alto Page 3 expected to gradually increase the portfolio's yields. The City's portfolio yield of 2.20 percent compares to LAIF's average yield for the quarter of 1.76 percent and an average yield on the two-year and five-year Treasury bonds during the fourth quarter of approximately 2.48 percent and 2.77 percent, respectively. For the past decade, the City's portfolio yield has outperformed the two and five year Treasury bond rates. With the recent rapid Treasury interest rate rise that is no longer the case; this is an expected occurrence. As the City's laddered portfolio investments matures in the next year or two and is reinvested in higher yielding securities, the City's portfolio yield is expected to again outperform these Treasury interest rates. Yield Trends The Federal Open Market Committee (FOMC) raised the federal funds and discount rates to 1.75 and 2.50 percent in June 2018, respectively. In the last twelve month, both rates have risen by 0.75 percent though at its August 2018 meeting the rates remained unchanged from June. The FOMC has upgraded its assessment of the economy to "strong" versus "solid". Inflation and unemployment remains low. Business fixed investment spending has improved strongly. The FOMC expects future rate increase to be gradual and dependent on the economic outlook. Though the continued expectation is rates will rise, factors that could keep a lid on rate increases include: low inflation, weak wage growth, and domestic and global economic uncertainties. Funds Held by the City or Managed Under Contract Attachment A is a consolidated report of all City investment funds, including those not held directly in the investment portfolio. These include cash in the City's regular bank account with US Bank and Wells Fargo. (A description of the City's banking relationships can be found in City Council Staff Report ID # 7858.) The bond proceeds, reserves, and debt service payments being held by the City's fiscal agents are subject to the requirements of the underlying debt indenture. The trustees for the bond funds are U.S. Bank and California Asset Management Program (CAMP). Bond funds with U.S. Bank are invested in federal agency and money market mutual funds that consist exclusively of U.S. Treasury securities. Bond funds in CAMP are invested in banker's acceptance notes, certificates of deposit, commercial paper, federal agency securities, and repurchase agreements. The most recent data on funds held by the fiscal agent is as of June 30, 2018. Fiscal Impact This is an information report with no fiscal impact. Environmental Review This information report is not a project under the California Environmental Quality Act; therefore, an environmental review is not required. Attachments: • Attachment A: Consolidated Report of Cash Management • Attachment B: Investment Portfolio • Attachment C: Investment Policy Compliance City of Palo Alto Page 4 Attachment A Consolidated Report of Cash Management City of Palo Alto Cash and Investments Fourth Quarter, Fiscal Year 2017-18 (Unaudited) Book Value Market Value City Investment Portfolio (see Attachment B) $ 526,839,894 $ 514,920,282 Other Funds Held by the City Cash with Wells Fargo Bank (includes general and imprest accounts) Cash with US Bank (includes general and imprest accounts) Petty/Working Cash Total - Other Funds Held By City Funds Under Management of Third Party Trustees * (Debt Service Proceeds) 1,997,630 1,997,630 9,088,300 9,088,300 12,578 12,578 11,098,508 11,098,508 US Bank Trust Services ** 1995 Utility Revenue Bonds Debt Service Fund 18 18 1999 Utility Revenue Bonds Debt Service Fund 2002 Downtown Parking Impvt. (Taxable) Certificates of Participation Reserve Fund 2009 Water Revenue Bonds (Build America Bonds) Project, Debt Service, Reserve, Cost of Issuance Funds 2011 Utility Revenue Refunding Bonds Debt Service, Reserve, and Cost of Issuance Funds California Asset Management Program (CAMP) *** 2012 University Ave. Parking Refunding Bonds Reserve Fund 2013 General Obligation (Library) Bond Project Fund Total Under Trustee Management GRAND TOTAL 220 220 297 297 2,566,718 2,566,718 1,444,687 1,444,687 2,593,674 2,593,674 620,375 620,375 7,225,988 $ 545,164,390 7,225,988 $ 533,244,779 * These funds are subject to the requirements of the underlying debt indenture. ** U.S. Bank investments are in money market mutual funds that exclusively invest in U.S. Treasury securities. *** CAMP investments are in money market mutual fund which invest in bankers acceptance, certificate of deposit, commercial paper, federal agency securities, and repurchase agreements. CUSIP Investment # Issuer City of Palo Alto Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Purchase Date Book Value Par Value City of Palo Alto Administration Svcs. Dept. 250 Hamilton Ave., 4th Floor Palo Alto, CA 94301 (650)329-2362 Current YTM YTM Maturity Days To Market Value Rate 360 365 Date Maturity Managed Pool Accounts SYS158 158 SYS159 159 Fidelity Investments 07/01/2015 Local Agency Investment Fund 07/01/2015 Subtotal and Average 3,005,251.35 24,693,234.38 3,005,251.35 24,693,234.38 27,698,485.73 27,698,485.73 3,005,251.35 24,632,439.66 27,637,691.01 Negotiable CD's 02600ADE4 01748DAW6 02082CBG4 025140BC7 02554BCE9 02772JAC4 029733BX9 02587CAC4 06610RAM1 065847DH5 06246PBP9 06610TDB8 080515AT6 066851SG2 06607ABD2 88241TBM1 061785CM1 062649ZV3 35907XCL9 063615AX6 03753XAN0 05581WNY7 05580AJK1 08173QBR6 06644QAA9 06652CEY3 Run Date: 08/07/2018 - 18:54 1476 NCD 1844 NCD 1525 NCD 1692 NCD 1371 NCD 1766 NCD 1805 NCD 1333 NCD 1776 NCD 1696 NCD 1821 NCD 1421 NCD 1280 NCD 1377 NCD 1477 NCD 1796 NCD 1396 NCD 1302 NCD 1498 NCD 1472 NCD 1693 NCD 1783 NCD 1807 NCD 1680 NCD 1767 NCD 1380 NCD American Federal Bank Allegiance Bank - Texas Alpine Bank American City Bank American Eagle Bank American National Bank American State Bank OSCE American Express Centurion Bk Bankers Bank Bank of Wisconsin Dells Bank of Grove Bankers Bank of the West Belmont Savings Bank Bar Harbor Bank & Trust Bank Champaign Texas Exchange Bank Bank of Deerfield Bank of Holland Michigan Frontier Bank Madison NE Bank West Apex Bank BMO Harris Bank BMW Bank of North America Beneficial Bank BankFirst BankWest, Inc. 1.780 1.755 1.780 1 1.900 1.873 1.900 1 1.861 1.887 1 09/30/2015 245,000.00 245,000.00 237,990.55 2.450 2.418 2.451 09/30/2022 1,552 09/29/2017 245,000.00 245,000.00 234,107.30 2.050 2.022 2.051 09/29/2022 1,551 02/16/2016 245,000.00 245,000.00 234,496.85 2.400 2.367 2.400 08/16/2023 1,872 09/30/2016 245,000.00 245,000.00 234,957.45 1.450 1.429 1.449 03/30/2021 1,003 08/26/2014 245,000.00 245,000.00 243,971.00 1.850 1.825 1.850 05/28/2019 331 04/04/2017 245,000.00 245,000.00 238,037.10 2.050 2.023 2.051 08/04/2021 1,130 05/30/2017 245,000.00 245,000.00 231,368.20 2.300 2.270 2.301 05/30/2024 2,160 07/10/2014 245,000.00 245,000.00 243,983.25 1.950 1.923 1.950 07/10/2019 374 04/19/2017 245,000.00 245,000.00 237,995.45 1.900 1.875 1.901 04/19/2021 1,023 10/12/2016 245,000.00 245,000.00 233,249.80 1.500 1.480 1.500 10/12/2021 1,199 06/29/2017 245,000.00 245,000.00 236,358.85 2.000 1.974 2.001 12/29/2021 1,277 12/29/2014 245,000.00 245,000.00 243,162.50 1.850 1.824 1.850 12/30/2019 547 05/13/2014 245,000.00 245,000.00 244,747.65 1.550 1.528 1.550 11/13/2018 135 08/27/2014 245,000.00 245,000.00 243,035.10 1.750 1.726 1.750 08/27/2019 422 09/30/2015 245,000.00 245,000.00 238,470.75 2.500 2.467 2.501 09/30/2022 1,552 05/22/2017 245,000.00 245,000.00 237,302.10 2.250 2.220 2.251 05/20/2022 1,419 09/30/2014 245,000.00 245,000.00 241,476.90 2.200 2.171 2.201 09/30/2020 822 05/21/2014 245,000.00 245,000.00 244,247.85 1.700 1.677 1.701 05/21/2019 324 11/20/2015 245,000.00 245,000.00 236,726.35 2.000 1.974 2.001 11/22/2021 1,240 09/16/2015 245,000.00 245,000.00 236,184.90 2.250 2.220 2.251 09/16/2022 1,538 09/30/2016 245,000.00 245,000.00 230,687.10 1.700 1.676 1.700 09/30/2022 1,552 04/28/2017 245,000.00 245,000.00 235,800.25 2.250 2.220 2.251 10/28/2022 1,580 06/16/2017 245,000.00 245,000.00 240,577.75 1.850 1.824 1.850 06/16/2020 716 09/12/2016 245,000.00 245,000.00 233,421.30 1.500 1.479 1.500 09/13/2021 1,170 04/13/2017 245,000.00 245,000.00 235,396.00 2.000 1.973 2.001 04/13/2022 1,382 09/15/2014 150,000.00 150,000.00 148,969.50 1.900 1.873 1.900 09/16/2019 442 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 2 Purchase Current YTM YTM Maturity Days To CUSIP Investment # Issuer Date Book Value Par Value Market Value Rate 360 365 Date Maturity Negotiable CD's 09710LAF2 1381 NCD Bofi Federal Bank 08/25/2014 49,480.36 50,000.00 48,041.50 2.250 2.493 2.527 08/30/2022 1,521 09710LAE5 1382 NCD Bofi Federal Bank 08/25/2014 98,967.99 100,000.00 96,576.00 2.350 2.592 2.628 08/08/2022 1,499 09710LAF2 1402 NCD Bofi Federal Bank 10/21/2014 99,072.56 100,000.00 96,083.00 2.250 2.462 2.496 08/30/2022 1,521 05965GVP8 1478 NCD Banco Poplar North America 10/07/2015 245,000.00 245,000.00 241,704.75 2.250 2.219 2.250 10/07/2020 829 108622EA5 1393 NCD Bridgewater Bank Bloom MN 09/24/2014 245,000.00 245,000.00 243,108.60 1.850 1.825 1.850 09/24/2019 450 12325EHA3 1531 NCD Business Bank 02/10/2016 245,000.00 245,000.00 236,513.20 1.550 1.530 1.551 02/10/2021 955 17312QJ67 1950 NCD Citigroup 04/24/2018 245,000.00 245,000.00 242,037.95 3.000 2.958 3.000 04/22/2023 1,756 981571AT9 1387 NCD Worlds Foremost Bank 09/04/2014 200,000.00 200,000.00 198,930.00 2.100 2.072 2.101 09/04/2019 430 134204BZ8 1307 NCD Campbell County Bank 05/30/2014 245,000.00 245,000.00 244,225.80 1.650 1.628 1.650 05/30/2019 333 201282HM5 1772 NCD Commercial Bank - Alma 04/21/2017 245,000.00 245,000.00 235,758.60 2.050 2.023 2.051 04/21/2022 1,390 12480LDV6 1571 NCD CBC National Bank 04/15/2016 245,000.00 245,000.00 235,442.55 1.500 1.479 1.500 04/15/2021 1,019 15118RJW8 1362 NCD Celtic Bank 08/20/2014 245,000.00 245,000.00 243,750.50 1.900 1.875 1.901 08/20/2019 415 15524EAA2 1538 NCD Central State Bank 02/16/2016 245,000.00 245,000.00 233,411.50 1.700 1.678 1.701 02/16/2022 1,326 320636AC7 1840 NCD First Iowa State Bank 07/31/2017 245,000.00 245,000.00 235,251.45 1.900 1.876 1.902 01/31/2022 1,310 17037VBT8 1884 NCD Choice Bank - Oshkosh WI 12/29/2017 245,000.00 245,000.00 236,135.90 2.350 2.317 2.350 12/29/2022 1,642 16116PHU8 1811 NCD Charter Bank Eau Claire 06/13/2017 245,000.00 245,000.00 235,778.20 2.100 2.071 2.100 06/13/2022 1,443 12545JAM7 1809 NCD CIBM Bank 06/16/2017 245,000.00 245,000.00 235,724.30 2.100 2.072 2.101 06/16/2022 1,446 17453FBP6 1677 NCD Citizens Deposit Bank 08/24/2016 245,000.00 245,000.00 233,499.70 1.400 1.380 1.400 08/24/2021 1,150 17670BAQ1 1541 NCD Citizens State Bank 02/19/2016 250,000.00 250,000.00 233,990.00 1.750 1.727 1.751 02/17/2023 1,692 23062KBH4 1813 NCD Cumberland Federal Bank FSB 07/07/2017 245,000.00 245,000.00 235,513.60 2.100 2.072 2.101 07/07/2022 1,467 202291AD2 1868 NCD Commercial Savings Bank 10/18/2017 245,000.00 245,000.00 234,428.25 2.100 2.071 2.100 10/18/2022 1,570 29266NYZ4 1246 NCD Enerbank USA 01/30/2014 245,000.00 245,000.00 242,785.20 2.050 2.021 2.050 01/30/2020 578 17801GBQ1 1791 NCD City National Bk of Metropolis 05/15/2017 245,000.00 245,000.00 235,079.95 2.000 1.972 2.000 05/16/2022 1,415 20404YBQ7 1536 NCD Community State Bank 02/24/2016 245,000.00 245,000.00 235,449.90 1.950 1.924 1.951 02/24/2022 1,334 22230PBN9 1799 NCD Country Bank of New York 05/26/2017 245,000.00 245,000.00 235,900.70 2.100 2.072 2.101 05/26/2022 1,425 140420NR7 1384 NCD Capital One Bank USA NA 09/04/2014 250,000.00 250,000.00 248,627.50 1.800 1.775 1.800 09/04/2019 430 14042E5M8 1457 NCD Capital One Bank USA NA 08/12/2015 245,000.00 245,000.00 242,317.25 2.300 2.268 2.300 08/12/2020 773 203507BA5 1627 NCD Community Bank Pasadena 06/16/2016 245,000.00 245,000.00 235,334.75 1.550 1.529 1.550 06/15/2021 1,080 20364ABA2 1530 NCD Commuincity Finl Svcs Bank 02/17/2016 245,000.00 245,000.00 236,741.05 1.600 1.579 1.601 02/17/2021 962 20056QQK2 1816 NCD Commerce Bank - Geneva 06/21/2017 245,000.00 245,000.00 238,061.60 2.000 1.973 2.001 06/21/2021 1,086 20143PDB3 1369 NCD Commercial Bank 08/19/2014 245,000.00 245,000.00 244,017.55 1.850 1.824 1.850 05/20/2019 323 20070PJA6 1797 NCD Commerce State Bank 05/22/2017 245,000.00 245,000.00 235,011.35 2.000 1.972 2.000 05/23/2022 1,422 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 3 Purchase Current YTM YTM Maturity Days To CUSIP Investment # Issuer Date Book Value Par Value Market Value Rate 360 365 Date Maturity Negotiable CD's 20404MAN1 1471 NCD Community State Bank, IA 09/11/2015 245,000.00 245,000.00 236,224.10 2.250 2.224 2.255 09/12/2022 1,534 219232CN3 1757 NCD Cornerstone Bank 03/10/2017 245,000.00 245,000.00 236,572.00 2.100 2.072 2.101 03/10/2022 1,348 25665QAV7 1756 NCD Dollar Bank FSB 03/08/2017 245,000.00 245,000.00 236,194.70 2.050 2.021 2.050 03/08/2022 1,346 27113PAL5 1463 NCD East Boston Savings Bank 08/24/2015 245,000.00 245,000.00 240,193.10 1.900 1.876 1.902 08/24/2020 785 87219RBK9 1812 NCD TBK Bank SSB 06/23/2017 245,000.00 245,000.00 235,638.55 2.100 2.072 2.101 06/23/2022 1,453 29976DZK9 1454 NCD Ever Bank 07/30/2015 245,000.00 245,000.00 240,915.85 2.000 1.972 2.000 07/30/2020 760 308702BQ1 1360 NCD Farmer's and Merchants Bank 08/15/2014 250,000.00 250,000.00 245,377.50 2.200 2.169 2.200 02/16/2021 961 319141 BV8 1330 NCD First Bank of Highland 07/03/2014 245,000.00 245,000.00 243,476.10 1.850 1.824 1.850 07/03/2019 367 31938QF25 1250 NCD First Business Bank 02/19/2014 245,000.00 245,000.00 242,420.15 2.000 1.972 2.000 02/19/2020 598 33767A2C4 1768 NCD FirstBank Puerto Rico 04/07/2017 245,000.00 245,000.00 236,324.55 2.100 2.072 2.101 04/07/2022 1,376 319464AR4 1297 NCD First Choice Bank / NJ 05/28/2014 245,000.00 245,000.00 244,235.60 1.700 1.677 1.701 05/28/2019 331 856188AU1 1283 NCD State Bank of Fenton (MI) 05/15/2014 245,000.00 245,000.00 244,157.20 1.650 1.630 1.653 02/15/2019 229 32018YAW8 1626 NCD First Federal S&L Bank 06/22/2016 245,000.00 245,000.00 229,212.20 1.800 1.776 1.800 06/22/2023 1,817 32022RFD4 1485 NCD 1st Financial Bank 10/19/2015 244,574.71 245,000.00 236,513.20 2.100 2.120 2.150 03/16/2022 1,354 34387ABA6 1413 NCD Flushing Bank 12/10/2014 245,000.00 245,000.00 244,544.30 1.800 1.776 1.801 12/10/2018 162 32056GCQ1 1834 NCD First Internet Bank 07/14/2017 245,000.00 245,000.00 234,952.55 2.050 2.023 2.051 07/14/2022 1,474 320337AR9 1222 NCD First General Bank 07/03/2013 245,000.00 245,000.00 244,985.30 1.300 1.282 1.300 07/03/2018 2 32008JAG8 1400 NCD First Eagle National Bank 10/17/2014 245,000.00 245,000.00 242,334.40 2.450 2.416 2.449 10/15/2021 1,202 335857BF4 1838 NCD First Oklahoma Bank 07/26/2017 245,000.00 245,000.00 235,310.25 2.100 2.072 2.101 07/26/2022 1,486 30781TBD9 1735 NCD Farmers & Merchant Bank 01/18/2017 245,000.00 245,000.00 236,655.30 2.050 2.021 2.050 01/18/2022 1,297 32110YEF8 1391 NCD First National Bank of America 09/09/2014 236,892.89 240,000.00 232,768.80 2.350 2.665 2.703 08/03/2022 1,494 330459CB2 1863 NCD FNB Bank Inc. 10/13/2017 245,000.00 245,000.00 232,355.55 2.250 2.220 2.251 10/13/2023 1,930 334342BU5 1537 NCD First Nationnal Bank / KS 02/26/2016 245,000.00 245,000.00 236,331.90 1.550 1.530 1.551 02/26/2021 971 32112UBW0 1480 NCD The FNB of Mcgregor 10/01/2015 245,000.00 245,000.00 237,179.60 2.000 1.972 1.999 09/30/2021 1,187 32114RAQ9 1473 NCD First Nat. Bank of Park Falls 09/17/2015 245,000.00 245,000.00 238,808.85 2.200 2.171 2.201 09/17/2021 1,174 33610RNX7 1255 NCD First Premier Bank 03/07/2014 245,000.00 245,000.00 242,207.00 2.500 2.465 2.500 03/08/2021 981 35471TCV2 1771 NCD Franklin Synergy Bank 04/04/2017 103,000.00 103,000.00 99,250.80 2.000 1.972 1.999 01/31/2022 1,310 32082BDH9 1351 NCD First Merchants Bank 08/06/2014 245,000.00 245,000.00 243,863.20 1.900 1.873 1.900 08/06/2019 401 20369JAA9 1555 NCD Community First Bank 03/17/2016 250,000.00 250,000.00 237,837.50 1.700 1.677 1.700 03/17/2022 1,355 308863AH2 1551 NCD Farmer's & Merchant's SVG Bank 02/29/2016 245,000.00 245,000.00 238,725.55 1.550 1.528 1.550 02/26/2021 971 33581VAF6 1469 NCD First Neighbor Bank, NA 09/03/2015 245,000.00 245,000.00 241,131.45 2.400 2.367 2.400 09/03/2021 1,160 33621JAB4 1335 NCD First Savings Bank Northwest 07/18/2014 245,000.00 245,000.00 243,461.40 1.800 1.776 1.801 07/18/2019 382 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 4 Purchase Current YTM YTM Maturity Days To CUSIP Investment # Issuer Date Book Value Par