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Home My WebLink About2023-04-17 City Council Agenda PacketCITY COUNCIL Special Meeting Monday, April 17, 2023 Council Chambers & Hybrid CITY OF 5:00 PM PALO Amended Agenda ALTO Amended Agenda Items appear below in Red Pursuant to AB 361 Palo Alto City Council meetings will be held as "hybrid" meetings with the option to attend by teleconference/video conference or in person. To maximize public safety while still maintaining transparency and public access, members of the public can choose to participate from home or attend in person. Information on how the public may observe and participate in the meeting is located at the end of the agenda. Masks are strongly encouraged if attending in person. The meeting will be broadcast on Cable TV Channel 26, live on YouTube https://www.youtube.com/c/cityofpaloalto, and streamed to M i d p e n Media Center https://midpenmedia.org. VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/362027238) Meeting ID: 362 027 238 Phone: 1(669)900-6833 PUBLIC COMMENTS Public comments will be accepted both in person and via Zoom for up to three minutes or an amount of time determined by the Chair. All requests to speak will be taken until 5 minutes after the staff's presentation. Written public comments can be submitted in advance to city.council@CityofPaloAlto.org and will be provided to the Council and available for inspection on the City's website. Please clearly indicate which agenda item you are referencing in your subject line. PowerPoints, videos, or other media to be presented during public comment are accepted only by email to city.clerk@CityofPaloAlto.org at least 24 hours prior to the meeting. Once received, the Clerk will have them shared at public comment for the specified item. To uphold strong cybersecurity management practices, USB's or other physical electronic storage devices are not accepted. TIME ESTIMATES 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. Special Meeting April 17, 2023 Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org. CALL TO ORDER CLOSED SESSION 5:05 - 7:30 PM 1. CONFERENCE WITH CITY ATTORNEY -EXISTING LITIGATION California Court of Appeal, Sixth Appellate District, Case No. H049425 Subject: Hamilton and High LLC, et al., Appellants v. City of Palo Alto, et al., Respondents Authority: Government Code Section 54956.9(d)(1) 2. CONFERENCE WITH LABOR NEGOTIATORS City Designated Representatives: City Manager and his Designees Pursuant to Merit System Rules and Regulations (Ed Shikada, Kiely Nose, Sandra Blanch, Tori Anthony, Molly Stump, and Jennifer Fine) Employee Organization: Service Employees International Union, (SEIU) Local 521, Utilities Management and Professional Association of Palo Alto (UMPAPA), Palo Alto Peace Officers' Association (PAPOA), Palo Alto Police Management Association (PMA), International Association of Fire Fighters (IAFF) local 1319, Palo Alto Fire Chiefs' Association (FCA); Authority: Government Code Section 54957.6 (a) STUDY SESSION 7:30 - 8:30 PM 3. Study Session Regarding Proposed Electric, Gas, Water and Wastewater July 2023 Rate Changes AGENDA CHANGES, ADDITIONS AND DELETIONS PUBLIC COMMENT 8:30-8:50PM CONSENT CALENDAR 8:50-8:55 PM 4. Approval of Minutes from March 31, 2023 and April 3, 2023 City Council Meetings 5. Finance Committee and the Utilities Advisory Commission Recommend the City Council Approve and Authorize the City Manager or Their Designee to Execute a Third Phase Agreement With Northern California Power Agency for the Purchase of up to 87,600 Megawatt Hours per Year of Geothermal Energy From Calpine Corporation's Geysers Power Company, LLC Over a Term of up to 12 Years for a Total not to Exceed Amount of $76.2 Million; CEQA status: not a project under CEQA Guidelines sections 15378(a) and (b) 6. Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021-2022 —Supplemental Report Added Special Meeting April 17, 2023 Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org. 7. Approval of Amendment #3 with Professional Account Management LLC, dba Duncan Solutions Contract (C17164727) in the Amount of $80,000 and to Extend the Contract Term to April 28, 2024 for Parking Citation Management; CEQA Status — Not a Project. 8. Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21-0042A1) 9. Approve Substantial Amendments to the Community Development Block Grant (CDBG) FY2021-22 and FY2022-23 Annual Action Plans and the Associated Budget Amendment and Resolution 10. Staff Recommends that Council Approve Bringing the Water and Wastewater Rate Proposals to Council on June 19, 2023, Pending Proposition 218 Notifications, for a Public Hearing to Consider Two Resolutions: 1) Approving the Fiscal Year 2024 Wastewater Collection Utility Financial Plan, Proposed Reserve Transfers, and Increasing Wastewater Collection Utility Rates by Amending Wastewater Collection Rate Schedules S-1, S-2, S-6 and S-7; 2) Approving the Fiscal Year 2024 Water Utility Financial Plan, Proposed Reserve Transfers, and Increasing Water Rates by Amending Water Rate Schedules W-1, W-2, W-3, W-4, and W-7; CEQA Status: Not a project under Public Resources Code 15378(b)(5) 11. Adoption of a Memorandum of Agreement with the Palo Alto Police Officers' Association and the Police Management Association; Adopt an Amendment to correct the Fire Chiefs' Association salary schedules; and, Adopt revised Management and Professional salary schedules CEQA Status - Not a project 12. Approval of a Funding Agreement with the Santa Clara Valley Water District for Reimbursement Costs Incurred in Support of the Purified Water Project, and a Budget Amendment in the Wastewater Treatment Fund Advanced Water Purification Facility capital project (WQ-19003) 13. Approval of Tenant Work Letter for Lease of 300 Homer Avenue Roth Building between the City of Palo Alto and the Palo Alto Museum; CEQA Status --Not a Project AA1. Adoption of a Resolution Authorizing the City Manager to Execute Participation Agreements on Behalf of the City of Palo Alto to Enter Into Settlement Agreements Regarding Manufacture and Distribution of Opioid Products with Allergan Finance, LLC and related entities (Allergan), Teva Pharmaceutical Industries Ltd. and related entities (Teva); Walgreens Co.; CVS Health Corporation and CVS Pharmacy, Inc. (CVS), and Walmart, Inc.; Agree to the Terms of the Memorandum of Understanding (MOU) Allocating Settlement Proceeds; and Authorize Entry Into the MOU with the California Attorney General. Special Meeting April 17, 2023 Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org. CITY MANAGER COMMENTS 8:55-9:10 PM ACTION ITEMS Item 14: 9:10 - 10:00 PM Item 15: 10:00- 11:00 PM 14. PUBLIC HEARING: Adoption of a Resolution Approving the Fiscal Year 2024 Gas Utility Financial Plan, Including Proposed Reserve and General Fund Transfers and Amending the Gas Utility Reserve Management Practices, and Increasing Gas Rates by Amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master -Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural Gas Service); CEQA status: exempt/not a project under Public Resources Code section 21080(b)(8) 15. PUBLIC HEARING: Adoption of a Resolution Approving the Fiscal Year 2024 Electric Utility Financial Plan and Proposed Reserve Transfers, Deactivating Utility Rate Schedule E-HRA, and Amending Utility Rate Schedules E-1, E-2, E -2-G, E- 4, E -4-G, E-4 TOU, E-7, E -7-G, E-7 TOU, E-NSE, and E -EEC; CEQA Status: Not a project under Public Resources Code 15378(b)(5) and exempt under Public Resources Code 15273(a) COUNCIL MEMBER QUESTIONS, COMMENTS, ANNOUNCEMENTS ADJOURNMENT AMENDED AGENDA ITEMS 6. Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021-2022 - Supplemental Report AA1. Adoption of a Resolution Authorizing the City Manager to Execute Participation Agreements on Behalf of the City of Palo Alto to Enter Into Settlement Agreements Regarding Manufacture and Distribution of Opioid Products with Allergan Finance, LLC and related entities (Allergan), Teva Pharmaceutical Industries Ltd. and related entities (Teva); Walgreens Co.; CVS Health Corporation and CVS Pharmacy, Inc. (CVS), and Walmart, Inc.; Agree to the Terms of the Memorandum of Understanding (MOU) Allocating Settlement Proceeds; and Authorize Entry Into the MOU with the California Attorney General. Special Meeting April 17, 2023 Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org. PUBLIC COMMENT INSTRUCTIONS Members of the Public may provide public comments to hybrid meetings via email, in person, teleconference, or by phone. 1. Written public comments may be submitted by email to city.councift cityofpaloalto.org. 2. In person public comments 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. 3. Spoken public comments using a computer or smart phone will be accepted through the teleconference meeting. To address the Council, click on the link below to access a Zoom -based meeting. Please read the following instructions carefully. • You may download the Zoom client or connect to the meeting in- browser. If using your browser, make sure you are using a current, up-to-date browser: Chrome 30 , Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in older browsers including Internet Explorer. Or download the Zoom application onto your phone from the Apple App Store or Google Play Store and enter the Meeting ID below • You may be asked to enter an email address and name. We request that you identify yourself by name as this will be visible online and will be used to notify you that it is your turn to speak. • When you wish to speak on an Agenda Item, click on "raise hand." The Clerk will activate and unmute speakers in turn. Speakers will be notified shortly before they are called to speak. • When called, please limit your remarks to the time limit allotted. • A timer will be shown on the computer to help keep track of your comments. 4. Spoken public comments using a phone use the telephone number listed below. When you wish to speak on an agenda item hit *9 on your phone so we know that you wish to speak. You will be asked to provide your first and last name before addressing the Council. You will be advised how long you have to speak. When called please limit your remarks to the agenda item and time limit allotted. Click to Join Zoom Meeting ID: 362-027-238 Phone: 1(669)900-6833 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) 48 hours or more in advance. Special Meeting April 17, 2023 Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org. Item 3 Item 3 Staff Report CITY OF PALO ALTO City Council Staff Report From: City Manager Report Type: STUDY SESSION Lead Department: Utilities Meeting Date: April 17, 2023 Staff Report:2304-1247 TITLE Study Session Regarding Proposed Electric, Gas, Water and Wastewater July 2023 Rate Changes RECOMMENDATION This is an informational report to facilitate the Council study session on customer utility rates No action by Council will be taken. EXECUTIVE SUMMARY The overall system average proposed rate changes in FY 2024 are - 5% decrease for electric, - 8% increase for gas (excludes changes in gas market prices), - 6% increase for water, and - 9% increase for wastewater. Across the Electric, Gas, Water and Wastewater utilities, costs continue to increase, including construction cost inflation, commodity price increases and the rising cost to transport energy and water. Additionally, infrastructure is aging and investment is needed to maintain the health of utilities and protect reliability. Gas market prices spiked this winter; it cost Palo Alto Utilities five times more to buy gas in the markets this January compared to January 2022. Figure 1 summarizes the impact of the proposals on a median residential customer's utility bill and illustrates the magnitude of the gas market price spike impacts on customer bills. With gas market price changes included, gas bills for FY 2024 are expected to be 13% lower than in FY 2023, though forecasts of gas market prices are highly uncertain. In addition to this study session there are three rates -related items on the agenda for Council's consideration tonight: Item 3: Staff Report Pg. 1 Packet Pg. 6 of 853 Item 3 Item 3 Staff Report • Public Hearing Action Item: FY 2024 Gas Utility Financial Plan & Rates Staff Report 2303- 1219 to adopt a resolution approving the FY 2024 Gas Utility financial plan, including proposed reserve transfers and general fund transfer (recommended at 15.5% of gross revenues), amend the Gas Utility Reserve Management Practices, and increase gas rates by amending gas rate schedules G-1, G-2, G-3 and G-10. Included in this item is the Council decision regarding whether to transfer up to 18% of the gross revenues of the gas utility to the general fund or a lesser amount in FY 2024. The Finance Committee (2-1) recommends a transfer at the 15.5% rate, though the staff report referenced above does outline alternatives for consideration. • Public Hearing Action Item: FY 2024 Electric Utility Financial Plan & Rates Staff Report 2303-1235 to adopt a resolution approving the FY 2024 Electric Utility financial plan, including proposed reserve transfers, and modify electric rates by deactivating the hydroelectric rate adjuster and amending electric rate schedules E-1, E-2, E -2-G, E- 4, E -4-G, E-4 TOU, E-7, E -7-G, E-7 TOU, E-NSE, and E -EEC. • Public Noticing Consent Item: Water and Wastewater FY 2024 Utility Financial Plan & Rates Staff Report 2303-1218 is a public noticing on consent calendar regarding Water, and Wastewater Collection rates, and recommends approval for a public hearing on June 19, 2023 for Water and Wastewater rates, pending Proposition 218 customer notifications, as recommended by the Finance Committee on March 21, 2023. Finance Committee Staff Report includes the financial plans and rate proposals for water and wastewater utilities presented to the Finance Committee. • The June 19, 2023 Council packet will include the rates and financial plans for water and wastewater and the CPI increases for storm drain, and fiber rates. No rate changes are recommended for refuse rates in FY 2024. BACKGROUND The City absorbed utility cost increases during the pandemic. Increased costs for construction, operations, energy, and water were not fully passed through to customers in 2020, 2021, and 2022 and were instead absorbed from reserves. As a result, revenues are too low to maintain normal operations in all utilities, except water. Reserves are lower than expected, because although the City intended to phase in rate increases slowly using reserves, spiking energy prices, inflation and other factors led to very low reserves in all utilities except water. As drought conditions continued to impact the City's hydroelectric supplies and as energy prices rose and spiked this past winter, the Council took several actions. Item 3: Staff Report Pg. 2 Packet Pg. 7 of 853 Item 3 Item 3 Staff Report 2022 Council Rate Actions Responding to Drought and Rising Energy Prices - Effective April 1, 2022, the Electric Hydro Rate Adjuster went into effect for every CPAU electric customer (see Staff Report 13905)1. - On December 19, 2022 the Palo Alto City Council approved an increase to the Electric Hydro Rate Adjuster, increasing the current Electric Hydro Rate from $0.013/kWh to $0.048/kWh, effective January 1, 2023. See Staff Report 148742 for more details. This increase was necessary to reflect hydrological conditions and market purchase costs impacted by ongoing drought conditions at that time. - On December 19, 2022, the Palo Alto City Council approved an increase to the gas monthly market -based commodity rate cap from $2.00 per therm to $4.00 per therm. See Staff Report 15047 for more details. These actions protected the financial health of the electric and gas utilities. However, the rapidly shifting market prices significantly impacted customer bills. Bill Impacts Natural gas prices were extreme this winter due to changes in market supply and demand. However, gas prices are dropping. March customer gas bills were less than 50% of February and April gas bill projections are expected to be even lower. Customer gas bills are expected to continue to decline through June. Although it is not possible to precisely predict commodity rates, staff monitors market prices monthly and automatically incorporates market prices into monthly supply rate adjustments, which are passed directly to customers as a line item on their utility bills. Staff projects commodity prices to decline in FY 2024. Beyond FY 2024 the forecast assumes (consistent with current gas market forecasts from various sources, including forward gas contracts on exchanges, forecasts from suppliers, and the Federal Energy Information Administration) overall supply costs will increase gradually from FY 2025 through FY 2028, remaining higher than historical gas prices. Figure 1 shows monthly median residential bills and how they increased to unprecedented levels as the natural gas market prices spiked. The figure also shows the projected bills for this summer in June and then in July to illustrate the impacts of these proposed rate increases that are proposed to be effective July 1, 2023. Next winter (January 2024), the forecast does not anticipate another gas price spike; however, gas commodity prices are highly variable, and weather or economic factors could shift this forecast rapidly, in which case any changes in 1 Council Staff Report 13905 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-minutes/city-council-agendas-minutes/2022/20220314/20220314pccsm-amended-fina I-revised- ppt.pdf 2 Council Staff Report 14874 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=2275 3 Council Staff Report 15047 https://www.citVofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-minutes/city-council-agendas-minutes/2022/20221219/20221219pccsm-amendedtime.pdf Item 3: Staff Report Pg. 3 Packet Pg. 8 of 853 Item 3 Item 3 Staff Report commodity costs would be passed through to customers via the monthly varying commodity rate adjuster. Figure 1: Total Monthly Median Residential Bill Total Monthly Median Residential Bill $600 $500 $400 $300 $200 $100 $0 Winter Jan -22 Communications Summer Winter Summer Summer Winter Jul -22 Actual Jan -23 Jun -23 Jul -23 Jan -24 Projected ■ Electric Utility ■ Gas Utility ■ Water Utility ■ Wastewater ■ Refuse ■ Storm Drain The Utilities Department has been conducting outreach on the proposed rates as well as high winter gas bills through CPAU's website www.cityofpaloalto.org/ratesoverview4 in addition to sharing public communication through OpEds and press releases for publication in the local media, blog posts, social media, Nextdoor, bill inserts, fliers for community events, utilities and other City newsletters, with neighborhood groups and key account customers, and providing customer service or other public -facing staff and management groups with frequently asked questions (FAQs). 4 City of Palo Alto Utilities Rates Overview webpage https://www.cityofpa loa Ito.org/Departments/Utilities/Customer-Service/Utilities-Rates Item 3: Staff Report Pg. 4 Packet Pg. 9 of 853 Item 3 Item 3 Staff Report Efficiency Programs The City acknowledges that many may be struggling with high utility bills and is offering ways to help. Free efficiency assessments. The City is providing free assessments from CPAU's home energy advisor, the Home Efficiency Genies, to help people reduce consumption and save money. https://www.cityofpaloalto.org/Departments/Utilities/Residential/Home-Efficiency- Genie Extended payment. The City is offering payment plan arrangements for those who need extra time paying their winter gas bills. Payment can be extended for 6-8 months. Customer may pay bills in installments, by contacting Utilities Customer Service at (650) 329-2161, or visit our Utilities Customer Service web6 page. https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service • Rate assistance7 and free home energy upgrades for income -qualified customers. Residents struggling to pay their utilities bills may qualify for CPAU's Rate Assistance Program, which provides a 25% discount on gas and electricity charges and a 20% discount on storm drain service fees. https://www.cityofpaloalto.org/rap • Residential Energy Assistance Program8. Customers may be able to reduce energy and water costs by having CPAU help improve their home's efficiency through the Residential Energy Assistance Program. • ProiectPLEDGE9. CPAU's ProjectPLEDGE may be able to help customers in need with one- time assistance. Please call Utilities Customer Service at (650) 329-2161 to determine your eligibility. • California Arrearage Payment Program (CAPP): This newly established California Arrearage Payment Program (CAPP)10 will offer financial assistance for California energy s Home Efficiency Genie https://www.citVofpaloalto.org/Departments/Utilities/Residential/Home-Efficiency-Genie 6 City of Palo Alto Utilities Customer Service webpage https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service Rate Assistance Program https://www.cityofpaIoaIto.org/Departments/Utilities/Residential/Utilities- Assista nce/Rate-Assistance-Program-RAP 8 Residential Energy Assistance Program https://www.cityofpaloalto.org/Departments/Utilities/Residential/Utilities-Assistance/Residential-Energy- Assista nce-Program-REAP 9 ProjectPLEDGE https://www.cityofpaloalto.org/Departments/Utilities/Residential/Utilities-Assistance/Proiect- Pledge 10 California Arrearage Payment Program https://www.cityofpaIoaIto.org/News-Articles/Utilities/California- Arrearage-Payment-Program-CAPP Item 3: Staff Report Pg. 5 Packet Pg. 10 of 853 Item 3 Item 3 Staff Report utility customers to help reduce past due energy bill balances that increased during the COVID-19 pandemic. Gas & Electric Utility Rebates Additionally, on March 27, 2023, Palo Alto City Council approved a one-time residential natural gas rebate to mitigate the extraordinarily high January 2023 gas bills. On April 10, 2023, Palo Alto City Council will consider final approval of both a gas and electric utility rebate totaling $2.5 million to be funded by the City's General Fund. Below is a table of the combined gas and electric rebates if a residential customer has both gas and electric utility services. City staff will calculate the individual residential rebate amount based on the number of services, RAP enrollment, and arrearage status. The rebates will be applied on customer's April or May 2023 utility bill as "Winter Rebate" depending on their billing schedule. Customers who apply for the Winter Rebate hardship program will receive a subsequent rebate after their application is approved. Jan 2023 Residential Bill # of Accounts % of Total Accounts Cost Gas Rebate Electric Rebate Combined Rebate High Billl 2,626 5.7% $ 245,380 $ 100.00 $ 65.00 $ 165.00 Med/High Bill 9,013 19.5% $ 698,465 $ 85.00 $ 45.00 $ 130.00 Low/Med Bill 34,592 74.8% $ 1,277,540 $ 70.00 $ 20.00 $ 90.00 SubTotal 100.0% $ 2,221,385 Rate Assistance Program 1,101 $ 110,100 $ 100.00 $ 100.00 $ 200.00 Arrearage > 180 days 669 $ 66,900 $ 100.00 $ 100.00 $ 200.00 Winter Rebate Application 700 $ 70,000 $ 100.00 $ 100.00 $ 200.00 SubTotal $ 247,000 Total Cost $ 2,468,385 1 One customer may be grouped in multiple bill tiers and qualify for both electric and gas rebates A customer with a low January bill (less than $400 gas bill and less than $300 electric bill) will receive a rebate of $90; they may also qualify for an additional $400 rebate if they are enrolled in RAP and have arrearages greater than 180 days. A customer with a high January bill (greater than $800 gas bill and greater than $500 electric) will receive a rebate of $165, they may also qualify for an additional $400 rebate if they are enrolled in RAP and have arrearages greater than 180 days. Item 3: Staff Report Pg. 6 Packet Pg. 11 of 853 Item 3 Item 3 Staff Report ANALYSIS Overall, staff with the Utilities Advisory Commission and Finance Committee are recommending the following rate changes: Projected Change in Residential Median Utility Bill Electric Utility $0.00 $0.00 $22.70 ($4.20) $3.90 $4.10 $4.40 $4.60 0% 0% 37% -5% 5% 5% 5% 5% Gas Utility 3) $1.28 $1.60 $2.60 $5.20 $4.90 $3.70 $3.90 $4.10 2% 3% 4% 8% 7% 5% 5% 5% Wastewater $0.00 $2.00 $1.30 $4.00 $4.40 $4.80 $4.60 $3.10 0% 3% 3% 9% 9% 9% 8% 5% Water Utility $0.00 $0.00 $8.00 $5.90 $4.20 $3.30 $3.40 $5.80 0% 0% 9% 6% 4% 3% 3% 5% Refuse $0.00 $0.00 $0.00 $0.00 $1.50 $1.50 $1.60 $1.60 0% 0% 0% 0% 3% 3% 3% 3% Storm Drain 4) $0.40 $0.30 $0.60 $0.80 $0.70 $0.70 $0.70 $0.80 3% 3% 4% 5% 4% 4% 4% 4% 1) 37% increase includes 4/1/22 hydro rate adjuster (HRA) activation (10%), 7/1/22 5% rate increase, and 1/1/23 HRA increase (19%) 2) -5% change includes a 21% increase to base electric rates and removal of the HRA 3) Gas utility rates shown exclude gas market price changes. FY24 bill forecast w/ market price changes is (-13%). Actual rates will vary. 4) Storm Drain fees increase by CPI index annually per approved 2017 ballot measure. 5) Analysis based on an FY2023 average monthly bill of $369 This study session is seeking to inform the full Council and the public of rate discussions that have occurred through March 2023 with the Utilities Advisory Commission and the Finance Committee. It is intended to allow for a comprehensive understanding of the total customer bill impact expected beginning July 1, 2023 should these plans be approved. The report specifically is organized by utility as follows: • Shared drivers of recommended rate changes • Electric Utility • Gas Utility • Water Utility • Wastewater Utility Following these specific utility discussions is the expected schedule for approval including the potential approval of gas and electric utility rates on this same April 17 Council agenda with the remaining rates as well as fiber customer rates to be considered for adoption on June 19, 2023. Item 3: Staff Report Pg. 7 Packet Pg. 12 of 853 Item 3 Item 3 Staff Report Shared Drivers of the Rate Cha The skyrocketing winter energy prices are just one of several trends that will affect people's utility bills in 2023, but they are one of the most impactful. However, as energy supply costs decline from the extremely high winter 2022/2023 levels, the City will continue to pass those supply cost declines through to customers through the monthly gas commodity rate adjuster and by deactivating the electric utility's hydroelectric rate adjuster in July. There are several shared drivers of rate increases across the four utilities. Costs continue to increase across the Electric, Gas, Water and Wastewater utilities. Construction inflation remains a difficult challenge for all public agencies in the Bay Area, and other types of inflation has affected all utility costs, including salary and benefit costs. The utilities are also recovering from the pandemic. During the pandemic the City kept rate increases low to help customer suffering from economic impacts, so in all utilities revenues are currently below costs. The City of Palo Alto had hoped to phase in needed rate increases gradually after the pandemic using reserves, but in most utilities that is no longer possible. For electric and gas, the winter 2022/2023 energy supply cost spikes were not passed through completely to customers, and the difference was absorbed from reserves. Reserve levels in both utilities will be very low by the end of FY 2023, making it impossible to phase in rate increases slowly without bringing reserves even further below minimum guideline levels. The Wastewater Collection utility will have low reserves by the end of FY 2023 as well. Electric Utility Staff and the Finance Committee is proposing a set of rate changes that will decrease bills by 5%. Staff is proposing to deactivate the hydroelectric rate adjuster while increasing base electric rates 21%, for a net decrease in utility bills of 5%. This is in contrast to the original staff proposal recommended for approval by the UAC in March of this year, which involved a 50% reduction in the hydroelectric rate adjuster and a 14% increase in the base electric rates. The new proposal is made possible by the expected receipt of a $24 million refund from the Bureau of Reclamation of overcharges associated with the Central Valley Project, where the City gets most of its hydroelectric power, as a result of a successful result in litigation the City participated in against the Bureau. The City uses a hydroelectric rate adjuster because of the year to year variability of output from its hydroelectric resources. On average these have been low cost resources, but the costs are largely fixed and the amount of electricity generated varies year to year. This can lead to higher energy supply costs during dry years and lower energy supply costs during wet years. The City manages this variability using the hydroelectric stabilization reserve, which accumulates reserves during wet years and spends them down during dry years, and the hydroelectric rate adjuster, Item 3: Staff Report Pg. 8 Packet Pg. 13 of 853 Item 3 Item 3 Staff Report which is a surcharge on electric customer bills activated when the hydroelectric stabilization reserve reaches low levels (less than $11 million) and dry conditions continue. The hydroelectric stabilization reserve is currently at critically low levels ($400,000), so staff would normally not recommend removing the hydroelectric rate adjuster, even with an improved outlook for hydroelectric generation. Without funds in the stabilization reserve, removing the rate adjuster entirely would make it likely that the adjuster would need to be activated again next year if next winter's precipitation is low. However, the pending receipt of the refund from the Central Valley Project litigation allows the City to partially refill the hydroelectric stabilization reserve. Staff is proposing adding $8 million to the reserve, with the expectation that the improved outlook for hydroelectric generation will generate enough electricity supply savings to bring the stabilization reserve above $11 million. This would greatly reduce the chance that the hydroelectric rate adjuster needs to be reactivated in the next year even if conditions are dry this upcoming winter. With this increase to the reserves, staff and the Finance Committee are comfortable recommending removal of the hydroelectric rate adjuster. Staff is also recommending that the base electric rates be increased 21%. This recommendation is due to two factors: • First, without the hydroelectric rate adjuster, FY 2024 electric utility revenues are projected to be approximately $32 million below costs. This is due to several factors: o Rates were not increased during the pandemic while costs continued to increase. o Hydroelectric output has been low and is forecasted to be lower on average going forward than it was historically. o Electricity supply costs increased greatly in late 2022 and early 2023 and are expected to remain elevated in future years, though lower than winter of 2022/2023. • By the end of FY 2023 the Electric Utility Supply and Distribution Operations Reserves, which are the risk management reserves for the utility, are projected to be at $19.5 million at the end of FY 2023, which is $11.3 million (36%) below the minimum guidelines of $31 million. • In addition to being below the minimum guidelines the City has loaned $10 million from its Electric Special Projects Reserve to the Operations Reserves, which is due to be repaid over the next several fiscal years. When Operations Reserves are above minimum guidelines, they can be drawn down to phase in rate increases over multiple years, but that is not possible this year. The Operations Reserves are currently not only below minimum guidelines but also have an outstanding internal loan. Staff is recommending closing most of the electric utility's annual deficit this year with a 21% increase to base rates. Staff is proposing to repay the $10 million outstanding internal loan using part of the refund, which means the City does not need to raise rates further than 21% to repay this internal loan over the next few fiscal years. And because Operations Reserves are already so far below minimum, staff is proposing adding $6 million from the refund to the Operations Reserves Item 3: Staff Report Pg. 9 Packet Pg. 14 of 853 Item 3 Item 3 Staff Report to bring them closer to the minimum guidelines. Even with this addition and the rate increase, the Operations Reserves are only expected to reach minimum levels in FY 2025. In summary, staff is proposing to use the $24 million refund as follows: • Transfer $8 million to the Hydroelectric Stabilization Reserve to help facilitate elimination of the Hydroelectric Rate Adjuster. • Repay $10 million in internal loans and avoid the need for additional internal loans, which also allows rates to be slightly lower in FY 2024 since future loan repayments are no longer needed. • Add $6 million to the Operations Reserves to bring them closer to the minimum guidelines. All $24 million of the refund is being used in ways that reduce rates indirectly in one way or another, which is why the current staff proposal results in a net 5% bill decrease as compared to the prior staff proposal presented to the UAC, which resulted in no net change in customer bills. Additional detail on the staff proposal is available in report 11, March 21, 2023. Gas Utility The FY 2024 Gas Utility Financial Plan includes projections of the utility's costs and revenues for FY 2023 through FY 2028. Gas utility costs are made up of gas supply costs (60 percent of costs in FY 2023), which represent the cost of buying gas and transporting it to Palo Alto, as well as environmental charges, and distribution -related costs (40 percent of costs in FY 2023), which represent the cost of operating Palo Alto's gas distribution system, administration, customer service, and other day to day operations. Gas supply revenues to cover gas supply costs are collected through four rate components (commodity, transmission, cap and trade, and Carbon Neutral Gas) that pass gas supply costs through directly to customers, and which change as frequently as monthly. Gas distribution revenues are collected through a distribution rate that is typically adjusted annually. Distribution rates last increased on July 1, 2022, which resulted in a roughly 3 percent increase in the total system average gas rate (the supply rates plus the distribution rates). Staff is proposing an increase to distribution rates that is projected to increase overall customer bills approximately 8%. Note that the actual net change to customer bills will vary depending on usage and the variation in gas supply costs. Gas market prices rose to unprecedented levels in FY 2023, leading to far higher gas supply costs for Palo Alto in FY 2023 than are projected for FY 2024 through FY 2028. As shown in Figure 2 below, customer gas bills spiked in the winter of 2022/2023 and are expected to decrease significantly by June 2023, just before this rate change would take effect, and are not currently forecasted to reach similar levels next winter, though these forecasts are uncertain. 11 Finance Committee Staff Report 2303-1109 https://cityofpaloaIto.primegov.com/meeting/document/1854.pdf?name=Item%204%20Staff%20Report Item 3: Staff Report Pg. 10 Packet Pg. 15 of 853 Item 3 Item 3 Staff Report Figure 2: Monthly Median Residential Gas Bill $300 FY 2024 Rate Changes $250 $200 $150 $100 $50 . ..I $0 Winter Summer Winter Summer Summer Winter Jan -22 Jul -22 Jan -23 Jun -23 Jul -23 Jan -24 Actual Projected Staff is proposing to increase the distribution component of the gas rates in FY 2024 to ensure the utility is recovering its costs of operations. Revenues were already below costs after keeping rate increases low through the pandemic, but construction inflation and other factors have driven costs up. The distribution rate increase is projected to increase overall customer bills approximately 8%, though changes to gas supply costs mean that the actual impact to customer bills may be higher or lower. This 8% increase in customer bills results from increasing the distribution component of the rates 21% to fully recover distribution costs and avoid decreasing reserves further. Even with this distribution rate increase, based on current market forecasts staff expects average annual customer gas bills to decline 13% in FY 2024 compared to FY 2023 because gas supply costs were extremely high in FY 2023, particularly in the winter. FY 2024 annual gas supply costs are forecasted to be about 36% lower than FY 2023. Gas market prices are uncertain, however, and these forecasts can change. The distribution rate increase is driven by two things: 1) the need to replenish reserves, which were depleted by significant losses due to FY 2023 commodity costs that were not be fully passed through to customers under the City's commodity rate cap of $4 per therm, and 2) continuing increases in capital and operating costs. Distribution rates did not keep up with these increased costs as the City pursued a Council policy to minimize rate increases during the economic downturn associated with the COVID-19 pandemic. The gas utility's transfer to the City's General Fund is another component of the City's gas rates. City voters first authorized the transfer in 1950, and in November 2022 voters approved Measure L, affirming the continuation of this practice by adding section 2.28.185 to the Municipal Code. Each year the City Council may transfer from the gas utility to the general fund an amount up to 18% of the gross revenues of the gas utility, though Council may choose to transfer a lesser Item 3: Staff Report Pg. 11 Packet Pg. 16 of 853 Item 3 Item 3 Staff Report amount. Staff is seeking a Council decision on the amount of the FY 2024 transfer as part of its rate change proposal at tonight's (April 17, 2023) Council meeting (Staff Report 2303-1219). All rate and cost discussions in this staff report are based on Alternative 2, which involves transferring up to 18% of gas utility gross revenues in FY 2023 and 15.5% in FY 2024. The UAC recommended Alternative 2 for adoption (with one dissenting vote for reasons unrelated to the transfer), as did the Finance Committee (with one dissenting vote specifically related to the transfer). Additional detail on the staff proposal is available in Staff Report 2302-094612, March 21, 2023 and Staff Report 2303-1219 on tonight's (April 17, 2023) Council agenda. Water Utility The City's water rate schedules consist of a volumetric charge for each CCF (100 Cubic Feet or 748 gallons) of water consumed during the billing period and a monthly service charge for each customer, based on water meter size. The volumetric charge has two parts: a wholesale commodity rate (or San Francisco Public Utilities Commission or SFPUC wholesale rate), and a customer volumetric rate. Water rates are designed to recover the City's costs of buying and distributing water while maintaining adequate financial reserves. The customer volumetric rate and the monthly service charge together are considered the distribution rates; revenue from those rates pay for the upkeep of Palo Alto's distribution system. Revenue from the wholesale commodity rate pays for the City's cost of buying water from the SFPUC. Staff and the Finance Committee are proposing a 2% water distribution rate increase (Staff Report 2303-1218, April 17, 2023). CPAU's operational costs for the water utility have increased by approximately 4.8% per year over the last five years and are projected to increase 3% per year on average over the next five years. Primary reasons for the cost increases are allocated charges (charges allocated to the water utility for administrative services provided by the General Fund) and operations and maintenance costs (including engineering). Capital costs have fluctuated from year to year. The Water Utility's healthy reserve levels allowed the Water Utility to hold rates flat for two years (FY 2021 and FY 2022). In FY 2022 and FY 2023, drought conditions and voluntary water use restrictions led to sales revenue declines and the Water Utility's reserves had adequate funding to manage these reductions together with a 4% distribution rate increase in July 2022. The proposal for the Water Utility uses remaining reserves to mitigate distribution rate increases to 2% in FY 2024, 7% in FY 2025 and 6% annually from FY 2026 through FY 2028 while still funding essential capital investments. Customers have a separate commodity rate for purchased water from the San Francisco Public Utilities Commission (SFPUC) relative to the rest of the distribution -related portion of the volumetric rates. This commodity charge passes through SFPUC rate increases to customers The 12 Council Staff Report 2302-0946 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=2275 Item 3: Staff Report Pg. 12 Packet Pg. 17 of 853 Item 3 Item 3 Staff Report pass -through commodity rate is currently $4.75 per hundred cubic feet (CCF) and will increase to $5.30 per CCF on July 1, 2023, according to SFPUC's February 2023 forecast. The SFPUC will not determine its final wholesale customer rate for FY 2024 until May. If SFPUC's final rate for FY 2024 does increase, Palo Alto will notify customers 30 days in advance of the pass -through rate increase via their billing statements or by any other mailing by CPAU to the customer's regular billing address. Staff expects the combination of the 2% water distribution rate increase together with the 11.6% commodity rate increase to have an overall combined average rate impact on water customers of 6%. If the Council does not approve the water distribution rate increase, this will put more upward pressure on water rates in subsequent years. The Council does not need to take action to pass through the SFPUC commodity rate increase as these rate changes are automatically passed -through as approved by Council on June 17, 2019 (Resolution 9844)13. Wastewater Utility Staff and the Finance Committee are proposing a 9% Wastewater Collection rate increase in FY 2024, 9% annual rate increases in FY 2025 and FY 2026, 8% in FY 2027 and 5% in FY 2028, to cover current and projected costs. Staff Report 2302-094414 to the Finance Committee on March 7, 2023 contains detailed bill and rate impacts of the Wastewater Collection rate proposals. The Financial Plan projects costs to rise over the forecast horizon due to increasing treatment costs related to capital improvements and operational costs at the Regional Water Quality Control Plant (RWQCP), as well as increasing collection system operational and Capital Improvement Program (CIP) costs. Staff recommends accelerating the rate of main replacements, from 1 mile to 2.5 miles per year beginning in FY 2026. This acceleration will allow the Wastewater Collection Utility to replace the last main no more than approximately 8 years beyond its anticipated 100 - year life expectancy. Staff and the Finance Committee's recommendation attempts to minimize rate impacts while also prudently managing the City's infrastructure and maintaining an acceptable level of risk. TIMELINE For Gas rates, Council may vote on the gas item on the agenda tonight to approve the Gas Financial Plan, rate changes, reserve and general fund transfers and changes to the reserve management policies and the gas rates would go into effect July 1, 2023. 