Value Market Value Rate 360 365 Date Maturity Negotiable CD's 321130AB2 1801 NCD First National Bank of Elkhart 05/31/2017 245,000.00 245,000.00 235,866.40 2.100 2.072 2.101 05/31/2022 1,430 33583FAA0 1779 NCD First Northeast Bank 04/19/2017 245,000.00 245,000.00 234,396.40 2.100 2.072 2.101 10/19/2022 1,571 33648RAT6 1366 NCD First State Bank 08/20/2014 245,000.00 245,000.00 243,777.45 1.850 1.825 1.851 08/20/2019 415 336460CH1 1824 NCD First State Bank - Dequeen 06/30/2017 245,000.00 245,000.00 235,244.10 2.000 1.973 2.000 04/29/2022 1,398 33646TAE7 1475 NCD First State Bank of Purdy 09/25/2015 247,985.67 248,000.00 241,413.12 2.350 2.321 2.353 04/13/2022 1,382 33708UCF4 1819 NCD First State Community Bank 06/30/2017 245,000.00 245,000.00 235,628.75 2.100 2.071 2.100 06/30/2022 1,460 32065TAW1 1856 NCD First Kentucky Bank 10/06/2017 245,000.00 245,000.00 234,516.45 2.100 2.072 2.101 10/06/2022 1,558 33749VAM0 1770 NCD First Western Bank & Trust 04/07/2017 245,000.00 245,000.00 235,452.35 2.000 1.973 2.001 04/07/2022 1,376 35137QAV6 1305 NCD Fox Chase Bank 06/06/2014 245,000.00 245,000.00 244,193.95 1.700 1.677 1.700 06/06/2019 340 402194FJ8 1920 NCD Gulf Coast Bank & Trust 01/26/2018 245,000.00 245,000.00 235,694.90 2.650 2.614 2.650 07/26/2024 2,217 38058KDA1 1375 NCD Gold Coast Bank 09/04/2014 245,000.00 245,000.00 243,762.75 1.800 1.775 1.800 08/05/2019 400 36157PXV6 1262 NCD GE Capital Bank 03/21/2014 245,000.00 245,000.00 243,081.65 2.650 2.613 2.650 03/22/2021 995 02007GAFO 1882 NCD Ally Bank 01/04/2018 245,000.00 245,000.00 241,111.85 2.250 2.219 2.250 01/04/2021 918 39115UBB8 1865 NCD Great Plains Bank 10/25/2017 245,000.00 245,000.00 234,364.55 2.000 1.972 2.000 07/25/2022 1,485 38762PCB6 1864 NCD Grant County Bank 10/18/2017 175,000.00 175,000.00 165,544.75 2.200 2.170 2.201 10/18/2023 1,935 38148PJ81 1951 NCD Goldman Sachs Bank USA / NY 05/09/2018 245,000.00 245,000.00 243,574.10 3.150 3.106 3.150 05/09/2023 1,773 411394AN9 1683 NCD Happy State Bank 09/16/2016 245,000.00 245,000.00 233,421.30 1.500 1.500 1.520 09/16/2021 1,173 40434AR84 1564 NCD HSBC Bank 04/07/2016 245,000.00 245,000.00 237,010.55 2.000 10/07/2021 1,194 263849BD2 1372 NCD Dubuque Bank & Trust 08/21/2014 245,000.00 245,000.00 243,743.15 1.900 1.873 1.900 08/21/2019 416 46147USQ4 1765 NCD Investors Community Bank 03/24/2017 245,000.00 245,000.00 235,623.85 2.200 2.172 2.202 09/23/2022 1,545 45906ABP1 1841 NCD International Bank 07/31/2017 245,000.00 245,000.00 235,280.85 2.100 2.072 2.101 07/29/2022 1,489 45581 EAC5 1773 NCD Industrial & Com Bk of China 04/12/2017 245,000.00 245,000.00 236,716.55 2.150 2.121 2.151 04/12/2022 1,381 45842PAK7 1808 NCD Interaudi Bank 06/09/2017 245,000.00 245,000.00 233,989.70 2.500 2.465 2.500 06/10/2024 2,171 46355PBV9 1535 NCD Iroquois Federal Sav Loan Asso 02/12/2016 245,000.00 245,000.00 238,789.25 1.600 1.578 1.600 08/12/2020 773 46176PEJ0 1460 NCD Investors Bank 08/25/2015 245,000.00 245,000.00 242,229.05 2.000 1.972 2.000 08/25/2020 786 45780PAN5 1455 NCD Inst. for Sav in Newburyport 07/31/2015 245,000.00 245,000.00 240,947.70 2.300 2.269 2.301 07/30/2021 1,125 46256YAB5 1343 NCD Iowa State Bank 07/23/2014 250,000.00 250,000.00 248,897.50 1.800 1.775 1.800 07/23/2019 387 48124JD39 1200 NCD JP Morgan Chase BAnk NA 06/05/2013 245,000.00 245,000.00 244,105.75 1.250 1.232 1.250 12/05/2018 157 50116CAX7 1798 NCD Kansas State Bank Manhattan 05/31/2017 245,000.00 245,000.00 233,992.15 2.500 2.465 2.500 05/31/2024 2,161 49306SYB6 1785 NCD Key Bank 05/17/2017 245,000.00 245,000.00 240,447.90 1.750 1.726 1.750 05/18/2020 687 51210SLR6 1686 NCD Lakeside Bank 09/16/2016 245,000.00 245,000.00 227,379.60 1.800 1.775 1.800 09/18/2023 1,905 501798FJ6 1306 NCD LCA Bank Corporation 05/30/2014 245,000.00 245,000.00 244,220.90 1.650 1.627 1.650 05/30/2019 333 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 5 Purchase Current YTM YTM Maturity Days To CUSIP Investment # Issuer Date Book Value Par Value Market Value Rate 360 365 Date Maturity Negotiable CD's 52168UCN0 1364 NCD Leader Bank 08/22/2014 245,000.00 245,000.00 243,767.65 2.000 1.973 2.001 08/22/2019 417 52465JGM3 1533 NCD Legends Bank 02/12/2016 245,000.00 245,000.00 238,916.65 1.700 1.678 1.701 02/11/2022 1,321 538036CH5 1671 NCD Live Oak Banking Company 08/19/2016 245,000.00 245,000.00 233,575.65 1.400 1.381 1.400 08/19/2021 1,145 549103QA0 1367 NCD Luana Savings Bank 09/05/2014 245,000.00 245,000.00 239,264.55 2.250 2.219 2.250 09/07/2021 1,164 554479DN2 1358 NCD Machias Savings Bank 08/28/2014 245,000.00 245,000.00 243,755.40 1.800 1.776 1.801 08/28/2019 423 56585YAA8 1818 NCD Marathon Savings Bank 06/28/2017 245,000.00 245,000.00 235,126.50 2.050 2.023 2.051 06/28/2022 1,458 57461PAG1 1319 NCD Mascoma Savings Bank 06/20/2014 248,194.06 248,000.00 247,747.04 1.800 1.627 1.650 01/15/2019 198 55266CUF1 1730 NCD MB Financial Bank NA 01/13/2017 245,000.00 245,000.00 237,062.00 2.100 2.072 2.101 01/13/2022 1,292 58740XZF0 1793 NCD Mercantile Bank of Michigan 05/12/2017 245,000.00 245,000.00 236,042.80 2.100 2.071 2.100 05/12/2022 1,411 583626AC0 1803 NCD Mechanics Coop Bank 05/26/2017 245,000.00 245,000.00 235,432.75 2.050 2.023 2.051 05/26/2022 1,425 58403BJ31 1238 NCD Medallion Bank - Salt Lake 01/10/2014 245,000.00 245,000.00 244,755.00 1.850 1.825 1.850 01/10/2019 193 59013JHE2 1464 NCD Merrick Bank 08/20/2015 245,000.00 245,000.00 240,227.40 1.900 1.876 1.902 08/20/2020 781 588806AV1 1534 NCD Merchants National Bank OH 02/17/2016 245,000.00 245,000.00 238,385.00 1.800 1.776 1.801 02/17/2022 1,327 59565QCG8 1810 NCD Mid -Country Bank 06/14/2017 245,000.00 245,000.00 235,278.40 2.050 2.023 2.051 06/14/2022 1,444 59541KBL0 1806 NCD Mid -Missouri Bank 06/12/2017 245,000.00 245,000.00 235,290.65 2.050 2.023 2.051 06/10/2022 1,440 598580AB4 1321 NCD Mifflinburg Bank & Trust Co. 06/20/2014 132,000.00 132,000.00 131,647.56 1.650 1.627 1.649 04/30/2019 303 57116AKU1 1483 NCD Marlin Business Bank 10/21/2015 245,000.00 245,000.00 241,584.70 1.750 1.727 1.751 10/21/2020 843 61747MF63 1890 NCD Morgan Stanley Bank NA 01/11/2018 245,000.00 245,000.00 239,139.60 2.650 2.613 2.650 01/11/2023 1,655 625925AP7 1800 NCD Municipal Trust and Savings 05/22/2017 245,000.00 245,000.00 232,213.45 2.350 2.317 2.349 05/02/2024 2,132 62847HAA7 1407 NCD Mutual One Bank 11/21/2014 250,000.00 250,000.00 248,415.00 1.850 1.825 1.850 11/21/2019 508 55406JAL6 1467 NCD MY Safra Bank FSB 09/03/2015 245,000.00 245,000.00 242,221.70 1.900 1.873 1.900 09/03/2020 795 628779FJ4 1322 NCD NBT Bank 06/20/2014 156,000.00 156,000.00 155,469.60 1.800 1.775 1.799 06/06/2019 340 628779FN5 1373 NCD NBT Bank 08/20/2014 94,000.00 94,000.00 93,521.54 2.100 2.071 2.100 08/20/2019 415 23204HCA4 1388 NCD Customers Bank 09/10/2014 250,000.00 250,000.00 248,590.00 2.100 2.071 2.100 09/10/2019 436 628825JL6 1344 NCD NCB Savings Bank 07/25/2014 245,000.00 245,000.00 243,419.75 1.800 1.775 1.800 07/25/2019 389 633368DY8 1607 NCD National Bank Commerce 05/11/2016 245,000.00 245,000.00 232,149.75 1.800 1.776 1.800 05/11/2023 1,775 63969ABL7 1466 NCD Nebraska State Bank & Trust 08/26/2015 245,000.00 245,000.00 240,641.45 2.250 2.220 2.251 08/26/2022 1,517 510868AG7 1309 NCD Lake Sunapee Bank FSB 06/05/2014 245,000.00 245,000.00 244,198.85 1.750 1.727 1.750 06/05/2019 339 66476QBX5 1814 NCD Northern Bank & Trust MA 06/29/2017 245,000.00 245,000.00 235,574.85 2.100 2.072 2.101 06/29/2022 1,459 20786AAT2 1355 NCD Connectone Bank 08/13/2014 245,000.00 245,000.00 243,821.55 1.850 1.824 1.850 08/13/2019 408 06414TNW9 1298 NCD Bank of Northern Michigan 05/21/2014 245,000.00 245,000.00 242,706.80 2.000 1.972 2.000 05/21/2020 690 66612AAA6 1365 NCD Northfield Bank 08/13/2014 245,000.00 245,000.00 243,767.65 1.850 1.824 1.850 08/12/2019 407 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 6 Purchase Current YTM YTM Maturity Days To Date Book Value Par Value Market Value Rate 360 365 Date Maturity Negotiable CD's 66704MEG2 1326 NCD Northstar Bank 07/18/2014 245,000.00 245,000.00 243,968.55 1.750 1.727 1.751 07/18/2019 382 634116CB1 1312 NCD National Bank of NY City 06/18/2014 245,000.00 245,000.00 244,105.75 1.650 1.627 1.650 06/18/2019 352 683430BU5 1532 NCD Oostburg State Bank 02/09/2016 245,000.00 245,000.00 239,872.15 1.550 1.530 1.551 02/09/2021 954 969294BY2 1524 NCD Williamette Valley Bank 02/04/2016 245,000.00 245,000.00 237,875.40 2.100 2.072 2.101 02/06/2023 1,681 687377DR9 1465 NCD Orrstown Bank 08/20/2015 245,000.00 245,000.00 240,739.45 2.000 1.974 2.002 08/20/2020 781 839145AA7 1851 NCD South Ottumwa Savings Bank 09/29/2017 245,000.00 245,000.00 234,107.30 2.050 2.022 2.051 09/29/2022 1,551 68956HAC7 1892 NCD Ottawa Savings Bank 01/19/2018 245,000.00 245,000.00 236,444.60 2.400 2.368 2.401 01/19/2023 1,663 71270QGB6 1378 NCD Peoples United Bank 08/27/2014 245,000.00 245,000.00 243,706.40 1.950 1.923 1.950 08/27/2019 422 732333AH2 1795 NCD Ponce De Leon Federal Bank 05/26/2017 245,000.00 245,000.00 235,883.55 2.100 2.072 2.101 05/26/2022 1,425 70147ACE2 1833 NCD Parkside Financial Bank 07/19/2017 245,000.00 245,000.00 232,696.10 2.100 2.072 2.101 03/15/2023 1,718 704692AK8 1275 NCD Peapack -Gladstone Bank 04/17/2014 245,000.00 245,000.00 244,404.65 1.800 1.776 1.801 04/17/2019 290 72741PCU9 1363 NCD Planters Bank 08/20/2014 245,000.00 245,000.00 233,837.80 2.500 2.467 2.501 08/20/2021 1,146 74160NED8 1331 NCD Prime Alliance Bank 07/11/2014 245,000.00 245,000.00 243,983.25 1.700 1.677 1.701 07/11/2019 375 700654AV8 1395 NCD Park National Bank 09/26/2014 250,000.00 250,000.00 249,080.00 2.100 2.070 2.099 03/26/2019 268 743738608 1445 NCD Providence Bank 02/26/2015 245,000.00 245,000.00 241,391.15 2.100 2.072 2.101 02/25/2022 1,335 712515GY5 1304 NCD Peoples State Bank, WI 05/23/2014 245,000.00 245,000.00 244,233.15 1.700 1.676 1.700 05/23/2019 326 74267GUN5 1293 NCD Private Bank & Trust Co. 05/21/2014 245,000.00 245,000.00 244,732.95 1.650 1.627 1.650 11/21/2018 143 6777210E0 1338 NCD Ohio Valley Bank 07/23/2014 250,000.00 250,000.00 248,920.00 1.800 1.776 1.801 07/23/2019 387 74934YAG6 1869 NCD RCB Bank 10/27/2017 245,000.00 245,000.00 235,293.10 2.200 2.171 2.201 10/27/2022 1,579 75950XAD1 1636 NCD Reliance Savings Bank 06/22/2016 245,000.00 245,000.00 235,234.30 1.450 1.430 1.450 06/22/2021 1,087 795450SC0 1350 NCD Sallie Mae Bank 07/30/2014 245,000.00 245,000.00 243,904.85 2.050 2.021 2.050 07/30/2019 394 855736CX0 1233 NCD State Bank Definace 07/19/2013 245,000.00 245,000.00 244,987.75 1.650 1.628 1.650 07/19/2018 18 856284Z98 1390 NCD State Bank of India 09/11/2014 245,000.00 245,000.00 243,640.25 2.150 2.120 2.150 09/11/2019 437 856528CG7 1230 NCD State Bank of Texas 07/17/2013 245,000.00 245,000.00 244,965.70 1.600 1.578 1.600 07/17/2018 16 814414AC2 1499 NCD Security National Bank 11/19/2015 245,000.00 245,000.00 236,763.10 2.000 1.974 2.001 11/19/2021 1,237 81489TAS5 1774 NCD Security State Bank 04/07/2017 245,000.00 245,000.00 236,329.45 2.100 2.072 2.101 04/07/2022 1,376 86063QAK1 1953 NCD Stifel Bank & Trust 05/15/2018 245,000.00 245,000.00 241,329.90 2.950 2.911 2.951 05/15/2023 1,779 86604XMN3 1888 NCD Summit Community Bank 01/26/2018 245,000.00 245,000.00 238,191.45 2.250 2.220 2.251 01/26/2022 1,305 835104BL3 1616 NCD Somerset Trust Company Bank 06/10/2016 245,000.00 245,000.00 229,346.95 1.800 1.776 1.800 06/12/2023 1,807 063847AW7 1704 NCD Bank of New England 10/19/2016 245,000.00 245,000.00 232,789.20 1.500 1.480 1.500 10/19/2021 1,206 83158TAA0 1872 NCD Slovak Savings Bank 10/20/2017 245,000.00 245,000.00 234,359.65 2.100 2.072 2.101 10/20/2022 1,572 814107A01 1777 NCD Security Bank 04/19/2017 245,000.00 245,000.00 235,339.65 2.000 1.973 2.001 04/19/2022 1,388 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Purchase Date Book Value Page 7 Current YTM YTM Maturity Days To Par Value Market Value Rate 360 365 Date Maturity Negotiable CD's 86128QBX5 1557 NCD Stockman Bank 03/30/2016 245,000.00 245,000.00 234,367.00 2.000 1.973 2.000 03/30/2023 1,733 88413QAF5 1242 NCD Third Federal Savings and Loan 01/22/2014 245,000.00 245,000.00 244,865.25 1.750 1.726 1.750 10/22/2018 113 884693BJ0 1266 NCD Thomasville Natl Bank 04/11/2014 245,000.00 245,000.00 242,964.05 2.400 2.367 2.400 04/12/2021 1,016 22766ABF1 1804 NCD Crossfirst Bank of Leawood 06/09/2017 245,000.00 245,000.00 232,215.90 2.150 2.121 2.151 06/09/2023 1,804 89235MHU8 1740 NCD Toyota Financial Savings Bank 02/10/2017 245,000.00 245,000.00 236,611.20 2.650 02/12/2024 2,052 894333FF5 1820 NCD Traverse City State Bank 06/28/2017 245,000.00 245,000.00 234,710.00 2.000 1.972 2.000 06/28/2022 1,458 90348JBR0 1815 NCD UBS Bank USA 06/15/2017 250,000.00 250,000.00 243,100.00 2.250 2.219 2.249 01/20/2022 1,299 90984P5A9 1749 NCD United Community Bank GA 03/01/2017 245,000.00 245,000.00 236,258.40 2.050 2.021 2.050 03/01/2022 1,339 903572BC8 1639 NCD Uinta Bank 06/24/2016 245,000.00 245,000.00 228,104.80 1.700 1.676 1.700 12/26/2023 2,004 909557EA4 1379 NCD United Bankers' Bank 08/29/2014 245,000.00 245,000.00 244,029.80 1.800 1.776 1.800 04/29/2019 302 90983WBD2 1694 NCD United Community Bank 09/29/2016 245,000.00 245,000.00 232,666.70 1.600 1.577 1.599 03/28/2022 1,366 91330ABF3 1529 NCD Unity Bank 02/26/2016 245,000.00 245,000.00 239,793.75 1.600 1.579 1.601 02/26/2021 971 91944RAF5 1422 NCD Valley Central Savings Bank 12/29/2014 245,000.00 245,000.00 243,162.50 1.850 1.824 1.850 12/30/2019 547 940637GJ4 1345 NCD Washington Trst Westerly 07/31/2014 245,000.00 245,000.00 243,899.95 1.900 1.873 1.900 07/31/2019 395 94768NJM7 1252 NCD Webster Bank NA 02/12/2014 245,000.00 245,000.00 244,549.20 1.900 1.873 1.900 02/12/2019 226 66736AAK5 1308 NCD Northwest Bank 05/29/2014 245,000.00 245,000.00 244,230.70 1.650 1.628 1.650 05/29/2019 332 95960NJA6 1392 NCD Western State Bank 09/26/2014 245,000.00 245,000.00 242,501.00 2.100 2.071 2.100 03/26/2020 634 940727AH3 1745 NCD Washington First Bank 02/23/2017 245,000.00 245,000.00 236,331.90 2.050 2.021 2.050 02/23/2022 1,333 9497486H5 1656 NCD Wells Fargo Bank 06/30/2016 245,000.00 245,000.00 235,160.80 1.600 1.578 1.600 06/30/2021 1,095 979424AA6 1459 NCD Woodford State Bank 08/12/2015 245,000.00 245,000.00 240,386.65 2.350 2.317 2.349 07/29/2022 1,489 93754PAN7 1842 NCD Washington County Bank 08/11/2017 245,000.00 245,000.00 235,572.40 2.050 2.021 2.050 05/11/2022 1,410 98970TU79 1417 NCD Zions First National Bank 12/08/2014 250,000.00 250,000.00 247,602.50 1.900 1.873 1.899 12/10/2019 527 Subtotal and Average 49,820,168.24 49,826,000.00 48,555,784.91 1.936 1.963 1,055 Medium Term Notes 037833AQ3 1342 MTN Apple, Inc. 07/15/2014 2,001,441.31 2,000,000.00 1,993,880.00 2.100 1.982 2.010 05/06/2019 309 037833AX8 1461 MTN Apple, Inc. 08/13/2015 744,764.61 750,000.00 735,967.50 1.550 1.980 2.008 02/07/2020 586 037833BD1 1497 MTN Apple, Inc. 11/05/2015 1,503,175.26 1,500,000.00 1,478,955.00 2.000 1.854 1.879 05/06/2020 675 037833BS8 1543 MTN Apple, Inc. 02/23/2016 701,377.23 700,000.00 687,827.00 2.250 2.140 2.169 02/23/2021 968 02079KAA5 1657 MTN Alphabet (Google) Inc. 07/11/2016 106,508.28 100,000.00 102,120.00 3.625 1.271 1.288 05/19/2021 1,053 38259PAB8 1658 MTN Alphabet (Google) Inc. 07/11/2016 1,007,568.36 946,000.00 966,055.20 3.625 1.271 1.288 05/19/2021 1,053 02079KAA5 1660 MTN Alphabet (Google) Inc. 07/12/2016 1,599,088.30 1,500,000.00 1,531,800.00 3.625 1.238 1.255 05/19/2021 1,053 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 8 Purchase Current YTM YTM Maturity Days To Date Book Value Par Value Market Value Rate 360 365 Date Maturity Medium Term Notes 02079KAA5 1734 MTN Alphabet (Google) Inc. 01/11/2017 908,892.55 871,000.00 889,465.20 3.625 2.012 2.040 05/19/2021 1,053 02079KAA5 1895 MTN Alphabet (Google) Inc. 01/10/2018 1,038,820.60 1,000,000.00 1,021,200.00 3.625 2.189 2.219 05/19/2021 1,053 02079KAA5 1931 MTN Alphabet (Google) Inc. 02/14/2018 394,786.38 382,000.00 390,098.40 3.625 2.377 2.410 05/19/2021 1,053 478160BM5 1411 MTN Johnson & Johnson 11/24/2014 1,999,318.83 2,000,000.00 1,981,340.00 1.875 1.874 1.900 12/05/2019 522 478160BM5 1418 MTN Johnson & Johnson 12/08/2014 1,500,505.85 1,500,000.00 1,486,005.00 1.875 1.824 1.850 12/05/2019 522 478160BS2 1624 MTN Johnson & Johnson 06/07/2016 1,002,467.61 1,000,000.00 971,420.00 1.650 1.530 1.551 03/01/2021 974 478160BS2 1900 MTN Johnson & Johnson 01/12/2018 492,820.60 500,000.00 485,710.00 1.650 2.179 2.210 03/01/2021 974 594918AY0 1448 MTN Microsoft Corporation 