13 Resolution 9844 https://www.cityofpaIoaIto.org/files/assets/public/city-clerk/resolutions/reso- 9844.pdf?t=69020.51 14 Finance Committee Staff Report https://cityofpaloaIto.primegov.com/meeting/document/1691.pdf?name=Staff%20Report Item 3: Staff Report Pg. 13 Packet Pg. 18 of 853 Item 3 Item 3 Staff Report For Electric rates, Council may vote on the electric item on the Council agenda tonight, the Council would also approve the Electric Financial Plan and rate changes and the approved rates would go into effect July 1, 2023. For Water rates and Wastewater rates, by approving the consent item on the Council agenda tonight, the Council would approve moving forward with the water and wastewater rate proposals for Council consideration and a public hearing on June, 19, 2023; staff will notice customers in accordance with Prop 218 requirements during April and May. Additionally, for the water commodity pass -through rate, staff expects SFPUC to vote on a wholesale water rate increase in May that will also become effective July 1, 2023. Upon final approval of the wholesale rate increase by the SFPUC, staff will provide Palo Alto customers with notice of any adjustments to the wholesale rate increase and pass through the increase. For Storm drain and Fiber customer rates, Council will receive these CPI increases at its June 19, 2023 meeting for adoption effective July 1, 2023. FISCAL/RESOURCE IMPACT Utility fund resource impacts of the recommendations summarized in this report include the continued financial solvency of the various utilities through the revenue increases described below. The estimated FY 2024 revenue impact of the recommendations in this report would be: • A $12 million increase or 6% compared to FY 2023 levels in the Electric Fund (excluding expected monies to be received from the CVPIA payment). • Sales revenues for the Gas Utility in FY 2024 are projected to increase by roughly $5.7 million or 8% compared to FY 2023 levels as a result of the proposed rate increases, not including fluctuations in commodity revenue/cost. • Staff projects estimated revenue for the Water Utility in FY 2024 to increase by $2.9 million or 6% compared to FY 2023 levels. This estimate includes the SFPUC wholesale rate increase of 11.6% (projected by SFPUC in February 2023; staff expects the Commission to approve a final wholesale water rate increase in May 2023). • For Wastewater Collection, staff projects revenues in FY 2024 to increase by approximately $1.8 million or 9% compared to FY 2023 levels because of the proposed rate changes. The recommendations summarized in this report are reflected in the FY 2024 Proposed Operating Budget except for the Water Utility, which will require revenue and expense adjustments to align with the final SFPUC wholesale rate increase, as that information was not available at the time the budget was produced. Staff will bring these water adjustments forward for Council consideration through the annual budget process. General Fund resource impacts of the recommendations summarized in this report are revenues from the gas transfer to the General Fund and utility bill costs to the General Fund. The difference Item 3: Staff Report Pg. 14 Packet Pg. 19 of 853 Item 3 Item 3 Staff Report between the City Council transferring 18% and 15.5% of the gross revenues of the gas utility to the General Fund in FY 2024 is approximately $1.2 million (see Staff Report 2303-1219 on the Council's agenda tonight for more detail). As the City's General Fund departments are utility ratepayers, staff expects the proposed rate changes to increase General Fund utility bill costs by $0.37 million in FY 2024 as a result of these rate changes relative to General Fund utility bills in FY 2024 without the proposed rate changes. Table 1 summarizes the required General Fund cost increases for utility services Table 1: General Fund Utility Expense Increases in FY 2024 Resulting from Proposed Rate Changes Utility Electric Gas Wastewater Water STAKEHOLDER ENGAGEMENT General Fund Utility Expense Increase ($ millions) $0.14 $0.06 $0.01 $0.16 • On June 13, 2022 the Palo Alto City Council reviewed and approved staff's proposed utility rate changes for fiscal year 2023, (see Staff Report 1366115 for more details). Systemwide average rate increases included 5% for electric, 4% for gas, 8.9% for water, 3% for sewer, 4.2% for stormwater and 4.2% for fiber. • Wastewater Collection main replacement: on October 12, 2022, the Utilities Advisory Commission reviewed three alternative approaches to accelerate the sanitary sewer main replacement (Staff Report #14610)16 and on November 20, 2022, the Finance Committee considered series of alternative rate trajectories to accelerate the sanitary sewer main replacement (Staff Report #14611)17. The UAC and Finance Committee provided feedback on additional scenarios they wanted to be reflected in the Financial Plan and staff incorporated this feedback into the final Financial Plans presented to the UAC and Finance Committee. 15 Council Staff Report 13661 https://www.citvofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-m inutes/city-council-agendas-minutes/2022/20220613/20220613pccsm-fi nal-amended- linked.pdf#page=102 16 Council Staff Report 14610 https://www.citvofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes- 2022/10-12-2022/10-12-2022-uac-agenda.pdf 17 Finance Committee Staff Report 14611 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- re po rts/age n d a s -m i n utes/fi n a n ce-co m m ittee/2022/20221129/20221129 pfcs m -1 i n ked. pdf Item 3: Staff Report Pg. 15 Packet Pg. 20 of 853 Item 3 Item 3 Staff Report • On March 1, 202318 the Utilities Advisory Commission (UAC) reviewed and approved the FY 2024 Electric, Gas, Water and Wastewater Collection Utility Financial Plans and Rate Proposals. • On March 7, 202319, the Finance Committee reviewed the FY 2024 Water and Wastewater Collection Utility Financial Plans and Rate Proposals. The Finance Committee approved the Water Utility proposals and asked staff to return with additional information for further evaluation for the Wastewater Utility. • On March 21, 202320, the Finance Committee reviewed the FY 2024 Electric, Gas, Water, and Wastewater Collection Financial Plans and Rate Proposals and unanimously approved the Electric, Water and Wastewater Collection Proposals; the Finance Committee approved the Gas Utility Proposals 2-1 with Council Member Stone voting no. ENVIRONMENTAL REVIEW The Council's study session on utility rates does not meet the California Environmental Quality Act's definition of a project, pursuant to Public Resources Code Section 21065 and CEQA Guidelines Section 15378(a) because it will not cause a direct or indirect physical change in the environment. APPROVED BY: Dean Batchelor, Director Utilities Staff: Jonathan Abendschein, Assistant Director of Utilities Lisa Bilir, Sr. Resource Planner 18 Utilities Advisory Commission Staff Reports https://www.cityofpaloalto.org/files/assets/public/agendas- minutes-reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and- m i n utes-2023/03-ma r -2023/03 -01 -2023 -agenda -a nd-packet. pdf 19 Finance Committee Staff Report https://cityofpaloaIto.primegov.com/meeting/document/1704. pdf?name=Staff%20Report 20 Finance Committee Staff Report https://cityofpaloaIto.primegov.com/Portal/Meeting?meetingTemplate Id=11228 Item 3: Staff Report Pg. 16 Packet Pg. 21 of 853 Item 4 Item 4 Staff Report City Council Staff Report Report Type: CONSENT CALENDAR CITY O F Lead Department: City Clerk PALO a LTO Meeting Date: April 17, 2023 Report #:2304-1246 TITLE Approval of Minutes from March 31, 2023 and April 3, 2023 City Council Meetings RECOMMENDATION That the minutes be reviewed and approved as presented. ATTACHMENTS Attachment A: March 31, 2023 Draft Minutes Attachment B: April 3, 2023 Draft Minutes APPROVED BY: Lesley Milton Item 4: Staff Report Pg. 1 Packet Pg. 22 of 853 Item 4 Attachment A - March 31 Draft Action Minutes CITY COUNCIL DRAFT ACTION MINUTES CITY OF PALO ALTO CALL TO ORDER Special Meeting Friday, March 31, 2023 The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 4:00 p.m. Present In Person: Burt, Kou, Lauing, Lythcott-Haims, Stone arrived 4:39 p.m., Veenker Present Remotely: None Absent: Tanaka AGENDA CHANGES, ADDITIONS AND DELETIONS None. PUBLIC COMMENT None. ACTION ITEMS 1. Interview and Consider Appointment for Openings on the Utilities Advisory Committee, Planning and Transportation Commission and Historic Resources Board The Council interviewed the following candidates: Plannine & Transportation Commission George Lu Scott O'Neil Allen Akin Cari Templeton (Incumbent) Arthur Keller Page 1 of 2 Item 4: Staff Report Pg. 2 Packet Pg. 23 of 853 ACTION MINUTES Item 4 Attachment A- March 31 Draft Action Minutes Alex Comsa Forest Olaf Peterson Historic Resources Board Samantha Joy Rodman Christian Pease (Incumbent) Alisa Eagleston-Cieslewicz (Incumbent) Utilities Advisory Commission Jason Titus Max Rayner Robert Phillips Benjamin Piiru Greg Hood Chris Tucher Meagan Mauter Claude Ezran Siyi Zhang Greg Scharff (Incumbent) Rachel Croft Natalie Geise Bob Wenzlau ADJOURNMENT The meeting was adjourned at 8:15 p.m. ATTEST: APPROVED: City Clerk Mayor NOTE: Action minutes are prepared in accordance with Palo Alto Municipal Code (PAMC) 2.04.160(a) and (b). Summary minutes (sense) are prepared in accordance with PAMC Section 2.04.160(c). Beginning in January 2018, in accordance with Ordinance No. 5423, the City Council found action minutes and the video/audio recordings of Council proceedings to be the official records of both Council and committee proceedings. These recordings are available on the City's website. Item 4: Staff Report Pg. 3 Page 2 of 2 Sp. City Council Meeting Action Minutes: 3/31/2023 Packet Pg. 24 of 853 Item 4 Attachment B - April 3 Draft Action Minutes CITY COUNCIL DRAFT ACTION MINUTES CITY OF PALO ALTO CALL TO ORDER Special Meeting Monday, April 03, 2023 The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 5:00 P.M. Present In Person: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka, Veenker Present Remotely: None Absent: None SPECIAL ORDERS OF THE DAY 1. Appointment of Applicants for Board and Commission Openings on the Utilities Advisory Committee, the Planning and Transportation Commission and the Historic Resources Board MOTION: Council Member Burt moved, seconded by Mayor Kou to proceed as presented to vote first for full term, then a subsequent vote for unexpired terms. SUBSTITUTE MOTION: Veenker/Lythcott-Haims to vote for all positions in the first round, with the top vote getters getting the full terms, and the candidate with the next number of votes getting the unexpired terms. If there are ties, then a second round of voting will commence. MOTION FAILED: 3-4, Lauing, Kou, Burt, Stone no ORIGINAL MOTION: Council Member Burt moved, seconded by Mayor Kou to proceed as presented to vote first for full term, then a subsequent vote for unexpired terms. MOTION PASSED: 5-2, Lythcott-Haims, Tanaka no Historic Resources Board First Round of Voting for Three (3) vacancies on the Historic Resources Board ending March 31, 2026 Samantha Joy Rodman: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka, Veenker Page 1 of 8 Item 4: Staff Report Pg. 4 Packet Pg. 25 of 853 Item 4 Attachment B - April 3 DRAFTACTION MINUTES Draft Action Minutes Christian Pease: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka, Veenker Alisa Eagleston-Cieslewic: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka, Veenker Candidate Samantha Joy Rodman receiving 7 votes is appointed to a full -term expiring March 31, 2026. Candidate Christian Pease receiving 7 votes is appointed to a full -term expiring March 31, 2026. Candidate Alisa Eagleston-Cieslewic receiving 7 votes is appointed to a full -term expiring March 31, 2026. Planning and Transportation Commission First Round of Voting for Two (2) full terms ending March 31, 2027 on the Planning and Transportation Commission George Lu: Lythcott-Haims Scott O'Neil: Tanaka Allen Akin: Kou, Burt, Stone, Lauing Cari Templeton: Burt, Lythcott-Haims, Stone, Lauing, Veenker Arthur Keller: Kou Alex Comsa: Tanaka Forest Olaf Peterson: Veenker Candidate Allen Akin receiving 4 votes is appointed to a full -term expiring March 31, 2027. Candidate Cari Templeton receiving 5 votes is appointed to a full -term expiring March 31, 2027. Utilities Advisory Commission First Round of Voting for Three (3) full terms ending March 31, 2026 on the Utilities Advisory Commission Jason Titus: Burt, Veenker Max Rayner: Tanaka Robert Phillips: Burt, Kou, Lauing, Benjamin Piiru: Greg Hood: Chris Tucher: Tanaka Meagan Mauter: Burt, Kou, Lauing, Lythcott-Haims, Veenker Page 2 of 8 Sp. City Council Meeting Draft Action Minutes: 4/3/2023 Item 4: Staff Report Pg. 5 Packet Pg. 26 of 853 Item 4 Attachment B - April 3 DRAFTACTION MINUTES Draft Action Minutes Claude Ezran: Kou Siyi Zhang: Lythcott-Haims, Stone Greg Scharff: Lauing, Stone, Tanaka Rachel Croft: Stone Natalie Geise: Lythcott-Haims, Veenker Bob Wenzlau: Candidate Megan Mauter receiving 5 votes is appointed to a full -term expiring March 31, 2026. No other Candidate received four votes required to be appointed to the full -term expiring March 31, 2026. A second round of voting is required. Planning and Transportation Commission First Round of Voting for One (1) unexpired term ending March 31, 2025 on the Planning and Transportation Commission George Lu: Burt, Lythcott-Haims, Tanaka Scott O'Neil: Arthur Keller: Kou, Lauing, Stone Alex Comsa: Forest Olaf Peterson: Veenker No Candidate received four votes required to be appointed to the un-expired term expiring March 31, 2025. A second round of voting is required. Utilities Advisory Commission Second Round of Voting for two (2) full terms ending March 31, 2026 on the Utilities Advisory Commission Jason Titus: Burt, Veenker Max Rayner: Tanaka Robert Phillips: Stone, Burt, Kou, Lauing Benjamin Piiru: Greg Hood: Chris Tucher: Claude Ezran: Siyi Zhang: Lythcott-Haims, Tanaka Greg Scharff: Stone, Kou, Lauing Rachel Croft: Natalie Geise: Lythcott-Haims, Veenker Page 3 of 8 Sp. City Council Meeting Draft Action Minutes: 4/3/2023 Item 4: Staff Report Pg. 6 Packet Pg. 27 of 853 Item 4 Attachment B - April 3 DRAFTACTION MINUTES Draft Action Minutes Bob Wenzlau: Candidate Robert Phillips receiving 4 votes is appointed to a full -term expiring March 31, 2026. No other Candidate received four votes required to be appointed to the full -term expiring March 31, 2026. A third round of voting is required. Planning and Transportation Commission Second Round of Voting for One (1) unexpired term ending March 31, 2025 on the Planning and Transportation Commission George Lu: Burt, Tanaka, Lythcott-Haims, Veenker Scott O'Neil: Arthur Keller: Stone, Lauing, Kou Alex Comsa: Forest Olaf Peterson: Candidate George Lu receiving 4 votes is appointed to an unexpired term ending March 31, 2025. Utilities Advisory Commission Third Round of Voting for one final full -term ending March 31, 2026 on the Utilities Advisory Commission Jason Titus: Burt Max Rayner: Robert Phillips: Benjamin Piiru: Greg Hood: Chris Tucher: Claude Ezran: Kou Siyi Zhang: Greg Scharff: Stone, Tanaka, Lauing Rachel Croft: Natalie Geise: Lythcott-Haims, Veenker Bob Wenzlau: No Candidate received four votes required to be appointed to the full -term expiring March 31, 2026. A fourth round of voting is required. The Council directed the elimination of candidates without votes. Page 4 of 8 Sp. City Council Meeting Draft Action Minutes: 4/3/2023 Item 4: Staff Report Pg. 7 Packet Pg. 28 of 853 Item 4 Attachment B - April 3 DRAFTACTION MINUTES Draft Action Minutes Utilities Advisory Commission Fourth Round of Voting for one final full -term ending March 31, 2026 on the Utilities Advisory Commission Jason Titus: Burt Claude Ezran: Greg Scharff: Kou, Lauing, Stone, Tanaka, Natalie Geise: Veenker, Lythcott Haims Candidate Greg Scharff receiving 4 votes is appointed to a full -term expiring March 31, 2026. Utilities Advisory Commission First Round of Voting for One (1) unexpired term ending March 31, 2025 on the Utilities Advisory Commission Jason Titus: Lythcott-Haims, Burt Max Rayner: Tanaka Robert Phillips: Benjamin Piiru: Greg Hood: Chris Tucher: Meagan Mauter: Claude Ezran: Kou Siyi Zhang: Greg Scharff: Rachel Croft: Lauing, Stone Natalie Geise: Veenker Bob Wenzlau: No Candidate received four votes required to be appointed to the un-expired term expiring March 31, 2025. A second round of voting is required. Utilities Advisory Commission Second Round of Voting for One (1) unexpired term ending March 31, 2025 on the Utilities Advisory Commission Jason Titus: Max Rayner: Tanaka Claude Ezran: Kou Rachel Croft: Veenker, Stone, Lythcott-Haims, Lauing, Burt Natalie Geise: Item 4: Staff Report Pg. 8 Page 5 of 8 Sp. City Council Meeting Draft Action Minutes: 4/3/2023 Packet Pg. 29 of 853 Item 4 Attachment B - April 3 DRAFTACTION MINUTES Draft Action Minutes Candidate Rachael Croft receiving 5 votes is appointed to an unexpired term ending March 31, 2025. 2. Introduction of Representatives from the North County TRUST (Trusted Response Urgent Support Team) alternative mental health response program AGENDA CHANGES, ADDITIONS AND DELETIONS PUBLIC COMMENT CONSENT CALENDAR Council Member Tanaka registered a no vote on Agenda Item Number 10. MOTION: Mayor Kou moved, seconded by Council Member Burt to approve Consent Agenda Item Numbers 3-10. MOTION PASSED ITEMS 3-9: 7-0 MOTION PASSED ITEM 10: 6-1, Tanaka no 3. Approval of Minutes from March 20, 2023 Meeting 4. The Utilities Advisory Commission and Staff Recommend Council Adoption of Amended Utilities Rules and Regulations, to Incorporate AMI Changes and Other Updates; CEQA review — exempt (CEQA Guidelines section 15273) Adopted Resolution 10096 5. Approval of the Utilities Department's 2023 Legislative Guidelines 6. 2850 West Bayshore [22PLN-00364]: Approval of Final Map for a single -lot subdivision for condominium purposes for 48 attached townhome condominiums. Environmental Assessment: Exempt per CEQA Guidelines Section 15332. Zoning District: ROLM (Research, Office, and Manufacturing). 7. Approval of Fourth Amendment to Santa Clara Valley Urban Runoff Pollution Prevention Program Memorandum of Agreement 8. Adopt a Resolution 10097 Expressing Concern for Public Safety and Urging State and Federal Action on Firearms in Sensitive Places. Page 6 of 8 Sp. City Council Meeting Draft Action Minutes: 4/3/2023 Item 4: Staff Report Pg. 9 Packet Pg. 30 of 853 Item 4 Attachment B - April 3 DRAFTACTION MINUTES Draft Action Minutes 9. Acceptance of $2,000,000 from the Consolidated Appropriation Act, 2022, Awarded by the Department of Health and Human Services Substance Abuse and Mental Health Services Administration (SAMHSA) for Assistance Related to North County TRUST (Trusted Response Urgent Support Team), an Alternative Response Pilot Program; Approval of a Contract with Momentum for Health for Assistance Related to North County TRUST with a Total Contract Amount Not to Exceed $1,931,706; and Approval of the Related Budget Amendment in the General Fund. CEQA status — not a project. Public Comments 10. Approve Amendment of Seven On -call Consulting Contracts to Increase the Not to Exceed to $3 Million Through June 2024 to Provide Expertise for Long Range Planning Projects, Application Processing, Historic and Environmental Review in the Department of Planning & Development Services, With all Work Subject to Assigned Task Order and Availability of Funds; Environmental Assessment: Exempt in Accordance with CEQA Guidelines Section 15061(b)(3). CITY MANAGER COMMENTS ACTION ITEMS 11. Approval of the following: 1) Contract with Flock Safety (S23187316) for Automated License Plate Recognition (ALPR) Implementation for a three-year term in an amount not to exceed $174,400; 2) ALPR Surveillance Use Policy; and 3) Budget amendment in the Supplemental Law Enforcement Services fund; MOTION: Council Member Tanaka moved, seconded by Mayor Kou to: A. Approve a 3 years contract with flock Safety to implement fixed ALPR technology, in an amount not to exceed $174,400 B. Approve the use of Fixed ALPR technology to deter and investigate criminal activity C. Approve the fixed ALPR Surveillance use policy D. Amend the Fiscal Year 2023 Budget Appropriation for the Supplemental Law Enforcement Services Fund (SLESF) by a. Increasing SLESF Contract Services expense appropriation by $61,900, and b. Decreasing the ending fund balance by $61,900. E. Staff to return to Council one year after implementation for review and determination for continuation F. Refer to Policy and Services discussion if the program should also be reviewed by City Auditor, IPA or other party G. Limit the access to sworn officers, dispatchers and comparable positions MOTION PASSED: 7-0 Page 7 of 8 Sp. City Council Meeting Draft Action Minutes: 4/3/2023 Item 4: Staff Report Pg. 10 Packet Pg. 31 of 853 DRAFT ACTION MINUTES Item 4 Attachment B - April 3 Draft Action Minutes 12. Parks and Recreation Commission Recommend Adoption of a Park Dedication Ordinance to Dedicate the 10 -acre Measure E site as Parkland. CEQA status — not a project. Public Comments MOTION: Council Member Burt moved, seconded by Council Member Lythcott-Haims to City Council to A. Direct staff to return with analysis on scope and timeframe to evaluate other environmental technology and facilities on a portion of the Measure E site and/or other lands. B. Direct staff to return to Council with a proposal to evaluate a minimum buffer size to support a wildlife corridor connecting Renzel Marsh to the Baylands Harbor marsh through the Measure E site. MOTION PASSED 6-1, Kou no 13. Update, Discussion, and Potential Direction regarding State and Federal Legislation ACTION: None taken COUNCIL MEMBER QUESTIONS, COMMENTS, ANNOUNCEMENTS ADJOURNMENT The meeting was adjourned at 11:22 P.M. ATTEST: APPROVED: City Clerk Mayor NOTE: Action minutes are prepared in accordance with Palo Alto Municipal Code (PAMC) 2.04.160(a) and (b). Summary minutes (sense) are prepared in accordance with PAMC Section 2.04.160(c). Beginning in January 2018, in accordance with Ordinance No. 5423, the City Council found action minutes and the video/audio recordings of Council proceedings to be the official records of both Council and committee proceedings. These recordings are available on the City's website. Item 4: Staff Report Pg. 11 Page 8 of 8 Sp. City Council Meeting Draft Action Minutes: 4/3/2023 Packet Pg. 32 of 853 Item 5 Item 5 Staff Report CITY COUNCIL STAFF REPORT From: City Manager CITY OF Report Type: Action PALO Lead Department: Utilities ALTO Meeting Date: April 17, 2023 Staff Report: 2301-0706 TITLE Finance Committee and the Utilities Advisory Commission Recommend the City Council Approve and Authorize the City Manager or Their Designee to Execute a Third Phase Agreement With Northern California Power Agency for the Purchase of up to 87,600 Megawatt Hours per Year of Geothermal Energy From Calpine Corporation's Geysers Power Company, LLC Over a Term of up to 12 Years for a Total not to Exceed Amount of $76.2 Million; CEQA status: not a project under CEQA Guidelines sections 15378(a) and (b) RECOMMENDATION The Finance Committee, the Utilities Advisory Commission (UAC), and Staff recommend the City Council: 1. Authorize the City Manager, or their designee, to execute a Third Phase Agreement' with the Northern California Power Agency (NCPA) to purchase up to 87,600 MWh of renewable energy/year from a portfolio of geothermal projects owned by Calpine Corporation's Geysers Power Company, LLC, over a period of 12 years, at a total cost not to exceed $76.2 million; 2. Authorize the City Manager, or their designee, to execute on behalf of the City all related documents or agreements necessary to administer the Third Phase Agreement that are consistent with the Palo Alto Municipal Code and City Council approved policies, including, but not limited to, collateral assignment agreements; and take any and all actions as are necessary or advisable to implement and administer the Third Phase Agreement; 3. Authorize the City Manager, or their designee, to approve and execute amendments to the Third Phase Agreement', as may be required from time to time, so long as the contract price and length of the agreement remain unchanged; and 4. Waive the application of the anti -speculation requirement of Section D.1 of the City's Energy Risk Management Policy as it may apply to surplus electricity purchases resulting 1 Third Phase Agreement: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-15051-ncpa-agreement.pdf Item 5: Staff Report Pg. 1 Packet Pg. 33 of 853 Item 5 Item 5 Staff Report from the City's participation in the Calpine contract, due to the variability of the City's hydroelectric resources and uncertainty around the City's long-term load forecast. EXECUTIVE SUMMARY Through a Request for Proposals (RFP) recently conducted by NCPA, the City has the opportunity to enter into a 12 -year agreement to purchase renewable power from a geothermal resource owned by Calpine. NCPA has executed a power purchase agreement (PPA) with Calpine to purchase the project output (which includes renewable energy and local resource adequacy capacity), and the City and other NCPA members who have elected to participate would receive shares of the output via Third Phase Agreements with NCPA. Palo Alto's share of the 100 MW project capacity would be 5 MW for the first two years of the agreement, and 10 MW for the remaining ten years —the output of which would be equivalent to 10.6% of Palo Alto's 2021 retail energy sales. The primary benefits of the Calpine project are: (1) the units are fully constructed and are already in operation —hence there is no project development risk; (2) geothermal resources are baseload generators, meaning they produce a nearly uniform level of energy on a 24 -hour basis, which is a good match for the City's load; and (3) the units provide local resource adequacy (RA) capacity, of which the City has a significant shortage. In addition, staff has determined that the contract price and value are very competitive with other renewable energy offerings in the market, and that this contract would provide a net value to the City (i.e., its total value would exceed the cost of the contract) of at least $13/MWh, which would be equivalent to over $550k/year during the first two years of the contract, and over $1.1 million/year during the remaining ten years. BACKGROUND SB 100 & Carbon Neutral Plan goals As part of ongoing efforts to meet the City's Carbon Neutral Plan requirements, as well as to comply with the state Renewable Portfolio Standard (RPS) mandate of providing at least 60% of sales from qualifying renewable resources by 2030, staff pursued a PPA opportunity presented by Calpine to NCPA. Calpine is offering to sell power from a geothermal2 power plant, which qualifies as an in -state "Bucket 1" renewable resource under the state's RPS requirements. Existing RPS portfolio Over the past three years, the City has had an average RPS level of 63%3 and is projected to maintain a high percentage of its power from renewable resources well into the future. Figure 1 below shows Palo Alto's projected RPS requirements along with the City's existing supply 2 Geothermal power plants have a small amount of carbon emissions associated with their operations from the natural release of greenhouse gases from the geysers. 3 This value refers to the total renewable energy content of the City's supply portfolio, including all of its in -state ("Bucket 1") renewable resources and its unbundled, out-of-state ("Bucket 3") renewable energy credits (RECs). For state RPS reporting purposes, the volume of Bucket 3 RECs that can be counted is limited; under this more restrictive framework the City's reported RPS level has averaged 31% over the last three years. Item 5: Staff Report Pg. 2 Packet Pg. 34 of 853 Item 5 Item 5 Staff Report resources. Starting in 2029, the City is projected to have a deficit relative to its RPS requirement level (depending on the amount of large hydroelectric output the City receives4). Figure 1: Palo Alto's Existing RPS Supplies and RPS Requirement Levels 600 500 (D 400 Q Q ' 300 a) c U) 200 100 0 SB 100 RPS ❑ Large Solar (Operating) Requirements ❑ PA CLEAN ■ Landfill Gas Hydro- ❑ Wind n Adjusted RPS 1 • • • [Requirements ❑ Small Hydro • • IHHHH •1 ANALYSIS The Market for Renewable Resources in California The pricing and availability of renewable resources in California has evolved significantly over the past decade as state and federal policies have shifted the market landscape. While the trend over the last decade has been the declining cost of renewable PPAs, the last two years has seen increasing challenges to developing and building renewable projects resulting from material shortages, supply chain issues, inflation, labor shortages, and tariffs. Before 2020, the market would generally have been described as a buyer's market, however, in the last two and a half years, this characterization has shifted to a seller's market as there are more renewable buyers, increasing challenges to completing projects, and as a result PPA prices have risen from record lows. 4 Under the state's RPS law, utilities that receive significant amounts of generation from certain large hydroelectric facilities are able to satisfy their RPS requirements with a lower RPS level than is required of other utilities. Such utilities are only required to achieve an RPS level equal to the difference between their total retail sales volume and the amount of generation they receive from qualifying large hydro facilities. Item 5: Staff Report Pg. 3 Packet Pg. 35 of 853 Item 5 Item 5 Staff Report While the downward trend in renewable energy pricing has reversed in the last couple of years, staff expects the generous subsidies included in the Inflation Reduction Act (IRA), which was signed into law August 16th, 2022, to eventually push renewable energy prices lower again. There are many details in the IRA that are being outlined by the Treasury Department, and the initial feedback from developers is that it is still too early to understand the net impact this law will have on Palo Alto's renewable resource options. Ultimately staff expects the IRA to reduce the cost of renewables. However, the consensus view in the California market is that it will likely be several years before these cost reductions materialize, given the extent of the current supply - demand imbalance and the various development challenges. While the market prices for intermittent renewable resources such as solar and wind, and energy storage systems have fluctuated in recent years, the price for baseload firm renewable resources such as geothermal energy has remained relatively steady. The price for energy from geothermal resources is relatively high, reflecting its higher cost of development and its higher value to the electrical grid. Results of Palo Alto's Renewable RFP (2022 RFP) In May 2022, staff issued a Request for Proposals of new renewable and/or carbon -free generating resources and energy -storage resources. Staff's evaluation of the four conforming project proposals (all of which were for solar resources) indicated that their "green premiums" (i.e. their net cost to the City — their total value less their total cost) ranged from $3/MWh to - $18 /MWh. In comparison, the Calpine geothermal project's net cost is estimated at -$3/MWh (see below for more detail on this analysis). But in the course of reviewing the four responsive proposals, staff (1) became aware of efforts at the federal level to pass significant new clean energy legislation (in what became the IRA), and (2) learned about the Calpine geothermal project proposal. As a result of these two events, staff decided to reject the four conforming proposals received through this RFP. Calpine Geothermal Project Summary In May 2020, Calpine submitted a proposal to NCPA's5 Renewables RFP for the sale of energy and associated attributes from Calpine's6 existing portfolio of geothermal projects located in The Geysers area of Northern California. At the time Calpine submitted its proposal, NCPA members were evaluating other lower -cost project proposals. But shortly thereafter, the price of renewable projects started to significantly increase, due to the confluence of factors noted above. So in September 2021, NCPA requested proposal updates from Calpine and the other RFP 5 NCPA is a not -for-profit Joint Powers Agency whose membership includes municipalities, a rural electric cooperative, and other publicly owned entities, including the city of Palo Alto. The mission of NCPA is to provide members cost effective wholesale power, energy -related services, and advocacy on behalf of public power consumers through joint action. 6 Calpine Corporation (Calpine) was founded in 1984 and, through its wholly -owned subsidiary GPC, is the largest owner of geothermal plants in The Geysers area in Northern California, with 725 MW of green energy capacity operating around the clock. The Geysers area is known as the world's largest geothermal field spanning an area of 30 square miles in Sonoma, Lake, Mendocino, Marin, and Napa counties. Item 5: Staff Report Pg. 4 Packet Pg. 36 of 853 Item 5 Item 5 Staff Report respondents to see if their projects were still available and if there were any changes in price and/or terms initially offered. Section 2.30.340(d) of the City's Municipal Code permits the City to procure wholesale utility commodities and services through public agencies, including NCPA. After receiving the updated information, NCPA and member utility staff' reviewed and analyzed the projects again and determined the geothermal output from Calpine would best diversify their renewable energy portfolios, aid them in achieving California RPS requirements, help meet their sustainability goals, and meet the needs of their expected load growth. Over the course of 2022, NCPA staff led negotiation of a PPA with Calpine for renewable energy and RA from Calpine's Geysers geothermal facilities on behalf of the interested NCPA members. To enable NCPA to enter into the PPA with Calpine, participating NCPA members must execute a Third Phase Agreement with NCPA, which specifies the rights and obligations of NCPA and participating members regarding governance and administration of the PPA. The Third Phase Agreement also obligates the participating members to pay their assigned contract percentage share of all project costs (outlined in Exhibit A of the attached Third Phase Agreement), including but not limited to, administrative services costs, scheduling coordination costs, and all other costs related to the PPA. Santa Clara, as the initial project participant, executed the Third Phase Agreement on December 23, 2022, which enabled NCPA to execute renewable energy and RA Agreements with Calpine for output from the Geysers geothermal facilities. As described in Exhibit A of the attached Third Phase Agreement, participating members become project participants by exercising their right to accept a transfer of a portion of the project participation percentage from Santa Clara by April 30, 2023. In total, NCPA members have expressed interest in purchasing 100 MW of generating capacity from Calpine for a term of 12 years. Palo Alto requested up to 20 MW of this capacity, but given the demand from other NCPA members, has only been allocated 10 MW, with 5 MW starting in 2025, and 5 additional MW starting in 2027. This total geothermal capacity is expected to generate up to 876,000 MWh annually, of which Palo Alto would receive up to 87,600 MWh/year. This project will increase and further diversify Palo Alto's renewable energy portfolio in accordance with the City's adopted Integrated Resource Plan and RPS Procurement Plan. The proposed 10 MW share of the Calpine geothermal output is equivalent to 10.6% of Palo Alto's 2021 retail energy sales. Due to increased demand for renewable energy generation resources, Calpine is limiting the amount of time it will reserve the quantity, price and terms of a PPA for prospective buyers. Therefore, staff recommends authorizing the City Manager to enter into the aforementioned Third Phase Agreement with NCPA. The benefits of the Calpine project are: (1) the units are fully constructed and are already in operation; (2) geothermal resources are baseload generators, meaning they produce a nearly uniform level of energy on a 24 -hour basis; and (3) the units The City of Alameda, City of Biggs, City of Gridley, City of Lodi, City of Lompoc, Port of Oakland, and City of Santa Clara are all expected to sign onto the Third Phase Agreement to receive output from this project. Item 5: Staff Report Pg. 5 Packet Pg. 37 of 853 Item 5 Item 5 Staff Report provide local resource adequacy (RA) capacity, of which the City has a significant shortage. Unlike many other new renewable energy projects, this project doesn't carry any development risk. Economic Assessment of Calpine Geo Contract The Calpine Geothermal PPA is expected to provide good value to CPAU customers while also reducing the supply portfolio's seasonal energy and RA capacity deficits, thereby reducing budget uncertainty. The geothermal project provides three valuable products to the electric portfolio: energy, resource adequacy, and renewable energy credits (RECs). If the sum of these three values is greater than the cost of the power purchase agreement, then the City will see a net monetary benefit from this contract. The primary value provided by this PPA is from the baseload energy output that the geothermal resource produces. Based on forward energy curves as of December 12, 2022, the average value of this energy is $71.80/MWh between 2025 and 2030.8 In addition to the energy component, each MWh of geothermal generation qualifies as a "Bucket 1" renewable energy credit (REC), which historically has been valued between $12-$18/MWh. Recently, Palo Alto sold surplus Bucket 1 RECs for as much as $25/MWh, and according to reports from independent brokers, the value of RECs has recently surged to over $40/MWh. Finally, the geothermal plant capacity qualifies as local RA, which the City can count towards its annual local and system RA requirements. RA is typically transacted and priced on a $/kW -month basis and has ranged between $6/kW-month to $8/kW-month recently, which would translate to approximately $8 to $11/MWh for the geothermal project. Staff transacted for system RA at a price around $15/MWh in October 2022, well above historical RA prices. The increase in RA prices is driven by increasing system RA requirements and reduced qualifying capacity of solar resources, leading to a market shortage of RA in high load summer months. These benefits of the geothermal PPA in aggregate are estimated to range between $92 to $101/MWh against a PPA price of $79/MWh. With each of these revenue streams, there is a large degree of uncertainty around what will happen to future prices from changes to macro -economic conditions, regulations, interdependent regional power markets, and overall market uncertainty. That said, forward pricing curves project off-peak power prices to become more valuable than on -peak prices within the next few years, and proposed changes to the RA market rules would reward generators that produce in times of the grid's greatest need. Furthermore, under the state's RPS legislation, all load serving entities are required to increase their share of renewable energy in their portfolios (to 60% by 2030), so there is increasing demand for RECs. All of these trends support the expected long-term value of the geothermal project, given its ability to generate renewable energy around 8 Note that all energy prices in California have increased sharply over the past two years, not just those of renewable energy projects: Two years ago, forward energy curves pegged the value of this product at $33/MWh, and even three months ago its value was projected to be just $54/MWh. Item 5: Staff Report Pg. 6 Packet Pg. 38 of 853 Item 5 Item 5 Staff Report the clock. The geothermal project's inability to reduce output during the sunshine hours will expose it to some lower prices, but these downsides are expected to be offset by the other trends mentioned. Staff conservatively estimates the geothermal project will provide a net benefit of at least $3/MWh9, with the potential for significant upside if market prices stay high and there are further challenges to bringing new resources onto the grid in the coming 5-10 years. Risk Management Assessment Given this project is an existing power plant, there is no development risk, and instead only operational risk. There are some unique operational risks to running a geothermal power plant, but NCPA, which owns and manages an existing geothermal plant nearby, has confidence in Calpine's history of managing their steam fields and the plant's ability to reliably produce power over the term of the agreement. In general, businesses in the renewable industry lack extensive financial and operational track records, and because of the capital -intensive nature of these projects, they tend to be highly leveraged as well. In contrast to most of the City's renewable energy suppliers, Geysers Power Company, LLC (the wholly -owned subsidiary of Calpine that controls its geothermal assets) is an investment -grade company (BBB/stable credit rating), as determined by Kroll Bond Rating Agency, a nationally recognized statistical rating organization, approved by the Securities and Exchange Commission. While Calpine has a higher projected default rate than the City's other (non-renewable) electric and gas suppliers, Calpine does have an excellent track record of operating a large portfolio of geothermal projects in the Geysers area over many years. And the output for this project will come from a collection of Calpine's resources in this area, so even if there are problems with one or two resources there is very little risk that the City will not receive the contracted volumes of output. To further mitigate this risk, in the event of a credit downgrade event, Calpine will provide collateral (in the form of cash or a letter of credit), in the amount of $2.5 million for the first two years of the contract and $5.0 million for the remainder of the contract, which would protect the City and the other PPA offtakers in a scenario where the facilities are unable to produce the contracted output and the market price of the replacement renewable power is higher than the price of the Calpine PPA. And perhaps most importantly, under the terms of the proposed PPA the City is not at risk for paying for output that is not delivered. As with all of the City's PPAs, the City will make no payments under the PPA until energy from the project is delivered. Palo Alto's Energy Portfolio with Calpine Geo Under the City's Energy Risk Management Procedures, staff regularly develops procurement plans for the prompt 36 -month period to mitigate the City's market price exposure. Given the supply portfolio's heavy concentration of hydroelectric and solar resources, these procurement plans typically result in staff buying market energy in the fall/winter months and selling surplus 9 The conservative net value estimate of $3/MWh is based on the lower -end estimates of the value of the project's RPS and RA products ($12/MWh and $8/MWh, respectively) and an energy value of $62/MWh instead of $71.80/MWh. The lower energy value estimate is equivalent to the energy value estimate of a few months ago, before the recent run-up in power and gas market prices. Item 5: Staff Report Pg. 7 Packet Pg. 39 of 853 Item 5 Item 5 Staff Report energy during the spring/summer months. Furthermore, within any given day, the supply portfolio is routinely short during off-peak (nighttime) and long during on -peak (daytime) periods. This PPA would reduce the need for market purchases and increase the opportunity for market sales in the spring and summer months, depending on the level of output from the City's hydroelectric resources. The existing supply portfolio10 is projected to have an overall surplus position from 2025 through 2028 even without entering an agreement for the geothermal project, as shown in Figure 2 below. The load forecast shown in Figure 2 is based on the mid -range scenario presented at the December 2022 UAC meeting, which includes modest load growth from data centers, electric vehicles, and building electrification. The hydro generation estimates are based on long term historical averages, which have been significantly higher than actual generation in the last few years during the drought. However, as noted in the December UAC meeting discussion, there is significant uncertainty around both the load and hydro generation projections shown here. Staff recently learned about commercial development plans that could result in significantly greater data center load within the next few years; meanwhile, the impacts of climate change are likely to significantly reduce the long-term level of hydro generation. Combined, these two factors could flip the portfolio's overall surplus positions of the next few years to deficit positions. —In light of this uncertainty, staff recommends waiving the anti -speculation requirement of the City's Energy Risk Management Policy for this agreement. 10 All six of the city's solar PPA extend to 2040 or later, while the landfill gas PPAs expire between 2026 and 2034. The City has one remaining wind PPA which expires in June 2028. Furthermore, the City can renew the Western Base Resource contract for a new 30 -year term that would start in 2025, and for planning purposes it is currently included in the supply portfolio baseline assumptions. Lastly, the City owns its share of the Calaveras project and it is therefore expected to remain in the portfolio indefinitely. Item 5: Staff Report Pg. 8 Packet Pg. 40 of 853 Item 5 Item 5 Staff Report Figure 2: Projected Annual Load -Resource Balance, 2025-2045 1 l 70P5 2006 PD T7 2028 70Th PO 2039 7097 2td.3 309-0 ]+730 7636 7037 2006 7099 2048 76-01 2d 3693 2041 rrrr�Wr;ern A4.!vi LmndliN 1flnd o1N AN Sole : Cirvtkwnm.l -Load - MdProle[bon 7045 While the supply portfolio, on average, has an overall surplus position in any given year, the portfolio is short during the 1st and 4th quarters of the calendar year given the seasonal generation from hydro and solar. Additionally, the portfolio is generally short during the non - solar (off-peak) hours. Monthly and daily load resource balance charts are shown in Attachments B and C. The geothermal project is a baseload power plant that produces electricity evenly across the day and year. Given the portfolio is currently projected to have surplus positions during the first few years of the geothermal PPA as shown above, staff is currently monitoring the City's actual load levels closely and will evaluate whether to sell solar energy during the 2nd and 3rd quarters (an amount equal to the total purchase amount from the Calpine project) to hedge being overly long on energy, while also improving the daily load -resource balance. Figure 3 below shows a monthly load -resource balance for the City's portfolio with both the Calpine purchase and solar energy sales included. This would balance the portfolio supply and demand more evenly across the seasons within any given year. While the City's risk management policies don't prescribe a specific load -resource balance level, staff tries to minimize the portfolio's overall exposure to the market in either direction to mitigate large supply cost fluctuations from market pricing volatility. Item 5: Staff Report Pg. 9 Packet Pg. 41 of 853 Item 5 Item 5 Staff Report Figure 3: Monthly Load -Resource Balance with Geothermal Energy Purchase and Q2/Q3 Solar Energy Sale Included 140 120 100 a so u'! C GL' 0 J 40 a 2 20 ifi ih �f1 if1 ifs ul iA 11 ""+ N N rr N N H N r l tV N y Y Q a a Western OCalaveras LandflI Gas ®Wind ESoIar EMAA Purchases (Sales} Geothermal Load — Portfolio v. Rec'd Purchases Palo Alto's Resource Adequacy Portfolio with Calpine Geo Resource adequacy (RA) is another market that the City is required to participate in as a load serving entity in the California Independent System Operator (CAISO) balancing authority. The CAISO RA requirements dictate required levels of generating capacity the City must own or procure to meet local, system, and flexible resource requirements on an annual and monthly basis. Currently, staff manages the City's RA requirements by utilizing its own resources, participating in NCPA's Capacity Pool Program, and through bilateral transactions with other market participants. The geothermal plant would qualify as local RA for the City, and it would also count towards the City's system RA requirements. As Figures 4 and 5 below indicate, the City has local RA deficits of approximately 50-80 MW per month, but surpluses of system RA that average approximately 80 Item 5: Staff Report Pg. 10 Packet Pg. 42 of 853 Item 5 Item 5 Staff Report MW. This PPA would reduce the city's Local RA deficit by 10 MW and would increase the System RA surplus by an equivalent amount.11 Figure 4: Annual Average Local RA Balance Forecast, 2025-2036 90 30 60 50 ab 30 20 ]0 0 HiTI'iT 2025 2026 2O7 2028 2029 2030 �COBLR3 Wind Landfil1as .alar 94 1 r I'll'' 2431 2042 2033 2434 2435 240£, i Geothermal -Local RegL iren1ent 11 While the City would retain the geothermal capacity in its own portfolio to help satisfy its local RA requirements, the addition of this contract would free up capacity from other resources (which do not qualify as local RA) that the City could sell to generate additional revenue and reduce its system RA surplus positions. Item 5: Staff Report Pg. 11 Packet Pg. 43 of 853 Item 5 Item 5 Staff Report Figure 5: Annual Average System RA Balance Forecast, 2025-2036 250 200 150 100 50 0 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Hydro COBUG Wind LaridflIIGes Solar Geothermal -System Requirement Palo Alto's RPS Portfolio with Calpine Geo The PPA will also increase the City's share of power being generated by renewable resources, as required by the state's RPS regulations. The City is already on track to meet state RPS targets without the geothermal PPA, so this is not a driving factor for this deal, but it would further increase the amount of Bucket 1 RECs the City is able to swap for lower -cost Bucket 3 RECs through its REC Exchange Program. (The profits earned through the REC Exchange Program are earmarked toward local decarbonization initiatives, so this contract would help the City's overall sustainability efforts.) In addition, increasing the City's RPS level provides further flexibility in the future if the City pursues a smaller share of the Western Base Resource contract. Item 5: Staff Report Pg. 12 Packet Pg. 44 of 853 Item 5 Item 5 Staff Report Figure 6: Palo Alto's Existing RPS Supplies and RPS Requirement Levels, with the Calpine Project 700 00 S00C �y �y uti il! CL 400 n 300 C w QJ 200 CI ❑ S-118 t rd --C ❑ PA CLEAN mind ■ Landfil I Gas 0 Large Solar (Operating) G: oth �rrr aI I;Proposv::;l NEXT STEPS The NPCA Commission approved Purchase Agreements Between Geysers Power Company, LLC and Northern California Power Agency, and the Third Phase Agreement for Purchase Agreements with Geysers Power Company, LLC at its December 1, 2022 meeting. Since then, NCPA, with input from attorneys representing participating members, completed PPA negotiations with Calpine. Santa Clara has executed the Third Phase Agreement with NCPA, and as the initial project participant has been allocated the full PPA output. Once Palo Alto and other participating members obtain their governing board approvals and execute the Third Phase Agreement as well, Santa Clara will assign shares of the PPA's energy, RECs and RA capacity to participating members, adding those members to the Third Phase Agreement between NCPA and Santa Clara. Santa Clara has asked all participating members to execute the Third Phase Agreement by the end of April 2023. Item 5: Staff Report Pg. 13 Packet Pg. 45 of 853 Item 5 Item 5 Staff Report FISCAL/RESOURCE IMPACT If Council approves the execution of this Third Phase Agreement with NCPA, the City will purchase up to 87,600 MWh/year for a total not -to -exceed amount of $6.93 million/year during the 12 - year contract term (2025-2036), up to $76.2 million. Funding for the purchase of the renewable energy will be included in the Electric Utility Fund budget beginning in FY 2025. POLICY IMPACT Approval of the proposed Third Phase Agreement is in conformance with the City's Sustainability and Climate Action Plan (S/CAP), Integrated Resource Plan, Carbon Neutral Plan, and RPS Procurement Plan, specifically the City's Renewable Portfolio Standard to meet at least 60% of the City's electric sales from renewable energy. STAKEHOLDER ENGAGEMENT The UAC reviewed staff's recommendation to recommend approval of the Third Phase Agreement with NCPA at its meeting on February 1, 202312. At that meeting, staff provided background on the Calpine geothermal project, the market for renewable energy in California, and the impact that the Calpine contract would have on the City's electric supply portfolio. The UAC expressed strong approval for the Calpine contract, voting 7-0 to support staff's recommendation. The UAC also encouraged staff to seek out additional opportunities to contract for new baseload renewable resources. The Finance Committee reviewed the UAC's and staff's recommendation to approve the Third Phase Agreement with NCPA at its meeting on March 21, 2023. At that meeting the Committee asked several questions about the Calpine contract, the City's RA requirements, and staff's load projections. Ultimately the Committee enthusiastically agreed with the UAC's and staff's recommendation to support this contract and voted 3-0 to recommend that the City Council approve the Third Phase Agreement with NCPA. ENVIRONMENTAL REVIEW The Council's approval of the Third Phase Agreement to purchase power generated by existing geothermal generating facilities does not constitute a "project" within the meaning of the California Environmental Quality Act (CEQA) under CEQA Guidelines sections 15378(a) and (b), because there is no potential for approval of this agreement to result in a physical change in the environment, and because this is an administrative governmental activity that will not result in a physical change in the environment. These facilities already underwent CEQA review, and no subsequent or supplemental environmental review will be required as (1) there are no substantial changes to these facilities which will require major revisions of any applicable environmental impact report; (2) there are no substantial changes that will occur with respect to the circumstances under which the facilities are being undertaken which will require major revisions in any applicable environmental impact report; and (3) no new information, which was 12 UAC Meeting Minutes, 2/1/2023: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-15051-uac-excerpt. pdf Item 5: Staff Report Pg. 14 Packet Pg. 46 of 853 Item 5 Item 5 Staff Report not known and could not have been known at the time the applicable environmental impact reports were certified as complete, has become available with respect to these facilities. APPROVED BY: Dean Batchelor, Director Utilities Staff: James Stack, PhD Item 5: Staff Report Pg. 15 Packet Pg. 47 of 853 Item 6 Item 6 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: Planning and Development Services ALTO Meeting Date: April 17, 2023 Report #:2303-1129 TITLE Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021-2022 RECOMMENDATION Staff recommends that the City Council: 1. Review the Stanford University Medical Center (SUMC) Annual Report for Fiscal Year 2021-2022, and find that Stanford Hospitals & Clinics, Lucile Packard Children's Hospital, and Stanford University (SUMC Parties) have complied in good faith with the terms and conditions of the SUMC Development Agreement; 2. Find that the SUMC Parties are not in default with the terms and conditions of the Agreement in all sections, with the exception of alternative mode share targets, for which the SUMC Parties have claimed a permitted delay due to the effects of the COVID- 19 Pandemic; and 3. Accept the City of Palo Alto's (City) Annual Report Supplements regarding the funds received from the SUMC Parties, as required under Section 12(d) of the Development Agreement (Attachment E). EXECUTIVE SUMMARY The City Council is required to review the SUMC Development Agreement (the "Agreement") to confirm compliance with the Agreement's terms. The Agreement is between Stanford Hospital and Clinics, Lucile Packard Children's Hospital, Stanford University (SUMC Parties), and the City of Palo Alto. The City also uses this Annual Report to Council to provide information on the City's compliance obligations, such as providing the required summary and description of how the City expended funds provided by SUMC per the Agreement. As documented in this Annual Report to Council, both SUMC and the City are in compliance with the terms of the Agreement for the reporting period Fiscal Year 2021-2022, with the exception of alternative mode share targets. In regard to the achievement of the alternative mode share Item 6: Staff Report Pg. 1 Packet Pg. 48 of 853 Item 6 Item 6 Staff Report milestone target, SUMC was not able to meet the specific target outlined in the Agreement. This was due to the effect of the COVID-19 pandemic on SUMC employee use of alternative transportation modes, such as Caltrain and other public transit systems. As received by the City on June 14, 2022, the SUMC Parties asserted a permitted delay under the Force Majeure provision of the Agreement. The SUMC Parties and City staff are actively engaged in discussing an amendment to the Agreement to address this issue. I X Iel %111 ► 101 On June 6, 2011, the Council approved Comprehensive Plan amendments, zoning changes, a conditional use permit, annexation, and design applications for the Stanford University Medical Center Facilities Renewal and Replacement Project (the "Projects"). The Projects include the construction of the new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children's Hospital (LPCH), construction of new School of Medicine (SOM) buildings, renovation of the existing Hoover Pavilion, construction of a new medical office building and parking garage at Hoover Pavilion, roadway improvements along Welch Road and Durand Way, and SUMC design guidelines. The Development Agreement vesting these approvals became effective on June 6, 2011, and continues for thirty (30) years from the effective date. This report covers activities by the SUMC Parties for Fiscal Year 2021-2022, which is the eleventh year of the Agreement. The annual report prepared for Fiscal Year 2020-2021 found the SUMC parties to be in compliance with the Agreement.' Previous annual reports and compliance documentation can be found via the weblinks in Attachment B. ANALYSIS Agreement Section 12, "Periodic Review of Compliance," requires City Council to confirm SUMC Parties' compliance with the terms of the Agreement. Discussion items in this report are intended to guide City Council through the many aspects that SUMC and City staff monitor and track throughout the year to ensure compliance. The SUMC Annual Report for FY 2021-2022 (Attachment A) describes the activities related to Agreement implementation and ongoing annual progress toward meeting the following obligations in Section 5 of the Agreement, "SUMC Parties' Promises:" • Health Care Benefits; • Fiscal Benefits; • Traffic Mitigation and Reduced Vehicle Trips; • Linkages (Pedestrian, Bicycle, and Transit); • Infrastructure, Sustainable Neighborhoods & Communities, Affordable Housing; and 1 City Council Report, 03/21/22 (SUMC Annual Report Fiscal Year 2020-2021): https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-council- agendas-minutes/2022/20220321/20220321pccsm-amended-1 inked-revised.pdf Item 6: Staff Report Pg. 2 Packet Pg. 49 of 853 Item 6 Item 6 Staff Report • Climate Change. Staff prepared a summary of the Section 5 obligations and the staff -confirmed compliance status (Attachment C). Agreement Section 12 also includes the requirement for demonstration of good faith compliance with the Agreement. Toward this end, SUMC has timely submitted all the reports required of the SUMC Parties for Fiscal Year 2021-2022. Construction Activities and Net New Square Footage SUMC discusses their construction activities for Fiscal Year 2021-2022 in their SUMC Annual Report (Attachment A). A summary of construction activities and tracking of square footage demolished and added can be found in Attachment D. SUMC did not add any net new square footage in FY 2021-2022 but continued to remove occupancy for portions of the 1959 Stone Complex by 18,472 square feet. This suspension of use provides a temporary option to prevent exceedance of the total occupied square footage allowed in their entitlements. While not triggered in the FY 2021-2022 monitoring period, there are provisions in the SUMC entitlements to have a three-year period (or up to five years with Planning Director approval) whereby SUMC is allowed to exceed the total occupied existing and net new building square footage. This provision is important for ensuring that SUMC can maintain existing operations while also efficiently transferring new uses, equipment, and operations over to the new facilities. City staff reviewed the information regarding SUMC net new square footage in the report and determined this information is complete and correct. Traffic Mitigation and Reduced Vehicle Trips SUMC implemented all required transportation demand management (TDM) obligations in FY 2021-2022, such as purchasing of Caltrain Go Passes, funding for the AC Transit U -Line, and other activities. Summaries of these activities can be found in Attachments A and C. Alternative Mode Share Milestone Targets SUMC achieved their 2021 alternative mode share milestone target of 33% for employee trips early and every year between 2013 and 2019. The alternative mode share rate was 38.1% in FY 2018 and 33.8% in FY 2019. The SUMC Parties maintained all TDM requirements in FY 2020 until Santa Clara County issued COVID-19 pandemic shelter -in -place orders in March 2020. On March 27, 2020, the City conditionally approved a one-year delay in the submittal of two reports; the FY 2020 Alternative Mode Share Report and Mitigation Measure TR 2.3 Enhanced Stanford University TDM Program report. Conditional approval of this delay was consistent with the procedures in Section 6(p) of the Agreement and no additional environmental review was required. Item 6: Staff Report Pg. 3 Packet Pg. 50 of 853 Item 6 Item 6 Staff Report In Fiscal Year 2020-2021, the SUMC parties found that the alternative mode share milestone target of 33% outlined in Agreement Section 5(c)(ix) was not met for 2021, nor was it above the previous 2018 milestone target of 30%. The alternative mode share rate for SUMC decreased to 28.8% between use of alternative modes versus driving alone, largely due to ongoing pandemic conditions. SUMC identified that the share of Caltrain riders dropped most significantly (-6.5%), followed by the carpools (-2.6%), and other forms of transit (-3%). SUMC observed modest increases in other alternative transportation modes, including in remote work and bicycling, but these increases were not sufficient to offset the decrease in transit usage and carpools. In Fiscal Year 2021-2022, despite continuing to implement all TDM programs, as well as enhancing communications and promotions, the SUMC parties found that the alternative mode share milestone target of 33% was again not met. It had decreased to 19.9% from 28.8% in the previous year. Under Agreement Section 5(c)(ix) Monitoring of TDM Programs, missing the alternative mode share milestone target for two consecutive years, FY 2020-2021 and FY 2021-2022, would require SUMC to provide a $175,000 payment to the City for alternative transportation funding. The City would need to use the payment to support local projects and programs that encourage use of alternative transportation modes or otherwise reduce peak period traffic trips in the intersections impacted by the project. After submitting the FY 2021-2022 Alternative Mode Share report, SUMC sent the City a Notice of Intent to claim a permitted delay as outlined in the Development Agreement Section 18(c) Force Majeure. SUMC subsequently filed a Development Agreement Amendment application that proposes adjusted dates for achieving alternative mode share milestone target dates to account for the effect of the COVID-19 pandemic on SUMC employee use of alternative transportation modes. The Amendment application is currently under review and will be agendized for City Council consideration later this year. In the meantime, the City deferred any action to collect the $175,000 payment. Construction Sales and Use Tax Monitoring Report SUMC submitted the annual Construction Sales & Use Tax Monitoring Report on June 30, 2022 (fiscal year report). The City sent its required response. Based upon the City's review of the annual Construction Sales and Use Tax Monitoring Report, revenues for calendar years 2011 through 2021 have totaled $5,405,338. This annual reporting assists in the process of ensuring that the City would receive no less than $8.1M in construction sales and use tax revenue by December 31, 2025. Supplement to the Annual Report Section 12 of the Agreement requires the City to prepare a Supplement to the Annual Report. The Supplement is to include an accounting of the funds received from the SUMC Parties to satisfy the obligations outlined in Section 5 of the Agreement, a description of the account Item 6: Staff Report Pg. 4 Packet Pg. 51 of 853 Item 6 Item 6 Staff Report balances, and a summary and description of expenditures from the funds for each Fiscal Year (Attachment E). Section 12 mentions preparation of the Supplement within 45 -days of the June and July receipt of the annual reports by SUMC, but there is no penalty for not doing so; after the close of the Fiscal Year, the City conducts an annual audit of the funds in Fall/Winter to demonstrate good faith in implementing the Agreement. The SUMC Parties have already paid the City approximately $44.3 million in public benefit fees since June 6, 2011 through the FY 2021-2022 reporting period. This sum includes the approximately $11.7 million third and final payment by SUMC during the FY 2017-2018 reporting period. Regarding fund usage during the Fiscal Year 2021-2022 reporting period, the City authorized transfers for the following: • $500,000 under "Expansion Cost Mitigation" for Rail Grade Separation (PL -17001); • $775,000 under "Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing" for $750,000 replacement of Fire Station Four (PE -18004) and $25,000 University Avenue Streetscape Update (PE -21004); and • $1,250,000 under "Community Health and Safety" for $1.2 million Charleston/Arastradero Corridor Project (PE -13011) and $50,000 to the General Fund allocated to local non -profits through the Human Services Resource Allocation Process (HSRAP). Use of Development Agreement Funds The funds received by the City through the Agreement represent funding for Operations and a significant portion of funding for implementation of the City's Capital Infrastructure Plan. For additional information about the recent past, current, and future use of Agreement funds, please refer to the following: • Fiscal Year 2022 Adopted Operating Budget document, Special Revenue Funds section; • Fiscal Year 2022 Adopted Capital Improvement Budget document; • City Council Report 13609 February 28, 2022 Design Services for the University Avenue Streetscape Update Capital Improvement Project, including amendments to the FY 2022 Capital Improvement Plan; • Fiscal Year 2023 Adopted Operating Budget Document, Special Revenue Funds section; and the • Fiscal Year 2023 Capital Improvement Budget document.2 2 Fiscal Year 2022 Adopted Operating Budget document, Special Revenue Funds section: https://www.cityofpaloalto.org/files/assets/public/ad ministrative-services/city-budgets/fy-2022-city- budget/adopted-budgets/operating-budget web.pdf. Item 6: Staff Report Pg. 5 Packet Pg. 52 of 853 Item 6 Item 6 Staff Report The SUMC agreement Section 5(a)(iii) requires that a joint committee make annual recommendations to the City Council regarding proposed disbursements from the Community Health and Safety Program Fund, and the City Council may use reasonable discretion to accept, reject, or modify these recommendations. The joint committee includes SUMC representatives and City staff from the Office of Transportation, Administrative Services, and Public Works departments. Projects using Community Health and Safety funds for the Fiscal Year 2021-2022 reporting period have gained mutual support from members of the joint committee and approval from the City Council. FISCAL/RESOURCE IMPACT There are no impacts to the City's budget resulting from this review of the SUMC Annual Reports for Fiscal Year 2021-2022. As stated above, the SUMC Parties have already paid approximately $44.3 million in public benefit fees to the City since June 6, 2011 through the FY 2021-2022 reporting period. Future fund contributions are not anticipated. As discussed earlier in this report, the City deferred collection of the $175,000 payment for alternative transportation funding, pending City Council action on the SUMC Development Agreement Amendment application. No staff analysis has been completed at this time regarding the potential use of this payment. STAKEHOLDER ENGAGEMENT Staff did not perform specific community outreach related to preparation of this annual report. Community members and policy makers were extensively involved in the crafting of the Agreement and all other associated project enabling entitlements. Also, subsequent related project entitlements continue to be processed through the City's standard review processes, as discussed in the Development Agreement and other entitlements. ENVIRONMENTAL REVIEW Reviewing and making findings regarding SUMC and City compliance with the Agreement is not a project under the California Environmental Quality Act and no environmental assessment is Fiscal Year 2022 Adopted Capital Improvement Budget document: https://www.cityofpa loa lto.org/files/assets/pu bl is/ad m i n istrative-services/city-budgets/fy-2022-city- budget/adopted-budgets/capital-budget-book-web.pdf. City Council Report 13609 February 28, 2022 Design Services for the University Avenue Streetscape Update Capital Improvement Project, including amendments to the FY 2022 Capital Improvement Plan: https://www.cityofpaloalto.org/City-Hall/City-Council/Council-Agendas-Minutes. Fiscal Year 2023 Adopted Operating Budget Document, Special Revenue Funds section: https://www.cityofpaloalto.org/files/assets/public/ad ministrative-services/city-budgets/fy2023-city- budget/adopted-fy23/operating-budget final-4.pdf. Fiscal Year 2023 Capital Improvement Budget document: https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-budgets/fv2023-city- budget/adopted-fv23/ca Pita 1 -budget final-4-online-version.pdf. Item 6: Staff Report Pg. 6 Packet Pg. 53 of 853 Item 6 Item 6 Staff Report required for the annual compliance review. An environmental impact report for the entire SUMC project was prepared and certified by the City Council prior to approval of the Agreement. ATTACHMENTS Attachment A: Fiscal Year 2021-2022 SUMC Annual Report Attachment B: Weblinks to Prior SUMC Annual Reports Attachment C: SUMC Development Agreement Section 5 Compliance Table Attachment D: SUMC Construction Activities and Square Footage Summary Attachment E: Supplement to the Annual Report APPROVED BY: Jonathan Lait, Planning and Development Services Director Item 6: Staff Report Pg. 7 Packet Pg. 54 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report 2O21-22 ANNUAL REPORT PREPARED FOR THE CITY OF PALO ALTO I JULY 6, 2022 Item 6: Staff Report Pg. 8 Packet Pg. 55 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report CONTENTS EXECUTIVE SUMMARY BACKGROUND AND PURPOSE 2021-2022 SUMMARY OF PROGRESS LUCILE PACKARD CHILDREN'S HOSPITAL STANFORD HEALTH CARE SCHOOL OF MEDICINE BLAKE WILBUR DRIVE ROADWAY EXTENSION NET NEW SQUARE FOOTAGE COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS HEALTH CARE BENEFITS SECTION 5(A)(II). FUND FOR HEALTHCARE SERVICES SECTION 5(A)(III). FUND FOR COMMUNITY HEALTH AND SAFETY PROGRAMS PALO ALTO FISCAL BENEFITS SECTIONS 5(B)(I) AND 5(B)(II). PAYMENT OF SALES AND USE TAXES SECTION 5(B)(III). FUNDING OF OPERATING DEFICIT SECTION 5(B)(IV). PAYMENT OF UTILITY USER TAX SECTION 5(B)(V). SCHOOL FEES TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS SECTION 5(C)(II). MENLO PARK TRAFFIC MITIGATION SECTION 5(C)(III). EAST PALO ALTO VOLUNTARY MITIGATION SECTION 5(C)(IV). CONTRIBUTIONS TO AC TRANSIT SECTION 5(C)(V). OPTICOM PAYMENTS SECTION 5(C)(VI). CALTRAIN GO PASSES SECTION 5(C)(VII). MARGUERITE SHUTTLE SERVICE SECTION 5(C)(VIII). TRANSPORTATION DEMAND MANAGEMENT COORDINATOR SECTION 5(C)(IX). MONITORING OF TDM PROGRAMS LINKAGES SECTION 5(D)(I). INTERMODAL TRANSIT FUND SECTION 5(D)(II). QUARRY ROAD FUND SECTION 5(D)(III). STANFORD BARN CONNECTION INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING SECTION 5(E). CLIMATE CHANGE SECTION 5(F). CLIMATE CHANGE FUND SATISFACTION OF CONDITIONS OF APPROVAL SECTION 5(H). SATISFACTION OF ALL CONDITIONS OF APPROVAL CONCLUSION 2 3 3 4 5 6 6 7 7 7 7 7 8 8 8 9 9 9 9 9 10 10 10 11 11 12 12 13 13 13 13 14 14 14 14 15 Item 6: Staff Report Pg. 9 Packet Pg. 56 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report EXECUTIVE SUMMARY On June 6, 2011, the Stanford University Medical Center parties (now Stanford Medicine) —comprised of Stanford Hospital and Clinics (now Stanford Health Care), Lucile Packard Children's Hospital, and Stanford University —entered into a Development Agreement with the City of Palo Alto, committing to provide a range of community benefits in exchange for vested development rights to develop and use the Stanford Medicine Renewal and Replacement Project ("Renewal Project") facilities in accordance with the approvals granted by the City, and a streamlined process for obtaining subsequent project approvals. The Renewal Project —driven by a growing demand for healthcare services, state -mandated seismic safety requirements, and the need to replace outmoded facilities with modern, technologically advanced spaces —is transforming the way that healthcare is delivered and research is conducted. Today, eleven years after the execution of the Development Agreement, the Lucile Packard Children's Hospital Expansion and the new Stanford Hospital are now open for patient care, and the School of Medicine has completed the first phase of development of its replacement facilities, with its BioMedical Innovations building open for research. Interior renovations within the 1989 portion of the preexisting Stanford Hospital facility have now commenced, and are expected to continue for the next several years, bringing the facility up to modern healthcare standards. Against this backdrop, Stanford Medicine submits its Annual Report in compliance with Section 12(c) of the Development Agreement, and looks forward to continued collaboration with the City of Palo Alto in advancing the goals of both Stanford Medicine and the broader community. ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 10 Packet Pg. 57 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report BACKGROUND AND PURPOSE The Palo Alto City Council's unanimous approval of the entitlements for the Stanford Medicine Renewal and Replacement Project in July 2011 has paved the way for a historic investment in new and replacement facilities for Stanford Medicine. The project approvals —including new zoning for the Renewal Project sites, a conditional use permit, architectural review approval, and the execution of a Development Agreement —allow for the construction of approximately 1.3 million net new square feet of hospital facilities, clinics, medical offices, and medical research spaces, and are enabling the Hospitals to optimize the delivery of healthcare services to patients, and maintain their position as leading providers of world -class healthcare. In order to facilitate this important replacement and expansion work, the Stanford Medicine parties entered into a Development Agreement with the City of Palo Alto, which includes a comprehensive package of community benefits and additional development conditions. In exchange for these benefits, the City has vested for a period of 30 years Stanford Medicine's rights to develop and use the property in accordance with the project approvals, and agreed to streamline the process for obtaining subsequent approvals. The terms of the Development Agreement (Section 12(c)) provide for a periodic review of compliance, and require that Stanford Medicine submit an Annual Report to the City of Palo Alto's Director of Planning and Community Environment each year within 30 days of the anniversary of the agreement effective date (June 6, 2011). The Annual Report is to summarize Stanford Medicine's progress on the Renewal Project, including a list of net new square footage for which a certificate of occupancy has been received, and a description of the steps that Stanford Medicine has taken to comply with the obligations listed in Section 5 of the Development Agreement. With this report, Stanford Medicine fulfills these requirements. Within 45 days of receipt of this Annual Report, the City will prepare a Supplement to the Annual Report, to provide an accounting of the City's balances and expenditures from each of the City Funds and how they were used. ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 11 Packet Pg. 58 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report 2021-2022 SUMMARY OF PROGRESS The Renewal Project has reached key milestones in recent years, with the opening of the Lucile Packard Children's Hospital expansion in 2017 and the opening of the New Stanford Hospital in 2019, and most recently the opening of the School of Medicine's BioMedical Innovations building in 20201 . While the COVID-19 pandemic changed the pace of progress on the Renewal Project, as Stanford Medicine focused resources on pandemic response, including launching clinical trials for therapeutic treatments for COVID-19 and establishing community testing and vaccination sites, it has also highlighted the importance of modern, state-of-the-art facilities to support Stanford Medicine's research and patient care. The section to follow provides an overview of central goals for the project elements that presently are under construction or nearing construction, a synopsis of progress to date, as well as a preview of near - term upcoming activities. LUCILE PACKARD CHILDREN'S HOSPITAL In response to growing community needs for specialized pediatric and obstetric care, Lucile Packard Children's Hospital opened an expanded facility in late 2017. The new Main building, located adjacent to the preexisting Lucile Packard Children's Hospital (West building), provides patients and doctors with the most modern clinical advancements and technology, while also creating a more patient- and family - centered environment of care, with additional single -patient rooms and more spaces for families to be with their child during treatment and recovery. 1 Temporary certificate of occupancy was issued in 2020; final certificate of occupancy was issued in 2021. ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 12 Packet Pg. 59 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report 2021-2022 SUMMARY OF PROGRESS The LPCH Main building features a new entrance lobby, public concourse with dining, three floors of nursing units, and new patient rooms. Spaces have been designed with an attention to natural light and views, and the exterior grounds —more than 3.5 acres of outdoor areas and gardens —provide a park -like setting for patients, families, and visitors. LPCH is currently planning for improvements to its preexisting West building which will modernize its infrastructure and provide a more comfortable patient experience. These improvements include a redesigned main lobby entry and drop-off for the West Building; plans are anticipated to be formally submitted to the City for Architectural Review in Summer 2022. STANFORD HEALTH CARE Stanford Health Care is constructing new and replacement hospital facilities to usher in a new era of advanced patient care. Growth in patient volumes and rapidly changing medical technology have rendered much of the existing midcentury hospital infrastructure inadequate, while new seismic safety requirements have accelerated the need to construct replacement facilities. In November 2019, Stanford Health Care's first phase of facilities renewal completed as the New Stanford Hospital received its license from the State Department of Public Health and opened to patient care. With the new Stanford Hospital now complete, Stanford Health Care has begun a series of renovations within its preexisting facilities, including the conversion of shared patient rooms into private rooms within the 1989 portion of the Hospital; this renovation work is planned to proceed in phases over the next several Item 6: Staff Report Pg. 13 Packet Pg. 60 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report 2021-2022 SUMMARY OF PROGRESS years. In addition, to continue to maintain its current 600 -bed count upon conversion of existing shared patient rooms to private rooms, Stanford Health Care is also planning an addition to the preexisting Hospital of approximately 37,000 square feet. This proposed addition received Architectural Review approval in March 2022, and a City grading / excavation permit was issued in June 2022. Grading activity is expected to commence in Summer 2022 SCHOOL OF MEDICINE The Stanford University School of Medicine is replacing its outmoded research buildings with new state-of-the-art facilities designed to support contemporary translational research. The new facilities will accommodate 21st century medical advancements and enable the development of new medical innovations, featuring integrated laboratory suites, with easier access between labs and support facilities, enabling transparency, flexibility, and collaboration. The first phase of School of Medicine development (BioMedical Innovations Building 1, or "BMI-1") is now complete, having received a certificate of occupancy in Spring 2021, and features four above -grade floors of research labs and light -filled gathering places, and a lower basement level for utility support, as well as a connective tunnel to other nearby research facilities. Building interiors were designed for best practices for laboratory design safety and space allocation, with a flexible template to maximize efficient use of space and ease of renovation. The four above -grade floors provide space for a mix of disciplines, basic and clinical research, wet and dry labs, and leading -edge translational studies. ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 14 Packet Pg. 61 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report 2021-2022 SUMMARY OF PROGRESS BLAKE WILBUR DRIVE ROADWAY EXTENSION As required by the 2011 Project Approvals, a new link roadway will be constructed between Sand Hill Road and Welch Road; this roadway will connect Durand Way to Blake Wilbur Drive, and will provide an important automobile, bicycle, and pedestrian connection in the vicinity of the Medical Center. Specifically, it will serve as an uncongested route for emergency vehicles accessing the medical campus via Sand Hill Road, and will provide improved access to both the Main Medical Campus and the outer Welch medical office buildings. The scope includes two travel lanes in each direction, Class II bicycle lanes, sidewalks with planter strips including new tree plantings and bioretention areas, new signal poles, and underground utilities. The roadway design was approved at the schematic level by the Architectural Review Board in 2011, but design development and construction were not immediately able to advance as the impacted site was under third -party lease until 2020. Design work resumed in 2020, and staff - level Architectural Review approval for the roadway improvements was issued in late 2021. Construction activities are anticipated to commence in 2022, pending permit issuance. NET NEW SQUARE FOOTAGE The following table summarizes the net new square footage for which a certificate of occupancy has been issued. -• • •• STANFORD HEALTH CARE .Lr.1_- 1101 Welch demolished (40,100) 500 Pasteur 719,261 Total 679,161 LUCILE PACKARD CHILDREN'S HOSPITAL EXPANSION 701 Welch demolished (56,300) 703 Welch demolished (23,500) Lucile Packard Children's Hospital Expansion 446,088 Total 366,288 SCHOOL OF MEDICINE BioMedical Innovations building 196,921 Partial decant of 1959 Stone Complex (18,472) Total 178,449 HOOVER PAVILION Miscellaneous shops and storage demolished (13,831) Stanford Neuroscience Health Center (Hoover MOB) 91,605 Total 77,774 ARIII"AI REPORT 2021-22 Item 6: Staff Report Pg. 15 Packet Pg. 62 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS This section of the Annual Report summarizes the steps that Stanford Medicine has taken to comply with its obligations under Section 5 of the Development Agreement. HEALTH CARE BENEFITS In addition to the health care funds listed below, Stanford Medicine provides certain intrinsic benefits to the community, as both a global leader in medical care and research, and as a community healthcare services provider. The Renewal Project enables Stanford Medicine to continue its important work, and the addition of more beds for adults and children will help to alleviate overcrowding. Additionally, the new hospital facilities provide critical emergency preparedness and response resources for the community in the event of an earthquake, pandemic, or other major disaster. Section 5(a)(ii). Fund for Healthcare Services The Hospitals have designated the amount of $3 million for Healthcare Services, which will increase to $5.6 million by December 31, 2025. No further action is required until 2026. This amount will be reconciled with the construction use tax payments as described in Development Agreement Section 5(b) (ii)(C), and will be spent between 2026 and 2036. Section 5(a)(iii). Fund for Community Health and Safety Programs Stanford Medicine has contributed a single lump -sum payment of $4 million to establish a Community Health and Safety Program Fund for the City of Palo Alto. This fund is to be distributed to selected community health programs that benefit residents of the City, including the Project Safety Net Program, a community -based mental health plan for youth well-being in Palo Alto. A joint committee is to be established to evaluate proposals regarding the other specific programs to receive funding, composed of two representatives selected by Stanford Medicine and two representatives selected by the City; this committee shall make annual recommendations to the City Council regarding proposed disbursements from the Community Health and Safety Program Fund, and the City Council shall use its reasonable discretion to decide whether to accept, reject, or modify the joint committee recommendations. Stanford Medicine provided the entire required contribution to the Community Health and Safety Program Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision, though Stanford Medicine has recently engaged with City staff to establish the joint committee to evaluate proposals for programs to receive funding. Joint committee meetings are targeted to begin in Summer 2022. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditures from this fund, and the purposes for which the expenditures were used. PALO ALTO FISCAL BENEFITS The Stanford Medicine Renewal Project brings considerable fiscal benefits to the City of Palo Alto. The project is expected to generate $8.1 million in sales and use tax revenues for the City, and multiple mechanisms have been put into place to ensure that this target is met. The Development Agreement also provides for further fiscal benefits to the City, including a payment by Stanford Medicine to fund the City's operating deficit, and the payment of utility user taxes and school fees. ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 16 Packet Pg. 63 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS Sections 5(b)(i) and 5(b)(ii). Payment of Sales and Use Taxes As required by the Development Agreement, Stanford Medicine submitted its annual Construction Sales and Use Tax monitoring report to the City on June 30, 2022. The Stanford Medicine parties will continue to submit such a report annually during the construction period for the Renewal Project so that the City can determine the share of construction use taxes that it has received as a result of the Renewal Project. Each year, within 60 days of receiving the monitoring report, the City will provide its determination of the amount of construction use taxes that it has received as a result of the Renewal Project during the preceding calendar year. In August 2026 or soon thereafter, Stanford Medicine and the City will conduct a reconciliation process to confirm that the City has received at least $8.1 million in construction use taxes as a result of the Renewal Project, as further described in Development Agreement Section 5(b)(ii). To date, Stanford Medicine has taken the following steps detailed below to maximize the City's allocation of sales and use taxes associated with Project construction and operation. Documentation of each of these items is included in the 2021 construction use tax monitoring report already submitted. • Stanford Medicine has obtained all permits and licenses necessary to maximize the City's allocation of construction use taxes derived from the project, including California Seller's Permits and Use Tax Direct Pay Permits. • Stanford Medicine has designated and required all contractors and subcontractors to designate the project site as the place of sale of all fixtures furnished or installed as part of the project. • Stanford Medicine has designated and required all contractors and subcontractors to designate the project site as the place of use of all materials used in the construction of the project. • Stanford Medicine has required all contractors and subcontractors to allocate the local sales and use taxes derived from their contracts directly to the City. Stanford Medicine has used best efforts to require contractors and subcontractors to complete and file any forms required by the State Board of Equalization to effect these designations. • Both Hospitals have obtained use tax direct pay permits from the State of California for their existing facilities in order to increase the City tax allocation for the Hospitals' purchases. The Hospitals will maintain the use tax direct pay permit for the life of the project. • Finally, Stanford Medicine has assisted the City in establishing and administering a Retail Sales and Use Tax Reporting District for the Renewal Project, to enable the City to track the generation, allocation, reporting and payment of sales and use taxes derived from the Project. Section 5(b)(iii). Funding of Operating Deficit In order to assure that City costs associated with the Renewal Project do not exceed revenues to the City resulting from construction and operation of the project, Stanford Medicine has provided to the City a single lump sum payment in the amount of $2,417,000. This payment was made on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision. Section 5(b)(iv). Payment of Utility User Tax Stanford Medicine will pay the City a utility user tax at a minimum rate of 5 percent of all electricity, gas, and water charges allocable to new construction completed as part of the project for the life of the project. This rate may be increased by the City as provided by Section 2.35.100(b) of the Municipal Code. The 5 percent utility user tax is currently being paid by Stanford Medicine. ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 17 Packet Pg. 64 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS Section 5(b)(v). School Fees Stanford Medicine will pay to the City —which is then to forward to the Palo Alto Unified School District — school fees upon issuance of each building permit from the City or OSHPD, in the amount that is generally applicable to non-residential development at the time of payment based upon net new square footage, as defined in the Development Agreement. School fees were paid in 2012 for LPCH and SHC in the amounts of $188,815 and $153,802, respectively. In July 2013, additional school fees were paid in the amount of $7,051 to account for additional program square footage for the New Stanford Hospital and Garage. In May 2014, an additional payment of school fees in the amount of $16,119 was made to account for the incremental square footage associated with the Hoover Medical Office Building, beyond the 60,000 square feet originally planned. In November 2015, additional school fees in the amount of $461.16 were paid to account for incremental square footage for the New Stanford Hospital Garage. In May 2022, school fees in the amount of $22,641 were paid to Palo Alto Unified School District to account for Stanford Health Care's planned addition to the 1989 portion of the preexisting hospital. TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS Stanford Medicine has taken a number of steps to mitigate the potential traffic impacts projected at full project buildout. Stanford Medicine provides a robust transportation demand management program, offering a variety of incentives for employees to forego driving alone to work. As required by the Development Agreement, Stanford Medicine has taken the additional actions outlined below. Section 5(c)(ii). Menlo Park Traffic Mitigation Stanford Medicine agreed to contribute to the City of Menlo Park a total of $3,699,000 for use in connection with traffic mitigation, infrastructure enhancements, and the promotion of sustainable neighborhoods and communities and affordable housing. This contribution has been made in three equal payments; the first payment of $1,233,000 was made on August 19, 2011. The second payment of $1,233,000 was made on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit. The final payment in the amount of $1,233,000 was made on December 14, 2017, within 30 days from issuance of the first Hospital occupancy permit. No further action is required by Stanford Medicine to comply with this Development Agreement provision Section 5(c)(iii). East Palo Alto Voluntary Mitigation Stanford Medicine has contributed a single lump sum payment of $200,000 to East Palo Alto to be used for roadway and traffic signal improvements on University Avenue. This payment was made on August 19, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision. In the event that Stanford Medicine does not meet the alternative transportation mode goals specified in the Development Agreement in the required timeframe, including any period of permitted delay, and is assessed a $4 million payment under Development Agreement section 5(c)(ix)(B), the City will be required to remit $150,000 of such payment to the City of East Palo Alto. Section 5(c)(iv). Contributions to AC Transit The Hospitals committed to the following actions within 30 days from issuance of the first Hospital occupancy permit, and have fulfilled these commitments as outlined below: ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 18 Packet Pg. 65 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS • The Hospitals agreed to offer a one-time payment of $250,000 to AC Transit to be used for capital improvements to the U -Line to increase capacity (Section 5(c)(iv)(A)). As required, the Hospitals offered to contribute $250,000 to AC Transit for capital improvements to the U Line; this offer was accepted, and the payment was made on January 5, 2018. The Hospitals agreed to offer to make annual payments to AC Transit in a reasonable amount, not to exceed $50,000, to be used for operating costs of the U -Line to maintain a load factor for bus service to the Medical Center of less than 1 (Section 5(c)(iv)(B)). The Hospitals are making annual payments to AC Transit for purposes of U -Line operating costs. • In order to encourage Hospital employees living in the East Bay to use public transit for their commute, the Hospitals committed to using best efforts to lease 75 parking spaces at the Ardenwood Park and Ride lot, or an equivalent location, at a cost not to exceed $45,000 per year (Section 5(c)(iv)(C)). The Hospitals continue to meet this requirement, and currently lease 100 parking spaces in Newark (35263 Fircrest Drive). However, the Fircrest-Ardenwood route that provided service to these spaces was suspended in December 2020 due to the pandemic reducing demand and resulting low ridership. East Bay riders continue to be served by the U Line and DB Express. Section 5(c)(v). Opticom Payments Within 30 days from issuance of the first Hospital occupancy permit, the Hospitals committed to pay $11,200 to the City of Palo Alto to be used for the installation of Opticom traffic control systems at the following seven intersections: El Camino Real/Palm Drive/University Avenue; El Camino Real/Page Mill Road; Middlefield Road/Lytton Road; Junipero Serra/Page Mill Road; Junipero Serra/Campus Drive West; Galvez/Arboretum; and the Alpine/280 Northbound ramp. However, since the time that this commitment was made, the City determined that Opticom systems are outdated, and proposed the purchase and installation of the ATMS.now Emergency.now package, which would allow coordinated prioritization at all City -maintained traffic signals. Agreement to this change in traffic signal priority system is documented in a letter dated December 12, 2017 from the City Manager to the SUMC Parties, which was accepted and agreed to by the SUMC Parties by countersigned letter. The required payment was made on December 12, 2017, within 30 days of issuance of the first Hospital occupancy permit. Section 5(c)(vi). Caltrain GO Passes The Development Agreement requires that the Hospitals purchase annual Caltrain GO Passes for all existing and new Hospital employees who work more than 20 hours per week at a cost of up to approximately $1.8 million per year, beginning on September 1, 2015. This obligation is expected to continue for a period of 51 years. Hospital management accelerated the purchase of the annual GO Pass for Hospital employees, and began providing free GO Passes to employees commencing on January 1, 2012. Annual passes were purchased again for all existing and new eligible employees for 2022. Section 5(c)(vii). Marguerite Shuttle Service The Hospitals will fund the reasonable costs, in an approximate amount of $2 million, for the purchase of additional shuttle vehicles for the Marguerite shuttle service, as and when required to meet increased demand for shuttle service between the project sites and the Palo Alto Intermodal Transit Station. In addition, the Hospitals will fund as annual payments the reasonable costs, in an approximate amount of $450,000 per year, to cover the net increase in operating costs for the Marguerite Shuttle. Demand 10 ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 19 Packet Pg. 66 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS for the Marguerite shuttle increased in 2012, and the Hospitals funded the purchase of three new hybrid shuttles to meet this increased demand. Since this time, the Hospitals have funded as annual payments the reasonable costs of the net increase in operating costs for the Marguerite Shuttle. Section 5(c)(viii). Transportation Demand Management Coordinator The Development Agreement requires that the Hospitals employ an onsite qualified Transportation Demand Management (TDM) Coordinator for Stanford Medicine, commencing on September 1, 2015, and continuing through the life of the Renewal Project. Because the Hospitals accelerated the purchase of the Caltrain GO Pass, the Hospitals also accelerated the hiring of the TDM Coordinator, filling this position in March 2012. The TDM Coordinator is responsible for overseeing the analysis, development, and implementation of programs to advance the Hospitals' TDM objectives. Specific duties that are carried out in collaboration with Stanford Transportation include raising awareness among commuters about alternative transportation options and Stanford's commute incentive programs; providing alternative commute planning assistance and responses to customer inquiries; writing and editing electronic and print communications; coordinating and staffing outreach events, such as free transit pass distributions and employee fairs; and providing alternative transportation information and resources at new employee orientations. In addition, the TDM Coordinator is responsible for overseeing the Transportation Hub within the new Stanford Hospital. The Transportation Hub serves as an alternative transportation information center available to both staff and patients, and includes a monitor screen (Transit Screen) that displays all mobility options in the area at a glance, in real time. The Hospitals have also created a new role, Transportation/TDM Director, that is in addition to the previously established TDM Coordinator role, to lead the effort of increasing the use of alternative transportation among Hospital employees. Section 5(c)(ix). Monitoring of TDM Programs The Hospitals are required to submit annual monitoring reports showing the current number of employees employed over 20 hours per week; the number of employees using an alternative transportation mode as ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 20 Packet Pg. 67 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS documented by a study or survey to be completed by the Hospitals using a method mutually agreeable to the City and the Hospitals; and the efforts used by the Hospitals to attempt to achieve the Alternative Mode Targets identified in the Development Agreement. The Development Agreement specifies payments to be made in the event that such targets are not met during particular time periods. Stanford Medicine submitted its 2022 Alternative Mode Share Report to the City on May 31, 2022; this report shows an alternative mode split of 19.9% for the Hospitals, representing a significant drop in alternative mode share since the start of the COVID-19 pandemic and a further decrease relative to the Spring 2021 results (28.8%). The continued shift from alternative modes to single -occupancy vehicles among on -campus Hospital staff is consistent with generally observed changes in transit behavior during the pandemic, with the key difference that the Hospitals' on -campus employees largely do not have the ability to perform work remotely, as they primarily occupy roles which require direct patient interface or otherwise require physical presence. Given ongoing concerns over the safety of public transportation during the pandemic, the further reduction in the Hospitals' alternative mode share from the most recent reporting year can be more easily understood. Under the circumstances, the Hospitals are excused from achieving, on schedule, the alternative mode share targets of this section of the Development Agreement. Due to the pandemic -induced circumstances noted above and as allowed by the Development Agreement, Stanford Medicine has filed a Notice of Intent to Claim a Permitted Delay with the City which establishes that due to the ongoing COVID-19 pandemic the Hospitals are unable to meet the alternative mode share targets on schedule. The Hospitals expect that the period of permitted delay will extend through a period ending one year after the expiration or termination of the United States Secretary of Health and Human Services' determination that a public health emergency exists due to the COVID-19 pandemic. This anticipated period of permitted delay accounts for an end to the current public health emergency, and the gradual return of commuter confidence in alternative transit. During this period, other related obligations would continue to be met, including but not limited to implementing an enhanced TDM program, monitoring progress toward meeting the alternative mode share targets, providing annual reports to the City, striving to maximize use of alternative commute modes by Hospital employees, and meeting with the City on a regular basis to identify potential improvements to the enhanced TDM program. Stanford Medicine plans to file an application for an amendment to the Development Agreement to implement the period of permitted delay and establish viable timelines for compliance with alternative mode share targets. Stanford Medicine remains committed to increasing its alternative mode share, and enabling employees to travel safely to work using alternative modes. LINKAGES To further encourage use of Caltrain, bus, and other transit services, and to enhance and encourage use of pedestrian and bicycle connections between Stanford Medicine and downtown Palo Alto, Stanford Medicine has funded the following specific infrastructure improvements. Section 5(d)(i). Intermodal Transit Fund Stanford Medicine has provided to the City one lump sum payment of $2.25 million for improvements to enhance the pedestrian and bicycle connection from the Palo Alto Intermodal Transit Center to the existing intersection of El Camino Real and Quarry Road. Up to $2 million of this amount is to be used by 12 ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 21 Packet Pg. 68 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS the City for the development of an attractive, landscaped passive park/green space with a clearly marked and lighted pedestrian pathway, benches, and flower borders. Stanford Medicine paid the entire required amount for the Intermodal Transit Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditures from this fund, and the purposes for which the expenditures were used. In Summer 2017, prior to issuance of the first Hospital Occupancy Permit, the City completed a temporary path with associated lighting, landscaping / green space, benches, and flower borders from the transit center to the existing crosswalk at the intersection of El Camino Real and Quarry Road. Available funds remaining (approximately $1.69 million) will be applied to the construction of permanent improvements in the future. Section 5(d)(ii). Quarry Road Fund Stanford Medicine has provided to the City one lump sum payment of $400,000 for improvements to and within the public right-of-way to enhance the pedestrian and bicycle connection from the west side of El Camino Real to Welch Road along Quarry Road, including urban design elements and way finding, wider bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus and/or shuttle stops, and prominent bicycle facilities. Stanford Medicine paid the entire required amount for the Quarry Road Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditures from this fund, and the purposes for which the expenditures were used. The City was required to construct the improvements prior to issuance of the first Hospital Occupancy Permit, but as agreed to with Stanford Medicine, delayed implementation of these improvements until utility trenching to the Medical Center was complete. In late 2018, the City completed these improvements, including enhanced crosswalks and bicycle striping and signage. Section 5(d)(iii). Stanford Barn Connection Stanford Medicine agreed to construct up to $700,000 of improvements to enhance the pedestrian connection between the Main Medical Campus and the Stanford Shopping Center from Welch Road to Vineyard Lane, in the area adjacent to the Stanford Barn prior to issuance of the first Hospital Occupancy permit. Construction of the improvements completed in November 2017, in advance of issuance of the first Hospital Occupancy permit. No further action is required by Stanford Medicine to comply with this Development Agreement provision. INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING Section 5(e). Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund Stanford Medicine agreed to contribute a total amount of $23.2 million toward City of Palo Alto infrastructure, sustainable neighborhoods and communities, and affordable housing. As required by the Development Agreement, this contribution has been made in three equal payments. The first payment, in the amount of $7,733,333, was made on August 25, 2011; the second payment of $7,733,333 was made ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 22 Packet Pg. 69 of 853 13 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final payment of $7,733,333 was made on December 12, 2017, within 30 days from issuance of the first Hospital occupancy permit. No further action is required by Stanford Medicine to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditures from this fund, and the purposes for which the expenditures were used. The City will use $1,720,488 of these funds in the same manner as funds collected under the City's housing fee ordinance. CLIMATE CHANGE Section 5(f). Climate Change Fund Stanford Medicine agreed to contribute a total amount of $12 million toward City projects and programs for a sustainable community, including programs identified in the City's Climate Action Plan, carbon credits, and investments in renewable energy and energy conservation. As required by the Development Agreement, this contribution has been made in three equal payments. The first payment, in the amount of $4 million, was made on August 25, 2011; the second payment of $4 million was made on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final payment of $4 million was made on December 12, 2017, within 30 days from issuance of the first Hospital occupancy permit. No further action is required by Stanford Medicine to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditures from this fund, and the purposes for which the expenditures were used. SATISFACTION OF CONDITIONS OF APPROVAL Section 5(h). Satisfaction of All Conditions of Approval Stanford Medicine will satisfy all Conditions of Approval by the dates and within the time periods required by the project approvals, subject to modifications allowed by the Development Agreement, and has taken several steps in order to ensure that this requirement is met (Section 5(h)). The Conditions of Approval encompass conditions imposed by the Architectural Review Board, mitigation measures enumerated in the Mitigation Monitoring and Reporting Program, and conditions attached to the Conditional Use Permit. In order to implement, monitor, and report on the implementation of this diverse array of conditions, Stanford Medicine, with input from City planning staff, has created two Excel spreadsheet tracking and reporting tools. These spreadsheets serve as a centralized repository for compliance monitoring information and documentation, and are updated by the Stanford Medicine project teams on a regular basis, and reviewed by the City. ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 23 Packet Pg. 70 of 853 Item 6 Attachment A FY 2021- 2022 SUMC Annual Report CONCLUSION As the Renewal Project completes its eleventh year, Stanford Medicine looks forward to continued engagement with the City of Palo Alto as the project continues to progress. ANNUAL REPORT 2021-22 Item 6: Staff Report Pg. 24 Packet Pg. 71 of 853 Item 6 Attachment B Weblinks to Prior SUMC Annual Reports Stanford University Medical Center (SUMC) Annual Reports Prior Fiscal Year Annual Reports: • Fiscal Year 2011-2012 http://www.cityofpaloaIto.org/civicax/filebank/documents/31976 • Fiscal Year 2012-2013 https://www.cityofpaloaIto.org/civicax/filebank/documents/39991 • Fiscal Year 2013-2014 http://www.cityofpaloaIto.org/civicax/filebank/documents/45631 • Fiscal Year 2014-2015 http://www.cityofpaloaIto.org/civicax/filebank/documents/51645 • Fiscal Year 2015-2016 https://www.cityofpaloaIto.org/civicax/filebank/documents/60896 • Fiscal Year 2016-2017 https://www.cityofpaloaIto.org/civicax/filebank/blobdload.aspx?t=49142.31&BlobID=65285 • Fiscal Years 2017-2018, 2018-2019, and 2019-2020 https://www.cityofpaloaIto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2021/11-november/20211101pccs-amended.pdf • Fiscal Year 2020-2021 https://www.cityofpaloaIto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2022/20220321/20220321pccsm-amended-linked- revised.pdf Item 6: Staff Report Pg. 25 Packet Pg. 72 of 853 SUMC Development Agreement, Section 5 - SUMC Parties' Item 6 Attachment C SUMC Development PAgreement Section 5 Compliance Table Health Care Benefits DA Description Summary Activity Complies? Section SUMC establishment of a $3M fund that will grow to $5.6M by December 31, 2025. Fund Fund for Financial assistance will be used in even increments over a ten Yes, complies — No activity 5(a)(ii) Healthcare for Palo Alto year period from 2026-2036 to assist Palo 02 required in FY 2021-2022. Services residents Alto residents who have self -payment responsibilities beyond their financial means, as described in Section 5(a)(ii). First and only payment of $4M on August Fund for $4M fund for 25, 2011 to establish City fund. The joint Yes, complies - Fund Community selected community committee formed according to the activity and balances in FY 5(a)(iii) Health and health programs for Development Agreement approved 2021-2022 reported in Safety Programs Palo Alto residents expenditures from this fund for FY 2021- Attachment E. 2022. There were expenditures from this fund during the reporting period FY 2021- 2022. Fiscal Benefits DA Description Summary Activity Complies? Section Payment of Activities to SUMC contributes to General Fund Sales and Yes, complies - SUMC 5(b)(i), (ii) Sales and Use maximize sales and Use Tax revenues via construction -related timely submitted the Taxes use taxes paid to the activities. The City reviews the Construction Construction Sales & Use Sales & Use Tax Monitoring Report that is Tax Monitoring Report for City submitted by SUMC on June 30 of each year. the previous calendar year. 1 SUMC Development Agreement Compliance: FY 2021-2022 Item 6: Staff Report Pg. 26 Packet Pg. 73 of 853 SUMC Development Agreement, Section 5 - SUMC Parties' Item 6 Attachment C SUMC Development PAgreement Section 5 Compliance -� Table The City submits a letter to SUMC each year The City sent their that notes local tax received from SUMC required response. This project activities for the year. Based upon annual reporting assists in the City's review of the annual Construction the process of ensuring Sales and Use Tax Monitoring Report, that the City would receive revenues for calendar years 2011 through no less than $8.1M in 2021 have totaled $5,405,338. construction sales and tax revenue by December 31, 2025. $2.417M fund to assure City costs Funding of associated with the Payment of $2.417M on August 25, 2011 to Operating project do not establish fund. There were expenditures Yes, complies -Fund 5(b)(iii) Deficit / exceed revenues from this fund during the reporting period activity and balances in FY Expansion Cost resulting from FY 2021-2022. 2021-2022 reported in Mitigation construction and Attachment E. operation of the project. Utilities confirmed that billing accounts 5% tax on all were created in past fiscal years when new 5(b)(iv) Payment of electricity, gas and meters were set for new construction, Yes, complies. Utility Users Tax water charges on including NSH, NSH Garage, LPCH, and BMI, new construction and the Utility Users Tax is paid through the normal billing process for each site. Payment of PAUSD $342,617 fee paid for LPCH and NSH Yes, complies - SUMC 5(b)(v) School Fees fees for net new expansion in 2012. $7,051 fee paid for NSH made payments to PAUSD square footage and NSH Garage expansion in July 2013. for all net new square 2 SUMC Development Agreement Compliance: FY 2021-2022 Item 6: Staff Report Pg. 27 Packet Pg. 74 of 853 SUMC Development Agreement, Section 5 - SUMC Parties' Item 6 Attachment C SUMC Development PAgreement Section 5 Compliance 22 Table $16,119 fee paid for Hoover Medical Office footage for which school Building expansion in May 2014. $461.16 fee fees apply at the time of paid to account for incremental square past permit receipt. Staff footage for the New Stanford Hospital will reconfirm SUMC Garage. Additional PAUSD school fees were payment of PAUSD school paid in FY 2021-2022 for the Nursing Pod fees for the Nursing Pod Extension project due to OSHPD requiring Extension project when these payments prior to issuance of a the City issues this permit construction shoring permit. in a future fiscal year. Traffic Mitigation and Reduced Vehicle Trips DA Description Summary Activity Complies? Section $3,699,000 payment First of three $1.23M payments made on Yes, complies - SUMC for traffic mitigation, August 19, 2011. Second payment of made all required Menlo Park infrastructure,payments $1.23M made on December 5, 2012. Third to Menlo Park, 5(c)(ii) Traffic and final payment of $1.23M made on Mitigation sustainable December 14, 2017, which was within 30 including the last and final neighborhoods, days from issuance of the first Hospital payment in FY 2017-2018. affordable housing Occupancy Permit (LPCH). $200K for roadway East Palo Alto and signal $200K payment made on 5(c)(iii) Voluntary improvements on August 19, 2011. Yes, complies. Mitigation University Ave. T SUMC Development Agreement Compliance: FY 2021-2022 Item 6: Staff Report Pg. 28 Packet Pg. 75 of 853 SUMC Development Agreement, Section 5 - SUMC Parties' Item 6 Attachment C SUMC Development P 2 Agreement Section 5 Compliance Table $250K payment made to AC Transit on January 5, 2018. SUMC is also invoiced by AC Transit for payments throughout the year that total over the $50K per year discussed in the U -line capital SUMC Development Agreement. Payments improvements, low to AC Transit are required for the life of the 5(c)(iv) Contributions load factor ratios, project. Yes, complies. to AC Transit parking spaces at Since May 2014 and until April 30, 2018, Ardenwood Park & SUMC Parties leased a park -and -ride facility Ride on Kaiser Drive near the Ardenwood Park & Ride. SUMC used an interim temporary facility through FY 2019-2020. In FY 2020- 2021 and FY 2021-2022, SUMC leased 100 parking spaces in Newark (35263 Fircrest Drive). $11.2K payment made to the City in FY $11,200 payment 2017-2018 within 30 days from issuance of Opticom for Opticom traffic the first Hospital Occupancy Permit (LPCH). 5(c)(v) Payments control system at 7 As the City has upgraded systems, the City Yes, complies. intersections and SUMC agreed through a letter exchange that the payment could be used for the new coordinated prioritization signaling at City - maintained traffic signals. 41 SUMC Development Agreement Compliance: FY 2021-2022 Item 6: Staff Report Pg. 29 Packet Pg. 76 of 853 SUMC Development Agreement, Section 5 - SUMC Parties' Item 6 Attachment C SUMC Development P 2 Agreement Section 5 Compliance Table SUMC purchase of Caltrain Go passes for all Go Passes have been purchased per the 5(c)(vi) existing and new Development Agreement since January 1, Yes, complies. Passes hospital employees 2012, including for FY 2021-2022. working >20hrs/week Since 2011, SUMC purchased additional Purchase of shuttle buses for the Marguerite Shuttle 5(c)(vii) Marguerite additional shuttles service which now includes five renewable Yes, complies. Shuttle Service to meet demand diesel-electric hybrid buses and 23 all - electric buses. Additional all -electric buses also came online in FY 2017-2018. Shuttles were running in FY 2021-2022. SUMC SUMC hires Transportation coordinator to TDM Coordinator was hired in March 2012. 5(c)(viii) Demand promote alternative This position has since been elevated to a Yes, complies. Management transportation TDM Program Manager position and the (TDM) position remains filled. Coordinator options The SUMC parties found that the alternative SUMC timely submitted Yearly report mode share milestone target of 33% their annual Alternative 5(c)(ix) Monitoring of regarding outlined in SUMC DA Section 5(c)(ix) was not Mode Share report for FY TDM Programs alternative transit met for 2022, nor was it above the previous 2021-2022. Monitoring in mode use 2018 milestone target of 30%; the FY 2021-2022 identified 51 SUMC Development Agreement Compliance: FY 2021-2022 Item 6: Staff Report Pg. 30 Packet Pg. 77 of 853 SUMC Development Agreement, Section 5 - SUMC Parties' Item 6 Attachment C SUMC Development P '2 Agreement Section 5 Compliance Table alternative mode share rate for SUMC that SUMC missed the decreased to 19.9% in FY 2021-2022 alternative mode share between use of alternative modes versus target of 33% for two driving alone, largely due to ongoing consecutive years. pandemic conditions. As received by the City on June 14, 2022, the SUMC Parties asserted a permitted delay under the Force Majeure provision of the Agreement. The SUMC Parties and City staff are actively engaged in developing an amendment to the Agreement in order to resolve this issue. Linkages DA Description Summary Activity Complies? Section First and only payment of $2.25M on August $2.25M payment to 25, 2011 to establish City fund. City improve pedestrian constructed temporary improvements prior Yes, complies -Fund 5(d)(i) Intermodal linkages to PA to the issuance of the first Hospital activity and balances in FY Transit Fund Intermodal Transit Occupancy Permit (LPCH) to serve the 2021-2022 reported in Center linkage goal and functional requirements. Attachment E. 5(d)(ii) Quarry Road $400K payment to First and only payment of $400K on August Yes, complies - As of Fund improve pedestrian 25, 2011 to establish City fund. City FY2019, there is no longer 61 SUMC Development Agreement Compliance: FY 2021-2022 Item 6: Staff Report Pg. 31 Packet Pg. 78 of 853 SUMC Development Agreement, Section 5 - SUMC Parties' Item 6 Attachment C SUMC Development PAgreement Section 5 Compliance 2 Table linkages along constructed the improvements prior to the a fund balance in this Quarry Road issuance of the first Hospital Occupancy category. Permit (LPCH) to serve the linkage goal and functional requirements. SUMC budgets up to SUMC constructed the Stanford Barn Stanford Barn $700K for Connection prior to the issuance of the first 5(d)(iii) Connection connections in the Hospital Occupancy Permit (LPCH) to serve Yes, complies. vicinity of barn the linkage goal and facilities are fully operational. Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing DA Description Summary Activity Complies? Section First of three $7,733,333 payments made on August 19, 2011. Second payment of $7,733,333 made on December 5, 2012. The Infrastructure, third and final payment of $7,733,333 made Sustainable on December 12, 2017, which was within 30 Yes, complies -Fund Neighborhoods $23.2M payment for days from issuance of the first Hospital activity and balances in FY 5(e) and these uses Occupancy Permit (LPCH). There were 2021-2022 reported in Communities, expenditures from this fund during the Attachment E. and Affordable reporting period FY 2021-2022. Housing Fund Of the funds in the Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund, $1,720,488 was to be used for support of 7 SUMC Development Agreement Compliance: FY 2021-2022 Item 6: Staff Report Pg. 32 1 Packet Pg. 79 of 853 SUMC Development Agreement, Section 5 - SUMC Parties' Item 6 Attachment C SUMC Development P 2 Agreement Section 5 Compliance Table affordable housing. SUMC funding supported the Stevenson House project in FY 2013 and the remaining affordable housing funds were fully exhausted in FY 2020 to support the Wilton Court Housing Project. Climate Change DA Description Summary Activity Complies? Section First of three $4M payments made on Climate Change $12M payment for August 19, 2011. Second payment of $4M Yes, complies -Fund 5(f) — Sustainability climate change- made on December 5, 2012. The third and activity and balances in FY Programs related projects and final payment of $4M made on December 2021-2022 reported in Benefit Fund programs 12, 2017, which was within 30 days from Attachment E. issuance of the first Hospital Occupancy Permit (LPCH). SUMC Development Agreement Compliance: FY 2021-2022 Item 6: Staff Report Pg. 33 Packet Pg. 80 of 853 Item 6 Attachment D SUMC Construction Activities and Square Footage Stanford University Medical Center (SUMC) Summary FY 2021-2022 Construction Activities and Square Footage Summary SUMC did not add any net new square footage in FY 2021-2022 but continued to remove occupancy for portions of the 1959 Stone Complex by 18,472 square feet. This suspension of use provides a temporary option to prevent exceedance of the total occupied square footage allowed in their entitlements. While not triggered in the FY 2021-2022 monitoring period, there are provisions in the SUMC entitlements to have a three-year period (or up to five years with Planning Director approval) whereby SUMC is allowed to exceed the total occupied existing and net new building square footage. This provision is important for ensuring that SUMC can maintain existing operations while also efficiently transfer new uses, equipment, and operations over to the new facilities. Overall, at the Main SUMC site, SUMC is entitled to construct and use up to 3,534,090 total square feet of hospital/clinic and research buildings, as well as associated facilities and infrastructure improvements, including up to 1,265,272 net new square feet. Overall, at the Hoover Pavilion site, SUMC is entitled to construct and use up to 153,343 total square feet of medical office/clinic buildings, as well as associated facilities, including up to 46,169 net new square feet of medical/office buildings. A total of approximately 133,731 square feet of floor area was previously demolished at the Stanford Hospital, Lucile Packard Children's Hospital (LPCH), and Hoover Pavilion sites. Net new floor area across the SUMC sites reported in previous Fiscal Years include the following: • The new Neuroscience Health Center at the Hoover Pavilion site represents 91,605 new square feet. • Lucile Packard Children's Hospital (LPCH) Expansion added 446,088 new square feet. • The New Stanford Hospital (NSH) garage added 29,744 new square feet. The NSH project added 689,522 new square feet. These two new buildings therefore represent 719,266 new square feet for NSH. • The School of Medicine (SOM) added 196,921 square feet through completion of the Biomedical Innovation Building (BMI). Item 6: Staff Report Pg. 34 Packet Pg. 81 of 853 Item 6 Attachment E Atta Supplement to the Annual Report CITY OF PALO ALTO Fiscal Year 2021-2022 Annual Report Supplement Prepared by the City of Palo Alto March 2, 2023 Background and Purpose On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes, a conditional use permit, annexation and design applications for the Stanford University Medical Center Facilities Renewal and Replacement Project (the "Projects"). The Projects include the construction of a new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children's Hospital, construction of new School of Medicine buildings, renovation of the existing Hoover Pavilion, construction of a new medical office building and parking garage at Hoover Pavilion, roadway improvements along Welch Road and Durand Way, and SUMC design guidelines. A Development Agreement (the "Agreement") vesting these approvals was entered into between the SUMC Parties and the City and was effective on June 6, 2011 and continues for thirty (30) years from the effective date. The Agreement requires an annual report, prepared by SUMC that outlines the activities of the preceding year and the efforts to fulfill the obligations of the Agreement. Per the requirements of sections 12(a) and 12(c) of the Agreement, The City of Palo Alto is to prepare a supplement to the annual report that contains an accounting of the funds described in the Section 5 of the Agreement ("SUMC Parties' Promises") including the fund balances and expenditures and the purposes for which the expenditures were used. Public Benefit Fund Accounting This SUMC Annual Report Supplement covers the period during the eleventh year of the Agreement: June 6, 2021 through June 6, 2022. Accounting for the funds outlined extends through the end of the City's FY 2022. The specific funding accounts reported in this SUMC Annual Report Supplement are consistent with Section 5 of the Agreement. These funds have been assigned a unique cost center number for Item 6: Staff Report Pg. 35 Packet Pg. 82 of 853 Item 6 Attachment E Supplement to the Annual Report accounting purposes. This SUMC Annual Report Supplement also contains the investment earnings and the earnings allocation to the various cost centers. In summary, the SUMC Parties have paid approximately $44.3 million in public benefit fees to the City since June 6, 2011 through the FY 2021-2022 reporting period. There were no required new payments from the SUMC Parties during the FY 2021-2022 reporting period. The first payment of $20,800,333 on August 11, 2011 was for the following funds: • Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)); • Fund for Expansion Cost Mitigation (Section 5(b)(iii)); • Fund for Pedestrian and Bicycle Connections from Intermodal Transit Center to El Camino Real/Quarry Road Intersection (Section 5(d)(i)); • Fund for Public Right of Way Improvements to Enhance Pedestrian and Bicycle Connections on Quarry Road (Section 5(d)(ii)); • Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e)), and • Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)). The second payment of $11,733,333 payment on December 5, 2012 was for the following funds: • Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e)) and • Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)). The third payment and final payment of $11,744,533 on December 12, 2017 was for the following funds: Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e)); • Fund for Climate Change -Sustainable Programs Benefit (Section 5(f)(i)); and • Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)). Public Benefit Fund Expenditures Expenditures and other activity occurred in the following funds in Fiscal Year 2021-2022 through June 30, 2022: $500,000 under "Expansion Cost Mitigation" for Rail Grade Separation (PL -17001), $775,000 under "Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing" for $750,000 replacement of Fire Station Four (PE -18004) and $25,000 University Avenue Streetscape Update (PE -21004), and $1,250,000 under "Community Health and Safety" for $1.2 million Charleston/Arastradero Corridor Project (PE -13011) and $50,000 to the General Fund allocated to local non -profits through the Human Services Resource Allocation Process (HSRAP). Item 6: Staff Report Pg. 36 Packet Pg. 83 of 853 Item 6 Attachment E Supplement to the Annual Report In FY 2021, CMR# 11877 was approved by the City Council to expense $500,000 for PF-01003 (Building System Improvements) from the Community Health and Safety Funds. In error, this was processed to expense from the Cost Expansion Finds. As part of the FY 2022 year-end clean-up, an adjustment was made to correct this. The Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund contained an original contribution of $1,720,488 for support of affordable housing. SUMC funding supported the Stevenson House project in FY 2013 and the remaining affordable housing funds were fully exhausted in FY 2020 to support the Wilton Court Housing Project. Item 6: Staff Report Pg. 37 Packet Pg. 84 of 853 Item 6 Attachment E Supplement to the Annual Report City of Palo Alto AUDRED BALANCES Stanford Medical Center Development Agreement (Fund 260) Fiscal Year Ended June30, 2022 Expansion Cost Intermodal Transit Quarry Road Infrastructure & Climate Change Community Total FY 2022 FY 2022 Mitigation Improvements Afford Housing &Susta1nabiIity Health&Safety Actuals Budget cost centers 26000060 60260010 60260020 60260030 60260040 80260010 Beginning Balances, 7/1/2021 1,849.832 1,261,292 - 9,541,087 2,905,643 2,913,283 18,571,136 Adustment: To correct transfer from Expanstion Cost Mitigation to Community Health & Safety CM R#11877 500,000 (500,004] Revenues: Revenues From Stanford - - - - - - - Transfer from Housing Residential (repayment of 2014 advances for Maybell) - - Investment Earnings/ Unrealized gain (loss] (1,124,553) (1,124,563) 370,300 Allocate to categories 1,124,553 1,124,5 63 Allocated Investment Earnings (129,642) (88,395) - (521,353) (203,636) (81,525) (1,124,563) - Total Revenues 370,358 (88,395) - (621,363) (203,636) (561,526) (1,124,563] 370,300 Expenditures: Temp Salaries/Benefits - Contract Services - Supplies Expenses - Other expenses - - TransfertoCapitalProjects (500,000) - (775,000) - (1,250,044) (2,525,444] (2,525,444) Total Expenditures (500,000) - - (775,000) - (1,250,000) (2,525,066) (2,525,000) FY 2022 Revenues less Exp (129,642) (88,395) - (1,395,353) (203,636) (1,831,525) (3,649,563) (2,154,700) Fund Balance Available as of 6/30/2022 1,720,190 1,172,897 - 8,244,724 2,702,007 1,081,755 14,921,573 Item 6: Staff Report Pg. 38 1 Packet Pg. 85 of 853 Item 7 Item 7 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: Police ALTO Meeting Date: April 17, 2023 Report #:2303-1156 TITLE Approval of Amendment #3 with Professional Account Management LLC, dba Duncan Solutions Contract (C17164727) in the Amount of $80,000 and to Extend the Contract Term to April 28, 2024 for Parking Citation Management; CEQA Status — Not a Project. :ZX��]�iI►IhhU7_��[�Ll Staff recommends that Council approve and authorize the City Manager or designee to execute Amendment #3 to Contract Number C17164727 with Professional Account Management/dba Duncan Solutions to increase compensation by $80,000, for a new total not -to -exceed amount of $800,000, and to extend the contract term to April 28, 2024. EXECUTIVE SUMMARY The Office of Transportation and the Police Department have separate contracts with Duncan Solutions to respectively administer the parking permit program and to facilitate parking citation processing and collection. This attached amendment with Duncan Solutions extends the term for the Police Department contract to align with the Office of Transportation, in preparation for the next competitive solicitation for comprehensive parking permit and citation management services. BACKGROUND Parking enforcement throughout the city is divided between the two departments. The Police Department is primarily responsible for timed parking enforcement in commercial zones and enforcing the state vehicle code and city municipal code throughout the city including most Stanford property in City jurisdiction. The Office of Transportation is primarily responsible for enforcing the municipal code as it relates to the Residential Parking Program. Police Department employees provide physical enforcement for their department while Office of Transportation contracts the physical parking enforcement service to a vendor. The Police Department does not issue permits while Office of Transportation manages a parking permit Item 7: Staff Report Pg. 1 Packet Pg. 86 of 853 Item 7 Item 7 Staff Report program. Both departments use a service provider to process and collect fees and fines for the issued citations, in conjunction with the Administrative Services Department. ANALYSIS The City of Palo Alto contracted with Duncan Solutions to facilitate parking citation processing and collections in 2016 for the Police Department. The original contract value was not to exceed $653,0001. The contract was extended and expires April 30, 20232. Office of Transportation maintains a separate residential permit parking program also using the same provider for citation processing, contract number C19171363, with a not to exceed amount $627,000 and is due to expire March 31, 20243. Before this extension, both department contracts total $1,280,000. The attached contract extension would align the end dates for the two contracts. By extending the Police Department contract to align closer to the expiration of Office of Transportation contract, staff would have sufficient time to further explore options for a consolidated and more comprehensive parking strategy between the two departments, if feasible. This would allow the departments to enhance coordination on services offered to the community, parking enforcement strategies, and to determine whether one service provider can meet the operational needs across programs. FISCAL/RESOURCE IMPACT Apart from the total not -to -exceed amount, updated to accommodate the extension, and the contract ending date, the terms and conditions of the original contract remain unchanged, including the original costs for services. The FY2023 Adopted Police Department Operating Budget has sufficient funding for this contract; no additional budgetary action required. Funding for the term that ends in FY2024 will be subject to Council's adoption of that budget during the normal budget cycle; no additional funding requirement is expected. STAKEHOLDER ENGAGEMENT This contract was reviewed and coordinated with internal departments including legal, procurement, and financial functions to ensure alignment with City policies and procedures. 1 City Council, December 5, 2016, Agenda Item #4, SR #7179 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- c m rs/yea r-archive/2016/i d-7179. pdf 2 City Council, May 23, 2022, Agenda Item #10, SR #14437 https://portal.laserfiche.com/Portal/PdfViewer.aspx?file=https%3A%2F%2Fportal.laserfiche.com%2FPortal%2FEle ctronicFile.aspx%3Fdocid%3D59502%26repo%3Dr- 704298fc%26pdfView%3 Dtrue#%5 B%7 B%22n u m%22%3A3%2C%22gen%22%3A0%7D%2C%7 B%22n a m e%22%3A% 22XYZ%22%7D%2Cnull%2Cnull%2Cnull%5D 3 City Council, June 24, 2019, Agenda Item #5, SR 10241 #14437 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- c m rs/yea r -a rc h ive/2019/i d-10241. pdf Item 7: Staff Report Pg. 2 Packet Pg. 87 of 853 Item 7 Item 7 Staff Report ENVIRONMENTAL REVIEW Adoption of this amendment is not a project under CEQA. ATTACHMENTS Attachment A: City of Palo Alto Contract #C17164727 Amendment No APPROVED BY: Andrew Binder, Police Chief Item 7: Staff Report Pg. 3 Packet Pg. 88 of 853 DocuSign Envelope ID: 593164D6-6E2F-4C63-BB98-879033C28451 Item 7 Attachment A - Professional Account Management LLC, dba AMENDMENT NO. THREE TO CONTRACT NO. C171647J Duncan Solutions BETWEEN THE CITY OF PALO ALTO AND Contract; C17164727 PROFESSIONAL ACCOUNT MANAGEMENT, LLC Amendment No. 3 This Amendment No. Three (this "Amendment") to Contract No. C17164727 (the "Contract") entered into as of April XX, 2023 by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("CITY"), and PROFESSIONAL ACCOUNT MANAGEMENT, LLC, a Wisconsin limited liability company, located at 633 W. Wisconsin Avenue, Suite 1600, Milwaukee, WI 53203 ("CONSULTANT").CITY and CONSULTANT are referred to collectively as the "Parties" in this Amendment. RECITALS A. The Contract was entered into by and between the Parties hereto for the provision of parking citation processing and collection services, as detailed therein. B. The Parties now wish to amend the Contract in order to increase compensation by Eighty Thousand Dollars ($80,000) from Seven Hundred Twenty Thousand Dollars ($720,000) to a new total not -to -exceed amount of Eight Hundred Thousand Dollars ($800,000) with no increased in rates; to extend the term for one additional year, from April 29, 2023 through April 28, 2024. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the Parties agree: SECTION 1. Definitions. The following definitions shall apply to this Amendment: a. Contract. The term "Contract" shall mean Contract No. C17164727 between CONSULTANT and CITY, dated December 5, 2016, as amended by: Amendment No.1, dated October 21, 2021 Amendment No.2, dated April 29, 2022 b. Other Terms. Capitalized terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Contract. SECTION 2. Section 2, TERM, of the Contract is hereby amended to read as follows: "The term of this Agreement shall be from the date of its full execution through April 28, 2024, unless terminated earlier pursuant to Section 19 of this Agreement." SECTION 3. Section 4 "COMPENSATION FOR ORIGINAL TERM" of the Contract is hereby amended to read as follows: Vers.: Aug. 5, 2019 Page 1 of 4 Item 7: Staff Report Pg. 4 Packet Pg. 89 of 853 DocuSign Envelope ID: 593164D6-6E2F-4C63-BB98-879033C28451 Item 7 Attachment A - Professional Account Management LLC, dba "The compensation to be paid to CONSULTANT for performance of Duncan Solutions described in Exhibit "A" ("Basic Services"), and reimbursable expen Contract;C17164727 to exceed amount of Eight Hundred Thousand Dollars ($800,000). CO Amu, -%u I Z4 to complete all Basic Services, including reimbursable expenses, within this amount with no changes to Exhibit C-1, Schedule of Rates." SECTION 4. Legal Effect. Except as modified by this Amendment, all other provisions of the Contract, including any exhibits thereto, shall remain in full force and effect. SECTION 5. Incorporation of Recitals. The recitals set forth above are terms of this Amendment and are fully incorporated herein by this reference. (SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.) Vers.: Aug. 5, 2019 Page 2 of 4 Item 7: Staff Report Pg. 5 Packet Pg. 90 of 853 DocuSign Envelope ID: 593164D6-6E2F-4C63-BB98-879033C28451 SIGNATURES OF THE PARTIES Item 7 Attachment A - Professional Account Management LLC, dba Duncan Solutions Contract; C17164727 Amendment No. 3 IN WITNESS WHEREOF, the Parties have by their duly authorized representatives executed this Amendment effective as of the date first above written. CITY OF PALO ALTO City Manager: APPROVED AS TO FORM: City Attorney or designee Attachments: Exhibit "C-1" entitled "Schedule of Rates" PROFESSIONAL ACCOUNT MANAGEMENT, LLC. DocuSigned by: y:flwt wwt Lu 49C304C92D394A6.._ Tim wendler Name: Title: President and CEO Vers.: Aug. 5, 2019 Page 3 of 4 Item 7: Staff Report Pg. 6 Packet Pg. 91 of 853 DocuSign Envelope ID: 593164D6-6E2F-4C63-BB98-879033C28451 Item 7 Attachment A - Professional Account Management LLC, dba Duncan Solutions EXHIBIT "C-1" SCHEDULE OF RATES 2023-2024 Contract; C17164727 Amendment No. 3 1. Citation Processing - per citation entered into the system Year Seven $1.37 2. Notices Letter or Large Postcard Format Year Seven $0.68 3. Internet Payments - Client's Processor Year Seven $1.07 4. Obtain California Registered Owner Information Included in processing cost Obtain Out -of -State Registration Information $0.98 to $4.50 5. Collections Services Comprehensive Collection Services 35% Special Note: DMV liens are currently used as a collections tool and are included as part of a comprehensive collections program we reimburse the City $3.00 for every registration hold placed. It11I?2 [.* 6. Manual Citation Data Entry/Imaging UflTEI �1 ci- $0.25 7. Phone Payments - Client's Processor Year Seven $1.07 Vers.: Aug. 5, 2019 Page 4 of 4 Item 7: Staff Report Pg. 7 Packet Pg. 92 of 853 Item 8 Item 8 Staff Report CITY OF PALO ALTO City Council Staff Report From: City Manager Report Type: CONSENT CALENDAR Lead Department: Administrative Services Meeting Date: April 17, 2023 Report #:2302-1018 TITLE Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21-0042A1) RECOMMENDATION Staff recommends that the City Council adopt a resolution to oppose the Taxpayer Projection and Government Accountability Act (Initiative 21-0042A1) (Attachment A) EXECUTIVE SUMMARY The Taxpayer Protection and Government Accountability Act would amend the California Constitution with provisions that limit voters' authority and input, adopt new and stricter rules for raising taxes and fees, and may make it more difficult to impose fines and penalties for violation of state and local laws. Staff recommends that the City Council adopt a resolution supporting opposition for this initiative. BACKGROUND The City's 2023 Federal and State Legislative Guidelines' reflect the City's priorities and guides staff and the City's legislative advocates on issues that are important to the City Council. Protecting local government revenue sources is one of the Foundational Principles of the guidelines and represents the core of the City's policy agenda. The Taxpayer and Government Accountability Act (Initiative 21-0042A1) was filed with the California Attorney General's Office (AGO) on November 30, 2021. On May 12, 2022, the initiative sponsors announced their intention to forego the November 2022 election and instead target the November 2024 election. On February 1, 2023, the initiative qualified for the 1 https://www.cityofpaloalto.org/files/assets/public/city-manager/legislation/2023-legislative-guidelines-final.pdf Item 8: Staff Report Pg. 1 Packet Pg. 93 of 853 Item 8 Item 8 Staff Report November 5, 2024 election. The full text of the initiative can be found on the California Office of the Attorney General websitez. The authority for local government to raise revenue through fees and taxes is restricted by State law, including the voter -approved provisions of Proposition 13 of 1978, Proposition 218 of 1996, and Proposition 26 of 2010. The Taxpayer Protection and Government Accountability Act would amend the California Constitution to further restrict the ability of the state, counties, other local agencies, and the electorate to approve or collect taxes, fees, and other revenues. The initiative also has a retroactive effect as any tax or fee adopted after January 1, 2022 that was not adopted in compliance with the initiative is void within 12 months of the initiative's effective date unless reenacted to comply. On January 19, 2022, the Legislative Analyst's Office (LAO)3 summarized the current requirements to approve taxes and fees compared to the proposed amendments to the State Constitution and outlined the amendments to the Constitution, should the initiative pass in the November 2024 election. The table below summarizes the LAO's analysis of the components of the ballot initiative: 1. Expands the definition of tax Expands definition of tax and may result in the reclassification of several fees and charges that are used to support specific service delivery as taxes subject to voter approval. 2. Requires voter approval for state taxes Require that new or increased taxes must be passed by two-thirds note in each legislative chamber and approved by simple majority of voters. Applies to any state tax approved between January 1, 2022 and the effective date of the measure, unless the tax fulfills certain requirements. 3. Requirements for approving local taxes Require that new or increased taxes must be passed by two-thirds vote of the electorate. Prohibits local advisory measures where local voters express a preference for how local general tax dollars should be spent. 4. Allowable uses and duration of state and Requires that state and local tax measures local tax revenues must be specified identify the type and amount (or rate) of the 2California Office of Attorney General, Ballot Initiatives, Active Measures, #21-0041A1, Full Text of Amended Ballot Initiative: https://oag.ca.gov/system/files/initiatives/pdfs/21-0042A1%20%28Taxes%29.pdf 3 California Office of Attorney General, Ballot Initiatives, Active Measures, #21-0041A1, Legislative Analyst's Office letter dated January 19, 2022: https://oag.ca.gov/system/files/initiatives/pdfs/fiscal-impact-estimate- report%2821-0042A1%29. pdf Item 8: Staff Report Pg. 2 Packet Pg. 94 of 853 Item 8 Item 8 Staff Report tax and duration of the tax; must state that the revenue can be used for general purposes. 5. Requires the legislature and local Requires that fees be imposed by majority government bodies to impose state and vote of the local governing body; restricts the local fees ability of local governments to delegate fee changes to administrative entities. Any fee approved between January 1, 2022 and the effective date of the measure, if passed by voters, unless the tax fulfills requirements of the measure. 6. Some new state and local fees cannot Except for licensing and other regulatory fees, exceed actual costs fees and charges may not exceed "the minimum amount necessary." Fees and charges paid for use of government property and the amount paid to purchase or rent property must be "reasonable." These fees and charges are currently allowed to be market based. ANALYSIS The initiative would significantly restrict the flexibility of state and local governments to raise revenue for services and projects, and potentially jeopardizes billions in annual revenue across California. The City's major tax revenues are property tax, sales tax, utility users tax, documentary transfer tax, and transient occupancy tax. Tax revenues are used to fund a variety of services such as public safety, emergency response, library, and repair and maintenance of streets and roads. Most proposed taxes require a two-thirds vote of Council before being presented to the voters. Special taxes require two-thirds vote by the electorate while general taxes require a majority vote of the electorate. The initiative expands the definition of a tax that may result in the reclassification of a fees and charges that are used to support specific service delivery as taxes subject to voter approval. In addition to these taxes, a variety of fees and other charges are levied for a variety of services provided by the City. Cities, counties, and special districts must regularly (e.g., annually) adopt increases to fee rates and charges and revise rate schedules to adjust for changes in service delivery costs ("actual cost") or level of service. "Actual cost" is defined as the "minimum amount necessary" to provide the service, however the initiative adds provisions that all fees must be "reasonable to the payor" and does not define what "reasonable" is. The initiative also increases the burden to show that a levy, charge or exaction is not a tax from a preponderance of the evidence to a clear and convincing standard. Item 8: Staff Report Pg. 3 Packet Pg. 95 of 853 Item 8 Item 8 Staff Report Finally, the initiative's retroactive application is problematic as hundreds of local measures were approved by the voters in 2022 which may not comply with the initiative's requirements. The City's own Business Tax (Measure K) and Measure to Affirm the Natural Gas Utility Transfer (Measure L) were approved by voters in November 2022. While we believe the two measures comply with the requirements of the Initiative, they, like many other local tax measures across the State, are subject to additional, unexpected scrutiny despite voter -approval. FISCAL/RESOURCE IMPACT Staff recommends the Council adopt an oppose position on this ballot initiative, as it restricts the City's local control and diminish the ability of voters and taxpayers to weigh in on local spending decisions. The measure would significantly restrict the City's flexibility to recover cost for specific services and raise revenue for City services, projects and identified unfunded needs. The City has been in close coordination with the League of California Cities as this process develops. STAKEHOLDER ENGAGEMENT This report transmits a proposed resolution for Council adoption opposing the Taxpayer Protection and Government Accountability Act (#21-0042A1). This ballot initiative is supported by: • California Business Roundtable • California National Association for Industrial and Office Parks • Howard Jarvis Taxpayers Association This ballot initiative is opposed by: • League of California Cities • California State Association of Counties • California Special Districts Association • California Contract Cities Association ENVIRONMENTAL REVIEW This report is not a project under California Environmental Quality Act (CEQA) as defined in CEQA Guidelines, section 15378, because it has no potential for resulting in either a direct or reasonably foreseeable indirect physical change in the environment. ATTACHMENTS Attachment A: Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21-0042A1) Attachment B: Fiscal and Program Effects of Initiative 21-0042A1 on Local Governments APPROVED BY: Kiely Nose, Assistant City Manager Item 8: Staff Report Pg. 4 Packet Pg. 96 of 853 Item 8 Item 8 Staff Report Item 8: Staff Report Pg. 5 Packet Pg. 97 of 853 *NOT YET APPROVED* RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO EX Item 8 Attachment A - Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21-0042A1) J OPPOSITION TO THE TAXPAYER PROTECTION AND GOVERNMENT ACCOUNTABILITY ACT (INIATIVE 21-0042A1) WHEREAS, the measure would amend the Constitution to further restrict the ability of the state, counties, other local agencies, and the electorate to approve or collect taxes, fees, and other revenues; and WHEREAS, the measure includes provisions that would make it more difficult for local voters to pass measures needed to fund local services and infrastructure, and would limit voter input by prohibiting local advisory measures where voters provide direction on how they want their local tax dollars spent; and WHEREAS, the measure puts billions of dollars across the State currently dedicated to local services at risk and could force cuts to fire and emergency response, law enforcement, public health, parks, libraries, affordable housing, services to support homeless residents, mental health services, and more; and WHEREAS, the measure would significantly restrict the City's flexibility to recover cost for specific services and raise revenue for City services, projects and identified unfunded needs; and NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALO ALTO, CALIFORNIA DOES HEREBY RESOLVES AS FOLLOWS: SECTION 1. Opposition to the Taxpayer Protection and Government Accountability Act (Initiative 21-0042A1); SECTION 2. The City of Palo Alto will join the No on Initiative 21-0042A1 coalition, a growing coalition of public safety, education, labor, local government, and infrastructure groups throughout the state. // // // // 1 0003_20230322_MV30 Item 8: Staff Report Pg. 6 Packet Pg. 98 of 853 Item 8 Attachment A - *NOT YET APPROVED* Resolution to Oppose the Taxpayer Protection and SECTION 3. This resolution shall take effect as of the date of its Government Accountability Act (Initiative 21-0042A1) INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Assistant City Attorney City Manager Director of Administrative Services 0003_20230322_MV30 2 Item 8: Staff Report Pg. 7 Packet Pg. 99 of 853 Item 8 Attachment B - Fiscal and CaIifovviiaCityFiviavace.1.om Program Effects of Initiative 21-0042A1 on Fiscal and Program Effects of Local Governments Initiative 21-0042A1 on Local Governments If Initiative 21-0042A1 is placed on the ballot and passed by voters, it will result in: • Over $20 billion of local government fee and charge revenues over 10 years placed at heightened legal peril. Related public service reductions across virtually every aspect of city, county, special district, and school services especially for drinking water, sewer sanitation, and public health and safety. • About $2 billion of revenues each year from fees and charges adopted after January 1, 2021 subject to legal peril.' • Over $2 billion dollars of annual revenues from dozens of tax measures approved by voters between January 1, 2022 and the effective date of the act2 subject to additional voter approval if not in compliance with the initiative. • Indeterminable legal and administrative burdens and costs on local government from new and more empowered legal challenges, and bureaucratic cost tracking requirements. • The delay and deterrence of municipal annexations. • Substantially higher legal and administrative cost of public infrastructure financing which will delay and deter new residential and commercial development. • Service and infrastructure declines including in fire and emergency response, law enforcement, public health, drinking water, sewer sanitation, parks, libraries, public schools, affordable housing, homelessness prevention and mental health services. 1. Local Government Taxes and Services Threatened With regard to taxes, Initiative 21-0042A1: • Prohibits advisory, non -binding measures as to use of tax proceeds on the same ballot. o Voters may be less informed and more likely to vote against measures. Eliminates the ability of special tax measures proposed by citizen initiative to be enacted by majority voter approval (Upland).3 o Because the case law regarding citizen initiative special taxes approved by majority vote (Upland) is so recent, it is unknown how common these sorts of measures might be in the future. This initiative would prohibit such measures after the effective date of the initiative. Any such measures adopted after January 1, 2022 through the effective date of the Act should it pass would be void a year after the effective date of the initiative. • Requires that tax measures include a specific duration of time that the tax will be imposed. This seems to require that all tax increases or extensions contain a sunset (end date). o This would require additional tax measures to extend previously approved taxes. • A city charter may not be amended to impose, extend, or increase a tax might interfere with the ability of cities that do not already have such authority in their charters to adopt Property Transfer Taxes. o There are no more than a few of these every few years, but it is a valuable tax for those that adopt it. 1 Assumes fee increases since January 1, 2022 would be subject to possible legal challenge if not adopted in compliance with the Initiative. 2 The effective date of the initiative would be sometime in December 2024, the date the California Secretary of State certifies the election results of the November 5, 2024 election. 3 Unlike the initiative 17-0050, this initiative does not eliminate that ability of cities and counties to adopt general taxes by majority voter approval. 2217 Isle Royale Lane • Davis, CA • 95616-6616 Phone: 530.758.3952 • Fax: 530.758.3952 Item 8: Staff Report Pg. 8 Packet Pg. 100 of 853 Item 8 Attachment B - Fiscal and Program Effects of Initiative 21-0042A1 on - 2 - rev J Local Governments • Requires that a tax measure adopted after January 1, 2022 and before the effective date of the initiative that was not adopted in accordance with the measure be readopted in compliance with the measure or will be void twelve months after the effective date of the initiative. If past election patterns and elections in 2022 are an indication, over 200 tax measures approving more than $2 billion annual revenues to support local public services would not be in compliance and would be subject to reenactment. Most will be taxes without a specific end date and special taxes (including parcel taxes). Because there is no regularly scheduled election within the 12 months following the effective date of the initiative, the measures would each require declaration of emergency and unanimous vote of the governing board to be placed on a special election ballot within a year for approval or the tax will be void after that date. I would expect most to succeed, but some will not, in particular citizen initiative majority vote special taxes which would have to meet a higher voter approval threshold to continue. • Requires voter approval to expand an existing tax to new territory (annexations). This would require additional tax measures and would deter annexations and land development in cities. o If a tax is "extended" to an annexed area without a vote after January 1, 2022, it will be void 12 months later until brought into compliance. Because there is no regularly scheduled election within the 12 months following the effective date of the initiative, such extensions would each require unanimous vote of the agency board to be placed on a special election ballot or would be void a year later. 1.a. Number of Measures and Value of Local Taxes at Risk4 Over a hundred local measures were approved in 2022 that likely do not comply with the provisions of Initiative 21-0042A1. Nearly $2 billion of annual revenues from these voter approved measures will cease a year after the effective date of the measure, reducing the local public services funded by these measures. We can expect a similar volume of measures in 2024 and a similar volume of non-compliance. So the combined total of annual local funding directly affected by Initiative 21-0042A1 due to its retroactivity provision is about $4 billion. Citizen Initiative Special Taxes in 2022. Special taxes placed on the ballot by citizen initiative and approved after January 1, 2022 by a majority but less than two-thirds of the voters are out of compliance with Initiative 21-0042A1. On June 7, 2022, there were three local special tax measures placed on the ballot by citizen initiative. Two failed to get majority voter approval. A one percent transactions and use tax (sales tax) for the John C. Fremont Healthcare District in Mariposa County received 69.6 percent approval, over the two thirds needed for any special tax under California Constitution Article XIIIC. So this measure was passed in compliance with Initiative 21- 0042A1. June 2022 Initiative Special Taxes - majority voter approval Estimated Agency Name County Tax/Fee Rate Annual Revenue Use Sunset YES% John C. Fremont Transactions Mariposa Measure N 1 cent $ 150,000 hospital 40yrs 69.6% PASS Healthcare District & Use Tax Transactions County of Kings Kings Measure F 1/2 cent $ 11,700,000 fire none 37.6% FAIL. & Use Tax Manhattan Beach Los Angeles Measure A School Parcel $1095/yr $ 12,000,000 schools 12yrs 31.2% FAIL. USD Tax On November 8, 2022, there were 14 local special taxes placed on the ballot by citizen initiative. Seven of these 4 Source: Compilation and summary of data from County elections offices. Calrforv.raCrtyFrv.ay.ce.cowt Item 8: Staff Report Pg. 9 Packet Pg. 101 of 853 Item 8 Attachment B - Fiscal and Program Effects of Initiative 21-0042A1 on - 3 - rev J Local Governments measures failed with less than majority voter approval. The other seven measures received majority, but less than two-thirds, voter approval. These measures passed under current law but are out of compliance with Initiative 21- 0042A1. Taken together these seven taxes will provide estimated annual revenues of from $900,000 to $1.4 billion in support of parks and recreation, zoo, library, affordable housing, transportation, homelessness prevention, and schools in these communities. November 2022 Initiative Special Taxes - majority voter approval Estimated Agency Name County Tax/Fee Rate Annual Revenue Use Sunset YES% Crockett Community Contra62.8% Costa Measure L Parcel Tax $50/parcel $ 60,000 parks/recr none PASS Services District Oakland Alameda Measure Y Parcel Tax $68/parcel $ 12,000,000 zoo 20yrs 62.5% PASS County of Mendocino Measure O Transactions 1/8 cent then 1/4 $ 4,000,000 library none 60.8% PASS & Use Tax cent in 2027 Los Angeles Los Angeles Measure ULA Property 4/o if>$5m, o5.5% $600mto $1.1 b affordable none 57 3% PASS Transfer Tax if>$10m housing County of Sacramento Measure A Transactions same 1/2 cent $ 212,512,500 transportati 40yrs 55.3% PASS & Use Tax San Francisco Proposition M Business $2500-$5000/ $ 20,000,000 housing 30yrs 54.5% PASS Operations Tax vacant resid unit schools, Santa Monica Los Angeles Measure GS Property $56/$1000 if $ 50,000,000 homelessne none 53.3% PASS Transfer Tax >$8m ss, afford. housing Total $900,000 to $1.4 billion Estimated Agency Name County Tax/Fee Rate Annual Revenue Use Sunset YES% County of Calaveras Measure A Transactions 1 cent $ 5,000,000 fire none 49.4% FAIL & Use Tax South San Francisco San Mateo Measure DD School Parcel $2.50/sf $ 55,900,000 schools none 47.2% FAIL (for Schools) Tax County of Fresno (for CSU ) Measure E Transactions 1/5 ct, $ 36,000,000 Calif State 20yrs 46.9% FAIL & Use Tax 1/ 40 ct (Reedley Univ Santa Cruz Santa Cruz Measure N Parcel Tax $6k/vacant SFU xxx vacant xxx 44.2% FAIL property County of Monterey Measure Q Parcel Tax $49/parcel $ 5,500,000 childcare lOyrs 41.1% FAIL San Francisco City San Measure O School Parcel $150/sfu $ 37,000,000 schools 10yrs 36.7% FAIL College Francisco Tax Morro Bay San Luis Measure B Parcel Tax $120+/parcel $ 680,000 harbor none 36.0% FAIL ----------------------------------- Obispo Inverness Public Marin Measure O Parcel Tax $0.20/sf, $ 276,000 fire none 27.0% FAIL Utility District $150/vacant Non -Specific Tax Durations in 2022 Voters approved 106 measures in June 2022 (10) and November 2022 (96) that do not provide a specific duration of time that the tax will be imposed (end date). Typically, the ballot titles for these measures state that the tax would be imposed "until ended by voters." Four of these measures also did not include any estimate of the annual revenues that the tax would generate, another violation of initiative 21-0042A1. Taken together, these approved local measures generate $561 million per year that will expire a year after the effective date of the initiative if Initiative 21-0042A1 passes. CatiforvtiaCityFivtavtce.cowt Item 8: Staff Report Pg. 10 Packet Pg. 102 of 853 Item 8 Attachment B - Fiscal and Program Effects of Initiative 21-0042A1 on — 4 — rev J Local Governments Measures in 2022 with Non -Specific Durations Annual Agency Name County Tax/Fee Rate Revenue j.Use Sunset YES% Oakland Alameda Measure T Business Tax various $ 20,900,000 none 71.4% PASS General Culver City Los Angeles Measure BL Business Tax various $ 10,000,000 none 60.5% PASS General H Segundo Los Angeles Measure BT Business Tax various $ 3,000,000 none 51.2% PASS General Pico Rivera Los Angeles Measure AB Business Tax various $ 5,800,000 none 75.5% PASS General Santa Ana Orange Measure W Business Tax various neutral none 64.8% PASS General Tracy San Joaquin Measure B Business Tax various $ 3,200,000 none 72.6% PASS General Burlingame San Mateo Measure X Business Tax various $ 2,500,000 none 75.1% PASS General Los Gatos Santa Clara Measure J Business Tax various $ 1,100,000 none 53.4% PASS General Santa Clara Santa Clara Measure H Business Tax $45/employee, $ 6,000,000 none 59.5% PASS General $15/rental unit Brisbane San Mateo Measure O Business Tax $2.50/mi/day $ 250,000 none 69.2% PASS lodging busn East Palo Alto San Mateo Measure L Business Tax 2.5% $ 1,480,000 none 69.9% PASS resid. rentals gmssRcpts County of Santa Cruz Unincorporated Measure C Busn Tax- 12.5cents/cup $ 700,000 none 68.2% PASS dis cu s South Lake Tahoe El Dorado Measure G Busn Tax 6% retail, $ 950,000 none 62.9% PASS Cannabis manufacturin McFarland Kern Measure O Busn Tax 8% of gross $ 1,800,000 none 63.5% PASS Cannabis recei is retail, Avenal Kings Measure C Busn Tax $25+/sfor $ 600,000 none 61.8% PASS Cannabis 15/o rrc is Baldwin Park Los Angeles Measure CB Busn Tax 4% $ 300,000 none 51.3% PASS Cannabis mssRc is Claremont Los Angeles Measure CT Busn Tax 4%-7% gr $ 500,000 none 61.1% PASS Cannabis rcpts, $1 - County of Los Angeles Unincorporated Measure C Busn Tax 4% gross $ 15,170,000 none 60.1% PASS Cannabis receipts retail, Cudahy Los Angeles Measure BA Busn Tax 15% $ 3,600,000 none 54.0% PASS Cannabis grossRcpts H Segundo Los Angeles Measure Y Busn Tax 10% $ 1,500,000 none 72.8% PASS Cannabis GrossRcpt, Hermosa Beach Los Angeles Measure T Busn Tax 10% $ 1,500,000 none 67.6% PASS Cannabis GrossRcpt, Lynwood Los Angeles Measure TR Busn Tax 5%to 10% $ 3,000,000 none 66.4% PASS Cannabis Santa Monica Los Angeles Measure HM Busn Tax 10% gross $ 5,000,000 none 66.4% PASS Cannabis Rcpts South El Monte Los Angeles Measure CM Busn Tax 0 6 % special $ 126,000 none 53.7% PASS " Cannabis excise taxon Monterey Monterey Measure J Busn Tax 6% grossRcpt $ 1,300,000 none 65.2% PASS Cannabis Pacific Grove Monterey Measure N Busn Tax 6% grossRcpt $ 300,000 none 70.8% PASS Cannabis Huntington Beach Orange Measure O Busn Tax 6% retail, 1% $ 600,000 none 54.7% PASS Cannabis other CaliforvtiaCityFivtavtce.cowt Item 8: Staff Report Pg. 11 Packet Pg. 103 of 853 Item 8 Attachment B - Fiscal and Program Effects of Initiative 21-0042A1 on — 5 — rev J Local Governments Measures in 2022 with Non -Specific Durations Annual Agency Name County Tax/Fee Rate Revenue Use Sunset YES% Laguna Woods Orange Measure T Busn Tax 4%-10% of $ 750,000 none 61.1% PASS Cannabis ross recei is Corona Riverside Measure G Busn Tax 9% of gross $5 000,000 none 61.6% PASS Cannabis recei is for Montclair San Bernardino Measure R Busn Tax 7% $3' 500,000 none 70.3% PASS Cannabis ro ssRc is County of San Diego Unincorporated Measure A Busn Tax 6% retail, 3% $ 5,600,000 none 57.4% PASS Cannabis distribution, Encinitas San Diego Measure L Busn Tax 4% to 7% of $ 1,400,000 none 65.1% PASS Cannabis gross receipts Healdsburg Sonoma Measure M Busn Tax 8% grossRcpt $ 500,000 none 72.7% PASS Cannabis Exeter Tulare Measure B Busn Tax 10% retail and ? none 66.5% PASS Cannabis other, $10/sf Tulare Tulare Measure Y Busn Tax 10% retail and ? none 65.2% PASS Cannabis other, $10/sf Woodland Yolo Measure K Busn Tax 10% ? none 66.2% PASS Cannabis mssRc is Redlands San Bernardino Measure J Busn Tax from $0.047/sf $ 530,000 none 53.5% PASS Distrib centers to $0.105/sf Arcadia Los Angeles Measure SW Busn Tax 5% n/a* none 63.9% PASS S orts Bettin mssRc is Albany Alameda Measure K ParcelTax $0.074+/sf $ 1,950,000 fire/EMS none 76.0% PASS Cameron Park Airport El Dorado Measure J ParoelTax by $600 to $ 117,900 airport/ none o PASS 78.2 /o District $900/parcel streets Highlands Village El Dorado MeasureL PareelTax $140+/parcel $ 10,920 streets none 86.3% PASS Lighting Benefit Zone Knolls Property El Dorado Measure P ParcelTax by $300+ to $8,400 streets none 75.5% PASS Owners CSD $600+/ arcel Sundance Trail Zone of El Dorado Measure C PareelTax $600+/yr $ 24,000 roads none 73.2% PASS Benefit South Pasadena Los Angeles Measure LL ParcelTax a4oc ? library none 86.2% PASS River Delta Fire District Sacramento Measure H PareelTax $90/yr $ 130,000 fire none 72.1% PASS Emeryville Alameda Measure O PropTransfTax $15/$1000 if $ 5,000,000 none 71.6% PASS $lnr$2m, San Mateo San Mateo Measure CC PropTransfTax by 1% to 1.5% $ 4,800,000 none 71.8% PASS if>$10m Alameda Alameda Measure F TOT by 4% to 14% $ 910,000 none 59.2% PASS Clovis Fresno Measure B TOT by 2% to 12% $ 500,000 none 69.7% PASS Kerman Fresno Measure G TOT 10% $ 40,000 none 62.3% PASS Trinidad Humboldt Measure P TOT by 4% to 12% $ 65,000 none 77.6% PASS Imperial Imperial Measure G TOT by 4% to 12% $ 600,000 none 56.2% PASS Arcadia Los Angeles Measure HT TOT by 2% to 12% $ 730,000 none 54.1% PASS Santa Monica Los Angeles Measure CS TOT by 1%, 3% $ 4,100,000 none 73.7% PASS home shares Notes ?