02/12/2015 2,001,212.94 2,000,000.00 1,975,380.00 1.850 1.785 1.810 02/12/2020 591 594918BG8 1496 MTN Microsoft Corporation 11/05/2015 2,002,622.47 2,000,000.00 1,968,460.00 2.000 1.913 1.940 11/03/2020 856 594918BG8 1515 MTN Microsoft Corporation 01/07/2016 901,728.62 900,000.00 885,807.00 2.000 1.887 1.913 11/03/2020 856 594918BW3 1878 MTN Microsoft Corporation 12/11/2017 100,257.27 100,000.00 97,880.00 2.400 2.292 2.324 02/06/2022 1,316 854403AC6 1336 MTN Stanford University 07/10/2014 306,539.01 300,000.00 305,172.00 4.750 1.966 1.993 05/01/2019 304 854403AC6 1347 MTN Stanford University 07/24/2014 153,360.45 150,000.00 152,586.00 4.750 1.896 1.922 05/01/2019 304 854403AC6 1349 MTN Stanford University 07/25/2014 230,043.62 225,000.00 228,879.00 4.750 1.895 1.921 05/01/2019 304 854403AC6 1419 MTN Stanford University 12/11/2014 107,363.50 105,000.00 106,810.20 4.750 1.893 1.920 05/01/2019 304 Subtotal and Average 20,804,663.65 20,529,000.00 20,442,817.50 1.833 1.858 740 Federal Agency Issues - Coupon 31315PPC7 1028 Federal Agricultural Mortgage 02/21/2012 3,000,000.00 3,000,000.00 2,990,070.00 1.790 1.765 1.790 02/21/2019 235 31315PQC6 1031 Federal Agricultural Mortgage 03/06/2012 2,000,000.00 2,000,000.00 1,999,060.00 1.550 1.528 1.550 09/06/2018 67 31315PTW9 1052 Federal Agricultural Mortgage 04/10/2012 1,500,000.00 1,500,000.00 1,494,840.00 1.870 1.844 1.870 04/10/2019 283 31315PQL6 1123 Call Federal Agricultural Mortgage 11/29/2012 1,500,000.00 1,500,000.00 1,461,915.00 2.000 1.972 2.000 11/29/2021 1,247 31315PPX1 1130 Federal Agricultural Mortgage 12/13/2012 1,513,271.00 1,500,000.00 1,466,175.00 2.200 1.930 1.957 07/05/2022 1,465 31315PB32 1134 Federal Agricultural Mortgage 12/19/2012 746,745.56 750,000.00 724,387.50 2.000 2.081 2.110 11/21/2022 1,604 31315PTY5 1136 Federal Agricultural Mortgage 12/27/2012 1,501,375.10 1,500,000.00 1,477,515.00 1.480 1.395 1.415 12/27/2019 544 31315PUE7 1137 Federal Agricultural Mortgage 01/04/2013 1,499,034.58 1,500,000.00 1,458,045.00 2.180 2.165 2.196 12/27/2022 1,640 31315PEY1 1138 Federal Agricultural Mortgage 01/04/2013 771,030.55 740,000.00 761,430.40 4.500 1.514 1.535 12/30/2019 547 31315PWN5 1139 Federal Agricultural Mortgage 01/04/2013 524,970.02 500,000.00 515,675.00 3.840 1.946 1.973 06/01/2021 1,066 31315PUE7 1141 Federal Agricultural Mortgage 01/08/2013 1,497,257.89 1,500,000.00 1,458,045.00 2.180 2.195 2.225 12/27/2022 1,640 31315PTW9 1142 Federal Agricultural Mortgage 01/09/2013 1,203,989.79 1,200,000.00 1,195,872.00 1.870 1.400 1.420 04/10/2019 283 31315PPC7 1143 Federal Agricultural Mortgage 01/09/2013 452,095.38 451,000.00 449,507.19 1.790 1.372 1.392 02/21/2019 235 31315PUE7 1144 Federal Agricultural Mortgage 01/23/2013 1,502,346.68 1,500,000.00 1,458,045.00 2.180 2.111 2.141 12/27/2022 1,640 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 9 Purchase Current YTM YTM Maturity Days To Date Book Value Par Value Market Value Rate 360 365 Date Maturity Federal Agency Issues - Coupon 31315PUE7 1147 Federal Agricultural Mortgage 01/28/2013 2,589,794.82 2,595,000.00 2,522,417.85 2.180 2.199 2.229 12/27/2022 1,640 31315PPF0 1152 Federal Agricultural Mortgage 02/11/2013 2,000,925.86 2,000,000.00 1,988,760.00 1.320 1.220 1.237 01/30/2019 213 31315PPF0 1155 Federal Agricultural Mortgage 02/21/2013 1,500,332.99 1,500,000.00 1,491,570.00 1.320 1.262 1.280 01/30/2019 213 31315PXH7 1186 Federal Agricultural Mortgage 05/01/2013 1,457,545.75 1,450,000.00 1,449,579.50 2.100 1.055 1.070 01/09/2019 192 31315PQT9 1243 Federal Agricultural Mortgage 01/15/2014 1,474,745.15 1,500,000.00 1,471,950.00 1.410 2.462 2.496 03/06/2020 614 31315P3G2 1244 Federal Agricultural Mortgage 01/15/2014 1,503,816.57 1,500,000.00 1,504,755.00 2.800 2.635 2.672 09/09/2020 801 31315PXH7 1256 Federal Agricultural Mortgage 03/05/2014 1,502,795.75 1,500,000.00 1,499,565.00 2.100 1.702 1.726 01/09/2019 192 31315PTU3 1257 Federal Agricultural Mortgage 03/06/2014 311,359.90 300,000.00 311,331.00 4.160 2.574 2.609 03/09/2021 982 31315P6P9 1258 Federal Agricultural Mortgage 03/07/2014 1,502,002.53 1,500,000.00 1,541,115.00 3.400 3.325 3.372 03/05/2024 2,074 31315P6P9 1259 Federal Agricultural Mortgage 03/10/2014 1,494,882.89 1,500,000.00 1,541,115.00 3.400 3.424 3.471 03/05/2024 2,074 31315PK40 1264 Federal Agricultural Mortgage 03/26/2014 1,498,856.70 1,500,000.00 1,492,260.00 2.500 2.495 2.530 03/26/2021 999 31315PJ67 1265 Federal Agricultural Mortgage 03/28/2014 1,798,767.20 1,800,000.00 1,792,728.00 1.700 1.784 1.809 02/28/2019 242 31315P4B2 1271 Federal Agricultural Mortgage 04/09/2014 1,005,479.09 1,000,000.00 1,028,730.00 3.460 3.297 3.343 01/30/2024 2,039 31315PPX1 1279 Federal Agricultural Mortgage 04/23/2014 1,217,660.82 1,250,000.00 1,221,812.50 2.200 2.889 2.930 07/05/2022 1,465 31315PVF3 1399 Federal Agricultural Mortgage 10/15/2014 496,611.99 500,000.00 490,635.00 1.475 1.857 1.882 04/03/2020 642 31315PA58 1406 Federal Agricultural Mortgage 11/07/2014 1,488,741.54 1,500,000.00 1,476,060.00 1.310 1.854 1.880 11/20/2019 507 31315PM22 1408 Federal Agricultural Mortgage 11/20/2014 2,000,000.00 2,000,000.00 1,982,400.00 1.840 1.814 1.840 11/20/2019 507 31315PM22 1410 Federal Agricultural Mortgage 11/20/2014 1,499,334.67 1,500,000.00 1,486,800.00 1.840 1.848 1.873 11/20/2019 507 31315PZ85 1423 Federal Agricultural Mortgage 12/23/2014 1,499,436.97 1,500,000.00 1,485,765.00 1.850 1.851 1.876 12/23/2019 540 31315P2C2 1427 Federal Agricultural Mortgage 01/09/2015 681,605.27 675,000.00 671,388.75 2.510 2.110 2.140 05/05/2021 1,039 31315PL23 1428 Federal Agricultural Mortgage 01/09/2015 419,470.72 404,000.00 414,225.24 3.330 2.540 2.575 03/27/2024 2,096 31315PD89 1433 Federal Agricultural Mortgage 01/22/2015 1,626,170.83 1,604,000.00 1,583,661.28 2.610 2.269 2.301 06/12/2023 1,807 31315PD89 1447 Federal Agricultural Mortgage 02/09/2015 1,462,907.95 1,450,000.00 1,431,614.00 2.610 2.377 2.410 06/12/2023 1,807 3130H0AJ2 1452 Federal Agricultural Mortgage 03/05/2015 1,000,000.00 1,000,000.00 978,640.00 2.150 2.120 2.150 03/01/2022 1,339 3132X0EU1 1552 Call Federal Agricultural Mortgage 02/26/2016 1,505,793.99 1,500,000.00 1,481,745.00 2.930 2.831 2.870 01/27/2026 2,767 3132X0EU1 1554 Call Federal Agricultural Mortgage 03/02/2016 1,501,146.98 1,500,000.00 1,481,745.00 2.930 2.878 2.918 01/27/2026 2,767 31315PZS1 1576 Federal Agricultural Mortgage 04/06/2016 1,011,301.67 1,000,000.00 969,390.00 2.130 1.839 1.864 01/24/2023 1,668 31315PEM7 1580 Federal Agricultural Mortgage 04/08/2016 534,769.33 474,000.00 509,294.04 4.350 2.296 2.328 08/04/2025 2,591 31315P2J7 1595 Federal Agricultural Mortgage 04/21/2016 1,595,066.78 1,500,000.00 1,535,985.00 3.300 2.084 2.112 05/01/2024 2,131 31315P2J7 1604 Federal Agricultural Mortgage 04/26/2016 1,588,636.74 1,500,000.00 1,535,985.00 3.300 2.159 2.189 05/01/2024 2,131 31315PUE7 1617 Federal Agricultural Mortgage 05/26/2016 506,502.17 500,000.00 486,015.00 2.180 1.844 1.870 12/27/2022 1,640 31315PQT9 1655 Federal Agricultural Mortgage 07/01/2016 1,509,975.65 1,500,000.00 1,471,950.00 1.410 0.992 1.005 03/06/2020 614 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 10 Purchase Current YTM YTM Maturity Days To Date Book Value Par Value Market Value Rate 360 365 Date Maturity Federal Agency Issues - Coupon 31315PQT9 1663 Federal Agricultural Mortgage 07/21/2016 512,167.42 510,000.00 500,463.00 1.410 1.135 1.150 03/06/2020 614 3132X0BH3 1665 Federal Agricultural Mortgage 07/25/2016 2,066,153.62 2,000,000.00 1,967,940.00 2.380 1.499 1.520 07/15/2022 1,475 3132X0BG5 1681 Federal Agricultural Mortgage 08/24/2016 1,769,960.92 1,750,000.00 1,721,177.50 1.750 1.136 1.152 06/15/2020 715 3132X0EQ0 1698 Federal Agricultural Mortgage 10/03/2016 1,510,296.77 1,500,000.00 1,458,240.00 1.550 1.256 1.274 01/25/2021 939 31315PRA9 1710 Federal Agricultural Mortgage 10/18/2016 1,771,852.38 1,500,000.00 1,682,190.00 4.810 2.131 2.160 02/03/2026 2,774 3130H0BL6 1736 Call Federal Agricultural Mortgage 01/19/2017 1,000,000.00 1,000,000.00 998,420.00 3.200 3.156 3.200 01/01/2027 3,106 3132X0PX3 1755 Federal Agricultural Mortgage 02/23/2017 1,001,271.91 1,000,000.00 977,060.00 2.100 2.034 2.063 02/23/2022 1,333 3132X0PX3 1758 Federal Agricultural Mortgage 03/02/2017 1,499,230.82 1,500,000.00 1,465,590.00 2.100 2.085 2.114 02/23/2022 1,333 3132X0RS2 1769 Federal Agricultural Mortgage 04/06/2017 1,500,000.00 1,500,000.00 1,462,710.00 2.075 2.046 2.075 04/06/2022 1,375 3132X0QG9 1781 Federal Agricultural Mortgage 04/12/2017 1,002,385.03 1,000,000.00 980,040.00 1.900 1.781 1.805 02/22/2021 967 3132X0QC8 1784 Call Federal Agricultural Mortgage 04/27/2017 1,500,492.41 1,500,000.00 1,499,940.00 3.250 3.200 3.245 02/23/2027 3,159 3132X0NZ0 1788 Federal Agricultural Mortgage 05/04/2017 1,004,494.79 1,000,000.00 978,360.00 2.100 1.938 1.965 01/03/2022 1,282 3130H0BN2 1789 Call Federal Agricultural Mortgage 05/11/2017 1,000,000.00 1,000,000.00 995,070.00 3.200 3.156 3.200 05/01/2027 3,226 3132X0QC8 1792 Call Federal Agricultural Mortgage 05/09/2017 1,500,000.00 1,500,000.00 1,499,940.00 3.250 3.201 3.245 02/23/2027 3,159 31315PPX1 1817 Federal Agricultural Mortgage 06/14/2017 1,010,086.59 1,000,000.00 977,450.00 2.200 1.908 1.934 07/05/2022 1,465 3132X0UA7 1830 Federal Agricultural Mortgage 06/29/2017 1,497,147.97 1,500,000.00 1,448,280.00 1.880 1.903 1.930 06/29/2022 1,459 3132X0UA7 1831 Federal Agricultural Mortgage 06/29/2017 997,348.49 1,000,000.00 965,520.00 1.880 1.923 1.949 06/29/2022 1,459 3130H0BR3 1850 Call Federal Agricultural Mortgage 09/28/2017 1,500,000.00 1,500,000.00 1,469,550.00 3.050 3.008 3.050 09/01/2027 3,349 3132X0WL1 1867 Federal Agricultural Mortgage 10/06/2017 993,498.85 1,000,000.00 965,840.00 2.250 2.332 2.365 08/23/2024 2,245 3132X0ZZ7 1877 Federal Agricultural Mortgage 12/12/2017 1,500,000.00 1,500,000.00 1,463,895.00 2.260 2.229 2.260 12/12/2022 1,625 3132X0D57 1889 Federal Agricultural Mortgage 01/08/2018 2,000,000.00 2,000,000.00 1,973,080.00 2.120 2.090 2.120 01/08/2021 922 3132X0E49 1891 Call Federal Agricultural Mortgage 01/10/2018 1,000,000.00 1,000,000.00 992,690.00 3.280 3.235 3.280 01/10/2028 3,480 3130H0AU7 1893 Federal Agricultural Mortgage 01/09/2018 1,002,401.40 1,000,000.00 987,500.00 2.625 2.546 2.581 08/01/2024 2,223 3130H0AU7 1901 Federal Agricultural Mortgage 01/11/2018 1,497,074.96 1,500,000.00 1,481,250.00 2.625 2.623 2.660 08/01/2024 2,223 3132X0G21 1911 Federal Agricultural Mortgage 02/02/2018 1,499,464.49 1,500,000.00 1,489,830.00 2.100 2.093 2.123 02/03/2020 582 3132X0G39 1912 Federal Agricultural Mortgage 01/30/2018 1,999,377.04 2,000,000.00 1,969,860.00 2.500 2.472 2.507 01/30/2023 1,674 3132X0G39 1915 Federal Agricultural Mortgage 01/30/2018 1,498,980.37 1,500,000.00 1,477,395.00 2.500 2.481 2.515 01/30/2023 1,674 3132X0G39 1921 Federal Agricultural Mortgage 01/31/2018 1,992,132.44 2,000,000.00 1,969,860.00 2.500 2.556 2.592 01/30/2023 1,674 31315PZS1 1924 Federal Agricultural Mortgage 02/08/2018 1,077,332.86 1,100,000.00 1,066,329.00 2.130 2.578 2.614 01/24/2023 1,668 3132X0H79 1927 Federal Agricultural Mortgage 02/22/2018 999,744.64 1,000,000.00 991,430.00 2.350 2.327 2.360 02/22/2021 967 3132X0H87 1928 Federal Agricultural Mortgage 02/22/2018 1,500,000.00 1,500,000.00 1,483,365.00 2.600 2.564 2.600 02/22/2023 1,697 3132X0G21 1930 Federal Agricultural Mortgage 02/09/2018 998,374.38 1,000,000.00 993,220.00 2.100 2.174 2.205 02/03/2020 582 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 11 Purchase Current YTM YTM Maturity Days To CUSIP Investment # Issuer Date Book Value Par Value Market Value Rate 360 365 Date Maturity Federal Agency Issues - Coupon 3132X0G21 1935 Federal Agricultural Mortgage 02/15/2018 997,374.29 1,000,000.00 993,220.00 2.100 2.238 2.269 02/03/2020 582 3132X0L33 1936 Federal Agricultural Mortgage 02/23/2018 1,500,000.00 1,500,000.00 1,494,405.00 2.770 2.732 2.770 02/21/2023 1,696 31315PEY1 839 Federal Agricultural Mortgage 12/30/2009 1,500,000.00 1,500,000.00 1,543,440.00 4.500 4.438 4.500 12/30/2019 547 31315PTU3 942 Federal Agricultural Mortgage 03/09/2011 1,500,000.00 1,500,000.00 1,556,655.00 4.160 4.103 4.160 03/09/2021 982 3133EAUF3 1092 Federal Farm Credit Bank 06/14/2012 1,500,000.00 1,500,000.00 1,487,475.00 1.500 1.479 1.500 06/14/2019 348 31331JN90 903 Federal Farm Credit Bank 09/29/2010 1,000,000.00 1,000,000.00 1,005,060.00 2.875 2.835 2.875 09/29/2020 821 31331J5F6 918 Federal Farm Credit Bank 12/16/2010 2,000,000.00 2,000,000.00 2,044,860.00 3.625 3.575 3.625 12/16/2020 899 3133EA4J4 1181 Call Federal Farm Credit Bank . 04/30/2013 1,499,984.70 1,500,000.00 1,496,670.00 1.150 1.137 1.153 10/11/2018 102 3133ECTM6 1227 Federal Farm Credit Bank . 07/02/2013 1,500,000.00 1,500,000.00 1,500,000.00 1.900 1.873 1.900 07/02/2018 1 3133ECRH9 1241 Federal Farm Credit Bank . 01/09/2014 479,493.43 500,000.00 490,940.00 2.450 3.383 3.430 06/06/2023 1,801 3133EAA65 1526 Federal Farm Credit Bank . 01/27/2016 627,129.96 625,000.00 603,512.50 2.125 2.024 2.052 07/26/2023 1,851 31331XSS2 1563 Federal Farm Credit Bank . 03/17/2016 556,740.87 500,000.00 542,220.00 5.160 1.876 1.902 03/14/2022 1,352 3133EFT98 1565 Call Federal Farm Credit Bank . 03/28/2016 999,250.93 1,000,000.00 961,590.00 2.620 2.596 2.632 03/28/2025 2,462 3133EF3D7 1582 Call Federal Farm Credit Bank . 04/21/2016 1,500,000.00 1,500,000.00 1,439,175.00 2.540 2.505 2.540 04/21/2025 2,486 3133EF3D7 1584 Call Federal Farm Credit Bank . 04/21/2016 1,500,000.00 1,500,000.00 1,439,175.00 2.540 2.505 2.540 04/21/2025 2,486 3133EF4A2 1585 Call Federal Farm Credit Bank . 04/19/2016 1,500,000.00 1,500,000.00 1,447,110.00 1.920 1.893 1.920 04/19/2022 1,388 3133EF2D8 1591 Call Federal Farm Credit Bank . 04/19/2016 1,500,000.00 1,500,000.00 1,429,260.00 2.640 2.603 2.639 04/13/2026 2,843 3133EC4L5 1593 Federal Farm Credit Bank . 04/21/2016 250,241.42 250,000.00 240,862.50 1.610 1.558 1.580 11/23/2021 1,241 3133ECPF5 1596 Federal Farm Credit Bank . 04/21/2016 1,010,092.32 1,000,000.00 967,930.00 1.875 1.578 1.600 05/13/2022 1,412 3133EFX44 1598 Call Federal Farm Credit Bank . 04/22/2016 1,000,000.00 1,000,000.00 964,910.00 2.050 2.021 2.049 10/05/2022 1,557 3133EFYV3 1603 Call Federal Farm Credit Bank . 04/26/2016 1,937,654.74 1,930,000.00 1,850,329.60 2.820 2.722 2.760 02/17/2026 2,788 3133EFYF8 1606 Call Federal Farm Credit Bank . 04/28/2016 1,611,762.32 1,605,000.00 1,566,255.30 2.730 2.621 2.657 02/10/2025 2,416 3133EF6T9 1609 Call Federal Farm Credit Bank . 05/12/2016 1,000,000.00 1,000,000.00 953,280.00 2.470 2.436 2.470 05/12/2025 2,507 3133EC7D0 1615 Federal Farm Credit Bank . 05/13/2016 1,009,934.25 1,000,000.00 949,890.00 2.125 1.930 1.956 12/13/2024 2,357 3133EGEB7 1623 Call Federal Farm Credit Bank . 06/09/2016 1,500,000.00 1,500,000.00 1,418,910.00 2.570 2.534 2.570 06/09/2026 2,900 3133EF2D8 1630 Call Federal Farm Credit Bank . 06/13/2016 1,005,619.83 1,000,000.00 952,840.00 2.640 2.522 2.557 04/13/2026 2,843 3133EF2D8 1634 Call Federal Farm Credit Bank . 06/16/2016 1,007,921.97 1,000,000.00 952,840.00 2.640 2.489 2.524 04/13/2026 2,843 3133EGGRO 1638 Call Federal Farm Credit Bank . 06/22/2016 2,000,000.00 2,000,000.00 1,900,540.00 2.500 2.582 2.618 06/22/2026 2,913 3133EGHN8 1641 Call Federal Farm Credit Bank . 06/30/2016 1,500,000.00 1,500,000.00 1,421,535.00 2.420 2.386 2.420 06/30/2025 2,556 3133EGJH9 1647 Call Federal Farm Credit Bank . 07/06/2016 1,500,000.00 1,500,000.00 1,418,340.00 2.240 2.209 2.240 01/06/2025 2,381 3133EGKM6 1650 Federal Farm Credit Bank . 07/06/2016 1,500,000.00 1,500,000.00 1,453,215.00 1.000 0.986 1.000 07/06/2020 736 31331XSS2 1659 Federal Farm Credit Bank . 07/08/2016 570,018.33 500,000.00 542,220.00 5.160 1.215 1.232 03/14/2022 1,352 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 12 Purchase Current YTM YTM Maturity Days To CUSIP Investment # Issuer Date Book Value Par Value Market Value Rate 360 365 Date Maturity Federal Agency Issues - Coupon 3133EGFB6 1664 Call Federal Farm Credit Bank . 07/25/2016 1,501,760.78 1,500,000.00 1,417,695.00 2.360 2.309 2.341 06/16/2025 2,542 3133EGQA6 1675 Call Federal Farm Credit Bank . 08/09/2016 1,497,396.44 1,500,000.00 1,415,715.00 1.850 1.859 1.885 11/08/2023 1,956 3133EGQH1 1679 Call Federal Farm Credit Bank . 08/18/2016 1,350,000.00 1,350,000.00 1,242,094.50 2.140 2.110 2.139 08/10/2026 2,962 3133EGXB6 1701 Call Federal Farm Credit Bank. 10/06/2016 1,619,628.79 1,625,000.00 1,485,428.75 2.140 2.154 2.184 10/05/2026 3,018 3133EGYL3 1705 Call Federal Farm Credit Bank . 10/17/2016 1,000,000.00 1,000,000.00 924,220.00 2.090 2.061 2.090 10/17/2025 2,665 31331XHX3 1782 Federal Farm Credit Bank. 04/12/2017 551,891.28 500,000.00 537,810.00 5.050 1.884 1.910 12/21/2021 1,269 3133EEVD9 1787 Federal Farm Credit Bank . 05/04/2017 899,693.02 900,000.00 870,867.00 2.300 2.274 2.306 03/25/2024 2,094 3133EDWX6 1822 Federal Farm Credit Bank . 06/21/2017 521,241.28 500,000.00 498,360.00 2.910 2.143 2.172 10/07/2024 2,290 3133EHGK3 1826 Call Federal Farm Credit Bank . 06/22/2017 1,000,000.00 1,000,000.00 975,870.00 2.850 2.798 2.836 04/24/2025 2,489 3133ED6R8 1843 Federal Farm Credit Bank . 09/14/2017 463,961.78 445,000.00 447,429.70 2.930 1.870 1.896 11/07/2022 1,590 3133EFYK7 1845 Call Federal Farm Credit Bank . 09/14/2017 505,956.87 506,000.00 489,494.28 2.290 2.260 2.291 02/08/2023 1,683 3133EHZLO 1846 Call Federal Farm Credit Bank . 09/20/2017 1,500,000.00 1,500,000.00 1,440,210.00 2.920 2.880 2.920 09/20/2027 3,368 3133EGCR4 1848 Call Federal Farm Credit Bank . 09/18/2017 995,611.64 1,000,000.00 960,800.00 2.070 2.135 2.165 06/01/2023 1,796 3133EHTZ6 1849 Call Federal Farm Credit Bank . 09/18/2017 1,000,000.00 1,000,000.00 959,480.00 2.950 2.909 2.949 08/09/2027 3,326 3133EHD59 1859 Call Federal Farm Credit Bank . 10/10/2017 1,000,000.00 1,000,000.00 988,960.00 2.900 2.860 2.900 04/10/2026 2,840 3133EHG31 1870 Call Federal Farm Credit Bank . 10/19/2017 1,000,000.00 1,000,000.00 958,880.00 3.000 2.958 3.000 04/19/2027 3,214 3133EHG72 1871 Call Federal Farm Credit Bank . 10/18/2017 1,000,000.00 1,000,000.00 971,400.00 3.080 3.037 3.080 10/18/2027 3,396 3133EHJ20 1874 Call Federal Farm Credit Bank . 10/23/2017 1,500,000.00 1,500,000.00 1,468,260.00 2.680 2.643 2.680 10/23/2024 2,306 3133EHZLO 1875 Call Federal Farm Credit Bank . 10/18/2017 670,712.52 675,000.00 648,094.50 2.920 2.958 3.000 09/20/2027 3,368 3133EC2B9 1885 Federal Farm Credit Bank . 12/29/2017 590,561.96 600,000.00 580,062.00 1.700 2.161 2.191 11/09/2021 1,227 3133EH3K7 1887 Call Federal Farm Credit Bank . 01/03/2018 1,494,668.79 1,500,000.00 1,454,175.00 3.100 3.102 3.146 06/21/2027 3,277 3133EJDE6 1932 Federal Farm Credit Bank . 02/16/2018 1,495,349.53 1,500,000.00 1,483,710.00 2.570 2.605 2.642 02/16/2023 1,691 3133EJNJ4 1954 Call Federal Farm Credit Bank . 05/07/2018 1,500,000.00 1,500,000.00 1,500,195.00 3.470 3.422 3.470 05/07/2024 2,137 313376BR5 1012 Federal Home Loan Bank 12/16/2011 2,000,000.00 2,000,000.00 1,995,920.00 1.750 1.725 1.749 12/14/2018 166 3133782M2 1039 Federal Home Loan Bank 03/08/2012 1,499,066.40 1,500,000.00 1,492,425.00 1.500 1.574 1.596 03/08/2019 250 313378LA7 1041 Federal Home Loan Bank 03/20/2012 1,500,000.00 1,500,000.00 1,478,145.00 2.330 2.298 2.330 02/25/2022 1,335 313378VG3 1049 Federal Home Loan Bank 04/09/2012 1,500,000.00 1,500,000.00 1,493,115.00 1.850 1.824 1.850 05/22/2019 325 313379EC9 1073 Federal Home Loan Bank 05/18/2012 2,000,000.00 2,000,000.00 1,972,060.00 2.000 1.972 2.000 11/18/2020 871 313381C94 1125 Federal Home Loan Bank 11/30/2012 1,500,773.82 1,500,000.00 1,473,240.00 1.250 1.196 1.212 12/13/2019 530 313381DA0 1126 Call Federal Home Loan Bank 12/05/2012 749,833.96 750,000.00 726,120.00 2.190 2.165 2.195 12/05/2022 1,618 313381GB5 1127 Federal Home Loan Bank 11/30/2012 1,500,000.00 1,500,000.00 1,493,100.00 1.000 0.986 1.000 11/30/2018 152 313381C94 1131 Federal Home Loan Bank 12/13/2012 1,500,000.00 1,500,000.00 1,473,240.00 1.250 1.232 1.249 12/13/2019 530 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 13 Purchase Current YTM YTM Maturity Days To CUSIP Investment # Issuer Date Book Value Par Value Market Value Rate 360 365 Date Maturity Federal Agency Issues - Coupon 313376BR5 1135 Federal Home Loan Bank 12/19/2012 1,504,327.82 1,500,000.00 1,496,940.00 1.750 1.075 1.090 12/14/2018 166 313376BR5 1140 Federal Home Loan Bank 01/08/2013 1,504,042.95 1,500,000.00 1,496,940.00 1.750 1.117 1.132 12/14/2018 166 313381DA0 1146 Call Federal Home Loan Bank 01/25/2013 212,142.19 212,500.00 205,734.00 2.190 2.201 2.232 12/05/2022 1,618 3133XHRJ3 1156 Federal Home Loan Bank 02/25/2013 1,445,975.98 1,315,000.00 1,409,916.70 5.000 1.825 1.850 12/10/2021 1,258 3133XSR59 1157 Federal Home Loan Bank 02/25/2013 2,022,761.79 2,000,000.00 2,014,100.00 3.750 1.128 1.144 12/14/2018 166 3133XSR59 1168 Federal Home Loan Bank 03/11/2013 535,939.78 530,000.00 533,736.50 3.750 1.165 1.182 12/14/2018 166 313371U79 1240 Federal Home Loan Bank 01/09/2014 1,515,742.54 1,500,000.00 1,516,785.00 3.125 2.615 2.651 12/11/2020 894 3130A0J27 1248 Federal Home Loan Bank 01/23/2014 1,499,889.22 1,500,000.00 1,493,115.00 2.220 2.194 2.225 01/07/2020 555 3130Al2B3 1253 Federal Home Loan Bank 02/24/2014 1,500,000.00 1,500,000.00 1,489,575.00 2.125 2.095 2.124 03/13/2020 621 313382K69 1261 Federal Home Loan Bank 03/13/2014 1,474,055.91 1,500,000.00 1,463,775.00 1.750 2.418 2.451 03/12/2021 985 313370US5 1267 Federal Home Loan Bank 04/02/2014 1,517,399.42 1,500,000.00 1,507,170.00 2.875 2.271 2.303 09/11/2020 803 313379EC9 1270 Federal Home Loan Bank 04/08/2014 198,702.98 200,000.00 197,206.00 2.000 2.263 2.295 11/18/2020 871 313379EC9 1272 Federal Home Loan Bank 04/09/2014 546,431.69 550,000.00 542,316.50 2.000 2.263 2.295 11/18/2020 871 3133XTYY6 1278 Federal Home Loan Bank 04/22/2014 332,216.87 325,000.00 330,684.25 4.375 1.889 1.916 06/14/2019 348 313379EE5 1314 Federal Home Loan Bank 06/04/2014 1,498,644.11 1,500,000.00 1,489,110.00 1.625 1.700 1.724 06/14/2019 348 313379EE5 1318 Federal Home Loan Bank 06/16/2014 1,497,631.75 1,500,000.00 1,489,110.00 1.625 1.774 1.799 06/14/2019 348 3133836A4 1324 Call Federal Home Loan Bank 06/24/2014 1,239,446.76 1,250,000.00 1,232,725.00 0.800 1.766 1.791 05/22/2019 325 3130A2FH4 1332 Federal Home Loan Bank 07/02/2014 1,500,542.79 1,500,000.00 1,490,655.00 1.750 1.686 1.710 06/14/2019 348 3130A7Q73 1577 Federal Home Loan Bank 04/08/2016 1,502,943.33 1,500,000.00 1,442,790.00 1.530 1.450 1.470 12/08/2021 1,256 3130A7RS6 1583 Call Federal Home Loan Bank 04/27/2016 1,689,339.02 1,690,000.00 1,608,001.20 2.650 2.619 2.655 04/27/2026 2,857 3130A7TA3 1587 Call Federal Home Loan Bank 04/28/2016 1,500,000.00 1,500,000.00 1,441,035.00 2.070 2.041 2.070 04/28/2023 1,762 313382K69 1605 Federal Home Loan Bank 04/27/2016 1,006,174.56 1,000,000.00 975,850.00 1.750 1.490 1.511 03/12/2021 985 3133827D9 1619 Federal Home Loan Bank 06/02/2016 503,172.52 500,000.00 489,340.00 1.750 1.476 1.496 02/08/2021 953 3133XDVS7 1620 Federal Home Loan Bank 06/02/2016 435,512.89 400,000.00 424,316.00 5.250 1.461 1.481 12/11/2020 894 3130A8F99 1628 Call Federal Home Loan Bank 06/15/2016 1,500,000.00 1,500,000.00 1,422,030.00 2.580 2.544 2.580 06/15/2026 2,906 3130A8J46 1632 Call Federal Home Loan Bank 06/29/2016 2,000,000.00 2,000,000.00 1,886,820.00 2.520 2.485 2.520 06/29/2026 2,920 3130A8J79 1633 Call Federal Home Loan Bank 06/27/2016 1,363,636.27 1,363,636.27 1,292,331.73 2.350 2.317 2.350 12/27/2024 2,371 3130A8JG9 1635 Call Federal Home Loan Bank 06/22/2016 1,500,000.00 1,500,000.00 1,438,785.00 2.070 2.041 2.070 06/22/2023 1,817 3130A8J79 1637 Call Federal Home Loan Bank 06/27/2016 909,091.00 909,091.00 861,554.63 2.350 2.317 2.350 12/27/2024 2,371 3130A8JX2 1640 Call Federal Home Loan Bank 06/29/2016 1,500,000.00 1,500,000.00 1,415,460.00 2.540 2.505 2.540 06/29/2026 2,920 3130A8HF3 1643 Call Federal Home Loan Bank 06/23/2016 1,497,655.86 1,500,000.00 1,417,605.00 2.440 2.430 2.464 09/23/2025 2,641 3130A8HT3 1644 Call Federal Home Loan Bank 06/29/2016 1,498,497.17 1,500,000.00 1,500,015.00 2.470 2.451 2.485 12/29/2025 2,738 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 14 Purchase Current YTM YTM Maturity Days To CUSIP Investment # Issuer Date Book Value Par Value Market Value Rate 360 365 Date Maturity Federal Agency Issues - Coupon 3130A8J46 1648 Call Federal Home Loan Bank 06/29/2016 1,500,359.75 1,500,000.00 1,415,115.00 2.520 2.425 2.459 06/29/2026 2,920 3130A0EN6 1649 Federal Home Loan Bank 06/28/2016 263,476.97 250,000.00 250,945.00 2.875 1.232 1.249 12/10/2021 1,258 3130A8MQ3 1651 Call Federal Home Loan Bank 07/12/2016 1,500,000.00 1,500,000.00 1,432,740.00 1.875 1.849 1.875 10/12/2022 1,564 3130A8F99 1652 Call Federal Home Loan Bank 06/29/2016 981,363.44 980,000.00 929,059.60 2.580 2.524 2.560 06/15/2026 2,906 3130A8SJ3 1661 Call Federal Home Loan Bank 08/01/2016 1,000,000.00 1,000,000.00 943,570.00 2.150 2.120 2.150 11/01/2024 2,315 3130A8R54 1662 Call Federal Home Loan Bank 07/28/2016 1,498,576.46 1,500,000.00 1,418,565.00 1.800 1.795 1.820 07/28/2023 1,853 3130A8VP5 1667 Call Federal Home Loan Bank 08/23/2016 1,500,000.00 1,500,000.00 1,413,870.00 2.000 1.972 2.000 08/23/2024 2,245 3130A8VN0 1668 Call Federal Home Loan Bank 08/17/2016 1,500,000.00 1,500,000.00 1,423,095.00 1.940 1.913 1.940 11/17/2023 1,965 3130A94L2 1690 Call Federal Home Loan Bank 09/15/2016 997,540.28 1,000,000.00 918,930.00 2.125 2.129 2.158 09/02/2026 2,985 3130A9N64 1695 Call Federal Home Loan Bank 10/06/2016 1,500,000.00 1,500,000.00 1,378,425.00 2.150 2.120 2.150 10/06/2026 3,019 3130A9N64 1697 Call Federal Home Loan Bank 10/06/2016 999,173.61 1,000,000.00 918,950.00 2.150 2.131 2.161 10/06/2026 3,019 3133827E7 1699 Federal Home Loan Bank 10/05/2016 511,536.39 500,000.00 485,320.00 2.130 1.578 1.600 02/06/2023 1,681 3130A9P62 1700 Call Federal Home Loan Bank 10/13/2016 1,500,000.00 1,500,000.00 1,383,330.00 2.200 2.169 2.200 10/13/2026 3,026 3130A9PT2 1702 Call Federal Home Loan Bank 10/26/2016 2,000,000.00 2,000,000.00 1,847,540.00 2.230 2.199 2.230 10/26/2026 3,039 3130A9PT2 1706 Call Federal Home Loan Bank 10/26/2016 309,654.41 310,000.00 286,368.70 2.230 2.214 2.245 10/26/2026 3,039 3130A9RH6 1707 Call Federal Home Loan Bank 10/20/2016 999,833.94 1,000,000.00 929,100.00 2.300 2.270 2.302 10/20/2026 3,033 3130A9RH6 1709 Call Federal Home Loan Bank 10/20/2016 999,792.43 1,000,000.00 929,100.00 2.300 2.271 2.302 10/20/2026 3,033 3130A9XC0 1713 Call Federal Home Loan Bank 11/17/2016 2,000,000.00 2,000,000.00 1,852,820.00 2.360 2.327 2.360 11/17/2026 3,061 3130A9XC0 1716 Call Federal Home Loan Bank 11/17/2016 1,496,230.00 1,500,000.00 1,389,615.00 2.360 2.361 2.393 11/17/2026 3,061 3130AA2Z0 1717 Call Federal Home Loan Bank 11/23/2016 1,500,000.00 1,500,000.00 1,411,560.00 2.690 2.653 2.690 11/23/2026 3,067 3130AA2Z0 1718 Call Federal Home Loan Bank 11/23/2016 204,549.13 205,000.00 192,913.20 2.690 2.682 2.720 11/23/2026 3,067 3130A7C29 1719 Call Federal Home Loan Bank 11/16/2016 1,500,000.00 1,500,000.00 1,431,915.00 2.750 2.712 2.749 02/24/2026 2,795 3130AAAZ1 1720 Call Federal Home Loan Bank 12/14/2016 1,500,000.00 1,500,000.00 1,439,730.00 2.900 2.860 2.900 12/14/2026 3,088 3130AAEX2 1724 Call Federal Home Loan Bank 12/28/2016 800,000.00 800,000.00 778,464.00 2.150 2.120 2.150 12/28/2021 1,276 3130AABG2 1727 Federal Home Loan Bank 12/16/2016 989,547.88 1,000,000.00 972,930.00 1.875 2.168 2.198 11/29/2021 1,247 3130AAAZ1 1741 Call Federal Home Loan Bank 01/27/2017 311,564.11 315,000.00 302,343.30 2.900 3.008 3.050 12/14/2026 3,088 3130A8HF3 1751 Call Federal Home Loan Bank 02/15/2017 315,992.11 325,000.00 307,147.75 2.440 2.836 2.875 09/23/2025 2,641 3130A7C29 1752 Call Federal Home Loan Bank 02/15/2017 245,837.45 250,000.00 238,652.50 2.750 2.958 3.000 02/24/2026 2,795 3133XHRJ3 1763 Federal Home Loan Bank 03/10/2017 2,085,147.94 1,910,000.00 2,047,863.80 5.000 2.150 2.180 12/10/2021 1,258 313378CR0 1780 Federal Home Loan Bank 04/12/2017 1,011,209.89 1,000,000.00 982,090.00 2.250 1.903 1.930 03/11/2022 1,349 3130ABJW7 1823 Call Federal Home Loan Bank 06/27/2017 1,500,000.00 1,500,000.00 1,444,230.00 2.550 2.515 2.550 06/27/2024 2,188 3130A7TA3 1847 Call Federal Home Loan Bank 09/18/2017 497,936.24 500,000.00 480,345.00 2.070 2.131 2.161 04/28/2023 1,762 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Purchase Date Book Value Par Value Page 15 Current YTM YTM Maturity Days To Market Value Rate 360 365 Date Maturity Federal Agency Issues - Coupon 3130ACH64 1854 Call Federal Home Loan Bank 10/26/2017 1,500,000.00 1,500,000.00 1,462,980.00 2.250 2.219 2.250 10/26/2022 1,578 3130AAWE4 1860 Call Federal Home Loan Bank 09/28/2017 501,289.68 500,000.00 489,110.00 2.220 2.116 2.146 03/08/2022 1,346 3130ABAF3 1861 Call Federal Home Loan Bank 09/29/2017 800,000.00 800,000.00 781,080.00 3.000 2.958 2.999 05/11/2027 3,236 3130ACK94 1862 Call Federal Home Loan Bank 10/10/2017 1,000,000.00 1,000,000.00 964,520.00 2.530 2.495 2.530 10/10/2024 2,293 3130ACMH4 1873 Call Federal Home Loan Bank 10/16/2017 1,500,000.00 1,500,000.00 1,448,970.00 2.500 2.465 2.500 10/16/2024 2,299 3130A3VC5 1886 Federal Home Loan Bank 01/03/2018 992,813.64 1,000,000.00 970,160.00 2.250 2.359 2.392 12/08/2023 1,986 3130A3DL5 1896 Federal Home Loan Bank 01/09/2018 998,344.97 1,000,000.00 977,140.00 2.375 2.376 2.409 09/08/2023 1,895 3130ADEVO 1903 Federal Home Loan Bank 01/18/2018 499,181.55 500,000.00 489,925.00 2.380 2.385 2.418 01/17/2023 1,661 3133XUMS9 822 Federal Home Loan Bank 08/12/2009 3,000,000.00 3,000,000.00 3,072,150.00 4.500 4.437 4.499 09/13/2019 439 3133X0PF0 940 Federal Home Loan Bank 02/17/2011 2,004,067.31 2,000,000.00 2,007,960.00 5.375 3.423 3.470 08/15/2018 45 3134G3A91 1106 Fed. Home Loan Mortgage Corp. 08/22/2012 1,500,000.00 1,500,000.00 1,480,140.00 1.400 1.380 1.400 08/22/2019 417 3134G3L73 1113 Fed. Home Loan Mortgage Corp. 09/26/2012 1,500,000.00 1,500,000.00 1,475,760.00 1.500 1.479 1.500 12/26/2019 543 3134G45T1 1273 Fed. Home Loan Mortgage Corp. 04/10/2014 1,962,758.17 2,000,000.00 1,951,940.00 2.000 2.564 2.600 12/10/2021 1,258 3134G45T1 1277 Fed. Home Loan Mortgage Corp. 04/22/2014 978,953.23 1,000,000.00 975,970.00 2.000 2.643 2.680 12/10/2021 1,258 3134G3A91 1282 Fed. Home Loan Mortgage Corp. 05/01/2014 298,245.02 300,000.00 296,028.00 1.400 1.914 1.941 08/22/2019 417 3134G35V8 1286 Fed. Home Loan Mortgage Corp. 05/02/2014 297,933.52 300,000.00 295,281.00 1.650 2.053 2.082 03/13/2020 621 3134G3U40 1287 Fed. Home Loan Mortgage Corp. 05/02/2014 297,973.99 300,000.00 295,620.00 1.450 1.938 1.965 11/21/2019 508 3134G3K58 1291 Fed. Home Loan Mortgage Corp. 05/06/2014 990,827.98 1,000,000.00 981,830.00 1.500 2.041 2.070 03/19/2020 627 3134G44G0 1292 Fed. Home Loan Mortgage Corp. 05/06/2014 989,043.29 1,000,000.00 980,240.00 1.500 2.091 2.120 05/22/2020 691 3134G3L73 1301 Fed. Home Loan Mortgage Corp. 05/13/2014 993,388.53 1,000,000.00 983,840.00 1.500 1.945 1.972 12/26/2019 543 3134G43G1 1352 Fed. Home Loan Mortgage Corp. 07/25/2014 995,213.01 1,000,000.00 990,430.00 1.200 1.765 1.790 05/07/2019 310 3134GAEF7 1678 Call Fed. Home Loan Mortgage Corp. 09/29/2016 1,000,000.00 1,000,000.00 967,020.00 1.650 1.627 1.650 09/29/2021 1,186 3134GBNX6 1828 Call Fed. Home Loan Mortgage Corp. 06/28/2017 1,500,000.00 1,500,000.00 1,471,440.00 2.000 1.969 1.996 05/28/2021 1,062 3134GBXU1 1835 Call Fed. Home Loan Mortgage Corp. 07/27/2017 1,500,000.00 1,500,000.00 1,456,020.00 2.250 2.219 2.250 07/27/2022 1,487 3134GBXU1 1836 Call Fed. Home Loan Mortgage Corp. 07/27/2017 1,000,000.00 1,000,000.00 970,680.00 2.250 2.219 2.250 07/27/2022 1,487 3134GBXU1 1837 Call Fed. Home Loan Mortgage Corp. 07/27/2017 999,389.17 1,000,000.00 970,680.00 2.250 2.234 2.265 07/27/2022 1,487 3134GBK92 1853 Call Fed. Home Loan Mortgage Corp. 10/12/2017 660,000.00 660,000.00 638,490.60 2.200 2.169 2.200 10/12/2022 1,564 3136G0AW1 1048 Federal National Mortgage Asso 04/16/2012 2,000,000.00 2,000,000.00 1,983,920.00 2.350 2.317 2.350 10/16/2020 838 3136G0DU2 1059 Federal National Mortgage Asso 04/30/2012 2,000,000.00 2,000,000.00 1,980,200.00 2.000 1.972 2.000 04/30/2020 669 3136G0EC1 1061 Federal National Mortgage Asso 04/30/2012 1,500,000.00 1,500,000.00 1,486,485.00 2.050 2.021 2.050 04/30/2020 669 3136G0FJ5 1066 Federal National Mortgage Asso 04/30/2012 2,000,000.00 2,000,000.00 1,970,700.00 2.000 1.972 2.000 10/30/2020 852 3136FTR43 1268 Federal National Mortgage Asso 04/08/2014 1,493,914.06 1,500,000.00 1,480,335.00 2.000 2.172 2.202 08/28/2020 789 Run Date: 08/07/2018 - 18:54 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Purchase Date Book Value Par Value Current Page 16 YTM YTM Maturity Days To Market Value Rate 360 365 Date Maturity Federal Agency Issues - Coupon 3136G0U58 1276 3136G0M57 1288 3136G0Y70 1290 3136G0YK1 1315 3136G02P5 1317 3136G3AN5 1546 Call 3136G0EG2 1654 3136G3XZ3 