= Ballot measure title did not include an estimate of annual revenues, also not in compliance with Initiative 21-0042A1. n/a*= Arcadia Measure SW passed but sports betting remains illegal after the failure of Propositions 26 and 27 on the November statewide ballot. Ca(iforvtiaCityFivtavtce.cotnn Item 8: Staff Report Pg. 12 Packet Pg. 104 of 853 Item 8 Attachment B - Fiscal and Program Effects of Initiative 21-0042A1 on — 6 — rev J Local Governments Measures in 2022 with Non -Specific Durations Annual Agency Name County Tax/Fee Rate Revenue Use Sunset YES% Anaheim Orange Measure J TOT online travel $ 3,000,000 none 59.2% PASS La Palma Orange Measure P TOT by 4% to 12% $ 200,000 none 71.1% PASS Colfax Placer Measure B TOT by 2%to10% $ 29,000 none 73.5% PASS Rocklin Placer Measure F TOT by 2% to 10% $ 300,000 none 59.8% PASS Roseville Placer Measure C TOT by 4% to 10% $ 3,000,000 none 73.0% PASS Big Bear Lake San Bernardino Measure P TOT by 2% to 10% $ 1,300,000 none 54.4% PASS Grand Terrace San Bernardino Measure M TOT new 10% $ 250,000 none 51.9% PASS Yucca Valley San Bernardino Measure K TOT by 5% to 12% $ 1,300,000 none 71.9% PASS Imperial Beach San Diego Measure R TOT by 4% to 14% $ 400,000 none 67.4% PASS ElPaso de Robles San Luis Obispo Measure F TOT by 1% to 11% $ 750,000 none 61.2% PASS Belmont San Mateo Measure K TOT by 2% to 14% $ 600,000 none 79.3% PASS Millbrae San Mateo Measure N TOT by 2% to 14% $ 1,500,000 none 75.8% PASS County of Humboldt Unincorporated Measure J TOT by 2% to 12% $ 3,080,000 none 63.3% PASS County of Placer - Measure A TOT by 2% to 10% $ 4,000,000 none 90.0% PASS North Tahoe TOT Area County of Santa Cruz Unincorporated Measure B TOT by 1% to 12% $ 2,300,000 none 69.2% PASS County of El Dorado - Measure S TOT 2/3 by 4% to 14% $ 2,500,000 none 81.8% PASS East Slo e Tahoe Chico Butte Measure H TrUT 1 cent $ 24,000,000 none 52.4% PASS Mendota Fresno Measure H TrUT 1.25 cent $ 493,498 none 57.2% PASS Blue Lake Humboldt Measure R TrUT 1 cent $ 30,000 none 55.4% PASS Rio Dell Humboldt Measure O TrUT 3/4cent $ 400,000 none 53.3% PASS County of Kern unincorporated areas Measure K TrUT 1 cent $ 54,000,000 none 50.8% PASS McFarland Kern Measure M TrUT 1 cent $ 579,662 none 62.2% PASS Tehachapi Kern Measure S TrUT 1 cent $ 4,000,000 none 57.2% PASS Avenal Kings Measure A TrUT 1 cent $ 500,000 none 72.5% PASS Susanville Lassen Measure P TrUT 1 cent $ 1,750,000 none 54.7% PASS Baldwin Park Los Angeles Measure BP TrUT 3/4 cent $ 6,000,000 none 58.1% PASS Malibu Los Angeles Measure MC TrUT 1/2 cent $ 3,000,000 none 52.6% PASS Monterey Park Los Angeles Measure MP TrUT 3/4 cent $ 6,000,000 none 58.5% PASS Torrance Los Angeles Measure SSI TrUT 1/2 cent $ 18,000,000 none 55.0% PASS Larkspur Marin Measure G TrUT 1/4 cent $ 700,000 none 59.4% PASS Sand City Monterey Measure L TrUT by 1/2cent to $ 1,400,000 none 68.7% PASS 1.5cents Hemet Riverside Measure H TrUT same 1 cent $ 15,000,000 none 58.0% PASS Elk Grove Sacramento Measure E TrUT 1 cent $ 21,000,000 none 54.1% PASS Galt Sacramento Measure Q TrUT 1 cent $ 3,600,000 none 52.4% PASS Colton San Bernardino Measure S TrUT 1 cent $ 9,500,000 none 66.8% PASS Ontario San Bernardino Measure Q TrUT 1 cent $ 95,000,000 none 53.2% PASS Solana Beach San Diego Measure S TrUT 1 cent $ 3,000,000 none 66.7% PASS Brisbane San Mateo Measure U TrUT 1/2 cent $ 2,000,000 none 63.9% PASS Goleta Santa Barbara Measure B TrUT 1 cent $ 10,600,000 none 64.7% PASS Solvang Santa Barbara Measure U TrUT 1 cent $ 1,600,000 none 63.1% PASS CaliforvtiaCityFivtavtce.cowt Item 8: Staff Report Pg. 13 Packet Pg. 105 of 853 -7 — Measures in 2022 with Non -Specific Durations Item 8 Attachment B - Fiscal and Program Effects of Initiative 21-0042A1 on rev J Local Governments Annual Agency Name County Tax/Fee Rate Revenue Use Sunset YES% Watsonville Santa Cruz Measure R TrUT 1/2 cent $ 5,000,000 none 64.4% PASS Vallejo Solano Measure P TrUT 7/8 cent $ 18,000,000 none 0 54.7% PASS Modesto Stanislaus Measure H TrUT 1 cent $ 39,000,000 none 62.8% PASS County ofColusa Measure A TrUT 2/3 1/2 cent $ 2,400,000 EMS none 0 69.4% PASS Atwater Merced Measure B TrUT 2/3 same 1 cent $ 4,000,000 police/fire none 73.7% PASS Truckee Nevada Measure U TrUT 2/3 by 1/4 cent to $ 3,000,000 open space none 76.4% PASS 1/2 cent / trails Palo Alto Santa Clara Measure L UtilityTransfer 18% gas $ 7,000,000 none 77.7% PASS Santa Clara Santa Clara Measure G UtilityTransfer 5% $ 30,000,000 none 84.2% PASS Hercules Contra Costa Measure N UUT 8% $ 3,600,000 none 69.3% PASS Carson Los Angeles Measure W UUT 2% electr, gas $ 8,000,000 none 78.4% PASS Sebastopol Sonoma Measure N UUT 3.75% (same) $ 700,000 none 83.5% PASS Co -temporal Advisory Measures in 2022 At the November 2022 election, there was just one local general tax measure that was accompanied by an advisory measure as to the use of funds. The City of Santa Monica's Measure DT property transfer tax failed with just 34 percent approval as voters instead chose the citizen initiative Measure GS. There was also just one such tax use advisory measure on the June 2022 election. Susanville's voters passed Measure P, a 1 percent transactions and use (sales) tax that generates $1.75 million per years for general city services. The measure was accompanied by advisory Measure Q, accompanied the city's It asked, "If Measure P passes, should the revenues be used to balance the budget to maintain and enhance existing public safety services (police and fire), and provide funding to support street infrastructure improvements and provide funding to support economic development efforts designed to increase businesses, jobs and visitors to Susanville?" Both measures passed. Under Initiative 21-0042A1, the tax will expire a year after the effective date of the initiative (i.e., in December 2025). 1.b. Additional Costs and Public Service Effects of the Tax Provisions Assuming a similar volume of local measures through 2024 as we saw in 2022, there will be over 200 local measures that will need to be redrafted to comply with the Initiative and placed back on the ballot for the taxes to continue after December 2025. The costs of re -drafting, re -placing and re -voting on these measures, previously legally approved by voters, will be in the tens of millions in total statewide. 2. "Exemat Charaes" (fees and charaes that are not taxes) and Services Threatened With regard to fees and charges adopted after January 1, 2022, Initiative 21-0042A1: • Subjects new fees and charges for a product or service to a new "actual and reasonable test." • Subjects fees and charges for entrance to local government property; and rental and sale of local government property to a new, undefined, "reasonable" test. • Allows legal challenge to any tax adopted before the effective date of the initiative and after January 1, 5 The Susanville measure also did not include a specific end date and so is included in the list and totals of those measures. Califorvi aCityFivtavtce.cowt Item 8: Staff Report Pg. 14 Packet Pg. 106 of 853 Item 8 Attachment B - Fiscal and Program Effects of Initiative 21-0042A1 on - 8 - rev J Local Governments 2022. Such a lawsuit could enjoin (stop) the enactment of the tax pending the outcome of the legal challenge. • Subjects a challenged fee to new, higher burdens of proof if legally challenged. 2.a. Value on New Local Government Fees and Charges at Risks Virtually every city, county, and special district must regularly (e.g., annually) adopt increases to fee rates and charges and revise rate schedules to accommodate new users and activities. Most of these would be subject to new standards and limitations under threat of legal challenge. Based on the current volume of fees and charges imposed by local agencies and increases in those fees simply to accommodate inflation, the amount of local government fee and charge revenue placed at risk is about $2 billion per year including those adopted since January 1, 2022. Of $2 billion, about $900 million (45 percent) is for special districts, $800 million (40 percent) is cities, and $300 million (15 percent) is counties.' Major examples of affected fees and charges are: 1. Certain water, sanitary sewer, wastewater, garbage, electric, gas service fees. 2. Nuisance abatement charges - such as for weed, rubbish and general nuisance abatement to fund community safety, code enforcement, and neighborhood cleanup programs. 3. Emergency response fees - such as in connection with DUI. 4. Advanced Life Support (ALS) transport charges. 5. Business improvement district charges. 6. Fees for processing of land use and development applications such as plan check fees, use permits, design review, environmental assessment, plan amendment, subdivision map changes. 7. Document processing and duplication fees. 8. Facility use charges, parking fees, tolls. 9. Fines, penalties. 10. Fees for parks and recreation services. 2.b. Additional Costs and Public Service Effects of the Fee/Charge Provisions In addition to service delays and disruptions due to fee and charge revenues placed at greater legal risk, there would be substantial additional costs for legal defense. The risk to fees and charges will make infrastructure financing more difficult and will deter new residential and commercial development. *********** me 6 Source: California State Controller Annual Reports of Financial Transactions concerning cities, counties and special districts, summarized with an assumed growth due to fee rate increases (not population) of 2 percent annually. 7 School fees are also affected but the amount is negligible by comparison. Calrforvt aCrtyFivtavtce.coven Item 8: Staff Report Pg. 15 Packet Pg. 107 of 853 Item 9 Item 9 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: Planning and Development Services ALTO Meeting Date: April 17, 2023 Report #:2302-0991 TITLE Approve Substantial Amendments to the Community Development Block Grant (CDBG) FY2021- 22 and FY2022-23 Annual Action Plans and the Associated Budget Amendment in Various Funds and Resolution RECOMMENDATION Staff recommends City Council take the following actions: 1. Approve an amendment to the Fiscal Year 2023 Budget Appropriation for the following funds (requires 2/3 approval): a. Community Development Block Grant Fund by: i. Increasing the revenue estimate by $300,000; and ii. Increasing the transfer to the Capital Improvement Fund appropriation by $300,000; b. Capital Improvement Fund by: i. Increasing the appropriation for the Sidewalk Repairs Capital Project (PO - 89003) by $300,000; and ii. Increasing the transfer from the Community Development Block Grant Fund by $300,000. 2. Adopt a Resolution (Attachment A) approving the following Substantial Amendments to the 2021-22 and 2022-23 Annual Action Plans: a. For Fiscal Year 2021-22, reallocate funding from Ravenswood Family Health Network to Sidewalk Repairs Capital Project (PO -89003) for ADA ramp improvements. b. For Fiscal Year 2022-23, amend the text for the description of the 525 E. Charleston Road project to reflect the correct project activity. EXECUTIVE SUMMARY The City is required to process a Substantial Amendment to a previously approved Community Development Block Grant (CDBG) Annual Action Plan (AAP) when certain changes occur to the Item 9: Staff Report Pg. 1 Packet Pg. 108 of 853 Item 9 Item 9 Staff Report contents of those plans. This report discusses two substantial amendments that need to be completed for compliance with the CDBG program. The two amendments are as follows: 1. FY2021-22 AAP - Reallocate $300,000 from Ravenswood Family Health Network to a City project for ADA ramp improvements. Ravenswood was not able to move forward with their project and informed the City they no longer needed the CDBG funds. 2. FY2022-23 AAP — Revise the text of the project summary for Mitchell Park Place/525 E. Charleston Road to reflect the correct project activity. The first of these amendments requires approval of an amendment to the Fiscal Year 2023 Budget Appropriation. BACKGROUND The CDBG program, administered by U.S. Department of Housing and Urban Development (HUD), provides annual grants on a formula basis to states, cities, and counties to develop viable urban communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for low- and moderate -income persons. The program is authorized under Title 1 of the Housing and Community Development Act of 1974. The HUD regulations require all CDBG funded activities to meet one of the three national objectives: • Benefit low -and very -low-income persons; • Aid in the prevention or elimination of slums or blight; or • Meet other community development needs having urgency or posing a serious and immediate threat to the health or welfare of the community. Palo Alto's CDBG program has been primarily directed towards housing -related work. Specifically, local CDBG funds are allocated to expanding and maintaining existing affordable housing supply; promoting housing opportunities and choices; and providing supportive services for targeted low-income groups including unhoused persons, persons with disabilities, the elderly, and others. For general information on Palo Alto's CDBG program, please visit: https://www.cityofpaloalto.org/CDBG. Annual Action Plan Amendments As part of the CDBG program, HUD requires the preparation of a five-year strategic action plan (i.e. Consolidated Plan) to address priority housing and community development needs and to set goals for attaining identified objectives. The implementation of the Consolidated Plan is reflected in the Annual Action Plan that is prepared for every fiscal year. The Annual Action Plan (AAP) identifies the specific projects to be funded that implement the strategies identified Item 9: Staff Report Pg. 2 Packet Pg. 109 of 853 Item 9 Item 9 Staff Report in the Consolidated Plan. Council adopted the updated FY2020-25 Consolidated Plan and the FY2020- 21 Annual Action Plan on June 15, 2020. When the City's CDBG funding situation changes, amendments to the Annual Action Plan may be required. There are two types of amendments: 1. Minor Amendments: Changes to a previously adopted Consolidated Plan or Annual Action Plan that does not meet the thresholds to qualify as a Substantial Amendment. Minor amendments are typically processed at a staff level. 2. Substantial Amendments: (a) A change in the use of CDBG funds from one eligible activity to another; (b) The implementation of an activity not previously identified in sufficient detail to provide affected citizens an opportunity to submit comments; or (c) A change in an activity's program budget which exceeds ten percent of the City's latest annual entitlement grant; and (d) Council approval required for all substantial amendments. DISCUSSION This section includes information on the required Annual Action Plan amendments. The Substantial Amendments approved by the City Council will be incorporated into the FY2021-22 AAP and the FY2023-23 AAP as required by HUD. Substantial Amendment to FY2021-22 Annual Action Plan — Ravenswood Funding Reallocation The approved FY2021-22 AAP included funding of $300,000 for Ravenswood Family Health Network for eligible improvments at its Palo Alto clinic.' The project included the rehabilitation of the existing entrance and exit ramps and conversion into ADA-accessible ramps. In an email dated November 29, 2022, Ravenswood Family Health Network informed the City that they no longer needed the funds due to the lack of contracts to bid for the project and the inability to expend the funds. With funding reallocation in mind, staff investigated other public facilities improvement projects that were CDGB-eligible activities. Due to the CDBG funding limitations, staff could not identify an eligible project from the current agencies supported by the program to reallocate funds to. In exploring eligible City projects, the Public Works Department, in consultation with the City's ADA Coordinator, suggested adding additional ramps within an existing community -wide ADA ramp improvement project that slated for bid in Spring 2023 (Sidewalk Repairs Capital Project P0- 1 This project funding was recorded in Resolution No. 98933 adopted by Council on June 15, 2020. Item 9: Staff Report Pg. 3 Packet Pg. 110 of 853 Item 9 Item 9 Staff Report 89003). An ADA ramp improvement project is a CDBG public facility eligible project (Matrix Code: 03K). The staff recommendation is to reprogram the Ravenswood $300,000 to the City's ADA ramp improvement project to better support and enhance the major curb ramp improvement project. Substantial Amendment to FY2022-23 Annual Action Plan — 525 E. Charleston Road The approved FY2022-23 AAP included funding of $356,330 for the Mitchell Park Place/525 E. Charleston Road2 project. CDBG funding was to be allocated for predevelopment costs associated with an affordable housing development. This activity supports the development of affordable housing at a Santa Clara County -owned property; Eden Housing will develop 50 affordable housing units, half of which are for people with disabilities. As the owner of the property, the County plans to execute a long-term lease with the developer, Eden Housing. In late Summer 2022, the City was informed by HUD that the Mitchell Park Place project description was incorrectly represented in the FY2022-23 Annual Action Plan. A substantial amendment is needed to amend section AP -38 Project Summary of the FY2022-23 Annual Action Plan. The text edits are detailed in Table 1 below (new text is underlined and removed text has Table 1: CDBG Project Description Change 8 Project Name Mitchell Park Place 525 E. Charleston Road Target Area Citywide Goals Supported Affordablc Housing Strengthen Neighborhoods Needs Addressed Affordablc Housing Community Services and Public Improvements Funding CDBG: $356,330 2 This project funding was recorded in Resolution No. 10056 adopted by the council on June 20, 2022. Item 9: Staff Report Pg. 4 Packet Pg. 111 of 853 Item 9 Item 9 Staff Report Description The City intends to use the CDBG Funds for public facilities improvements near the proposed Eden Housing development site. Eden Housing is developing 50 units of affordable housing. Approximately half the units are for persons with disabilities. The parcel is owned by the County and will be a long-term lease with the developer. The City intends to use—CDBG funding for costs HUD Note: At the initial pr.,development as per regulation. h+ d f the 2022 2O23 AAP, t publiccvmnTe� �e�� c� o7 focused ff d b l h T a l ti n g this rvC�$ ccrvrnr-�'arrvTc�un�c—r�$� ��ee��a�a-cm�cms the details to be determined. The City will follow project and are the Citizen Participation Plan if -, and will proceed with protocols substantial amendment i required. Target Date 6/30/2023 12/30/2023 Estimate the number and type of families that will benefit from the proposed activities TS -B 50 families will benefit from public improvements Location Description 525 E. Charleston Road Planned Activities TBD POLICY IMPLICATIONS The project recommended for the reallocated CDBG funds is consistent with the priorities established in the City's adopted FY 2020-2025 Consolidated Plan. FISCAL/RESOURCE IMPACT The recommendations in this report are cost neutral. This action is a reallocation of unspent funds dedicated by HUD in the FY2021-22 CDBG cycle and does not constitute a new funding source. The CDBG program runs on a reimbursement basis. Approval of this action will reallocate existing Community Development Block Grant funding to a new project and allow for the distribution of funds. There is no impact to the General Fund. STAKEHOLDER ENGAGEMENT The draft Substantial Amendments to the FY2021-22 and FY2022-23 Annual Action Plans, reflected in red -lined versions of the AAPs, were made available on the City's webpage for public review beginning March 7, 2023 through April 6, 2023; this was advertised in the Daily Post on March 3, 2023. This constituted the required 30 -day public review period. Item 9: Staff Report Pg. 5 Packet Pg. 112 of 853 Item 9 Item 9 Staff Report Additionally, the notice provided details of this City Council public hearing, initially scheduled for April 10, 2023. Due to changes in the Council agenda, the public hearing was moved to April 17, 2023 and a correction notice was placed in the newspaper on April 5, 2023. At the time of this report preparation, no public comments were received. ENVIRONMENTAL REVIEW For purposes of the National Environmental Policy Act (NEPA) and the California Environmental Quality Act (CEQA), budgeting by itself is not a project. Prior to commitment or release of funds for each of the proposed projects, staff will carry out the required environmental reviews or assessments and certify that the review procedures under CEQA, HUD and NEPA regulations have been satisfied for each project. ATTACHMENTS Attachment A: Draft Resolution Attachment B: Draft Amended FY2021-22 Annual Action Plan, with red -lines on page 26 Attachment C: Draft Amended FY2022-23 Annual Action Plan, with red -lines on page 36 APPROVED BY: Jonathan Lait, Planning and Development Services Director Item 9: Staff Report Pg. 6 Packet Pg. 113 of 853 *NOT YET APPROVED* Resolution No. Resolution of the Council of the City of Palo Alto Approvin Item 9 Attachment A - Resolution Approving the Substantial Amendments to the CDBG Annual Action Plans for FY21-22 and FY22-23 Substantial Amendments to the Community Development Block Grant Annual Action Plans for Fiscal Years 2021-2022 and 2022- 2023 A. On June 15, 2020, the Palo Alto City Council approved and adopted a document entitled "Consolidated Plan" which identified and established the Palo Alto housing and non - housing community development needs, objectives, and priorities for the period July 1, 2020 to June 30, 2025. B. The Substantial Amendments to the Annual Action Plans for Fiscal Year 2021-2022 and 2022-2023, were subjected to public review and commentary during the period from March 7, 2023 through April 6, 2023. C. The potential uses of Community Development Block Grant funds were evaluated in light of the needs and objectives identified in the Consolidated Plan and reflected in the recommendations and comments of interested citizens. D. Under the CDBG program, the highest priority for funding is given to activities which will benefit persons with low and moderate incomes. E. The City Council held a publicly noticed public hearing on the proposed use of the reallocated CDBG funds for Fiscal Year 2021-2022 and the text amendments for Fiscal Year 2022- 2023. F. CDBG funds allocated to the City for Fiscal Years 2021-2022 and 2022-2023 are proposed to implement the programs described in this resolution. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. The uses of CDBG funds for Fiscal Year 2021-2022 are hereby approved and authorized for the following program: Name of Program Amount City of Palo Alto ADA Ramp Improvement Project $300,000 TOTAL $300,000 // 1 0160101_20230405_ayl6 Item 9: Staff Report Pg. 7 Packet Pg. 114 of 853 *NOT YET APPROVED* SECTION 2. The project description changes for the Fiscal Year Action Plan are hereby approved and authorized for the following prograrr Item 9 Attachment A - Resolution Approving the Substantial Amendments to the CDBG Annual Action Plans for FY21-22 and FY22-23 Project Name Mitchell Park Place 525 E. Charleston Road Target Area Citywide Goals Supported Strengthen Neighborhoods Needs Addressed Community Services and Public Improvements Funding CDBG: $356,330 Description The City intends to use the CDBG Funds for public facilities improvements near the proposed Eden Housing development site. Eden Housing is developing 50 units of affordable housing. Approximately half the units are for persons with disabilities. The parcel is owned by the County and will be a long-term lease with the developer. Target Date 12/30/2023 Estimate the number and 50 families will benefit from public improvements type of families that will benefit from the proposed activities Location Description 525 E. Charleston Road Planned Activities TBD SECTION 3. The total amount set forth under Section 1 of this resolution represents the proposed reallocation of $300,000 in CDBG funds from the United States Department of Housing and Urban Development (HUD) for Fiscal Year 2021-2022. SECTION 4. The City staff is hereby authorized to submit the CDBG Substantial Amendments to the Fiscal Year 2021-2022 and Fiscal Year 2022-2023 Annual Action Plans, and such money shall be spent as set forth in this resolution. The Mayor, City Manager and any other designated City staff or officials are hereby authorized to execute such application forms and any other necessary documents to secure these funds. The City Manager or designee is authorized to sign all necessary grant agreements with the program providers set forth in Section 1. 2 0160101_20230405ay16 Item 9: Staff Report Pg. 8 Packet Pg. 115 of 853 *NOT YET APPROVED* Item 9 Attachment A - Resolution Approving the Substantial Amendments SECTION 5. The funding amounts set forth in Section 1 of thi to theCDBGAnnual sed on final allocation amounts from CDBG HUD appropriations; City Staff i Action Plans forFY21-22 ake and FY22-23 adjustments increasing or decreasing the funding amounts set forth herein the adopted Citizen Participation Plan. SECTION 6. The City Council hereby finds that the CDBG programs authorized under Section 1 and 2 of this resolution are not a project under the California Environmental Quality Act (CEQA). However, the Council further authorizes and directs City staff to prepare certifications that may be required, under CEQA and the National Environmental Policy Act (NEPA), for each project under the CDBG program prior to the release of funds for any such project. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney Mayor APPROVED: City Manager Director of Planning and Development Services Director of Administrative Services CDBG Coordinator 0160101_20230405_ayl6 3 Item 9: Staff Report Pg. 9 Packet Pg. 116 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation DRAFT CITY OF PALO ALTO Substantial Amendment #1 FY 2021-2022 Annual Action Plan April 17, 2023 Initially Approved on May 3, 2021 Refer to pages 3, 29, & 31 for revisions. Item 9: Staff Report Pg. 10 Packet Pg. 117 of 853 Substantial Amendment 04/10/2023 Executive Summary AP -05 Executive Summary - 91.200(c), 91.220(b) Introduction Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation The City of Palo Alto (City) Fiscal Year (FY) 2021-22 One Year Action Plan contains the City's one-year plan to carry out housing and community development activities funded by Federal formula grant funds received from the U.S. Department of Housing and Urban Development (HUD), Community Development Block Grant (CDBG) program. This Action Plan covers the second of five program years covered by the City's 2020-2025 Consolidated Plan which was adopted by the Palo Alto City Council on June 15, 2020. The Department of Planning and Development Services is the lead agency for the Consolidated Plan and submits the Annual Action Plan for the City's CDBG program. HUD requires entitlement jurisdictions to submit an Annual Action Plan to report the distribution of federal entitlement grant funds over the Consolidated Plan's five-year period identifying how funding allocations help meet the goals covered in the Consolidated Plan. A total of $746,715 is available for funding projects and programs during the 2021 Program Year. The City received $536,756 from the federal CDBG program, approximately $136,049 in program income and $73,910 in reallocated funds from previous years. The City's Action Plan covers the time period from July 1, 2021 to June 30, 2022, (HUD Program Year 2021). The City's FY 2021-22 Action Plan reports on the status of needs and outcomes the City expects to achieve in the coming year. All of the activities mentioned in this Action Plan are based on current priorities. By addressing these priorities, the City hopes to meet those objectives stated in the 2020- 2025 Consolidated Plan. All the proposed projects and activities are intended to principally benefit residents of the City who have extremely low-, low- and moderate -income, and populations that have special needs, such as the elderly, disabled, and homeless. 2. Summarize the objectives and outcomes identified in the Plan This could be a restatement of items or a table listed elsewhere in the plan or a reference to another location. It may also contain any essential items from the housing and homeless needs assessment, the housing market analysis or the strategic plan. The City is part of the San Francisco Metropolitan Bay Area, located 35 miles south of San Francisco and 14 miles north of San Jose. The City is located within the County of Santa Clara, borders San Mateo County, and encompasses an area of approximately 26 square miles, one-third of which consists of open space. According to Quick facts data provided by the U.S. Census Bureau[1] The City's total resident population is 65,364. The City has the most educated residents in the country and is one of the most expensive cities to live in. In Silicon Valley, the City is considered a central economic focal point and is home to over 9,483 businesses. Annual Action Plan 2021 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 11 Packet Pg. 118 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation The Action Plan provides a summary of how the City will utilizes its allocation to the meet the needs of the City's lower income population. According to the U.S. census data[2], 6.1% of all residents within the City had incomes below the federal poverty level. Additionally, according to the 2019 Point in Time Homeless Census.[3] There are 299 unsheltered homeless individuals living within the City of Palo Alto. This number represents an increase of 17% from the 256 individuals that were counted in 2017. As mentioned previously, a total of $746,715 is available for funding projects and programs during FY2021-22. The City received $536,756 from the federal CDBG program, approximately $136,049 in program income and $73,910 in reallocated funds from previous years. Table 1, "Fiscal Year 2021 CDBG Budget" below summarizes the uses of the funds proposed during FY 2021-22. Applicant Agency Allocation Public Services Palo Alto Housing Corporation — SRO Resident Supportive Services $24,535 Catholic Charities of Santa Clara County — Long Term Care Ombudsman $10,000 Life Moves — Case Management at Opportunity Center $31,545 Silicon Valley Independent Living Center — Case Management Services $14,021 Sub -total $80,101 Planning and Administration Project Sentinel — Fair Housing Services $33,698 City of Palo Alto Administration $99,304 Sub -total $133,002 Economic Development Downtown Streets — Workforce Development Program $160,477 Sub -total $160,477 Public Facilities and Improvement Ravcnswood Family Health Network — Construction of ADA ramp ADA Ramp Improvement Project -City of Palo Alto $300,000 Sub -total $300,000 Housing Rehabilitation Rebuilding Together Peninsula — Safe at Home $73,135 Sub -Total $73,135 Grand Total 746,715 Table 1: Fiscal Year 2021 CDBG Budget 3. Evaluation of past performance Annual Action Plan 2021 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 12 Packet Pg. 119 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation This is an evaluation of past performance that helped lead the grantee to choose its goals or projects. The City is responsible for ensuring compliance with all rules and regulations associated with the CDBG entitlement grant program. The City's Annual Action Plans and Consolidated Annual Performance and Evaluation Reports (CAPER) have provided many details about the goals, projects and programs completed by the City. A review of past CAPERS reveals a strong record of performance in the use of CDBG funds. For example, during the 2015-2020 Consolidated Plan period, 244 affordable rental units were rehabilitated, 130 jobs were created or retained, and nearly 2,600 households were assisted through public service activities for low- and moderate -income housing The City evaluates the performance of subrecipients on a semiannual basis. Subrecipients are required to submit semiannual progress reports, which include client data, performance objectives, as well as data on outcome measures. Prior to the start of the program year, program objectives are developed collaboratively by the subrecipient and the City, ensuring that they are aligned with the City's overall goals and strategies. The City utilizes the semiannual reports to review progress towards annual goals. 4. Summary of Citizen Participation Process and consultation process Summary from citizen participation section of plan. The City solicited input throughout the development of the FY 2021-22 Annual Action Plan. As required by HUD, the City provides multiple opportunities for public review and comment on the Action Plan and on any substantial amendments to it. Per the City's adopted Citizen Participation Plan, the City held a 30 -day public review comment period for the Action Plan. The City published notifications of upcoming public hearings and the 30 -day public review comment period in a local newspaper of general circulation, on the City's CDBG webpage and via email blasts to stake holders. The City held two advertised public hearings on March 11, 2021 and May 3, 2021. The Action Plan 30 -day public review period occurred from March 15, 2021 through April 16, 2021. 5. Summary of public comments This could be a brief narrative summary or reference an attached document from the Citizen Participation section of the Con Plan. There were no public comments received during the public review period. 6. Summary of comments or views not accepted and the reasons for not accepting them The City accepts and responds to all comments that are submitted. As mentioned above, no public comments were received regarding the FY 2021-22 Action Plan. 7. Summary Please see above. Annual Action Plan 2021 4 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 13 Packet Pg. 120 of 853 Substantial Amendment 04/10/2023 PR -05 Lead & Responsible Agencies - 91.200(b) 1. Agency/entity responsible for preparing/administering the Consolidated Plan Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation The following are the agencies/entities responsible for preparing the Consolidated Plan and those responsible for administration of each grant program and funding source. Agency Role Name Department/Agency Lead Agency PALO ALTO CDBG Administrator PALO ALTO Department of Planning & Development Services HOPWA Administrator HOME Administrator HOPWA-C Administrator Table 1— Responsible Agencies Narrative The City is the Lead and Responsible Agency for the United States Department of Housing and Urban Development's (HUD) entitlement programs in Palo Alto. The Department of Planning and Development Services is responsible for administering the City's CDBG program. The City joined the HOME Consortium in 2015 and receives federal HOME Investment Partnership (HOME) funds through the County. Entitlement jurisdictions receive entitlement funding (i.e., non-competitive, formula funds) from HUD. HUD requires the City to submit a five- year Consolidate Plan and Annual Action Plan to HUD listing priorities and strategies for the use of its federal funds. The Consolidate Plan helps local jurisdictions to assess their affordable housing and community development needs and market conditions to meet the housing and community development needs of its populations. As a part of the Consolidate Plan process for 2020-2025, the City collaborated with the County of Santa Clara(County) as the Urban County representing the Cities of Campbell, Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Morgan Hill, and Saratoga; the Cities of Cupertino, Gilroy, Mountain View, Sunnyvale, San Jose, and Santa Clara; and the Santa Clara County Housing Authority (SCCHA) to identify and prioritize housing and community development needs across the region, and to OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 Item 9: Staff Report Pg. 14 Packet Pg. 121 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation develop strategies to meet those needs. The FY 2021-22 Annual Action Plan represents the second year of CDBG funding of the 2020-2025 Consolidated Plan. Consolidated Plan Public Contact Information [rum Maqbool, CDBG Staff Specialist City of Palo Alto Department of Planning and Development Services 250 Hamilton Avenue, 5th Floor Palo Alto, CA 94301 E-mail: erum.maqbool@cityofpaloalto.org Phone: (650) 329-2660 OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 Item 9: Staff Report Pg. 15 Packet Pg. 122 of 853 Item 9 Attachment B - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2021-22 Draft- Ravenwood Reallocation AP -10 Consultation - 91.100, 91.200(b), 91.215(l) 1. Introduction The Action Plan is a one-year plan which describes the eligible programs, projects and activities to be undertaken with funds expected during FY 2021-22 and their relationship to the priority housing, homeless and community development needs outlined in the 2020-25 Consolidated Plan. Provide a concise summary of the jurisdiction's activities to enhance coordination between public and assisted housing providers and private and governmental health, mental health and service agencies (91.215(l)). During Fiscal Year 2021-22, the City will continue to work with non-profit organizations to provide programs and services for low-income households; private industry, including financial and housing development groups, to encourage the development of affordable housing opportunities regionally and within the City; and other local jurisdictions, including the County of Santa Clara, in carrying out and monitoring regional projects in a coordinated and cost-effective manner. The City will provide technical assistance to the public service agencies it funds with CDBG dollars and will continue to attend the biweekly Regional CDBG/Housing Coordinators meetings. Describe coordination with the Continuum of Care and efforts to address the needs of homeless persons (particularly chronically homeless individuals and families, families with children, veterans, and unaccompanied youth) and persons at risk of homelessness. The Santa Clara County Office of Supportive Housing is the administrator of the regional Continuum of Care (CoC). The City continuously coordinates with the Santa Clara County CoC to end and prevent homelessness in the County. City staff attends monthly meetings. The Santa Clara County CoC is a group comprising stakeholders throughout the County, including governmental agencies, homeless service and shelter providers, homeless population, housing advocates, affordable housing developers, and various private parties, including businesses and foundations. The City's representation on the CoC Board is its Human Services Manager. Members of the CoC meet monthly to plan CoC programs, identify gaps in homeless services, establish funding priorities, and pursue a systematic approach to addressing homelessness. City staff, as well as staff of other cities, meet and consult with the County's CoC staff during the bi-weekly countywide CDBG Coordinators Group meetings, and communicate more frequently via email and/or phone on joint efforts. The CoC is governed by the CoC Board, which takes a systems -change approach to preventing and ending homelessness. This same CoC Board is comprised of the same individuals who serve on the Destination: Home (Destination Home) Leadership Board. Destination Home is a public -private partnership that is committed to collective impact strategies to end chronic homelessness. Destination Home is the governing body for the CoC and is responsible for implementing by-laws and operational protocols of the CoC. Annual Action Plan 2021 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 16 Packet Pg. 123 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Regional efforts of the CoC include the development of The Community Plan to End Homelessness, which identifies strategies to address the needs of people experiencing homelessness in the County, including chronically homeless individuals and families, families with children, veterans, and unaccompanied youth. The plan also addresses the needs of persons at risk of homelessness. The CoC is now in the process of updating a new plan for the next five years and the City plans to participate in these efforts. Also, during the development of the 2020-25 ConPlan, the City consulted both the CoC and County Office of Supportive Housing for their expertise and experience for identifying community needs. Describe consultation with the Continuum(s) of Care that serves the jurisdiction's area in determining how to allocate ESG funds, develop performance standards for and evaluate outcomes of projects and activities assisted by ESG funds, and develop funding, policies and procedures for the operation and administration of HMIS The City is not an ESG entitlement jurisdiction and therefore does not receive ESG funds. However, the City does administer federal grant programs that help homeless and low-income families in Santa Clara County. The City also helps fund and conduct the Point in Time (PIT) count, the biennial regional collaborative effort to count and survey people experiencing homelessness. The latest count and survey were conducted in January 2019. The data from the 2019 County of Santa Clara PIT count is used to plan, fund, and implement actions for reducing chronic homelessness and circumstances that bring about homelessness. The Santa Clara County Office of Supportive Services takes the role of Homeless Management Information System (HMIS) administration. The County, and its consultant Bitfocus, work jointly to operate and oversee HMIS. Both software and HMIS system administration are now provided by Bitfocus. Funding for HMIS in Santa Clara County comes from HUD, the County of Santa Clara, and the City of San Jose. The CountyALACALALAaAzs HMIS is used by many City service providers across the region to record information and report outcomes. 2. Agencies, groups, organizations and others who participated in the process and consultations Annual Action Plan 2021 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 17 Packet Pg. 124 of 853 Substantial Amendment 04/10/2023 Table 2— Agencies, groups, organizations who participated 1 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 2 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 3 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 4 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation Boys and Girls Clubs of Silicon Valley Services -Children Housing Need Assessment Agency attended Santa Clara focus group meeting on 11/7/19 as part of the 2020-25 Consolidated Plan process Healthier Kids Foundation Santa Clara County Services -Children Housing Need Assessment Agency attended Santa Clara focus group meeting on 11/7/19 as part of the 2020-25 Consolidated Plan process COMMUNITY SERVICES AGENCY OF MOUNTAIN VIEW AND LOS ALTOS Services -Elderly Persons Housing Need Assessment Agency attended stakeholder consultation conference call on 11/15/19 as part of the 2020-25 Consolidated Plan process San Jose Conservation Corps Charter Services -Education Housing Need Assessment Annual Action Plan 2021 Item 9: Staff Report Pg. 18 Packet Pg. 125 of 853 Substantial Amendment 04/10/2023 I 6 7 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation Briefly describe how the Agency/Group/Organization was Agency attended Gilroy focus group meeting on 11/18/19 as part of consulted. What are the anticipated outcomes of the the 2020-25 Consolidated Plan process consultation or areas for improved coordination? Agency/Group/Organization CommUniverCity San Jose I Agency/Group/Organization Type I Services -Education What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? OMB Control No: 2506-0117 (exp. 09/30/2021) Strategic Plan Agency attended stakeholder consultation conference call on 11/25/19 and regional forum meeting in San Jose on 11/20/19 as part of the 2020-25 Consolidated Plan process. The Health Trust Services -Persons with Disabilities Services -Persons with HIV/AIDS Services -Health Housing Need Assessment Strategic Plan Agency attended stakeholder consultation on 11/21/19 as part of the 2020-25 Consolidated Plan process Rebuilding Together, Silicon Valley Services - Housing Housing Need Assessment Agency attended stakeholder consultation conference call on 11/21/19 and San Jose regional forum on 11/20/19 as part of the 2020-25 Consolidated Plan process Annual Action Plan 2021 10 Item 9: Staff Report Pg. 19 Packet Pg. 126 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation 8 Agency/Group/Organization City of Cupertino Community Development Department Housing Division Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs Homeless Needs - Chronically homeless Homeless Needs - Families with children Homelessness Needs - Veterans Homelessness Needs - Unaccompanied youth Homelessness Strategy Non -Homeless Special Needs Economic Development Anti -poverty Strategy Lead -based Paint Strategy Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 9 Agency/Group/Organization City of Gilroy Agency/Group/Organization Type Other government - Local OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 11 Item 9: Staff Report Pg. 20 Packet Pg. 127 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs Homeless Needs - Chronically homeless Homeless Needs - Families with children Homelessness Needs - Veterans Homelessness Needs - Unaccompanied youth Homelessness Strategy Non -Homeless Special Needs Market Analysis Economic Development Anti -poverty Strategy Lead -based Paint Strategy Briefly describe how the Agency/Group/Organization was Agency was consulted and provided emailed feedback as part of the consulted. What are the anticipated outcomes of the 2020-25 Consolidated Plan process consultation or areas for improved coordination? 