1669 Call 3136G36A8 1687 Call 31364CCC0 1715 3136G05L1 1883 3135G0T78 1894 3135G0T78 1904 3136G0P62 1922 3135G0T94 1926 880591EL2 1132 880591EN8 1133 880591EL2 1145 880591EL2 1260 880591CJ9 1508 880591ER9 1519 880591CJ9 1589 880591EN8 1703 880591CJ9 1714 Treasury Securities - Coupon 3130ADJH6 912828SD3 912828TH3 912828TN0 912828SX9 Run Date: 08/07/2018 - 18:54 1918 1237 TB 1284 TB 1285 TB 1289 TB Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Federal National Mortgage Asso Tennessee Valley Authority Tennessee Valley Authority Tennessee Valley Authority Tennessee Valley Authority Tennessee Valley Authority Tennessee Valley Authority Tennessee Valley Authority Tennessee Valley Authority Tennessee Valley Authority 04/16/2014 983,231.14 1,000,000.00 975,890.00 1.750 2.364 2.397 04/30/2021 1,034 05/02/2014 245,335.74 250,000.00 243,060.00 1.750 2.452 2.486 04/09/2021 1,013 05/05/2014 996,795.74 1,000,000.00 993,340.00 1.080 1.633 1.656 01/30/2019 213 06/05/2014 1,195,508.89 1,200,000.00 1,187,232.00 1.500 1.815 1.840 08/28/2019 423 06/12/2014 995,342.45 1,000,000.00 990,690.00 1.200 1.765 1.790 04/29/2019 302 03/16/2016 1,000,000.00 1,000,000.00 986,180.00 1.500 1.978 2.006 03/16/2021 989 06/30/2016 1,029,763.19 1,000,000.00 987,300.00 2.280 1.171 1.187 04/23/2021 1,027 07/28/2016 1,348,962.19 1,350,000.00 1,298,713.50 1.500 1.505 1.526 07/28/2021 1,123 09/27/2016 1,050,000.00 1,050,000.00 983,356.50 2.000 1.972 2.000 09/27/2024 2,280 11/10/2016 664,593.30 500,000.00 640,940.00 7.125 2.367 2.400 04/30/2026 2,860 12/29/2017 494,702.87 500,000.00 482,380.00 2.000 2.238 2.270 08/26/2022 1,517 01/09/2018 987,141.74 1,000,000.00 967,740.00 2.000 2.288 2.320 10/05/2022 1,557 01/19/2018 982,257.88 1,000,000.00 967,740.00 2.000 2.409 2.443 10/05/2022 1,557 02/05/2018 982,334.12 1,000,000.00 975,860.00 1.500 2.268 2.300 10/15/2020 837 02/08/2018 1,485,038.97 1,500,000.00 1,472,880.00 2.375 2.574 2.610 01/19/2023 1,663 12/14/2012 527,607.43 500,000.00 514,815.00 3.875 1.596 1.618 02/15/2021 960 12/14/2012 1,008,292.75 1,010,000.00 976,841.70 1.875 1.893 1.920 08/15/2022 1,506 01/23/2013 1,580,827.15 1,500,000.00 1,544,445.00 3.875 1.647 1.669 02/15/2021 960 03/12/2014 1,199,312.51 1,160,000.00 1,194,370.80 3.875 2.427 2.461 02/15/2021 960 11/20/2015 1,247,758.95 1,000,000.00 1,239,630.00 6.750 2.807 2.846 11/01/2025 2,680 01/15/2016 761,379.44 750,000.00 744,877.50 2.875 2.564 2.600 09/15/2024 2,268 04/18/2016 996,627.15 775,000.00 960,713.25 6.750 2.337 2.370 11/01/2025 2,680 10/07/2016 1,508,408.85 1,490,000.00 1,441,083.30 1.875 1.538 1.560 08/15/2022 1,506 11/10/2016 1,611,723.31 1,250,000.00 1,549,537.50 6.750 2.317 2.350 11/01/2025 2,680 Subtotal and Average 323,278,677.07 320,999,227.27 315,599,125.39 2.201 2.232 1,560 Federal Home Loan Bank U.S. Treasury U.S. Treasury U.S. Treasury U.S. Treasury 01/29/2018 01/07/2014 05/02/2014 05/02/2014 05/05/2014 999,815.40 1,994,903.04 1,486,485.72 1,487,038.83 1,492,264.87 1,000,000.00 2,000,000.00 1,500,000.00 1,500,000.00 1,500,000.00 994,380.00 2.100 2.083 2.112 01/29/2020 577 1,988,980.00 1.250 1.682 1.705 01/31/2019 214 1,475,865.00 0.875 1.726 1.750 07/31/2019 395 1,475,685.00 1.000 1.755 1.780 08/31/2019 426 1,483,470.00 1.125 1.692 1.716 05/31/2019 334 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Purchase Date Book Value Par Value Current Page 17 YTM YTM Maturity Days To Market Value Rate 360 365 Date Maturity Treasury Securities - Coupon 912828SX9 912828TC4 912828J43 912828L57 912828P38 912828N30 912828P38 912828P38 912828P79 912828P79 1299 TB 1316 TB 1761 TB 1866 TB 1898 TB 1905 TB 1923 TB 1925 TB 1929 TB 1934 TB U.S. Treasury U.S. Treasury U.S. Treasury U.S. Treasury U.S. Treasury U.S. Treasury U.S. Treasury U.S. Treasury U.S. Treasury U.S. Treasury 05/13/2014 1,492,761.96 1,500,000.00 1,483,470.00 1.125 06/10/2014 1,489,855.85 1,500,000.00 1,480,080.00 1.000 03/09/2017 1,481,823.44 1,500,000.00 1,451,430.00 1.750 10/06/2017 1,488,445.70 1,500,000.00 1,442,760.00 1.750 01/11/2018 1,461,917.80 1,500,000.00 1,437,360.00 1.750 01/22/2018 1,481,311.06 1,500,000.00 1,462,320.00 2.125 02/05/2018 1,445,733.59 1,500,000.00 1,437,360.00 1.750 02/08/2018 966,925.25 1,000,000.00 958,240.00 1.750 02/09/2018 953,478.10 1,000,000.00 946,680.00 1.500 02/15/2018 950,603.74 1,000,000.00 946,680.00 1.500 Subtotal and Average 20,673,364.35 21,000,000.00 20,464,760.00 1.654 1.687 2.071 1.914 2.308 2.387 2.560 2.487 2.534 2.601 1.677 1.711 2.100 1.941 2.340 2.420 2.596 2.521 2.570 2.638 2.029 2.057 05/31/2019 334 06/30/2019 364 02/28/2022 1,338 09/30/2022 1,552 01/31/2023 1,675 12/31/2022 1,644 01/31/2023 1,675 01/31/2023 1,675 02/28/2023 1,703 02/28/2023 1,703 978 Municipal Bonds 004284638 03667PFL1 041042ZW5 121457EQ4 142665DH8 142665DH8 142665DH8 142665DJ4 156792GV9 156792GW7 2463807H6 357172VA0 359819DN6 359819DM8 373384RU2 373384W69 3733844V5 373384RU2 373384RX6 Run Date: 08/07/2018 - 18:54 1494 MUN 1790 MUN 1913 MUN 1548 MUN 1547 MUN 1556 MUN 1753 MUN 1857 MUN 1523 MUN 1876 MUN 1952 MUN 1646 MUN 1916 MUN 1917 MUN 1613 MUN 1645 MUN 1666 MUN 1691 MUN 1775 MUN Acalanes Union High School Dis Antelope Valley Community Coll State of Arkansas Burlingame School District Carlsbad Unified School Dist . Carlsbad Unified School Dist . Carlsbad Unified School Dist . Carlsbad Unified School Dist . Cerritos Community College Dis Cerritos Community College Dis State of Delaware Fremon Union High School Distr Fullerton School District Fullerton School District State of Georgia State of Georgia State of Georgia State of Georgia State of Georgia 10/30/2015 1,006,656.78 1,000,000.00 978,420.00 2.381 05/09/2017 222,589.61 220,000.00 216,064.20 2.608 01/26/2018 324,186.78 320,000.00 318,659.20 2.875 02/24/2016 844,494.74 730,000.00 808,555.30 6.238 02/24/2016 321,066.10 300,000.00 312,774.00 4.584 03/04/2016 1,337,362.46 1,250,000.00 1,303,225.00 4.584 02/17/2017 372,793.68 350,000.00 364,903.00 4.584 09/27/2017 355,660.60 305,000.00 339,379.60 5.234 01/27/2016 510,750.33 500,000.00 496,630.00 2.781 11/30/2017 56,098.04 55,000.00 54,692.00 2.971 05/03/2018 1,529,790.12 1,500,000.00 1,532,385.00 3.500 06/28/2016 630,843.83 525,000.00 597,313.50 6.080 02/14/2018 1,001,323.39 995,000.00 981,547.60 3.160 02/14/2018 751,880.46 750,000.00 737,692.50 3.040 05/17/2016 533,267.83 500,000.00 511,130.00 3.570 06/27/2016 385,718.52 365,000.00 367,876.20 3.250 07/29/2016 1,866,232.54 1,825,000.00 1,739,900.25 2.375 09/26/2016 414,789.88 385,000.00 393,570.10 3.570 04/10/2017 269,628.47 250,000.00 260,595.00 4.000 2.120 2.266 2.486 3.557 2.130 2.138 2.317 2.850 2.012 2.416 2.927 2.994 3.028 2.959 1.878 1.898 1.972 1.630 2.739 2.150 2.298 2.520 3.606 2.159 2.168 2.350 2.890 2.040 2.450 2.967 3.035 3.070 3.000 1.904 1.925 1.999 1.653 2.777 08/01/2021 08/01/2022 06/01/2022 08/01/2025 08/01/2021 08/01/2021 08/01/2021 08/01/2026 08/01/2021 08/01/2022 07/01/2022 02/01/2026 08/01/2026 08/01/2025 10/01/2022 02/01/2023 02/01/2025 10/01/2022 10/01/2025 1,127 1,492 1,431 2,588 1,127 1,127 1,127 2,953 1,127 1,492 1,461 2,772 2,953 2,588 1,553 1,676 2,407 1,553 2,649 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 18 Purchase Current YTM YTM Maturity Days To Date Book Value Par Value Market Value Rate 360 365 Date Maturity Municipal Bonds 373384RY4 373384RY4 419792DA1 419791YP7 419792NH5 419791YP7 419792NH5 544351KS7 544351KR9 544495VX9 5741925C0 574193NC8 574193PU6 5741925D8 62451FFK1 56781 RGU5 623040GX4 644682M37 64985HWN3 64986DEE1 677522HZ0 677522JB1 677522JB1 6775207G7 677521 GP5 685585FD8 68609BGH4 697379UE3 697379UE3 697379UE3 697379UE3 697379UE3 Run Date: 08/07/2018 - 18:54 1919 MUN 1945 MUN 1685 MUN 1852 MUN 1944 MUN 1946 MUN 1947 MUN 1748 MUN 1879 MUN 1949 MUN 1689 MUN 1762 MUN 1941 MUN 1943 MUN 1348 MUN 1858 MUN 1489 MUN 1948 MUN 1942 MUN 1933 MUN 1550 MUN 1688 MUN 1742 MUN 1832 MUN 1881 MUN 1910 MUN 1682 MUN 1192 MUN 1193 MUN 1195 MUN 1437 MUN 1610 MUN State of Georgia State of Georgia State of Hawaii State of Hawaii State of Hawaii State of Hawaii State of Hawaii City of Los Angeles City of Los Angeles Los Angeles Dept. of WTR & PWR State of Maryland State of Maryland State of Maryland State of Maryland Mtn. View-Whisman School Dist. Marin Community College Dist. Mt. San Antonio Community Coll State of New Hampshire New York St Envrnmntl Facs New York State Envrnmntl Corp State of Ohio State of Ohio State of Ohio State of Ohio State of Ohio Orchard School District State of Oregon Palo Alto Unified School Dist. Palo Alto Unified School Dist. Palo Alto Unified School Dist. Palo Alto Unified School Dist. Palo Alto Unified School Dist. 01/26/2018 1,196, 841.73 1,095,000.00 1,171,398.15 4.310 2.979 3.020 10/01/2026 3,014 03/19/2018 215,162.80 200,000.00 213,954.00 4.310 3.204 3.248 10/01/2026 3,014 10/19/2016 1,097,048.09 1,045,000.00 1,023,044.55 3.150 2.431 2.465 10/01/2026 3,014 09/21/2017 245,692.79 225,000.00 237,924.00 4.800 2.071 2.100 02/01/2022 1,311 03/20/2018 972,148.56 1,000,000.00 954,710.00 1.921 2.584 2.620 10/01/2022 1,553 03/21/2018 378,945.18 355,000.00 375,391.20 4.800 2.761 2.800 02/01/2022 1,311 03/29/2018 1,453,519.88 1,500,000.00 1,432,065.00 1.921 2.663 2.700 10/01/2022 1,553 02/14/2017 1,001,404.67 1,000,000.00 977,600.00 2.640 2.784 2.823 09/01/2023 1,888 12/11/2017 1,092,202.44 1,090,000.00 1,064,494.00 2.440 2.355 2.388 09/01/2022 1,523 03/29/2018 1,755,893.88 1,500,000.00 1,727,670.00 5.516 3.254 3.300 07/01/2027 3,287 09/16/2016 531,716.68 485,000.00 506,257.55 4.300 1.534 1.555 03/01/2022 1,339 03/22/2017 1,000,000.00 1,000,000.00 980,520.00 2.250 2.219 2.250 03/15/2022 1,353 03/21/2018 1,501,550.78 1,500,000.00 1,487,310.00 2.480 2.406 2.440 03/15/2021 988 03/20/2018 1,376,182.41 1,280,000.00 1,347,814.40 4.400 2.633 2.670 03/01/2023 1,704 07/24/2014 503,105.54 500,000.00 497,830.00 2.973 2.893 2.933 08/01/2021 1,127 09/28/2017 517,402.16 500,000.00 493,405.00 3.272 2.791 2.830 08/01/2027 3,318 10/26/2015 1,431,664.36 1,335,000.00 1,396,249.80 4.103 2.490 2.525 08/01/2023 1,857 03/22/2018 1,538,353.79 1,500,000.00 1,529,100.00 3.500 2.544 2.580 06/01/2021 1,066 03/15/2018 980,688.81 1,000,000.00 975,750.00 1.431 2.377 2.410 07/15/2020 745 02/15/2018 1,983,365.59 2,000,000.00 1,961,980.00 2.438 2.624 2.661 06/15/2022 1,445 03/09/2016 1,500,000.00 1,500,000.00 1,440,060.00 1.570 1.548 1.569 05/01/2021 1,035 09/13/2016 811,658.29 800,000.00 760,368.00 2.110 1.764 1.788 05/01/2023 1,765 01/31/2017 1,963,514.13 2,000,000.00 1,900,920.00 2.110 2.485 2.520 05/01/2023 1,765 06/30/2017 1,019,535.48 900,000.00 981,477.00 4.971 2.416 2.450 04/01/2024 2,101 12/21/2017 206,361.17 200,000.00 203,522.00 3.625 2.179 2.210 11/01/2020 854 01/25/2018 198,058.62 200,000.00 193,052.00 3.185 3.279 3.325 08/01/2027 3,318 08/29/2016 589,792.12 570,000.00 560,880.00 2.500 1.528 1.550 05/01/2022 1,400 05/10/2013 2,021,495.24 2,000,000.00 1,965,520.00 2.441 2.031 2.060 08/01/2021 1,127 05/13/2013 1,819,345.07 1,800,000.00 1,768,968.00 2.441 2.031 2.060 08/01/2021 1,127 05/15/2013 2,010,250.74 1,990,000.00 1,955,692.40 2.441 2.051 2.080 08/01/2021 1,127 01/27/2015 202,129.08 200,000.00 196,552.00 2.441 2.041 2.070 08/01/2021 1,127 05/12/2016 1,026,282.01 1,000,000.00 982,760.00 2.441 1.528 1.550 08/01/2021 1,127 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Page 19 Purchase Current YTM YTM Maturity Days To Date Book Value Par Value Market Value Rate 360 365 Date Maturity Municipal Bonds 697379UD5 697379UD5 801546PH9 801546PJ5 80181PCT2 80181PCU9 80181PCV7 80181 PCW5 797646NL6 797646NC6 797646T48 797646T55 797646T48 79772EBC2 797669XU7 797669XU7 798186C83 799017KT4 799017KV9 799017UW6 799017UW6 839278JM1 880541XY8 880541XX0 880541XX0 882723PP8 882722KA8 882722JZ5 882723A41 882722KC4 882722VJ7 882723EN5 Run Date: 08/07/2018 - 18:54 1684 MUN 1880 MUN 1897 MUN 1899 MUN 1906 MUN 1907 MUN 1908 MUN 1909 MUN 1441 MUN 1509 MUN 1711 MUN 1712 MUN 1839 MUN 1937 MUN 1938 MUN 1939 MUN 1435 MUN 1516 MUN 1518 MUN 1902 MUN 1940 MUN 1914 MUN 1673 MUN 1674 MUN 1676 MUN 1482 MUN 1586 MUN 1592 MUN 1621 MUN 1625 MUN 1708 MUN 1855 MUN Palo Alto Unified School Dist. Palo Alto Unified School Dist. County of Santa Clara County of Santa Clara Santa Cruz County Capital Fin. Santa Cruz County Capital Fin. Santa Cruz County Capital Fin. Santa Cruz County Capital Fin. City & County of San Francisco City & County of San Francisco City & County of San Francisco City & County of San Francisco City & County of San Francisco San Francisco Cmnty Facs Dist SF Bay Area Rapid Transit Dist SF Bay Area Rapid Transit Dist San Jose Unified School Dist. San Mateo Union High School Dt San Mateo Union High School Dt San Mateo Union High School Dt San Mateo Union High School Dt South Pasadena Unified School State of Tennessee State of Tennessee State of Tennessee State of Texas State of Texas State of Texas State of Texas State of Texas State of Texas State of Texas 09/02/2016 611,938.25 600,000.00 595,194.00 2.291 1.290 1.308 08/01/2020 762 12/20/2017 1,032,050.28 1,025,000.00 1,016,789.75 2.291 1.923 1.950 08/01/2020 762 01/11/2018 1,341,888.19 1,340,000.00 1,314,312.20 2.500 2.436 2.470 08/01/2023 1,857 01/12/2018 1,460,000.00 1,460,000.00 1,425,018.40 2.680 2.643 2.680 08/01/2024 2,223 01/25/2018 452,305.26 465,000.00 444,967.80 2.500 2.968 3.010 06/01/2024 2,162 01/25/2018 456,401.45 465,000.00 447,999.60 2.750 3.008 3.050 06/01/2025 2,527 01/25/2018 465,111.67 470,000.00 455,782.50 3.000 3.107 3.150 06/01/2026 2,892 01/25/2018 274,646.19 280,000.00 268,091.60 3.125 3.209 3.253 06/01/2027 3,257 02/09/2015 392,391.64 360,000.00 387,054.00 4.950 2.416 2.450 06/15/2022 1,445 11/27/2015 1,139,868.57 1,000,000.00 1,136,670.00 5.450 3.067 3.110 06/15/2025 2,541 11/01/2016 2,110,264.13 2,105,000.00 1,990,930.05 2.290 2.219 2.249 06/15/2025 2,541 11/01/2016 244,649.57 245,000.00 227,372.25 2.390 2.376 2.410 06/15/2026 2,906 07/14/2017 223,844.87 230,000.00 217,536.30 2.290 2.682 2.720 06/15/2025 2,541 03/02/2018 666,874.24 680,000.00 666,087.20 3.250 3.451 3.499 09/01/2027 3,349 03/07/2018 2,091,454.46 2,100,000.00 2,057,139.00 2.387 2.494 2.528 07/01/2021 1,096 03/07/2018 1,493,760.40 1,500,000.00 1,469,385.00 2.387 2.497 2.531 07/01/2021 1,096 01/29/2015 574,762.33 580,000.00 556,927.60 2.500 2.663 2.700 08/01/2023 1,857 01/08/2016 246,081.51 245,000.00 243,738.25 2.193 1.775 1.800 09/01/2019 427 01/19/2016 183,451.46 180,000.00 178,344.00 2.720 2.046 2.075 09/01/2021 1,158 01/16/2018 991,907.54 1,000,000.00 975,410.00 2.699 2.786 2.825 09/01/2025 2,619 03/09/2018 980,793.76 1,000,000.00 975,410.00 2.699 2.959 3.000 09/01/2025 2,619 02/15/2018 178,589.03 180,000.00 174,657.60 3.000 3.057 3.100 08/01/2027 3,318 08/25/2016 1,012,133.14 1,000,000.00 932,040.00 2.116 1.923 1.950 08/01/2026 2,953 08/25/2016 1,665,599.38 1,650,000.00 1,549,185.00 2.066 1.893 1.920 08/01/2025 2,588 08/25/2016 706,617.92 700,000.00 657,230.00 2.066 1.893 1.920 08/01/2025 2,588 10/14/2015 939,673.00 920,000.00 912,262.80 2.589 1.864 1.890 10/01/2021 1,188 04/19/2016 1,103,950.00 1,000,000.00 1,039,530.00 5.643 3.339 3.385 10/01/2023 1,918 04/21/2016 256,696.98 235,000.00 243,887.70 5.503 3.047 3.090 10/01/2022 1,553 06/07/2016 503,330.69 500,000.00 490,455.00 1.777 1.450 1.470 10/01/2020 823 06/09/2016 544,331.05 485,000.00 505,403.95 5.913 3.831 3.885 10/01/2025 2,649 10/19/2016 117,120.73 110, 000.00 112, 875.40 3.673 1.825 1.850 04/01/2022 1,370 09/22/2017 266,529.03 250,000.00 256,745.00 3.832 2.747 2.785 08/01/2025 2,588 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a CUSIP Investment # Issuer Fund ALL - Portfolio Listings Investments by Fund June 30, 2018 Purchase Date Book Value Par Value Current Page 20 YTM YTM Maturity Days To Market Value Rate 360 365 Date Maturity Municipal Bonds 91412GSB2 91412GGU3 91412GGT6 91412GSB2 91412GSB2 91412GSB2 91412GQB4 917542QT2 917542QR6 924258TT3 93974 D H W 1 93974CPH7 93974CPG9 93974CRC6 95640HBT4 1340 MUN 1356 MUN 1368 MUN 1383 MUN 1414 MUN 1420 MUN 1481 MUN 1622 MUN 1731 MUN 1456 MUN 1672 MUN 1721 MUN 1778 MUN 1802 MUN 1479 MUN University of California University of California University of California University of California University of California University of California University of California State of Utah State of Utah State of Vermont State of Washington State of Washington State of Washington State of Washington West Valley -Mission Community 07/14/2014 1,870,754.34 1,875,000.00 1,860,862.50 1.796 07/31/2014 432,662.95 425,000.00 429,347.75 3.348 08/08/2014 252,146.98 250,000.00 251,120.00 3.048 08/27/2014 953,146.95 955,000.00 947,799.30 1.796 11/28/2014 748,899.09 750,000.00 744,345.00 1.796 12/12/2014 1,497,512.51 1,500,000.00 1,488,690.00 1.796 10/08/2015 260,672.62 260,000.00 256,305.40 1.995 06/07/2016 776,690.16 750,000.00 759,127.50 3.289 01/04/2017 836,275.16 770,000.00 809,739.70 4.554 08/06/2015 2,082,951.28 2,000,000.00 2,017,520.00 4.250 08/08/2016 261,816.79 250,000.00 247,635.00 2.740 12/05/2016 556,634.03 515,000.00 547,347.15 4.636 04/12/2017 1,608,886.06 1,500,000.00 1,574,760.00 4.586 05/23/2017 544,678.22 485,000.00 522,238.30 4.669 10/01/2015 275,345.12 250,000.00 259,282.50 6.090 Subtotal and Average 84,564,535.23 82,290,000.00 82,220,103.55 2.007 2.281 1.982 1.972 1.923 1.943 1.824 1.430 2.904 3.275 1.504 2.465 2.081 2.416 4.030 2.035 07/01/2019 365 2.313 05/15/2020 684 2.010 05/15/2019 318 2.000 07/01/2019 365 1.950 07/01/2019 365 1.970 07/01/2019 365 1.850 05/15/2020 684 1.450 07/01/2020 731 2.944 07/01/2024 2,192 3.320 08/15/2023 1,871 1.524 08/01/2022 1,492 2.500 08/01/2022 1,492 2.110 08/01/2021 1,127 2.450 08/01/2024 2,223 4.086 08/01/2024 2,223 2.412 2.445 1,701 Total Investments and Average Run Date: 08/07/2018 - 18:54 526,839,894.27 522,342,713.00 514,920,282.36 2.171 2.201 1,398 Portfolio CPA AP Fl (PRF_FI) 7.1.1 Report Ver. 7.3.3a Attachment C Investment Policy Compliance As of June 30, 2018 Investment Policy Requirements Compliance Check 1 General Investment Guidelines: a) The max. stated final maturity of individual securities in the portfolio should be 10 years. b) A max. of 30 percent of the par value of the portfolio shall be invested in securities with maturities beyond 5 years. c) The City shall maintain a minimum of one month's cash needs in short term investments. d) At least $50 million shall be maintained in securities maturing in less than 2 years. Plus two managed pool accounts which provide instant liquidity: - Local Agency Investment Fund (LAIF) - maximum investment limit i $65 million - Fidelity Investments e) Should market value of the portfolio fall below 95 percent of the book value, report this fact within a reasonable time to the City Council and evaluate if there are risk of holding securities to maturity. d) Commitments to purchase securities newly introduced on the market shall be made no more than three (3) working days before pricing. f) Whenever possible, the City will obtain three or more quotations on the purchase or sale of comparable securities (excludes new issues, LAIF, City of Palo Alto bonds, money market accounts, and mutual funds). Full Compliance 28.70% Full Compliance $127.1 million $3 million $24.7 million 97.76% Full Compliance Full Compliance 2 U.S. Government Securities: a) There is no limit on purchase of these securities. b) Securities will not exceed 10 years maturity. Full Compliance 4.02% 3 U.S. Government Agency Securities: a) There is no limit on purchase of these securities except for: Callable and Multi -step-up securities provided that: - The potential call dates are known at the time of purchase; - the interest rates at which they "step-up" are known at the time of purchase; and - the entire face value of the security is redeemed at the call date. - No more than 25 percent of the par value of portfolio. b) Securities will not exceed 10 years maturity. Full Compliance Full Compliance Full Compliance Full Compliance 22.57% 4 Bonds of the State of California Local Government Agencies a) Having at time of investment a minimum Double A (AA/AA2) rating as provided by a nationally recognized rating service (e.g., Moody's and/or Standard and Poor's). b) May not exceed 20 percent of the par value of the portfolio. Full Compliance 15.76% 5 Certificates of Deposit: a) May not exceed 20 percent of the par value of the portfolio; b) No more than 10 percent of the par value of the portfolio in collateralized CDs in any institution. c) Purchase collateralized deposits only from federally insured large banks that are rated by a nationally recognized rating agency (e.g. Moody's, Standard & Poor's, etc.). d) For non -rated banks, deposit should be limited to amounts federally insured (FDIC) e) Rollovers are not permitted without specific instruction from authorized City staff. Full Compliance 6 Banker's Acceptance Notes: a) No more than 30 percent of the par value of the portfolio. b) Not to exceed 180 days maturity. c) No more than $5 million with any one institution. None Held Attachment C Investment Policy Compliance As of June 30, 2018 Investment Policy Requirements Compliance Check 7 Commercial Paper: a) No more than 15 percent of the par value of the portfolio. b) Having highest letter or numerical rating from a nationally recognized rating service. c) Not to exceed 270 days maturity. d) No more than $3 million or 10 percent of the outstanding commercial paper of any one institution, whichever is lesser. None Held 8 Short -Term Repurchase Agreement (REPO): a) Not to exceed 1 year. b) Market value of securities that underlay a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities. None Held 9 Money Market Deposit Accounts a) Liquid bank accounts which seek to maintain a net asset value of $1.00. Full Compliance 10 Mutual Funds: a) No more than 20 percent of the par value of the portfolio. b) No more than 10 percent of the par value with any one institution. None Held 11 Negotiable Certificates of Deposit (NCD): a) No more than 10 percent of the par value of the portfolio. b) No more than $5 million in any one institution. Full Compliance 9.53% FDIC Insured 12 Medium -Term Corporate Notes: a) No more than 10 percent of the par value of the portfolio. b) Not to exceed 5 years maturity. c) Securities eligible for investment shall have a minimum rating of AA from a nationally recognized rating service. d) No more than $5 million of the par value may be invested in securities of any single issuer, other than the U.S. Government, its agencies and instrumentality. e) If securities owned by the City are downgraded by either rating agencies to a level below AA it shall be the City's policy to review the credit situation and make a determination as to whether to sell or retain such securities. Full Compliance 3.92% 13 Prohibited Investments: a) Reverse Repurchase Agreements b) Derivatives as defined in Appendix B of the Investment Policy Full Compliance None Held 14 All securities shall be delivered to the City's safekeeping custodian, and held in the name of the City, with the exception of : - Certificates of Deposit, Mutual Funds, and LAIF Full Compliance CITY OF PALO ALTO City of Palo Alto (ID # 9529) City Council Staff Report Report Type: Informational Report Meeting Date: 9/10/2018 Summary Title: PAFD Biannual Performance Report FY18 Title: Palo Alto Fire Department Biannual Performance Report for the Second Half of Fiscal Year 2018 From: City Manager Lead Department: Fire Recommendation Staff recommends the City Council review the Second Palo Alto Fire Department Biannual Performance Report for Fiscal Year 2018. Background and Discussion In Fiscal Year 2015 the Palo Alto Fire Department (PAFD) identified performance reporting as a key initiative, and began reporting on key performance measures quarterly. Beginning Fiscal Year 2018, the Department will be submitting reports twice each year. The report provides overall calls for service information, as well as more detailed information on the key service areas, including Emergency Medical Services, Fire Suppression, Rescue and Hazardous Materials Response, and Fire Prevention. The report also provides information on mutual and automatic aid with our regional public safety partners and internal workforce planning efforts. Performance measures include the following: • Calls for Service: This data provides information on the final outcome of all emergency response calls. The data is tracked in the Fire Department's Record Management System, and uses standardized call type codes, which are defined by the National Fire Incident Reporting System (NFIRS). The report includes overall call volume by primary category, and a detailed listing of call type in the service type sections. In Fiscal Year 2018 the Department will be structuring and reporting on calls for service based on the NFIRS category groups in order to maintain consistency City of Palo Alto Page 1 amongst various City performance reports and statistics sent to State and National reporting centers. • Response Times: This aspect measures the time it takes from an emergency call or request for response being created in the dispatch center to the arrival of resources to the scene of the emergency. This information is tracked in the Computer Aided Dispatch (CAD) System, and the performance goals, or service levels, are set by Council in accordance with county and national standards. • Ambulance Transports: The report provides the number of ambulatory transports to hospitals or other medical care facilities, and the proportion of Emergency Medical Calls that included transports. This information is tracked in the Fire Department's Emergency Medical Record Management System. • Fire Containment: This measures the proportion of building and structure fires that are contained to the area or room of origin within Palo Alto and Stanford Campus. • Mutual and Automatic Aid: This includes the number and proportion of all incidents in which the PAFD provided aid to neighboring communities, as well as the aid received from neighboring Fire Departments. This information is tracked in the CAD System. • Permits: This provides the count of facility, electric vehicle, and solar permits issued by the Fire Prevention Bureau. This information is currently tracked in the Development Center's Records Management System. • Inspections: A count of the total number of Hazardous Materials and State Mandated inspections is provided. In addition, an estimated number of inspections to be completed for the year is also provided to assess overall workload performance to date. • Fire and Life Safety Plans Reviewed: This provides a total count of all plans reviewed, as well as the proportion of plans that were reviewed within the time guidelines. • Vacancies and Off -Line Employees: This section provides the total number of budgeted full-time equivalent line personnel, current vacancies, and employees that are off line from workers compensation or light duty. This information is obtained from the Fire Department's Staffing and Scheduling System (TeleStaff), as well as the City's Personnel Management System. • Succession Planning Metrics: This provides the number and proportion of line personnel that are eligible to retire, or will be eligible within the next five years. City of Palo Alto Page 2 This information is tracked in the City's Personnel Management System. This report also provides the total number of hours line personnel have spent in an acting capacity. Personnel serving in an acting capacity are a key component of the Department's overall succession planning efforts. Acting capacity allows junior officers to learn the responsibilities of higher ranks with guidance from senior officers. This information is tracked in TeleStaff. • Training hours: The total number of training hours completed by all line personnel is provided, as well as the average number of hours per each line personnel on staff. This information is tracked in the Fire Department's Record Management System. Local, State and Federal mandates require fire personnel to train a minimum of 20 hours per month. Attachments: • ATTACHMENT A_Coverletter • ATTACHMENT B_BiAnnual Performance Report FY18.2 • Attachment C_EMS Survey • Attachment D_Thank You Notes City of Palo Alto Page 3 City of Palo Alto Fire Department Honorable Councilmembers, I am pleased to provide the enclosed performance report for the second half of Fiscal Year 2018. This period marks a significant change in our deployment, as the changes and staffing reductions approved by City Council in October 2017 took effect at the beginning of this period in January 2018. These changes were the result of a lengthy meet and confer process with the IAFF Union, Local 1319. The deployment changes shifted resources in order to better meet the needs of the community, increase ambulance availability, and spread the workload of the system more equitably amongst crews. The Department has been closely monitoring the performance of the new deployment internally, and the enclosed performance report shows that the system is continuing to perform well. Response times remain consistent with those from the same period of the prior fiscal year. We have also seen that with cross staffing and dispatch changes that the workload generated by the system is much more equitable across all units. This has allowed are busiest units to have time for fire inspections, training and other daily required tasks, which was previously a challenge with their call volume. I am also happy to report to you that the Department is nearing completion of the Accreditation Process. The Palo Alto Fire Department embarked on the process in 2013, beginning with the development of the Strategic Plan. Accreditation allows us to take a close assessment of the Department's policies, procedures and programs and identify areas of strength and where we can continue to improve. I am grateful to our staff for the hard work and countless hours put into this intensive process. On August 9, 2018, the Commission on Fire Accreditation International awarded the Fire Department accreditation. The Palo Alto Fire Department becomes the tenth municipal fire department in California to achieve accreditation. Sincerely, Eric Nickel, EFO, CFC, CFO Fire Chief P.O Box 10250 Palo Alto, CA 94303 650.329.2184 650.327.6951 fax Palo Alto Fire Department Bi-Annual Performance Report Fiscal Year 2018, Second Period Calls for Service The Palo Alto Fire Department (PAFD) responded to a total of 4,344 calls for service in the second period of Fiscal Year 2018. This includes responses within Palo Alto, Stanford, and neighboring cities to provide Auto and Mutual Aid. Approximately eighty-three percent (83%) of calls are generated from Palo Alto, fifteen percent (15%) from Stanford, and the remainder from neighboring cities or requests for regional fire deployment. The majority of calls were for Rescue and Emergency Medical Services, making up sixty-three percent (63%) of the responses. Table 1 below shows the main categories of the calls to which PAFD responded. Calls are classified based on the actual event occurred, rather than the initial call request. Call Type FY17 JAN -JUN FY18 JAN -JUN Rescue and Emergency Medical Services Incidents 2,908 2,729 Good Intent 708 671 False Alarm and False Call 615 553 Service Call 267 228 Fire 70 84 Hazardous Condition, No Fire 133 78 Overpressure Rupture, Explosion, Overheat, No Fire 2 1 Grand Total 4,703 4,344 Good Intent and False Alarm calls make up the second largest types of responses. Most calls for service that may be a true threat of fire, gas or other emergency hazard are actually found to be something else after Firefighters investigate the situation. These calls are coded as Good Intent calls. As well, many fire alarm activations are from causes other than fire or emergency hazard. These situations are categorized as False Alarm calls. Emergency Medical Services Emergency Medical Service (EMS) is the primary service that the Palo Alto Fire Department provides to Palo Alto and Stanford. While this shift toward EMS is being seen across the region, the Palo Alto Fire Department is the only Fire Department in the County that provides ambulance and transport services. This is especially valuable to our community. The most recent Report from the Council on Aging Silicon Valley from 2012 indicates that Palo Alto has the highest percentage of the oldest PAFD FY18 Bi-Annual Performance Report seniors (75 and over) in the County. This population relies most on our services, with a service utilization rate more than six times greater than the rest of the population. Of the 2,729 Emergency Medical Service calls the PAFD responded to in the second period of Fiscal Year 2018, the overwhelming majority were for medical, trauma and cardiac calls that did not involve a vehicle accident. Rescue and EMS Performance Measures FY17 JAN -JUN FY18 JAN -JUN Emergency Medical Service Incident 2,849 2,687 Extrication, Rescue 39 23 Lock -In 17 10 Rescue or EMS Standby 3 9 Total 2,908 2,729 Transports Number of Transports 1,870 1,887 Percent of EMS Calls resulting in transport 64% 69% Response Times Percent of first responder arriving on scene to EMS calls within 8 minutes 94% 92% Percent of paramedic responder arriving on scene to EMS calls within 12 minutes 99% 99% Average response time for first responder arriving on scene to EMS calls 4:42 5:11 This period reflects a slight dip in the number of Rescue and EMS Incident calls. The number of EMS calls that resulted in an ambulance transport to a local hospital or care facility, accounted for sixty nine percent (69%) of all EMS calls. The most common rescue calls involved the removal of victims from a stalled elevator totaling twenty-three (23) which is also a decrease in comparison to the same period of the previous fiscal year. Lock -Ins also depict a decrease this period accounting. 