10 Agency/Group/Organization City of Mountain View Agency/Group/Organization Type Other government - Local OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 12 Item 9: Staff Report Pg. 21 Packet Pg. 128 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs Homeless Needs - Chronically homeless Homeless Needs - Families with children Homelessness Needs - Veterans Homelessness Needs - Unaccompanied youth Homelessness Strategy Non -Homeless Special Needs Market Analysis Economic Development Anti -poverty Strategy Lead -based Paint Strategy Briefly describe how the Agency/Group/Organization was Agency attended regional forum meeting at Palo Alto on 11/7/19 as consulted. What are the anticipated outcomes of the part of the 2020-25 Consolidated Plan process consultation or areas for improved coordination? 11 Agency/Group/Organization BILL WILSON CENTER Agency/Group/Organization Type Services -Children What section of the Plan was addressed by Consultation? Housing Need Assessment Homeless Needs - Families with children Briefly describe how the Agency/Group/Organization was Agency attended Santa Clara focus group meeting on 11/7/19, consulted. What are the anticipated outcomes of the community meetings on 11/4/19 at Morgan Hill and 11/20/19 at consultation or areas for improved coordination? Roosevelt as part of the 2020-25 Consolidated Plan process 12 Agency/Group/Organization HEART OF THE VALLEY Agency/Group/Organization Type Services -Elderly Persons What section of the Plan was addressed by Consultation? Housing Need Assessment OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 13 Item 9: Staff Report Pg. 22 Packet Pg. 129 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency was consulted through interview questions. Agency provided emailed feedback as part of the 2020-25 Consolidated Plan process 13 Agency/Group/Organization City of San Jose Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency was contacted for consultation as a partner in addressing the needs of the County as part of the 2020-25 Consolidated Plan process 14 Agency/Group/Organization CITY OF MORGAN HILL Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency attended regional forum meeting at Morgan Hill on 11/4/19 as part of the 2020-25 Consolidated Plan process 15 Agency/Group/Organization City of Sunnyvale Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency attended regional forum meeting at Palo Alto on 11/7/19 and provided emailed feedback as part of the 2020-25 Consolidated Plan process 16 Agency/Group/Organization Servant Partners Agency/Group/Organization Type Neighborhood Organization Neighborhood Organization OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 14 Item 9: Staff Report Pg. 23 Packet Pg. 130 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was Attended community meeting on 11/13/19 at Hillview library as part consulted. What are the anticipated outcomes of the of the 2020-25 Consolidated Plan process consultation or areas for improved coordination? 17 Agency/Group/Organization SENIOR ADULTS LEGAL ASSISTANCE (SALA) Agency/Group/Organization Type Service -Fair Housing What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was Agency attended Palo Alto and San Jose public engagement meeting consulted. What are the anticipated outcomes of the on 11/17/19 and 11/19/19, regional forum meeting on 11/4/19 at consultation or areas for improved coordination? Morgan Hill and 11/7/19 at Palo Alto as part of the 2020-25 Consolidated Plan process 18 Agency/Group/Organization HomeFirst Agency/Group/Organization Type Services -homeless What section of the Plan was addressed by Consultation? Housing Need Assessment Homeless Needs - Chronically homeless Briefly describe how the Agency/Group/Organization was Agency attended regional forum meeting at Morgan Hill on 11/4/19 as consulted. What are the anticipated outcomes of the part of the 2020-25 Consolidated Plan process consultation or areas for improved coordination? 19 Agency/Group/Organization Santa Clara County Office of Supportive Housing Agency/Group/Organization Type Other government - County What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was Agency attended regional forum meeting at Morgan Hill on 11/4/19 consulted. What are the anticipated outcomes of the and at Palo Alto on 11/7/19 as part of the 2020-25 Consolidated Plan consultation or areas for improved coordination? process OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 15 Item 9: Staff Report Pg. 24 Packet Pg. 131 of 853 Substantial Amendment 04/10/2023 20 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 21 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 22 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 23 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation City of Santa Clara Other government - Local Housing Need Assessment Agency attended regional forum meeting at Morgan Hill on 11/4/19 and provided emailed feedback as part of the 2020-25 Consolidated Plan process Vista Center for the Blind and Visually Impaired Services -Persons with Disabilities Non -Homeless Special Needs Agency attended stakeholder consultation on 12/9/19 as part of the 2020-25 Consolidated Plan process Destination: Home Services -homeless Housing Need Assessment Agency attended stakeholder consultation on 11/11/19 as part of the 2020-25 Consolidated Plan process COMMUNITY SOLUTIONS Services -Victims of Domestic Violence Housing Need Assessment Agency attended the AFH and ConPlan joint meeting on 12/11/19 at the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan process Annual Action Plan 2021 16 Item 9: Staff Report Pg. 25 Packet Pg. 132 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation 24 Agency/Group/Organization St Mary Parish Agency/Group/Organization Type Neighborhood Organization Neighborhood Organization What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency attended the AFH and ConPlan joint meeting on 12/11/19 at the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan process 25 Agency/Group/Organization Community and Neighborhood Revitalization Committee - Gilroy Agency/Group/Organization Type Community Organization What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency co -hosted the AFH and ConPlan joint meeting on 12/11/18 at the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan process Identify any Agency Types not consulted and provide rationale for not consulting Through the countywide development of the Consolidated Plan, AT@T was consulted regarding broadband. For Palo Alto specific information on this topic, staff in the future will contact the City of Palo Alto Utilities Advisory Commission regarding the Cityac as Fiber Network Expansion Project. In regard to resilience specific organizations, Grid Alternatives, an environmental sustainability organization, provided a stakeholder interview during the Consolidated Plan process. Staff plans to expand outreach in this area through contact with the Santa Clara County Office of Emergency Management and the City of Palo Alto Emergency Services which has developed a local hazard mitigation plan. OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 17 Item 9: Staff Report Pg. 26 Packet Pg. 133 of 853 Substantial Amendment 04/10/2023 Other local/regional/state/federal planning efforts considered when preparing the Plan Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation Name of Plan Lead Organization How do the goals of your Strategic Plan overlap with the goals of each plan? Continuum of Care Regional Continuum of Identifies housing inventory count to facilitate the provision of housing services to those Care Council experiencing homelessness City of Palo Alto Identifies barriers to affordable housing, such as land -use controls, inefficiencies of the Housing Element City of Palo Alto (2015-2023) development review process, and strategies to alleviate such barriers This plan provides a roadmap for the Santa Clara County HIV Planning Council for 2012-2014 Santa Clara County HIV Prevention and Care to provide a comprehensive and compassionate system of HIV Comprehensive HIV Planning Council for prevention and care services for the County. This effort aligns with the Strategic Plan's Prevention and Care PI Prevention and Care goal to support activities that strengthen neighborhoods through the provision of community services and public improvements SCCHA Moving to Work Santa Clara County Addresses housing authority updates and strategies pertaining to public housing and Annual Plan Housing Authority vouchers Regional Housing Need Association of Bay Area This plan analyzes the total regional housing need for the County and all of the Bay Area. Plan for San Francisco This effort aligns with the Strategic Plan's goal to assist in the creation and preservation Bay A Governments of affordable housing. The Community Plan to End Homelessness in the County is a five-year plan to guide Community Plan to End governmental actors, nonprofits, and other community members as they make decisions Homelessness in Santa Destination: Home about funding, programs, priorities and needs. This effort aligns with the Strategic Plan's Clara goal to support activities to end homelessness This plan details recommendations for infrastructure maintenance and replace, as well Palo Alto's City of Palo Alto as identifies potential sources of funding. This effort aligns with the Strategic Plan's Infrastructure: Catching Infrastructure Blue goal to support activities that strengthen neighborhoods through the provision of Up, Keeping U Ribbon Plan community services and public improvements OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 18 Item 9: Staff Report Pg. 27 Packet Pg. 134 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation Name of Plan Lead Organization How do the goals of your Strategic Plan overlap with the goals of each plan? City of Palo Alto This plan is the primary tool for guiding future development in Palo Alto. It provides a Comprehensive Plan City of Palo Alto guide for long-term choices and goals for the City future. This effort aligns with the (2030) Strategic Plan's goal to support activities that strengthen neighborhoods through the provision of community services and public improvements Narrative OMB Control No: 2506-0117 (exp. 09/30/2021) Table 3 — Other local / regional / federal planning efforts Annual Action Plan 2021 19 Item 9: Staff Report Pg. 28 Packet Pg. 135 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation AP -12 Participation - 91.401, 91.105, 91.200(c) 1. Summary of citizen participation process/Efforts made to broaden citizen participation Summarize citizen participation process and how it impacted goal -setting The Planning and Development Services Department is the lead agency for overseeing the development of the Consolidated Plan and Action Plan. Per the City's adopted Citizen Participation Plan, the City is to allow a 30 -day public review and comment period for the Action Plan. The City has published notifications of upcoming public hearings and the 30 -day public review comment period in the local newspaper of general circulation, on its CDBG webpage and via email blasts. The City held two advertised public hearings on March 11, 2021 and May 3, 2021. The Action Plan 30 -day public review period occurred from March 15, 20121 through April 16, 2021. The City did not receive any public comments on the Action Plan. Citizen Participation Outreach Sort Orde r Mode of Outreac h Target of Outreac h Summary of response/ attendanc e Summary of comment s receive d Summary o f comment s not accepted and reason S URL (If applicable) One The member Human of the Relations public Commissi provided on met on March 11, comment s on the 2021 to funding https://www.cityofpaloalto.o Non- discuss allocation All rg/files/assets/public/agenda targeted/ the Public . Three comments s-minutes-reports/agendas- 1 broad FY2021- Hearing members were minutes/human-relations- communi 22 funding represent accepted. commission/2021/03-11-21- ty allocations ing two hrc-agenda.pdf and funding review the applicant draft FY2021-22 S provided Annual Action comment s at the Plan meeting. Annual Action Plan 2021 20 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 29 Packet Pg. 136 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Sort Orde r Mode of Outreac h Target of Outreac h Summary of response/ attendanc e Summary of comment s receive d Summary o f comment s not accepted and reason s URL (If applicable) The City Council met on One May 3, member 2021 to of the https://www.cityofpaloalto.o Non - discuss public All rg/files/assets/public/agenda targeted/ Public the provided comments s-minutes-reports/agendas- 2 broad Hearing FY2021-22 comment were minutes/city-council- communi funding s on the accepted. agendas-minutes/2021/05- ty allocations funding 03-21-ccm-agenda-revis and adopt allocation the draft FY2021-22 AAP Notice of Public Hearing and Public Comment Non - Period on targeted/ Newspa the Draft 3 broad N/A N/A per Ad AAP was communi published ty in the Daily Post on February 25, 2021. Annual Action Plan 2021 21 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 30 Packet Pg. 137 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Sort Mode of Target of Summary Summary Summary o URL (If applicable) Orde Outreac Outreac of of f comment r h h response/ comment s not attendanc s receive accepted e d and reason s Notice of Public Hearing and Public Non- Comment targeted/ Period on 4 Newspa broad the Draft N/A N/A per Ad communi AAP was ty published in the Daily Post on March 6, 2021. Notice of City Council Non- Public targeted/ Hearing 5 Newspa broad was N/A N/A per Ad communi published ty in the Daily Post on April 17, 2021. Draft AAP FY2021-22 for public Non- review https://www.cityofpaloalto.o and Internet targeted/ rg/Departments/Planning- 6 Outreac broad comments N/A N/A Development-Services/Long- for posted h communi Range-Planning/Community- at the City ty Development -Block -Grant of Palo Alto's CDBG webpage. Annual Action Plan 2021 22 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 31 Packet Pg. 138 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Sort Orde r Mode of Outreac h Target of Outreac h Summary of response/ attendanc e Summary of comment s receive d Summary o f comment s not accepted and reason s URL (If applicable) Notice of City Council Non- Public targeted/ Hearing Email 7 broad was N/A N/A Blasts communi emailed to ty approxima tely 55 stakehold ers. Table 4— Citizen Participation Outreach Annual Action Plan 2021 23 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 32 Packet Pg. 139 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation Expected Resources AP -15 Expected Resources - 91.420(b), 91.220(c)(1,2) Introduction In FY 2021-22, the City will allocate $746,715 to eligible activities that address the needs identified in the Consolidated Plan. It should be noted that while the HUD CDBG allocations are critical, the allocations are not sufficient to overcome barriers and address all needs that low-income individuals and families face in attaining self-sufficiency. The City will continue to leverage additional resources as described below to provide support and services to the populations in need within the community. The following section discusses the anticipated resources available during the next five years for community development activities. Anticipated Resources Program Source Uses of Funds Expected Amount Available Year 1 Expected Narrative Description Annual Program Prior Year Total: of Funds Amount Allocation: Income: Resources: $ Available $ $ $ Remainder of ConPlan CDBG public - Acquisition CDBG funds will be used for the creation federal Admin and and preservation of affordable rental Planning units, improvements in lower income Economic neighborhoods, and public services that Development benefit low income and special needs Housing households Public Improvements Public Services 536,756 136,049 73,910 746,715 2,250,000 Other public - Other federal 0 0 0 0 0 Table 2 - Expected Resources — Priority Table OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 24 Item 9: Staff Report Pg. 33 Packet Pg. 140 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation Explain how federal funds will leverage those additional resources (private, state and local funds), including a description of how matching requirements will be satisfied Entitlement Funds Leverage, in the context of the CDBG and HOME Investment Partnerships Program (HOME), means bringing other local, state, and federal financial resources to maximize the reach and impact of the City's HUD Programs. HUD, like many other federal agencies, encourages the recipients of federal monies to demonstrate that efforts are being made to strategically leverage additional funds in order to achieve greater results. The City joined the Santa Clara County's HOME Consortium in 2015 and does not receive federal HOME funds on an entitlement basis from HUD. The HOME Consortia consists of the cities of Cupertino, Gilroy, Palo Alto, and the Urban County. HOME funds can be used to fund eligible affordable housing projects for acquisition, construction and rehabilitation. Starting in FY 2015-16 developers of affordable housing projects were eligible to competitively apply through an annual RFP process directly to the County for HOME funds to help subsidize affordable housing projects in Palo Alto. Applications will be directly submitted through the County's request for proposal process for available HOME funds. Certain nonprofit organizations known as Community Housing Development Organizations (CHDOs) may also apply for funding from State HCD for housing projects located within Palo Alto. The City received one HOME grant from 1992 HOME funding for the Barker Hotel project. Proceeds from HOME loan repayments must be deposited into a HOME Program Income Fund and used in accordance with the HOME program regulations. In addition, the County will only fund a project that has the local support of the City. If the City receives HOME dollars from its participation in the HOME consortium, the required 25 percent matching funds will be provided from the City's Affordable Housing Fund, which is comprised of two sub -funds: The Commercial Housing Fund & the Residential Housing Fund. To date, no projects within the City have been funded through the HOME Consortium. Moving forward, the City plans to increase outreach to developers in the City to provide additional information on the HOME Consortium & available funding. Other State & Federal Grant Programs In addition to the CDBG entitlement dollars, the federal government has several other funding programs for community development & affordable housing activities. These include: Section 8 Housing Choice Voucher Program, Section 202, Section 811, the Federal Home Loan Bank Affordable Housing Program (AHP) & others. It should be noted that in most cases the City would not be the applicant for these funding sources as many of these programs offer assistance to affordable housing developers rather than local jurisdictions. The State of California has recently passed approximately 20 bills with the intent of increasing or preserving affordable housing with the State. According to the Governor's State of the State address, bills that help increase housing production, both market -rate & affordable, will be a priority. The City will continue to track & look for opportunities to leverage State resources for the City. Local Housing & Community Development Sources: Other local resources that support housing & community development programs include: Palo Alto Commercial Housing Fund & Palo Alto Residential Housing Fund. The City will continue to seek opportunities for projects that meet Annual Action Plan 25 2021 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 34 Packet Pg. 141 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation local bond requirements in order to bring additional resources to help the City's affordable housing shortage. Annual Action Plan 26 2021 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 35 Packet Pg. 142 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation If appropriate, describe publically owned land or property located within the jurisdiction that may be used to address the needs identified in the plan The City has no surplus public land. However, in 2019, the Governor Newsome signed Executive Order N-06-19 that ordered the California Department of General Services (DGS) and the California Department of Housing and Community Development (HCD) to identify and prioritize excess state- owned property and aggressively pursue sustainable, innovative, cost-effective housing projects. There is no excess state property in the City of Palo Alto. Discussion Please see information provided in previous sections. Annual Action Plan 2021 27 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 36 Packet Pg. 143 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation Annual Goals and Objectives AP -20 Annual Goals and Objectives - 91.420, 91.220(c)(3)&(e) Goals Summary Information Sort Goal Name Start End Category Geographic Needs Addressed Funding Goal Outcome Indicator Order Year Year Area 1 Affordable 2020 2025 Affordable Affordable Housing CDBG: Homeowner Housing Rehabilitated: Housing Housing $73,135 6 Household Housing Unit 2 Homelessness 2020 2025 Homeless Homelessness CDBG: Public service activities other than $56,080 Low/Moderate Income Housing Benefit: 169 Persons Assisted 3 Strengthen 2020 2025 Non -Homeless Community Services CDBG: Public Facility or Infrastructure Neighborhoods Special Needs and Public $324,021 Activities other than Low/Moderate Non -Housing Improvements Income Housing Benefit: 1,200 Community Persons Assisted Development Public service activities other than Low/Moderate Income Housing Benefit: 74 Persons Assisted 4 Fair Housing 2020 2025 Non -Housing Fair Housing CDBG: Public service activities other than Community $33,698 Low/Moderate Income Housing Development Benefit: 13 Persons Assisted 5 Economic 2015 2020 Non -Housing Economic CDBG: Jobs created/retained: 15 Jobs Development Community Development $160,477 Development Table 3 —Goals Summary OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 28 Item 9: Staff Report Pg. 37 Packet Pg. 144 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation Goal Descriptions 1 Goal Name Affordable Housing Goal Assist in the creation and preservation of affordable housing for low income and special needs households. Description 2 Goal Name Homelessness Goal Support activities to prevent and end homelessness, such as funding affordable housing opportunities, resource centers Description for homeless individuals, and support for tenants of single -room occupancy units. 3 Goal Name Strengthen Neighborhoods Goal Provide community services and public improvements to benefit low-income and special needs households. This includes Description assisting those with disabilities to transition from unstable housing to permanent housing, supporting residents of long- term care facilities, and supporting individuals experiencing domestic violence. 4 Goal Name Fair Housing Goal Promote fair housing choice by funding fair housing organizations to provide fair housing services, such as education, Description tenant -landlord mediation, and testing. 5 Goal Name Economic Development Goal Support economic development activities that promote employment growth and help lower -income people secure and Description maintain jobs. This includes funding nonprofits working toward developing the skills of low-income and homeless individuals. OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 29 Item 9: Staff Report Pg. 38 Packet Pg. 145 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation AP -35 Projects - 91.420, 91.220(d) Introduction The Consolidated Plan goals below represent high priority needs for the City of Palo Alto (City) and serve as the basis for the strategic actions the City will use to meet these needs. The goals, listed in no particular order, are: 1. Assist in the creation and preservation of affordable housing for low income and special needs households. 2. Support activities to end homelessness. 3. Support activities that strengthen neighborhoods through the provision of community services and public improvements to benefit low income and special needs households. 4. Promote fair housing choice. 5. Expand economic opportunities for low income households. # Project Name Ravcnwood Family Hcalth Nctwork: ADA Acccssiblc Clinic Entrancc Exit thc Palo Alto -1 and at Clinic ADA Ramp Improvement Project -City of Palo Alto 2 Catholic Charities of Santa Clara County: Long Term Care Ombudsman 3 Silicon Valley Independent Living Center: Housing and Emergency Housing Services. 4 Project Sentinel - Fair Housing Services 5 City of Palo Alto - Planning and Administration 6 Downtown Streets Inc. - Workforce Development Program. 7 Rebuilding Together Peninsula Safe at Home 8 LifeMoves - Opportunity Services Center and Hotel De Zink (HDZ): Case Management 9 Alta Housing (Former: Palo Alto Housing Corporation Management and Services Corporation) Table 4— Project Information Describe the reasons for allocation priorities and any obstacles to addressing underserved needs The City awards CDBG funding to projects and programs that will primarily benefit low-income, homeless and special needs households. The City operates on a two-year grant funding cycle for CDBG public service grants and a one-year cycle for CDBG capital housing rehabilitation and public facilities and improvement projects. Projects are only considered for funding within the Consolidated Plan period if they address the goals discussed above. Annual Action Plan 2021 30 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 39 Packet Pg. 146 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft-Ravenwood Reallocation AP -38 Project Summary Project Summary Information OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2021 31 Item 9: Staff Report Pg. 40 Packet Pg. 147 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Project Name Ravenswood Family Health N twork: ADA Accessible Clinic Entrance and Exit at the Palo Alto Clinic ADA Ramp Improvement Project -City of Palo Target Area Citywide Goals Supported Strengthen Neighborhoods Needs Addressed Community Services and Public Improvements Funding CDBG: $300,000 Description ADA Accessible Clinic Entrance Exit the Palo Alto Clinic. Eligible and at ActivityD�///{Ma-trl3F National 7 n 2 n Q (-, ) ( 2 ) cti e /EI A/d�2D}:C$3�^-CDBG 1 n � n n5 CDBG 570.201(C). Recipient Type: LMC. This Cit-at�iT24 CFR projectwill help in it into rehabilitating existing ramp and convert a safe and ADA 270 GrantPale Alto to for Ave, allow accessible ramp at adequate distancing to the COVID 19 social prevent spread of as well as patients' access to the clinic. The City intends to fund and manage a major curb ramp improvement project that will bring an estimated 70 curb ramps up to current ADA accessibility standards. CDBG Eligible Activity: Public Facilities and Improvements: Health Facilities (HUD Matrix Code). The Project meets the following Consolidated Plan Goal(s): #3 - Support provision of essential human services, particularly for special needs populations, and maintain/expand community facilities and infrastructure. Target Date 6/30x, 22 12/30/2023 Estimate the number and type of families that will benefit from the proposed activities Approximately 1,200 Palo Alto belonging to 80% and low residents income bracket will benefit from the proposed activity Approximately 70 curb ramps at many intersections will be improved benefitting elderly populations and persons with disabilities. 2,283 persons in the City live with disabilities. Location Description Palo Alto, CA 94306 Street intersection locations TBD Planned Activities the Project include activities removal of existing ramp and replacement with stair ADA Additionally, an accessible ramp and a option. a motion to the door be installed to allo., safe will sensor and easy access clinic. The City intends to competitively bid the removal of noncompliant ADA intersections and installation of current DOT standard ADA ramp improvements to be completed in 2023. 2 Project Name Catholic Charities of Santa Clara County: Long Term Care Ombudsman Target Area Goals Supported Strengthen Neighborhoods Needs Addressed Community Services and Public Improvements Funding CDBG: $10,000 Annual Action Plan 2021 32 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 41 Packet Pg. 148 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Description Long -Term Care Ombudsman Program. Eligible Activity (Matrix Code):05A. CDBG National Objective: 570.208(a)(2). CDBG Citation:570.201(e). Recipient Type: LMC Target Date 6/30/2022 Estimate the number The program will provide advocacy and complaint investigation for 50 and type of families elderly residents of long-term care facilities in Palo Alto. that will benefit from the proposed activities Location Description Long-term care and skilled nursing facilities throughout the City. Planned Activities Regular contact with Palo Alto Residential Care Facilities to observe and monitor conditions of care. 3 Project Name Silicon Valley Independent Living Center: Housing and Emergency Housing Services. Target Area Goals Supported Strengthen Neighborhoods Needs Addressed Community Services and Public Improvements Funding CDBG: $14,021 Description Housing and Emergency Housing Services. Eligible Activity (Matrix Code):05B. CDBG National Objective:570.208(a)(2). CDBG Citation:570.201(e). Recipient Type: LMC Target Date 6/30/2022 Estimate the number 24 unduplicated Palo Alto residents will benefit from one on one and type of families housing assistance. that will benefit from the proposed activities Location Description Citywide Planned Activities Silicon Valley Independent Living Center provides assistance for individuals with disabilities and their families to transition from homelessness, health care facilities, unstable or temporary housing to permanent affordable, accessible, integrated housing with emergency assistance, security deposits, rent, information, and referral, and other basic essentials. 4 Project Name Project Sentinel - Fair Housing Services Target Area Goals Supported Fair Housing Annual Action Plan 2021 33 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 42 Packet Pg. 149 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Needs Addressed Fair Housing Funding CDBG: $33,698 Description Fair Housing Services. Eligible Activity (Matrix Code):21D. CDBG National Objective:570.208(a)(2). CDBG Citation: 570.206(c). Recipient Type: LMC Target Date 6/30/2022 Estimate the number 13 unduplicated individuals will be provided with fair housing services of and type of families complaint counseling, investigation and where appropriate enforcement that will benefit from referral. the proposed activities Location Description Citywide Planned Activities Project Sentinel will provide community education and outreach regarding fair housing law and practices, investigation, counseling and legal referral for victims of housing discrimination, and analyses for City staff and officials regarding fair housing practices. California and federal fair housing laws assure specific protected classes the right to be treated in terms of their individual merits and qualifications in seeking housing. Unfortunately, some people are not aware of the law or their rights. 5 Project Name City of Palo Alto - Planning and Administration Target Area Goals Supported Affordable Housing Homelessness Strengthen Neighborhoods Fair Housing Economic Development Needs Addressed Affordable Housing Homelessness Community Services and Public Improvements Fair Housing Economic Development Funding CDBG: $99,304 Description Planning and Administration: CDBG Citation: 570.206(a) Target Date 6/30/2022 Annual Action Plan 2021 34 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 43 Packet Pg. 150 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Estimate the number The City will provide general administrative support to the CDBG and type of families program. that will benefit from the proposed activities Location Description Citywide Planned Activities Administer the Administrative costs for the overall management, coordination, and evaluation of the CDBG program, and the project delivery costs associated with bringing projects to completion. 6 Project Name Downtown Streets Inc. - Workforce Development Program. Target Area Goals Supported Economic Development Needs Addressed Economic Development Funding CDBG: $160,477 Description Workforce Development Program. Eligible Activity (Matrix Code): 05H.CDBG National Objective: 570.208(a)(2)(A). CDBG Citation: 570.204(a)(2). Recipient Type: LMC Target Date 6/30/2022 Estimate the number 15 unduplicated homeless and unemployed persons will be placed in and type of families jobs through job training/employment readiness classes and outreach to that will benefit from local employers. the proposed activities Location Description Citywide Planned Activities The Workforce Development Program will provide a transition from unemployment and homelessness to regular employment and housing through case management, job training, mentoring, housing, and transportation assistance. Downtown Streets Team will screen and prepare applicants and will use their community connections to provide training and job opportunities. 7 Project Name Rebuilding Together Peninsula ALACA.AaAaAa Safe at Home Target Area Goals Supported Affordable Housing Needs Addressed Affordable Housing Funding CDBG: $73,135 Annual Action Plan 2021 35 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 44 Packet Pg. 151 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Description Safe at Home Program. Eligible Activity (Matrix Code): 14A/B.CDBG National Objective: 570.208(a)(3). CDBG Citation: 570.202(b)(11). Recipient Type: LMH Target Date 6/30/2022 Estimate the number 6 households and type of families that will benefit from the proposed activities Location Description Citywide Planned Activities Provide home safety repairs, mobility and accessibility improvements for low- income households in Palo Alto with the primary consideration being the correction of safety hazards. 8 Project Name LifeMoves - Opportunity Services Center and Hotel De Zink (HDZ): Case Management Target Area Goals Supported Homelessness Needs Addressed Homelessness Funding CDBG: $31,545 Description Opportunity Services Center Eligible Activity (Matrix Code):03TCDBG National Objective: 570.208(a)(2). CDBG Citation:570.201(e). Recipient Type: LMC Target Date 6/30/2022 Estimate the number 38 unduplicated individuals (homeless and/or very low income and type of families individuals per year) will receive case management services including that will benefit from assistance with housing/job the proposed searches, referrals and mentoring through the Opportunity Services activities Center. Location Description 33 Encina Way, Palo Alto, CA 94301 Planned Activities Case management services will be provided to Opportunity Services Center and Hotel De Zink clients in locating housing and/or employment and be connected to benefits. 9 Project Name Alta Housing (Former: Palo Alto Housing Corporation Management and Services Corporation) Target Area Goals Supported Homelessness Annual Action Plan 2021 36 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 45 Packet Pg. 152 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Needs Addressed Homelessness Funding CDBG: $24,535 Description SRO Resident Support Program. Eligible Activity (Matrix Code):05OCDBG National Objective:570.208(a)(2). CDBG Citation:570.201(e). Recipient Type: LMC Target Date 6/30/2022 Estimate the number and type of families that will benefit from the proposed activities Location Description 439 Emerson Street, Palo Alto, CA 94301 735 Alma Street Palo Alto, CA 94301 Planned Activities Palo Alto Housing Corporation engages a service coordinator to provide 40 hours weekly services to provide case management and support counseling services to residents at Alma Place and Barker Hotel to help them maintain housing stability. Activities include financial counseling, health maintenance, information and referral, problem solving, employment assistance, crisis intervention and case management. Both Alma Place and Barker Hotel are single -room occupancy facilities.