0 Response Time Goal Met: At least 90% of first responder arriving on scene to EMS calls within 8 minutes. This period the PAFD first responder arrived on scene to EMS calls within 8 minutes ninety-two percent (92%) of the time. 0 Response Time Goal Met: At least 99% of paramedic responder arriving on scene to EMS calls within 12 minutes. This quarter the PAFD paramedic responder arrived on scene to EMS calls within 12 minutes ninety-nine percent (99%) of the time. 21 Page PAFD FY18 Bi-Annual Performance Report Fire Suppression Very few of the potential fire calls coming into dispatch turn out to be a real fire once PAFD investigates the scene and cause of the concerning elements. This period PAFD responded to eighty-four (84) calls where fire was present, with seventy-five (75) in Palo Alto or Stanford. There were seven building fires that the Department responded to, five of which were contained to the area of origin. Here are the descriptions of the building fires that we had between Jan 01 and June 30: January 15, 2018 This fire was at the Three Seasons Restaurant. When the first due engine arrived, they reported heavy fire on the roof of a 2 story commercial building. There was also fire in the kitchen of the restaurant, which was also determined to be where the fire originated. Based on the investigation, the kitchen exhaust flue caught on fire and ran through the vent and eventually, the roof. Unfortunately, the restaurant has closed and has gone under extensive remodeling to repair fire damage. March 6, 2018 This was a fire in a single family residence. The source of this fire was discovered in the corner of the garage before it was extinguished. Smoke from the fire had charged the home as well as the attic. Based on the investigation, the cause may have been faulty wiring. March 25, 2018 This fire was reported as a duplex with flames seen from the front porch and spreading laterally to the attached unit and along the eves. The fire was knocked down from the exterior with no extension into the structure. Based on the first -in captain's investigation, the fire seemed to be caused by faulty wiring. May 7, 2018 This fire was reported as a fire in a laboratory. It was reported that it was a small fire in a battery test room and was extinguished with a CO2 extinguisher. June 12, 2018 This fire took place at a 2 story single family residence. The first -in engine was able to make access and quickly knock down the fire. It appeared that the fire was possibly caused by a malfunctioning power supply unit. June 16, 2018 Engine 65 responded to a private fire alarm at an apartment complex. Upon arrival, they heard an audible alarm. When the crews made access to the involved room, they found that the fire was extinguished by the activated sprinkler head. The cause was determined to be a faulty light fixture. 31 Page PAFD FY18 Bi-Annual Performance Report Fire Suppression Measures FY17 JAN -JUN FY18 JAN -JUN Structure Fire 36 42 Mobile property (vehicle) fire Natural vegetation on fire Outside rubbish fire 6 7 5 13 6 22 Special outside fire 1 1 Total 70 84 Response Times Percent of first responder arriving on scene to Fire calls within 8 minutes 86% 88% Average response time for first responder arriving on scene to Fire calls 5:22 5:43 Fire Containment Percent of building and structure fires contained to the room or area of origin 90% 71% 0 Response Time Goal Not Met: At least 90% of first responder arriving on scene to Fire calls within 8 minutes. This period the PAFD first responder arrived on scene to Fire calls within 8 minutes eighty-eight percent (88%) of the time. This goal is consistently near eight -five percent, and we are seeing consistent small increases as the department continues to explore ways to improve on this measure. 0 Fire Containment Goal Not Met: At least 90% of building and structure fires contained to the room or area of origin. This period there were seven (7) building or structure fires within Palo Alto or Stanford, of which five were contained to the room or area of origin. The two fires that spread beyond the area of origin had grown beyond the original area before crews arrived on scene. In both bases first responders arrived under six minutes. 41 Page PAFD FY18 Bi-Annual Performance Report Hazardous Materials The Fire Department responded to a total of 77 calls related to hazardous material (HazMat) incidents. The most common HazMat call is spills and leaks of either natural or liquid petroleum gas (LPG) which totaled 42. This number accounted for fifty-five (55%) percent of HazMat calls. The second highest HazMat calls were related to electrical wiring or equipment problems. Twenty-six (26) of these calls account for thirty-four (34%) percent of all HazMat calls. Hazardous Materials Response Measures FY17 JAN -JUN FY18 JAN -JUN Combustible/Flammable spills and leaks 32 35 Electrical wiring/Equipment problem 26 26 Accident, potential accident 10 6 Chemical release, reaction, or toxic condition 6 6 Biological hazard 2 5 Total 76 78 Response Times Average response time for first responder arriving on scene to Rescue & Hazardous Materials calls 6:17 7:00 51 Page PAFD FY18 Bi-Annual Performance Report Mutual and Automatic Aid The Fire Department previously held automatic aid agreements with five regional Fire Departments, including Mountain View, Menlo Park, San Mateo County, and Santa Clara County Fire. At the request of the City of Mountain View, the automatic aid agreement was modified at the beginning of January this year resulting in a significant decrease in the number of calls compared to the prior fiscal year. The Palo Alto Fire Department continues to advocate for the closest unit response and collects objective data to support improved services to all of our communities under the previous automatic aid agreement. Of the other jurisdictions where mutual aid was provided Santa Clara County received the next highest aid from the department yet in comparison to the previous period, the data shows aid provided decreased about 42%. Three other agencies provided mutual or automatic aid for calls within Palo Alto or Stanford on a total of 66 incidents. Mutual Aid Performances FY17 JAN -JUN FY18 JAN -JUN Mutual and Auto Aid Provided Agency Mountain View Fire 189 30 Santa Clara County Fire 53 31 Menlo Park Fire 5 4 San Mateo County 0 1 All Mutual and Auto Aid Provided 247 66 Mutual and Auto Aid Received Agency Mountain View Fire 193 44 Menlo Park Fire 30 13 Santa Clara County Fire 16 4 Woodside Fire 7 5 Moffett Fire 3 0 Santa Clara City Fire 2 0 All Mutual and Auto Aid Received 251 66 61 Page PAFD FY18 Bi-Annual Performance Report Fire Prevention The Fire Prevention Bureau ensures compliance with the Fire Code for the safety of occupants and protection of property. Fire Inspectors perform fire sprinkler and fire alarm inspections, plan checks, permitting, and field fire safety inspections with the goal of ensuring all construction complies with local and national codes. The number of plans to review slightly decreased by 1% compared to reviews in FY17 during the same period. The Bureau has kept up with reviewing the majority of plans on time despite the sizeable workload increase, with ninety-six percent (96%) of plans reviewed on time. The percentage of facilities inspected at sixteen percent (16%) is below the goal of twenty-five percent (25%). This is due to a staffing shortage, as one of the hazardous materials inspectors was out on disability for the duration of the reporting period. This was in addition to a vacancy created by a retirement at the beginning of the fiscal year. In the coming Fiscal Year, the Bureau expects to be fully staffed by September, as those on disability are expected to return and hiring processes will be finalized to fill vacancies. Prevention Bureau Performance Measures FY17 JAN -JUN FY18 JAN -JUN Permits Fire Permits Issued 324 232 Sprinkler Permits Issued 131 140 Electric Vehicle Permits Issued 21 1 Solar Permits Issued 154 69 Inspections Fire Inspections 4,205 4,964 Hazardous Material Inspections Completed 170 87 Number of Hazardous Material Inspections for the year 584 563 Percent of Hazardous Material Facilities Inspections Complete 29% 16% State Mandated Inspections Completed 169 397 Number of State Mandated Inspections for the year 397 397 Percent of State Mandated Facilities Inspections Complete 43% 100% Fire and Life Safety Plan Review Plans Reviewed 998 985 Percent of Reviews Completed On -Time 97% 96% 71 Page PAFD FY18 Bi-Annual Performance Report Workforce Planning This period marks the beginning of Deployment changes and staffing reductions approved by City Council in October 2017. The Department operates daily emergency response operations with a revised total of 86.00 FTE line personnel. This includes three battalions of crews that staff six stations in the City and Stanford 24 hours each day. Over the last period, the department has operated with 8.0 positions vacant and 7.0 employees off-line creating a total of 15.00 FTE positions that require backfilling with overtime. The permanent vacancies are mostly within the Firefighter and Apparatus Operator Classifications; one vacancy in the Captain rank due to a retirement, and one vacancy in the Battalion Chief rank due to a promotion. The Department is currently conducting an entry level hiring process for a fall academy. The Battalion Chief position is a critical middle management role, and in order to build on the Department's succession planning efforts is in the process of updating the Acting Battalion Chief policies, with the goal of selecting Acting Battalion Chiefs through a process by winter 2018. Training hours reported for this period reflect a drop which is significantly caused by a change of training and reporting software now used by the department. The Department is in the process of change management with regard to utilizing a new system for tracking training hours on duty. The reduced number reflects the transitional period, as the majority of training has not been accurately captured in the system. The Training Battalion Chief is working with crews and management staff to increase accountability with proper reporting. We should see an improvement and data that more accurately reflects training hours in the coming fiscal year. Vacancies and Off -Line Employees FY18 JAN -JUN Classification Budgeted FTE Off -Line Employees Vacancies (Workers Comp/Light Duty) Personnel On Line Percent of Personnel On Line Battalion Chief 4 1 0 3 75% Fire Captain 22 1 1 20 91% Fire Apparatus Operator & Fire Fighters 60 6 6 48 80% TOTAL 86 8 7 71 82% 81 Page PAFD FY18 Bi-Annual Performance Report Succession Planning FY17 JUL-DEC FY18 JUL-DEC Personnel Number of Line Personnel Currently Eligible to Retire 26 21 Number of Line Personnel Eligible to Retire in Five Years 19 22 Percent of all Line Personnel Eligible to Retire within Five Years 48% 51.2% Number of Acting Battalion Chief Hours* 84 Number of Acting Captain Hours 5,453 5,201 Number of Acting Apparatus Operator Hours 13,362 12,437 Training Hours of Training Completed 14,587 8,018 Average Hours Per Line Personnel 95 113 *In the most recent Memorandum of Agreement with the Fire Chief's Association, Battalion Chief's cover each other's vacancies with straight time. Rarely, a Fire Captain will work overtime to temporarily fill the shift vacancy for a Battalion Chief, but this is not captured in our systems as working out of class. 91 Page PAFD VITAL SIGNS REPORT SURVEYS RECEIVED 1-1-2018 THROUGH 6-30-2018 FILTERS: SURVEY: 1 Feedback Innovations P.O. Box 100, Andover MA 01810 (844) 340-6060 Feedback-Innovations.com VITAL SIGNS PATIENT SATISFACTION REPORT 1.0 EXECUTIVE SUMMARY PAFD received a total of 142 responses for this period. The highest rated section was Communication, with a total score of 96.5. The lowest rated section was Billing, with a total score of 88.93. • The Communication section had a 97.6% increase in Degree ambulance staff took your condition seriously Grado en que el personal del ambulancia se tom() en serio su condition. • The Billing section had a 88.2% increase in Helpfulness of billing personnel Amabilidad del personal de facturacion. This may be a focus for further improvement. • Percentile ranking this period is lower 31.25%. Cumulative Score: 94.19 Pre -Hospital Patient Satisfaction Survey Current Period - Previous Period - 40 60 Score Benchmark 80 0 Score Benchmark 100 Previous Period Current Period 0.0 94.19 94.38 94.93 The benchmark is the mean average of all responses for all services in the Feedback Innovations database. Feedback Innovations 1 VITAL SIGNS PATIENT SATISFACTION REPORT Professionalism of person on the phone Profesionalidad de la persona al telefono Ability of person on phone to meet your needs Capacidad de la persona al telefono para satisfacer sus necesidades Speed in which person on the phone dispatched help Velocidad en que la persona al telefono envio la ayuda Information given prior to ambulance arrival Information ofrecida antes de la Ilegada de la ambulancia Ambulance staff's concern for your privacy La preocupacion del personal del ambulancia en cuanto a su privacidad Degree ambulance staff took your condition seriously Grado en que el personal del ambulancia se tomo en serio su condition Ambulance staff's efforts to inform you about treatment Los esfuerzos del personal del ambulancia para informarle sobre el procedimiento Degree to which the ambulance staff worked together to care for you Grado en que el personal del ambulancia trabajo en equipo para cuidar de usted Your confidence in skill of ambulance staff Su confianza en la experiencia del personal del ambulancia Ambulance staff cared for you as a person Cuidados recibidos por personal del ambulancia How well your pain was controlled LEn que grado se ha controlado su dolor? Your comfort when moved by ambulance staff Su comodidad cuando fue trasladado por el personal del ambulancia Comfort of ambulance ride Confort durante el viaje en ambulancia Helpfulness of billing personnel Amabilidad del personal de facturacion Ability of billing personnel to meet your needs Capacidad del personal de facturacion para satisfacer sus necesidades Responsiveness of billing personnel to billing issues Capacidad de respuesta a los problemas de facturacion Cleanliness of ambulance Limpieza de la ambulancia Wait time to get an ambulance Tiempo de espera para conseguir una ambulancia Degree to which service was worth the fees Grado en que el servicio es digno de los honorarios Likelihood of recommending ambulance service Probabilidad de recomendar el servicio Overall rating of experience Valoracion general de la experiencia 94.6% 95.2% 95.91% 96.02% 94.8% 96.12% 95.25% 95.6% 96.22% 97.0% 97.07% 95.4% 95.23% 97.6% 97.4% 97.18% 97.0% 96.71% 96.8% 93.14% 94.4% 88.2% 92.61% 95.6% 95.21% 93.6% 89.8% 88.8% 91.3% 91.37% 91.63% 96.0% 95.04 90.8% 93.8% 97.03 % 96.33% 95.6% 92.94% 94.8% 94.97% Score Benchmark 96.17% Feedback Innovations 2 VITAL SIGNS PATIENT SATISFACTION REPORT 2.0 IMPROVEMENT PRIORITY RANKING Rank Question 1 Professionalism of person on the phone Profesionalidad de la persona al telefono 2 Ability of person on phone to meet your needs Capacidad de la persona al telefono para satisfacer sus necesidades 3 Speed in which person on the phone dispatched help Velocidad en que la persona al telefono envio la ayuda 4 Information given prior to ambulance arrival Informacion ofrecida antes de la Ilegada de la ambulancia 5 Helpfulness of billing personnel Amabilidad del personal de facturacion 6 Ability of billing personnel to meet your needs Capacidad del personal de facturacion para satisfacer sus necesidades 7 Responsiveness of billing personnel to billing issues Capacidad de respuesta a los problemas de facturacion 8 Cleanliness of ambulance Limpieza de la ambulancia 9 Wait time to get an ambulance Tiempo de espera para conseguir una ambulancia 10 Degree to which service was worth the fees Grado en que el servicio es digno de los honorarios 11 Likelihood of recommending ambulance service Probabilidad de recomendar el servicio 12 Ambulance staff's concern for your privacy La preocupacion del personal del ambulancia en cuanto a su privacidad 13 Degree ambulance staff took your condition seriously Grado en que el personal del ambulancia se tome) en serio su condicion 14 Ambulance staff's efforts to inform you about treatment Los esfuerzos del personal del ambulancia para informarle sobre el procedimiento 15 Degree to which the ambulance staff worked together to care for you Grado en que el personal del ambulancia trabajo en equipo para cuidar de usted 16 Comfort of ambulance ride Confort durante el viaje en ambulancia 17 Your confidence in skill of ambulance staff Su confianza en la experiencia del personal del ambulancia 18 Ambulance staff cared for you as a person Cuidados recibidos por personal del ambulancia 19 How well your pain was controlled i,En que grado se ha controlado su dolor? 20 Your comfort when moved by ambulance staff Su comodidad cuando fue trasladado por el personal del ambulancia The Improvement Priority Ranking uses a combination of score and correlation to overall satisfaction to determine the most important areas for improvement. The closer to 1 the more important it is to your patients that this aspect of your service be improved upon. Fee ,ihack Innovations 3 VITAL SIGNS PATIENT SATISFACTION REPORT TABLE OF CONTENTS 1.0 EXECUTIVE SUMMARY 1 2.0 IMPROVEMENT PRIORITY RANKING 3 TABLE OF CONTENTS 4 4.0 SECTIONS 5 4.1 Dispatch 5 4.2 Communication 6 4.3 Medical Care 7 4.4 Billing 8 4.5 Service Quality 9 4.6 Overall 10 3.0 DEMOGRAPHIC INFORMATION Respondents (153 Total) 30% - 25% - 20%- Respondents (153 Total) Unknown Male Female _ ..■ ._ __ uu 41 11 ro-zv as zo-ze z0 -z9 30-39 40-49 Age Range s0 -be Male — Female Unknown 11 100-109 Unknown Feedback Innovations 4 VITAL SIGNS PATIENT SATISFACTION REPORT 4.0 SECTIONS 4.1 Dispatch Percentile ranking this period is lower 36.17%. The Dispatch section showed a 95.4% increase overall from Previous Period to Current Period, with a total score of 95.4. Drilling down by question for the Dispatch section: • There was a 94.6% increase for Professionalism of person on the phone Profesionalidad de la persona al telefono, with a score of 94.6. • There was a 95.2% increase for Ability of person on phone to meet your needs Capacidad de la persona al telefono para satisfacer sus necesidades, with a score of 95.2 • There was a 97.0% increase for Speed in which person on the phone dispatched help Velocidad en que la persona al telefono envio la ayuda, with a score of 97.0. • There was a 94.8% increase for Information given prior to ambulance arrival Informacion ofrecida antes de la Ilegada de la ambulancia, with a score of 94.8. RESULTS FOR QUESTIONS IN THE DISPATCH SECTION Current Period - Previous Period - 40 60 Score IM Benchmark 80 100 Previous Period Current Period Score Benchmark 0.0 95.4 95.39 95.82 Feedback Innovations VITAL SIGNS PATIENT SATISFACTION REPORT 4.2 Communication Percentile ranking this period is lower 41.67%. The Communication section showed a 96.5% increase overall from Previous Period to Current Period, with a total score of 96.5. Drilling down by question for the Communication section: • There was a 95.6% increase for Ambulance staff's concern for your privacy La preocupacion del personal del ambulancia en cuanto a su privacidad, with a score of 95.6 • There was a 97.6% increase for Degree ambulance staff took your condition seriously Grado en que el personal del ambulancia se tom() en serio su condicion , with a score of 97.6. • There was a 95.4% increase for Ambulance staff's efforts to inform you about treatment Los esfuerzos del personal del ambulancia para informarle sobre el procedimiento, with a score of 95.4. • There was a 97.4% increase for Degree to which the ambulance staff worked together to care for you Grado en que el personal del ambulancia trabajo en equipo para cuidar de usted, with a score of 97.4. RESULTS FOR QUESTIONS IN THE COMMUNICATION SECTION Current Period Previous Period - MIAIMMME I 0 Score Benchmark 40 60 Score Benchmark 80 100 Previous Period 0.0 95.9 Current Period 96.5 96.42 Feedback Innovations VITAL SIGNS PATIENT SATISFACTION REPORT 4.3 Medical Care Percentile ranking this period is upper 47.92%. The Medical Care section showed a 95.48% increase overall from Previous Period to Current Period, with a total score of 95.48. Drilling down by question for the Medical Care section: • There was a 97.0% increase for Your confidence in skill of ambulance staff Su confianza en la experiencia del personal del ambulancia, with a score of 97.0. • There was a 96.8% increase for Ambulance staff cared for you as a person Cuidados recibidos por personal del ambulancia, with a score of 96.8. • There was a 94.4% increase for How well your pain was controlled ZEn que grado se ha controlado su dolor?, with a score of 94.4. • There was a 95.6% increase for Your comfort when moved by ambulance staff Su comodidad cuando fue trasladado por el personal del ambulancia, with a score of 95.6. • There was a 93.6% increase for Comfort of ambulance ride Confort durante el viaje en ambulancia, with a score of 93.6. RESULTS FOR QUESTIONS IN THE MEDICAL CARE SECTION Current Period - Previous Period 2L: Score Benchmark 40 60 80 100 Score IMM Benchmark Previous Period 0.0 94.28 Current Period 95.48 94.94 Feedback Innovations VITAL SIGNS PATIENT SATISFACTION REPORT 4.4 Billing Percentile ranking this period is lower 27.08%. The Billing section showed a 88.93% increase overall from Previous Period to Current Period, with a total score of 88.93. Drilling down by question for the Billing section: • There was a 88.2% increase for Helpfulness of billing personnel Amabilidad del personal de facturacion, with a score of 88.2. • There was a 89.8% increase for Ability of billing personnel to meet your needs Capacidad del personal de facturacion para satisfacer sus necesidades, with a score of 89.8 • There was a 88.8% increase for Responsiveness of billing personnel to billing issues Capacidad de respuesta a /os problemas de facturacion, with a score of 88.8. RESULTS FOR QUESTIONS IN THE BILLING SECTION Current Period - Previous Period - 0 20 40 60 Score Benchmark Score Benchmark 80 100 Previous Period Current Period 0.0 88.93 90.62 91.43 Feedback Innovations VITAL SIGNS PATIENT SATISFACTION REPORT 4.5 Service Quality Percentile ranking this period is lower 29.79%. The Service Quality section showed a 94.05% increase overall from Previous Period to Current Period, with a total score of 94.05. Drilling down by question for the Service Quality section: • There was a 96.0% increase for Cleanliness of ambulance Limpieza de la ambulancia, with a score of 96.0. • There was a 95.6% increase for Wait time to get an ambulance Tiempo de espera para conseguir una ambulancia, with a score of 95.6. • There was a 90.8% increase for Degree to which service was worth the fees Grado en que el servicio es digno de los honorarios, with a score of 90.8. • There was a 93.8% increase for Likelihood of recommending ambulance service Probabilidad de recomendar el servicio , with a score of 93.8. RESULTS FOR QUESTIONS IN THE SERVICE QUALITY SECTION Current Period - Previous Period - 80 0 20 40 60 Score M= Benchmark Score Benchmark Previous Period 0.0 94.58 Current Period 94.05 94.82 Feedback Innovations VITAL SIGNS PATIENT SATISFACTION REPORT 4.6 Overall Percentile ranking this period is lower 22.92%. The Overall section showed a 94.8% increase overall from Previous Period to Current Period, with a total score of 94.8. Drilling down by question for the Overall section: • There was a 94.8% increase for Overall rating of experience Valoracion general de la experiencia, with a score of 94.8. RESULTS FOR QUESTIONS IN THE OVERALL SECTION Current Period - Previous Period - 0 Score Benchmark 20 40 Score 60 80 100 Benchmark Previous Period Current Period 0.0 94.8 95.54 96.17 Feedback Innovations 10 February 22, 2018 Police Chief Robert Jonsen Palo Alto Police Department 275 Forest Avenue Palo Alto, CA 94301 Re: Officer Hubbard, Badge#6986 Dear Police Chief Jonsen, I am writing to commend one of your police officers, Officer Hubbard. I was involved in an accident on the evening of February 3, 2018. I was driving on Fabian Way in South Palo Alto when an elderly couple walked in front of my vehicle. This resulted in a low speed collision. Fortunately, at the time, the couple did not appear to have sustained major injuries. We called 911 and the fire department/paramedics arrived promptly as did Officer Hubbard to assess the situation. The paramedics assessed and treated both pedestrians involved in the accident. Both were brought to the hospital for further evaluation. Officer Hubbard assisted in securing the area, diverting the local traffic, assessing the scene of the accident and taking statements from myself and the other party regarding the accident. I found Officer Hubbard to be very calm and professional throughout the entire incident. I have never been involved in an accident of this type and it was a very chaotic and stressful experience. He calmly explained the protocol in this type of situation and was very patient and thorough in answering any questions I had following the accident. Obviously, nobody ever wishes to be involved in an accident but accidents do happen. I am grateful to the Palo Alto Fire Department/paramedics who assisted the injured pedestrians and to Officer Hubbard who assisted to control the site of the accident. Having only moved to Palo Alto a couple years ago, this was the first time 1 have needed the services of the Palo Alto Fire Department and Police Department. 1 was VERY impressed with the quality of service provided by both. Please convey my gratitude to Officer Hubbard for his outstanding service. Sincerely, Daniel Yao 2539 Cowper Street Palo Alto, CA 94301 Received MAR 2 2018 Police Chief Jesus, Thanks for making this little girl's day! It looks like her fender is bent, and she couldn't ride her bike unless you removed it. Add bike repair to our list of things we do for the community. If you don't mind, I'd like to share this with the City Manager's Office and Council as another example of PAFD members fulfilling our mission. I will make sure we get this note in your personnel file. Best, Eric From: Matt Elgin [mailto:mattelgin@gmail.com] Sent: Thursday, May 10, 2018 6:12 PM To: Fire Subject: Thank you Your kind fireman saved the day for my daughter, thanks! (Picture Included) June D, Lida Fire Administration 250 Hamilton Avenue Attn: Chief Eric Nickels 6th Floor Palo Alto, CA 94301 On May 18, 2018 I was taken ill and had to go to the PAMF Urgent Care Dept. After being examined it was decided that I needed to go to the Stanford Hospital. This was approximately 7:00pm. The doctor felt it was urgent and had the staff call 911. The ambulance was there immediately and a staff of I think 5 arrived and took over. From that moment I was in the care of the best EMTs anyone could ask for. They were reassuring, kind and knowledgeable. I don't have enough words to convey to you how professionally your team treated me. They monitored my vital signs, calmed me down and got me into the hospital quickly. They even made me laugh. Three of their names are James, John and Brandt or Brent. I hope I am right on these names, but it was a stressful time they made bearable. This note is to thank them very much and to let you know how well your staff cares for our citizens. Sincerely ‘(.4(-Th CON Crtive25 \--\ctseA__ Margaret Hager 3160 Maddux Dr. Palo Alto CA Sent: Friday, June 15, 2018 1:59 AM To: Fire; Police Cc: Keene, James; Hoyt, George Subject: Appreciation Re: June 11, 2018 - Monday Evening Fire on Palo Alto Ave Hello City of Palo Alto, Fire Department and Police Department; I just want to put down in words, my appreciation for how the Fire and Police Department folks responded in our hour of need. You folks were unbelievably speedy getting to us within minutes, amazing in your teamwork and utterly awesome in your courtesy throughout the emergency. And it was noticed, the great care you took with precious computer equipment. I am a resident of 426 Palo Alto Ave. I woke from a nap around 10 pm to hear my upstair's neighbor say he saw smoke in his stairwell and was calling 911. In the two minutes it took me to grab the kitty and laptop, a policeman was already walking up to the door to guide us off the property. Just then, my next door neighbor rushed past into his apartment with the fire and I heard him say "Hurry, it's still a small fire, you can put it out!" Looking around we saw the firemen had arrived and were approaching. You contained it and prevented a disaster. Within the hour you were back out to us, answering our anxious questions and helping us to retrieve our car keys and bare essentials as we figured out how to cope with housing for the night. The National Disaster coordinator as well as the Red Cross and our neighborhood residents present were all wonderful, offering help and a place to stay as we digested our situation. Wednesday, on my way to clean up I met the building inspector on the street and he was most helpful in his efforts to make it possible for power to be re-established, so that we could get back into our living spaces. That day I also ran into the doctor two houses down. He stopped to ask how we were and then spoke of his admiration for the impressive teamwork shown by the fire fighters who responded, three fire engines worth! I don't know what stations they came from but - Thank You ! You made a tough time easier. Today Thursday, I saw a team of police officers gathered at our place. I asked what they were up to - and they said "To learn from the situation". The shock of the last few days is unravelling and with time to take a breath, I thought, its time to let you know what your efforts mean at this end. I cannot think of a better group of people for a community to rely on, you are much appreciated. With admiration and gratitude, Viviane Chen From: Lanie Wheeler [mailto:hswdw14@gmail.com] Sent: Tuesday, June 19, 2018 3:43 PM To: Nickel, Eric; Jonsen, Robert; Keene, James Subject: Many thanks Last Friday morning our family had the experience of needing to place a call to 911, resulting in a visit from the Palo Alto Fire Department paramedics and the Palo Alto Police Department and subsequent transport to the Stanford Hospital Emergency Room. I just felt compelled to let you all know how professionally and caringly each of the responders from the initial 911 operator to the paramedics to the police officer who remained with me after the ambulance left our house treated both my husband and me. I was too rattled to get any of their names except for Yolanda Clausen who left her card with me. The case number was 18-3189. If you can tie that back to specific responders, please let them know how grateful I am to them. I just know their work played a huge part in the prognosis for my husband's eventual recovery. Lanie Wheeler CIS OF PALO ALTO OPEN RECRUITMENTS BOARD AND COMMISSIONS Influence the Future of Your Community -A APPLICATION DEADLINE: OCTOBER 20, 2020 at 4:30 P.M. Currently Recruiting For: Architectural Review Board 2 Positions with terms ending December 15, 2023 Historic Resources Board 4 Positions with terms ending December 15, 2023 Parks and Recreation Commission 1 Unexpired Position with a term ending December 15, 2022 Planning and Transportation Commission 2 Positions with terms ending December 15, 2024 QUESTIONS? Contact the City Clerk's Office at 650.329.2571 or email Jessica.Brettle@CityofPaloAlto.org Applications available online at http://bit.ly/bcapplications CITY OF P ALTO