</ Annual Action Plan 2021 37 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 46 Packet Pg. 153 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation AP -50 Geographic Distribution - 91.420, 91.220(f) Description of the geographic areas of the entitlement (including areas of low-income and minority concentration) where assistance will be directed The City allocates CDBG funds to benefit low -moderate income (LMI) households and does not have target areas. Instead, the City focuses its services and capital improvements across the City as a whole. Geographic Distribution Target Area Percentage of Funds Table 5 - Geographic Distribution Rationale for the priorities for allocating investments geographically Not applicable. Discussion Please see discussion above. Annual Action Plan 2021 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 47 Packet Pg. 154 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Affordable Housing AP -55 Affordable Housing - 91.420, 91.220(g) Introduction One Year Goals for the Number of Households to be Supported Homeless Non -Homeless Special -Needs Total Table 6 - One Year Goals for Affordable Housing by Support Requirement One Year Goals for the Number of Households Supported Through Rental Assistance The Production of New Units Rehab of Existing Units Acquisition of Existing Units Total Table 7 - One Year Goals for Affordable Housing by Support Type Discussion Annual Action Plan 2021 39 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 48 Packet Pg. 155 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation AP -60 Public Housing - 91.420, 91.220(h) Introduction Actions planned during the next year to address the needs to public housing Actions to encourage public housing residents to become more involved in management and participate in homeownership If the PHA is designated as troubled, describe the manner in which financial assistance will be provided or other assistance Discussion Annual Action Plan 2021 40 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 49 Packet Pg. 156 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation AP -65 Homeless and Other Special Needs Activities - 91.420, 91.220(i) Introduction Describe the jurisdictions one-year goals and actions for reducing and ending homelessness including Reaching out to homeless persons (especially unsheltered persons) and assessing their individual needs Addressing the emergency shelter and transitional housing needs of homeless persons Helping homeless persons (especially chronically homeless individuals and families, families with children, veterans and their families, and unaccompanied youth) make the transition to permanent housing and independent living, including shortening the period of time that individuals and families experience homelessness, facilitating access for homeless individuals and families to affordable housing units, and preventing individuals and families who were recently homeless from becoming homeless again Helping low-income individuals and families avoid becoming homeless, especially extremely low-income individuals and families and those who are: being discharged from publicly funded institutions and systems of care (such as health care facilities, mental health facilities, foster care and other youth facilities, and corrections programs and institutions); or, receiving assistance from public or private agencies that address housing, health, social services, employment, education, or youth needs. Discussion Annual Action Plan 2021 41 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 50 Packet Pg. 157 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation AP -75 Barriers to affordable housing -91.420, 91.220(j) Introduction The incorporated and unincorporated jurisdictions within the County face barriers to affordable housing that are common throughout the Bay Area. High on the list of market barriers is the lack of developable land, which increases the cost of available lands and increases housing development costs. Local opposition is another common obstacle as many neighbors have strong reactions to infill and affordable housing developments. Their opposition is often based on misconceptions, such as a perceived increase in crime; erosion of property values; increase in parking and traffic congestion; and overwhelmed schools. However, to ensure a healthy economy the region must focus on strategies and investment that provide housing for much of the region's workforce — for example, sales clerks, secretaries, waiters, baristas, teachers, and health service workers — whose incomes significantly limit their housing choices. It should be noted that in a constrained housing supply market, when housing developments produce housing that is relatively affordable, higher income buyers and renters generally outbid lower income households. A home's final sale or rental price will typically exceed the projected sales or rental costs. Public subsidies are often needed to guarantee affordable homes for low and moderate income households. Actions it planned to remove or ameliorate the negative effects of public policies that serve as barriers to affordable housing such as land use controls, tax policies affecting land, zoning ordinances, building codes, fees and charges, growth limitations, and policies affecting the return on residential investment Palo Alto is addressing the barriers to affordable housing through: • Context -Based Design Codes: The City adopted form -based codes in 2006 to ensure and encourage residential development by following context -based design guidelines to incentivize increased density needs. Density Bonus Ordinance: The City adopted a Density Bonus Ordinance in January 2014 to allow for bonuses of 20 to 35 percent, depending on the amount and type of affordable housing provided, the regulations also allow for exceptions to applicable zoning and other development standards, to further encourage development of affordable housing. • Below Market Rate (BMR) Housing Program: Established in 1974, the City's BMR requires developers to provide a certain percentage of units as BMR in every approved project of three units or more. The program originally required that for developments on sites of less than five acres, the developer must provide 15 percent of the total housing units as BMR housing units. If the site was larger than five acres, the developer was required to provide 20 percent of the units as BMR housing. The City of Palo Alto have historically used in -lieu fees and the use of development impact fees charged on new, market -rate housing and/or commercial Annual Action Plan 2021 42 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 51 Packet Pg. 158 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation development. The City updated its Commercial and Residential Impact Fee Nexus Studies and adopted two ordinances to make changes to its BMR program and adopted a new fee structure. The ordinances became effective on June 19, 2017. Fair Housing: The City provides funding to Project Sentinel. Project Sentinel provides expertise in fair housing law and tenant -landlord disputes. Services include information, referrals, community outreach and education. In addition, Project Sentinel resolve fair housing complaints via investigation, mediation, education and outreach to both property owners and tenants about fair housing policies. • Housing Implementation Ordinance (HIP): Effective May 2, 2019, this Ordinance adopted changes to the following zoning districts: Citywide — where multifamily uses are permitted, Multifamily Residential Districts (RM), Downtown (CD -C), California Avenue (CC ((2)), and El Camino Real (CS and CN). Affordable Housing (AH) Combining District: In 2018, The City Council adopted the Affordable Housing Combining District to provide flexible development standards beyond the State Density Bonus Law to allow 100% affordable housing projects located in a commercial zoned area. • Workforce Housing (WH) Combining District: The City Council also adopted in 2018 the Workforce Housing Combining District to encourage the development of housing within half - mile of major fixed rail transit by modifying flexible development standards for the public facilities (PF) zoning district. Discussion Please see above. Annual Action Plan 2021 43 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 52 Packet Pg. 159 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation AP -85 Other Actions - 91.420, 91.220(k) Introduction This section discusses the City's efforts in addressing the underserved needs, expanding and preserving affordable housing, reducing lead -based paint hazards, and developing institutional structure for delivering housing and community development activities. Actions planned to address obstacles to meeting underserved needs The diminishing amount of funds continues to be the most significant obstacle to addressing the needs of underserved populations. To address this, the City supplements its CDBG funding with other resources and funds, such as: In FY2020-21, The City's Human Service Resource Allocation Process (HSRAP) provided $549,306 from the General Fund in support of human services. The HSRAP funds, in conjunction with the CDBG public service funds, are distributed to local non-profit agencies. Additionally, approximately $78,000 was provided to nonprofit organizations serving Palo Alto residents with short-term and/or urgent funding to address emergency, critical or emerging human services needs through the Emerging Needs Fund. The Palo Alto Commercial Housing Fund is used primarily to increase the number of new affordable housing units for Palo Alto's work force. It is funded with mitigation fees required from developers of commercial and industrial projects. • The Palo Alto Residential Housing Fund is funded with mitigation fees provided under Palo Alto's BMR housing program from residential developers and money from other miscellaneous sources, such as proceeds from the sale or lease of City property. The Residential Housing Fund is used to assist new housing development or the acquisition, rehabilitation or the preservation of existing housing for affordable housing. The City's Below Market Rate Emergency Fund was authorized in 2002 to provide funding on an ongoing basis for loans to BMR owners for special assessment loans and for rehabilitation and preservation of the City's stock of BMR ownership units. HOME Program funds are available on an annual competitive basis through the State of California HOME program, and the County's HOME Consortium. The Housing Authority of the County of Santa Clara (HACSC) administers the federal Section 8 program countywide. The program provides rental subsidies and develops affordable housing for low income households, seniors and persons with disabilities living within the County. Actions planned to foster and maintain affordable housing The City will foster and maintain affordable housing by continuing the following programs and ordinances: • The Below Market Rate Emergency Fund which provides funding on an ongoing basis for loans to BMR owners for special assessment loans and for rehabilitation and preservation of the City's Annual Action Plan 2021 44 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 53 Packet Pg. 160 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation stock of BMR ownership units. The Commercial Housing Fund is used primarily to increase the number of new affordable housing units for Palo Alto's work force. The Residential Housing Fund is used to assist new housing development or the acquisition, rehabilitation or the preservation of existing housing for affordable housing. The Density Bonus Ordinance adopted by the City Council in January 2014. The density bonus regulations allow for bonuses of 20 to 35 percent, depending on the amount and type of affordable housing provided. The City's participation in the County's HOME Consortium will allow developers of affordable housing projects to be eligible to competitively apply through an annual RFP process directly to the County for HOME funds to help subsidize affordable housing projects in Palo Alto, including acquisition, construction and rehabilitation. Actions planned to reduce lead -based paint hazards The City's housing and CDBG staff provides information and referral to property owners, developers, and non-profit organizations rehabilitating older housing about lead -based paint (LBP) hazards. Any house to be rehabilitated with City financial assistance is required to be inspected for the existence of LBP and LBP hazards. The City will provide financial assistance for the abatement of LBP hazards in units rehabilitated with City funding. The City also requires that contractors are trained and certified in an effort to decrease the risk of potential use of LBP in new units. All development and rehabilitation projects must be evaluated according to HUD's Lead Safe Housing Rule 24 CFR Part 35. Actions planned to reduce the number of poverty -level families The City, in its continuing effort to reduce poverty, will prioritize funding agencies that provide direct assistance to the homeless and those in danger of becoming homeless. In FY 2021-2022, these programs will include the following: • LifeMoves provides basic necessities for persons who are homeless or at risk of becoming homeless. The Opportunity Services Center is a comprehensive, one -stop, multi -service, day drop -in center that provides critical services for homeless Palo Alto residents. Specifically, the facility provides showers, laundry, clothing, snacks, case management, and shelter/housing referral services. • Palo Alto Housing Corporation will provide counseling and supportive case management services for low-income residents of single -room occupancy facilities to help them maintain housing stability. Activities include financial counseling, health maintenance, information and referral, problem solving, employment assistance, crisis intervention, and case management. • Downtown Streets Team works to reduce homelessness through a "work first" model. Downtown Streets Team uses its community connections to provide training and job Annual Action Plan 2021 45 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 54 Packet Pg. 161 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation opportunities to homeless people, specifically in the downtown area. Actions planned to develop institutional structure The City is striving to improve intergovernmental and private sector cooperation to synergize efforts and resources and develop new revenues for community service needs and the production of affordable housing. Collaborative efforts include: • Regular bi-weekly meetings between entitlement jurisdictions at the CDBG Coordinators Meeting and Regional Housing Working Group. • Joint jurisdiction Request for Proposals and project review committees. • Coordination on project management for projects funded by multiple jurisdictions. • HOME Consortium meetings between member jurisdictions for affordable housing projects. Actions planned to enhance coordination between public and private housing and social service agencies The City benefits from a strong jurisdiction and region -wide network of housing and community development partners, such as the County and the Continuum of Care. To improve intergovernmental and private sector cooperation, the City will continue to participate with other local jurisdictions and developers in sharing information and resources. In addition to the actions listed above, the City will continue to coordinate with the City's human services funding efforts to comprehensively address community needs. Discussion Please see discussions above. Annual Action Plan 2021 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 55 Packet Pg. 162 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Program Specific Requirements AP -90 Program Specific Requirements - 91.420, 91.220(1)(1,2,4) Introduction The following provides additional information about the CDBG program income and program requirements. Community Development Block Grant Program (CDBG) Reference 24 CFR 91.220(1)(1) Projects planned with all CDBG funds expected to be available during the year are identified in the Projects Table. The following identifies program income that is available for use that is included in projects to be carried out. 1. The total amount of program income that will have been received before the start of the next program year and that has not yet been reprogrammed 0 2. The amount of proceeds from section 108 loan guarantees that will be used during the year to address the priority needs and specific objectives identified in the grantee's strategic plan. 0 3. The amount of surplus funds from urban renewal settlements 0 4. The amount of any grant funds returned to the line of credit for which the planned use has not been included in a prior statement or plan 0 5. The amount of income from float -funded activities 0 Total Program Income: 0 Other CDBG Requirements 1. The amount of urgent need activities 0 2. The estimated percentage of CDBG funds that will be used for activities that benefit persons of low and moderate income.Overall Benefit - A consecutive period of one, two or three years may be used to determine that a minimum overall benefit of 70% of CDBG funds is used to benefit persons of low and moderate income. Specify the years covered that include this Annual Action Plan. 100.00% Annual Action Plan 2021 47 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 56 Packet Pg. 163 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Please see discussion above. Annual Action Plan 2021 W. OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 57 Packet Pg. 164 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Attachments Annual Action Plan 2021 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 58 Packet Pg. 165 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Citizen Participation Comments Annual Action Plan 2021 50 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 59 Packet Pg. 166 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation APPENDIX A PUBLIC COMMENTS Item 9: Staff Report Pg. 60 Packet Pg. 167 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation FY2021-22 Annual Ackiof Plan was circulated for Pub Ilc Comment5 and Review frorn March 15, 2021 through April 16, 2021. nuriing the 30 days public comment and review period time, no comments were received uivits Lontroi No: L,Ub-viii (exp. uy/su/zuul Item 9: Staff Report Pg. 61 Packet Pg. 168 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation APPENDIX B PUBLIC HEARING NOTIFICATIONS Item 9: Staff Report Pg. 62 Packet Pg. 169 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation Mnnriay Xa,vnL¢r as, 2D 1I1 bait Pow a Richd J. Pollak, 95 Pollak i5 5urvirmd by dauRMtm, Su - Richard Pollak, a W011d War [1 wen- canna Lea and Jody Pollak; son, Daniel afro and an aCn7naw11Cal and aCTUSpaCt F link; and granddaughicn, Jaimin and eoinc gcr form Los Allas, has dieTi d- e Jcnna Mould. was 9.5, Pollak, who diod an Nov- 16. was Joel K. Straus, 73 barn in Milwaukee to Lillian Fried- Joel Keith Straus, a Lawyer wiry lived lender PcIL1k and Jrkwph Pollak- in Mountain View, has died.I-k was 73- j]urigg Wiwld War 1I h4 scrv+ed lathe Straus, who died on Nov_ 17. was U.S. Air Fiwx in Burma and India as horn to Mollic and Jack Straus On (3cl. an cngilaxr-cunncr On B-25 bombers, 25. IV47, in Chic'ag(*- Hying 510 Cllmbat Iniswcs and reociv- He m'eivcd a hi5tcnry dtgrci from in g the T)isliin islred Flying Cross. UCLA and a law degree from UC-Hayt- Pollak became an acmnan[lcal and ing5 College of law in San Frenek'o. aCrlkspace Cnginccr attcr studying at Straus, who prectk'ed family law for Caltcch and the Uniuersily of Michi- 410 years. card as presuicnt of tine San gam. In the 1950s. lie participated in pi- Marco County Bar Assacialion and was oneering n irk Sill "I1. -by -wire- conlrol a law prpflccnrat San Francisco State_ systems rorjcl aircratt, workingal Hon- Straws, who movcd lo Mountain eywel.l in Minncnpnli4 and Northrup In View in 2013, was a member of Pen in- Snuthcrn Calitcirnia. sula Sinai Congrcgation in FoMe1 City. Pollak, who mewed in Palo Alit IA I-Ic is survived by his wifc. Linda 1957, wnrkcd for mrxct nr his carter at S[raus son, Jonathan Straus (Ashley); l.ockheed in Sam nyvalc rm s:lcllile sys- daughter, Fltca Ro cn (David): grand- lcros until his rctiTrmcnl in 1992, children, Harm Straus, Sam Straus. El- Hc wits iw edcd in death by his li0tt Rosen and Amalia Rosen: sister, mite, Anne Fshnian Pollak; and si.er, Vivian Vuhirc; ciskr-in-law,Joyirc Rob - Jaen Kan, hies: anti mother-in-law. Sy11il Kutiy. en�lni WE'RE BACK, WE'LL HELP .r,alningmanunb - Olepueahle menu -a • Plnsllc-pnper- YOU COME BACK TOO oneml wrens 5rpining offered mrurrirr✓'afrr 6us1rnrsrs riwnpirrg nqn . cavloguoc - pruinodcwiar mare.lala c dji4k>'dtavinX ui INkne . Mmunt0A pnntan - Xwnr s[udr mele.ials • N¢YL4[IGrs Copy Memher 01rec[.les • MamMra Factory - Memorial honk • Tani•/auarlatku - Trawl ar,d photo hoots 3929 El Camino Real, Pal, ,U[0 • E69682623 . Plum A aluhprlril} pdnb2avee_Yery.nm r capimeraory.fain Call far detalis how we can save you over 2D Yeors in $100,004 on any property over $5 million bone6 s in M8t11Pork Vincent J. O'Shea III Call or Text I +tirtocforlrl000rrpeNliorb1c OryWo7 (650) 520-4547 yEns and lam the klraker/owner l ten do m}4hiig Iwool on any i higcgeEmenl crd 1 do ml hicwe t4 chock with my lurokel Iqr R1Gk ctrl c,1 line that and yoci thy '—• • conwmerso-.e alylw hoveto do kcalrnr' 1 REDUCE YOUR CAPITAL GAINS TAXES Ancid paying excess va capital 9eins taires by calking to Los Akos Economic Consultant Paul J, Lesti. n,,Sarre 1962 hehas been helping dientsfdtb. right financial solution.tnfuirill dlair liiolanvanx g dr Paul J. Lesti ITr,41[rah L1X.1 Lent 51nrenu d Se111amenra, Inc. `95 L71s1,•I r1, ii'. n I 1 r !_ a 491[ t65o� s0-�l00ao Lcvl.aom Pauliii.esti,mm L. rsl6sity STOREWIDE SALE Buy one, get second d FREE ��ixJm':p r 0" pvsonal 5eM[R &arleno0', In dee.i. pengrolprnnt in irr,n proofsk r,Ln hcmewpnInfr ..why dealwhhlmy lion end risk yeriiny iirecnrd.eh Cus:d n the n? See rnl CASSARA BROTHERS CLOTHIERS FULL MEN'S CLOTHIER SINCE 1i69 991 IJ. San Aritunle Rd., Los Altos (650) 949.4335.OPEN 7 DAYS A WEEKS CITY OF PALO ALTO Notice of Funding Availability Fiscal Year 2021-22 & 2022-23 Community Development Block Grant Program S" I T Y :] r PALO Preproposal Cenlerenca: Monday, acamber 14, 2020 at 11:00 a.m. ,Vh:nd;nxar a, me Wnrernidi iS ni3rWdlGry ALTO Au,lkrrilorn Eli.,: GA 8t 000000 12 -DO bill On Ffldas_ ,l funny 1i 2071 Appli00hon3 rite aim avaiahln 11r 210 Oh y of P#I010010 C'g k10inily D0r0f)pinini Blocs ltram (CD6 j Program ter Fiscal Year 2021-22 (July 1, 2021 to June 30, 202218 2022- 23 [July 1, 2= io JVIa W. 20231 The City is requeslinp prdpbeaen for eligible caprlal heuyng AA7publlt k*WM rAhallilryuicn nrvjacl3. piklie 101 -net prl)grom36nd OPngnliC ua rnlnprnse l praterla Tim City Inay annaro and eppropeate lunde to one ar more 9Yglnle projects in each baidirg cetagory. Furore must be used In serve lour-aldear rnoderale- irgenla heu;ahc s locoaot .iilhin the CIy or Pole Alto jurioialan liming. The CDRG Program is diecird toward expanding and mnirrlaninp the a{Iordlbls housing 7upply; promoting hcogiig bppnnuri[Ieni and ChaiGoa, main0inirg and impr2rirlg camnlunity radllilea: ncneaalrg ec,nomie copoduletas. accasobiily. errergy nlnoency and saslairiehilay, and providing sdppolne services specfiraly for pastas at Iran and very bun irndmd. TArghieci grcaips criht ini:hx:e: prrIMR who art ho*im4, EEriorg, persgnawnh dlaai.5t0O. and Anne' special reads grb,ps. Thu lollowing funding categories are on a annitroar gran) landing oyde (FY21JP2'l: 1. GDOG Capital Ftbusng and Pubic Faeroes rashahlitaann Proiacls tepprox. 11419,[139. This Amdint is AvoiLWr >R lhrac ivndirg tdlo3fric5: Hoi$irx-i Rahabllllalun, Pubic FacAhaa Fleriabilllandnano E W nrxlbo Deyeloprnent Cahageryl Thu iallowing iundlyg cuteyonae ale on a Iwo -boar grant lundhg cycle IFY ai aa, A 2ml 1. CDBG Pnhlin Ser•riws lapprooc. 566,0061 2. CDSG Planning and Abrinislralipn (approx. $117,200. Thu Cilyol Fob 4110 r One Al lheepplleanialor the admnleirialm 01210 Cfl6CC5 program untla'lhia aaugoryl 3. CDBG Economic Development lapprox. 5450,096. This amount .0 avalable tut IhrocIindirr oicpdrics: Housing Hehabditat a, Pudic Fait00cs Rdlabigalidl and Ecalidf111d Deseldpi'nam Calegeryl A etWad dram Prc-Prcposal Caricrnnm will Int Fold on IAmday. De€omhcr ii, 2224, l l:po B.M. - 12:Do p.n1. The maeling 1Alll be red Villmllylhrnlgh Mlrcdaoa Teams Meetng. For mea111gs dlLlals. see balbw: cal it (alldl6 nnitll 41 696761fia�286994Sa}Sti4 United Slater, San Joao Phors4 COnferer a ID: 288 316 9591 To realest link of an meellru or i you are mantle to intend lino nreedng, phew carilect Erum 1i�gbcd, CDOG BicO 3podafsl a1 850829.2686 or via email or crian,mPgbooll diyplpaluano.org Appliwti4nsare available online ot: hllplFwau allpoipeloal Lou rglgovidaplalpinAong_range_planninglcommun icy_ dnal u p m a rrl_d odtg ran rider au tt ee p. The esllmaled CDBG doltar amounts ninny charlg�e based upon the 11nal allAcailona amounoad by the Depertrnerit or Housing and Urban Development Funding albaalions are subject to City Causal approval and may charge as a result. The appliwetri period .5111 dots an Monday. llahnlilher 30, 2aN and trill end at 12A6 yM on FAdey, JanLmty 15, Ott21. For addtonei queelionEs please infect Erurn Mert000l, CDBG Staff Seecaelie[, at arum magbnGiilrolPd4+Allo,ory. 01500305 2b1 Peracna wnh asuWlldes who require auxmery ea Cr aarvuas in using City teolrter, services or proq•urns, or who woikl Ila4 id innigkwr on tie Cly's vorrolialrce elan line Artleri[ana wait Oiaabilies At (ADh1 or loon, may a llai_ ADA Cdardrlmtdr, Oty Al Pakr Ann, 950-921-2550 lumdat or nrdaWdtyAipnoaTa.org Item 9: Staff Report Pg. 63 Packet Pg. 170 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation 20 De&Pvsl nserid n. Fehawy 25. 2021 Bt-okon Pipes + Eleritlaal Inslallalions 0a -the -Spot Repairs • Remodeling Projects Here's a confession: Most of the time, I'm phone can number 72. Peopre ran me after the first IoD seemed successful ... for acouple of days until Eanathing stops working- Nomla]Iy- itoe wrk fix that I'm happy to do- However, I do l€€1 bed about thempneyyouspEmon fial first call mi.The next tine you have a joberoud that hones that naedsdoing. why not save yourself the firetcefn Contact "A Handyman it the Hills" at (650] 390-7411 •i. Alemv. a...p uoo nxr.rrnYylara,r�rw, NOTICE OF PUBLIC REVIEW PERIOD AND PUBLIC HERRINGS FOR THE FISCAL YEAR IPYI2e21.22 COMMUNITY DEVELOPMENT BLOCK GRANT 1COBGl ANNUAL ACTION PLAN CITY OF THE CITY OF PALO ALTO IS DEVELOPING ITS FY 202t-22 PALS ANNUAL ACTION PLAN (AAP. This NOTICE ALTO SCHEDU E OF PUBLIC HEARINGS ANDOPPORTUNITIES FOR PUBLIC COMMENT. Tine Annual Acllan Plan Identilies one CIt'e hsuiw and canmunlry deo lorrient aDeds and provides a are -year action plan to oemonslrate now the City will Invest as COBS grants in order to address croon media. The funded actnlities are interned in meet Pelt Alas alfordeble housing and community development ob ecwes desratwd in the 2020.2025 Consolidated Plan. Tne Development 01110 AAP is slgntfeantly infarrled by pudle feedback. A 30•day a't review and cdrnmenl period on the Drag 2U1-22 Annual Action Pran fur tree ancaacl of FnI2f-22 Community ❑evelopmenr omit Gram (CDBG1 rte, wo be}! en Marra 15. 2021 and end on April 16, 2021. II you would like la provide oammenls on Uhe AAP, the City walr tree your ahandanco a1 any of the meetings Ilsled in the schedule below. Addiionally. comments may he provided by phone. regw4u PW Ito OBG Slaff Speclallst, larrrg 8 Peveklpnent $ervigey, 260 Hamilton Ave, 6th Floor, Palo Alto, Ualilornia 944'+,01}. or small via the contact inlorrnalbn listed below 1x both English speakers end those with Ynited En h proiiaiency. EItCUonIC Coplas of Inc Droll Annual Febon Ptah Will he a92ilalsa 9n March 15, 2021, on one C.tyh wabs,le: hllpa:Owww.cilya1pa16aits.ongfgov/deptsrpinAong_ra nge_plannmgluemmun ity_ devalopmenl bIack_grenVdetauh.asp CONTACT IHFORh1ATlOrl: For questions andfor oammems regarding the AAP, priase CdntOet Erum Mac xx,1 at 650•x29.2660 cI by drnailing Brum.magdo0l eltyapabarlo 4p PUBLIC HEARINGS: The City ol Palo Ann Human Relations Commission will hold avirtual pudic hearing In review arid lake public Comment on the draft FY2021-22 Animal Action Plan and Fiscal (oar 2021 COBG funding allocalions reccmmertded by the CDBG Human Relato s Selection Cornmilteeon Thursday, March 11, 2021. The Publk:liearing wi' be Field at 7:d0 p.m., or as sotin as possible Ihereafier. on i+rlual Tereccnferee ee, For Agenda, Meefing link end edditrinai mfrmeation related tO the mewing please erEi_ httpEJdnwwndynrparu n.orgIpnelhoerdwhm lrnstdefeult.esp The Palo Alto City Councilrlill hold a Public Hearing on Monday, Maya, 202110 adopt the FY 2021-22 Annual Acton Plan and the assooeled FN 2021 COOL attccattee The Public He rig sill the held at 5:O0pm-, cr as soon as p0wlble thereafter, on Nrlual Telecurrlerenca. For Agenda, Meeting Link and additional information related to 1he mestig please aieit: hnps:'han cityerpabatnorg+govlagendaarcouridVdefault.asp PeFsnnte !471n Qt0a0rlrbeE t7r0 rgev'e lnaFerWss in an opprcpriare altkmafivs nywnor, avehi'Bry 0070,, Dr ntocMcatwrka ro po#cres or f.Yoceduma no access City nseelingsr pro rams, Lv3erviGES.portukfctrtln9lireC yitADACttirR'Onato'CaorgeHoyt9r6$d- 1129-25&1lvorce? or by emsrli'rg adeato rofpeleetro org. Regi,esrs for assrsaance or accomenodabons shmuddbe n nihedasstartasposudrlwbrit no ratty titan 48 house in advance bra aeltedinled nxaaring. pnogram, or Settee. Springsteen's DUI charge tossed out The goveruntcnt dropped drunken driving and rccklcss driving charges against Flroce Springsleen yesterday stemming From an incident in New Jersey on Nov, 14, admitting that the rocker's blood-akijh 1 level was so low 11121 it didn't warrant the charges. Springslccn pleaded guilty to a third charge, conwming alcohol in a closed area. The Gatcway Nal ion - al Rcercation Area. Fac i ng a Judgc and more than Itltt onlookers i n a video conference. Springstcen sat next to his lawyer and admitted he was aware it was illegal t9 consume alcohol at the park. "1 had two sriull shots oFtequila.- SpringMlcen said in response Io ques- tions from an assistanl U.S. auorncy. U.S. Magistrate Anthony Mautr]ne fined Spri ngstecn .554111 for the offense, plus $4r1 in court tees. "I think I can pay Ihat immediately, your honor;" Springvteen told Mau - tone. PEPARPIEU RAPE CHARGE, The Paris prosecutor':; ofticc said Shat French relor Gerard Depardieu has ._ been charged with rope and sexual assault after authorities revived an investigation That was DEPAGOIEU inilially dropped. The office said on Tuusday Thal Depardieu was not detained when he was handed the preliminary charges on Dec. I6. French media reports said the charges relate to allegalions made by an actress in her 24s That date back to 2018. An initial inquiry against the star was dropped in 2[}19 because of lack of evidence, but was ]aver revived. The woman reportedly alleged that Depardieu assaulted her on Aug. 7 and Aug. 13, 2(118, at his hone in Paris. The Iwo met when Depard eu led a mater class ❑t hor school. RUSH SPARKS FLAG DISPUTE: Pa]m Beach County defied Florida Gov, Ron DeSsin is yesterday. refusing to ]borer ill courthouse flags to half - stall in honor Of the We conservalivebroadcaster Rush Limbauglli — a move that the governor's office called " r "The lowering of flags should be e unifying gesture during solemn occasions, such as in remembrance of the young lives losl during the Palk. land High School massacre," Palm Beach County Commissioner Melissa McKinley tweeted. "Although Rush Linibaagh was a significant public fig - ore, he was also en incredibly divisive one who hum many people wilh his words and actions." ]7eSantis' office issued a statement saying, "II is unfortunate that Palm Beach County would rather engage in petty polilics than honor the death of one of their eoumly's and state's most prominent residents and a Presidential Medal of Freedom recipienl.- PLEASE tf °kft 1 2 7 SUPPORT a aa7r2aia 7ae46951 LOCAL e s e 7 5 2• r a 7 a e a 8 v 5 2 1 7 41a4}a9;aa 9273 4S BUSINESS In 1+ i 9�� 9 6 4 9 P 7 h 1 B 5 s G r 1 v 4 s s S a 5 O, 8 r 1 7 ,og r''ll I 3 0 8 5 E 1 9+ a 1 r 2 s 2 7 9 __r7 FA_'! 0 6 2 S S 0 7 9 1 6 9 8 & 1 2 7 a s C�AF�l G a T 2 4 1 nit 3 2 4 1 B 7 5 tin ff it Tai i'rir viO 3,P ln[n•iaurs i3 a 6 v 7 2 4 Si0 r x 4 9 2 1 3T 39 El Csnv,ioacsl Privacy i9°-' - 'e Puzzles on page 29 WE'RE BACK w9dnesd0y - PundOt r 5:00 PM to 9:00 PM gftL FA,y iTalico TO -GO & DELIVERY OUTDOOR DINING ri T ti 341 cab loenla Avenue PALO ALTO /t tuS1A4y`p@ Call 0650) 463.4f}16 or order via' DOORDASH Italicorestaurant.com • inlo41italicoreAaurant.com Item 9: Staff Report Pg. 64 Packet Pg. 171 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation 3 Du&Post Sawnne. Ma F 11.2021. City of Palo Alto Architectural Review Board Regular Meeting March 18, 2021 at 8:3Uam - Oe Thursday Msrch 1& 2021, 01 8:30 AM the AnChrleelual Aovlew Board PALO ORB) will conduct apubic heam11. Puauem 10 the peasinter of Caffo rm ALTO O:raevTora Eoectnfve Order N-2. issued no March 1T. 2=, to prevent Vie saoatl d COVID-19. INN nagepro t,in be hold by vinuat xl a1rerence only, oath no physical bcalion. The meeting %ill be broadaasI Iree on Cebe TV acrd 1rrough Crlennei 26 at tree Ml0 o n Inedta Center at n¢lyhnlcPen,%alrnnoa. Mte bens d it*public may oonttlenl by nlldirg an emal to albfoiIyoroaluatoo org or by adendng the Zn rn visual meeting to giun Fee mmmenb. In9blrctions Ice thB Zoom nree0rlg. Alf ageir OM and 81611 reports can be found at bl.ly pilot* AHB. hlut W. ly1PApendireprcieohtoview Project pkrrs and dalaia AM" hale I. PUBLIC HEARING F OUAS1Jt1OICOAL 4280 El C'aarirn Redd 119PLrF00112]: Cenmderetlon of a Mirror Archtecoersl Redew to Allows for Facade Renovation to stn ErlsVrg SlrLclura. Scepe o1'16k Iatlude0 P03106109 9 Ec611ng Wood 5diug and Reptecilg Ft With slew Saomo and Met Siang, new Paint and Metal Cable Railing Along all $Mreoys. En ironmentalAa9eaemenl: Exampl. Zormg District.CS l*ery co C1'xrenereal). For Mare Irdormaliurl Cte1L1t Ilte F,ojeot Planner Emily Foley at easily, foleybicityofproaha sp. 2. AM FTew1oi ail Otlecnve Standards Or REVISED NOTICE OF PUBLIC REVIEW PERIOD AND PUBLIC HERRINGS FOR THE FISCAL YEAR {FYI 2921.22 CCUMUNIlY DEVELOPMENT BLOCK GRANT (CDBGI ANNUAL ACTION PLAN CI —Y OF PALO The City of Palo Alto Is develepg Its FY 2011-22 Am al Aebcn A LT O Plan IwP], This nolioe provides a scheewe o1 puW h6ta11t sect Gpporturrliesfor publiccommertl. The Annual Action Plan identifies the City's housing and canmanity deoeloprneni needs" provides a one-year action plan In demorlsrrale how the City will inve0L lie CDBG grants in cKw no address 11109E need3. The hrge0 ac11 Mlee are iclerded 10 rceel Palo Allo'S allordeb a housing and oommunily development ct ectivea described in the 2020- 2p25I orontlidoteci Plan. The development of the AAP Ia sgnihcantly informed by publio feedback A39 -day pubic review and 0011130191 period 00 1110 [)salt 131122 Annual AC66n Ptaft Itr tae aloceucn of FY2O21-22 Communily Development Bock Gram ICDBG) finds, to bags on March 15, 21121 and end un April 15, 2921, It you would like Id ylOorle Coa'Imen1S do the AA.P. the Coy *&IWMre your cLlennenC6 31 eery of the meetings lisled in the Schedule below. Addioonelly. comments may be Ixovlded oy phone, reguBr mall Ito CIP130 Seatf Sperx t. Pteiie I a LleoeTtent Services, 256 Hamillon Ave. Srh Floor, Palo Alto, Celilornie 94301). or email via the contact inIorme110n 101011 below for both English Speokerg and those with Ynited Era nh p lioieracy. ELECTRONIC COPIES; Electronic Copies of the Draft Axwral Acilon Plan will be available on March 15, 2021, on the Cily'o wehmle: hlI oe lltoyw,cilyalpalbalro.rxgrgbvfdeptsrlpinnang_ranga_planninitommun ity_ development binOo grant defadl.asp CONTACT WF0F1l1AT10Nn For queetione endbr comments regarding the AAP, pease contact Erum Magtwd at 656-3211-2660 or by amailing arum magbod61 cityofpabarb.crg PUBLIC HEARINGS: The OIry d Palo Ana Human Relallons Commiselon will hgltl a virtual pulAlc heezbe 111 r0ii0w and 1ak6 puGtiC 0011010111 on 11111 draft FY2021.22 Annu0lAttion Plan ofd Fiscal Year 2o2f CDBG funding ellocallona recommended by the CDBG Human Relatrvas Seleclion CarnmftesonThursday, Marsh 11, 2021. The PublicHearirlg till beholder Fn0fi-00 p.m-, oloan onas pasth3ethereafter. vie Virtual Tekronfererhge. For Agerdfa, M&91ing link and adnitieaI .11orillMlGn related 11. the meeling p111ASt visa: hnpEJAi tar.cityorpakakm.crgrwiraxlrtlebenkldnounenta18{)527 The Palo Alb City Council will hold a Public Hearing on Monday, Mey 3, 2021 1P adopt the F e 2921-22 Annual Acrkxh Pion and the aesac siad FY 21221 COBG e$lCcatCns. The Public Hearing will be held at 5flt p.m., or as soon as posade Iherealer. via Vlrlual Telecnlerence. For Agenda, Meeting LInk and additional Informorlon related in the meenni please vomit: hhpg'tM raw-elryelpeganocuryrgumIagenct&ayusoilIroarsuk.tap Persons w,in dasoaaas hobo requee malaria's in an appropnere ahemerive (Wmal, 3UXAwy ads, or nk7CF7ivalbrrs ro punuies or Rocsorures to aeceas Oily 6Gealrngs progrenas, or sine oars ahoufdwrrtacr Me Guyh ADA Coordriremr George Hay1 St 6510- 321-25501 voce] or ky ernaliFP9 aUa Glyob7afeaMo org. Hequesfs W asscslanca or acrxxrunodatr000 ahoutdbe nnhminad au swore as possrbee ben no Wei than 48 bestow In advance of a aorieo oe11 rr+wearr 2. L0rrtgram, OP 061311110 Cage's fifth wife `-NsaionaJ Trcaaurr" actor Nicolas haiku. au urdiog Lothe NowYork PoeL Cage has lied ihr knul u fifth Lime, Caber divorced his last wiFe, FFika Koi- marrying a woman less than half his ke. less than two years ago other they aie in Lau, Vrpas. TMZ were married for just four Tepurl.ul yratcntuy. Jaya In wort ducumcnts, The SFryour-old Cage, Cage said he "Iouked un- whu lives in Sin City. rnstandine of his acLiuns yF, married Riko ShiboLa• 26, in marrying iKOikel to un Fah. 16 ut the Wynn the exLrnl that hr was Hotel after he peu xnud to C,— incapable of upxuring Lo 9HIRATA her over FauiTime. in the the rhurriaae." summer while she was in Japan. He wan pnrviously married to Pmri- The ceremony inuludmi rradings of oia Ar. urtte- Lisa Marie Pessary and Walt Whitman puetry and Japanrsr Alice Kim. �-i11rIr131� PLEASE Easy DFiicrR +UPRT 1 . rc 9m >, , 7 1 w 5 5 a e r 2 a -5924011D 52318ae97 LOCAL e89 ar9a5 A9r2319, BUSINESS 07 2 5 6 9 3 d 1 2 2& 7 a s 3 0 5 5 s a 7 P d rc, 3 1 3 a 8 0 2 T 5$ 'aR IT w'ILL RISAPPEAR] 9, 4 S 1 9 s T 2 9 6 1 s s 8 2 1 PM 2 u 7 s i r, a 4 f@ a s@ 7 7 a s a 3 7 1 2 5 6 117e e a1O54 3 5 a 4 al nsnercxr ass Fnre•rlEiio 34]9 El C...;PJoAlaa 4 1 G s$ P] 6 a 1 5 2 b 9 1 e 1 e �,ua.J csoaso-mru wMr..e..,.wrn Pu ales ut page 26 - Logo, ks Iike it's time for your check-up ---------------------------------------- FREE Exam 2iwaseTeating ,eeshoeening krkronhlpping L I.— 1 wY C Plea Canned Spree m Hauser On sbe xr x AL r I N ` Vaeeinalions Paraclle Eeern 0n.sMo Leh 2461 W. El Lamina Real, Mountain View Animal Hospital 16001164-LOSSn JpineVetOnllne.rom SMOG CHECK FluACeiilkae Feul What year is your $925. tAps1aelrrh tqe hdwrhen 611 rasa vehicle pricing? $86 oil atAttnlmmem Dill. 2(l(& Newer..-.. $23.50 $28FIIP, Pace Pg9B1 rill. emal Drtlrop yr.panspnsenlorr rorminads 1996 to 1999.......$SB.5t1 lheamewl scrvrelygrvahrlrs nanr 1995$ Older,...,. $413.50 51600 iK21u E1'AP IeslI q II rrqunt r ------------------1 -------tee:-UoUPoiflil ---; BUY ONE ; AIR & CABIN FILTER SERVICE 6oschClearlWrwRoge i/ ,wiper dada. """1 1/` Get one 1S25SAVINGS) /// i $ ; leehcet lnlerlor IIIct systen, coll,l,ttane,. 50d 6 o!! 0. ' 'f t bacteria killing, 9 frnshere-spray +FREE VISTA UTId13 % .,ii., ,, ,,,, ,,,, ,,,,n. -., ,. Pili0 hitkuPtv2ddadas. unnn,ln,:rar7c:snnls."ncsal,a ' DaPrrr• rprs h6kml `----------------------- -COUPON- -----• FUEL INJECTION c1IIISYSTEM SERVICE i 1 695 , SAVE ' I ur• 91 More than 50 years in Palo Alto! 2200 EI Camino Real I PALO ALTO Helps maintain MPG & engine µether i (650) 857-1313 mance.lcsaysyehicletuneupl www.paloallosilell.00m : -----------_----------- Item 9: Staff Report Pg. 65 Packet Pg. 172 of 853 Item 9 Attachment B - SA Palo Alto AAP 2021-22 Draft- Ravenwood Reallocation 34 DM b Post Sutu one. AM l 17. 24521 Now Open For Outdoor Dining &Take -Out Orders OPEN Monday -Sunday — R:ooam-7:oopm You can still calI to place your order of go to our website to order online. Latest updates can be found onour soe:lal ntedla pages on Facebook and Instageam. Dinner specials available after 4pm. WOODFIRED PIZZA AVAI LABLEWEDNESDAY-SUNDAY ONLY beginning at noon. We do have glutersFreecrust substitute. Your safety and the safety of our staff Is our utmost pilorIty f waik.0 for ywrraaoperrrfrnn en 6 Fyour.Cnfl tze1nupPolV Located at the crossroads of Highways 84 and 35 (5kyline) (650) 851-0303 `Harry Potter' star dies from cancer Bri LiskL autrtss Helen Mit'r dry. wtu, startrcd in the televisiun shciw "Peaky Blinders" and the Harry Platermav- ies, has died in ls,ndtia, her husband said yesterday. She was 12 and had been suffering from c-auwcr. Her husbannL (chow scour Damian Lewis, said McCrory died "peacefully at Immrre" after e'heruic battle with cancer-" "Site died as she lived. tradesly," Levels wrote unTwiner. MIC4`RDRY McCrory was one uF Britain's mint rnspcc*A AcYrusses, making her murk by playing a suc- cessiLm of Formidable and suntetimes fearstune women. She played the m:uriarch of a crime family on "Peaky Blinders," which is set in the early 20th -century En- glish underwurid, and the scheming '.hcldernun ally Nurcissa Malfny in the "Harry Putter" mnvics. McCrory also starred as a human ripthtrdraj ed mu, intemtion- a1 intrigue in the TV thriller "Fear- lesx," played IawyerCherie. Blair, wife of British Prime MinisterTuny Blair, in the 20456 movie "'Ilse Queen," and appeared in James Rrmd's "SkyfelL" YOUTUBE STAR HOSPITALIZED: Y,.Tube perwtnality, businessnuur and musician lefTre- Star wax hnspitalixed after a arc crush in Wyoming yesterday. Star veered off a slushy ntad in the Casper aria and tprertumed his Rolls Royce, according to car the Wyuming Highway Patrol. A Friend, Daniel STAR Lucas, also was in the car- Rudy were taken to a hurspital in Casper with undisclosed injuries. Star, whu is best known fur his urls- ntetks business, has drawn attention fur using ral:isL language- pending with nCunfederaLe fag and prltrtuating sClf- harm, prlmprinn him to ArX11O ixe. Eater oHfic■n a 4 n a 1 7 9 8 2 a 2 u 7 e 4 3, 8 nN Xo. mNlaSC1 9 1 a 2 51n a 7 6 r 7 a 8 s 51 n rro,.;v-romsutu.e= t s 2 4 9 a 8 t 1 v s rc 2 8, 8 +1 r +vae"aeead: ' e 9 r u 1 8 s 1 5 9 r r 2 8 3 4 rrq terY.rdd r n1 b 2I,.ed LIP 4 5 C12 1 8 a 6 6 3 1 4 5 7 2 9 r°"+ TMr rc. t'rho s ite.ad o z 1 9 a a 7 c 5 1217 4 8 s a 5 6 1 dp,�.. ex., w. ur o.qa rw a61(811rew c,1., 2 x 5. 7 8 6Cv 9 1I 2 0 a B a wyr.w.rt asoar 1 6 7 a 4u 2 9 B e 9 2, 9 8 1 Pt w�eai awe n m11 i(8e 4 9 9 5 2 : I d 8 3, 7 r 9 s ersw �,ob2w.u.c+ me„r,,,,.a„..ax'it rreb�rr J PuaIBe Ord page 33 I Branowawer. a' area wselo.rrl POST +ar n. ¢a. 7t. Mmr 7t NOTICE OF PUBLIC HEARINGS FOR THE FISCAL YEAR {FY) 2021-22 COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) ANNUAL ACTION PLAN CI —Y OF PALO wThe City or Palo Alta is de,relopirt ids FY 2G21� " AnnActon JR LTA Plan {APPJ. The Annlasl AC58n Plan kLnlJlies the CAy'a rousing and communitydevahlpmanl need. and pmsidea a era -year action plan ta din (rain how the City will invest its CUES umnIs in order to address atdde mods. The lurldud ad11uf roes are irnettded lu meal Peed Alts u aRtedaaie hduaita5 srld txmmlrlity delrelapmam agectro.a described In the 2D2o-2D25 Cdnsoltdaied Pia... The davelopmar4 01 tire AAP is sign'dirsnlly nfomred by pubf c feadheck. II you wolyd limb piSaide Mnln er1LS on tell AAP, Ihh dully nClenlrf your t1lLtrndarsu0 ti Ih0 Chy Caur ell meeting Ilaled he40w. PUBLIC HEARII9G-The Palo Ailo City Councll rill hold a FY�lle Hearing on Monday, May 9, 2021 to edop111w FY 2021-22 Annual Satan Plan and me associated FY 2021 COB) albcaliora, The Puklic Hear:rg will be held at 5;00 p.m., 1x as sons as parable therealier. Members or me pursue who wish w parlinpale in the meering Can fnd insiluctiona on the lop and bottom cd indmlefuel npendsa. Fu Agenda and a 1 raral iniormaton related to the meeting plw,seviyt: hltps/hem..dtyolpabala.org�Lraparlmants•'City-CIwis5 ity-Caonal-Agardos-ar.b Minylpg Aecoreing b the provisions ci the California Gvoemdra Ex9CDIIve Ordir N -SP -20, ittiued on March 17, 2924, to prowonl the apiatif ci COVID-19 red meoling will 0.' ham by vinuaa tea abnlarence only urn. no prlyalcal mcatlon. Meetings are brasdcast on Cade TV Chennnl28 or 29, Ore an YouTube, and liven.' the Midpan Media Canter, CONTACT INFORMATION: For queellolie or oarnmanta regarding itle AAP pleura obnlasl Crum P gbcd al 650.329'981) or eri.n,niaqbrulrinnlpekmuIn.org Persaes nfrh MsaDmhaes Iry,p rev ttuw rruravlain en an aapraplrrafe arfarnehvu fwmaf, AV-NaryaSd Ar cu mdetdl.ats ra Modeled or p xedures ad xccesr (Sly pvggren., am' aarwklse ahoalld cnnfac3 Ste Lily§ ADA L77ardn'nletor Devrpe 148y1 of 45rt- 9P9-2 5O fineal pr by erra4ng acts c'to tnatrallo orp Ragwasis rpr asob-7arnca or eaammnrfrlassnceasbaa xraydrltrStyli, asf Cut nil 741E'tkaartaencu,rs 151 aPr,enc6 ar a a^neduiad nieenng, propvam, an aaivn9. Item 9: Staff Report Pg. 66 Packet Pg. 173 of 853 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - ;25 E. Charleston -Mitchel Park DRAFT CITY OF PALO ALTO Substantial Amendment #1 FY 2022-2023 Annual Action Plan April 17, 2023 Initially Approved on June 20, 2022 Refer to page 37 for revisions. Item 9: Staff Report Pg. 67 Packet Pg. 174 of 853 Substantial Amendment 04/10/2023 Executive Summary AP -05 Executive Summary - 91.200(c), 91.220(b) Introduction Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park The City of Palo Alto (City) Fiscal Year (FY) 2022-23 One Year Action Plan contains the City's one- year plan to carry out housing and community development activities funded by Federal formula grant funds received from the U.S. Department of Housing and Urban Development (HUD), Community Development Block Grant (CDBG) program. This Action Plan covers the third of five program years covered by the City's 2020-2025 Consolidated Plan which was adopted by the Palo Alto City Council on June 15, 2020. The Department of Planning and Development Services is the lead agency for the Consolidated Plan and submits the Annual Action Plan for the City's CDBG program. HUD requires entitlement jurisdictions to submit an Annual Action Plan to report the distribution of federal entitlement grant funds over the Consolidated Plan's five-year period identifying how funding allocations help meet the goals covered in the Consolidated Plan. The CDBG federal appropriations for FY2022-2023 were released by HUD on May 13, 2022. The total amount available for allocation in FY2022-2023 is $653,168, which includes the entitlement grant ($513,168) and program income ($140,000) and is available for funding projects and programs during the 2022 Program Year. The City's Action Plan covers the time period from July 1, 2022, to June 30, 2023, (HUD Program Year 2022). The City's FY 2022-23 Action Plan reports on the status of needs and outcomes the City expects to achieve in the coming year. All of the activities mentioned in this Action Plan are based on current priorities. By addressing these priorities, the City hopes to meet those objectives stated in the 2020- 2025 Consolidated Plan. All the proposed projects and activities are intended to principally benefit Annual Action Plan 2022 Item 9: Staff Report Pg. 68 Packet Pg. 175 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park residents of the City who have extremely low-, low- and moderate- income, and populations that have special needs, such as the elderly, disabled, and homeless. 2. Summarize the objectives and outcomes identified in the Plan This could be a restatement of items or a table listed elsewhere in the plan or a reference to another location. It may also contain any essential items from the housing and homeless needs assessment, the housing market analysis or the strategic plan. The City is part of the San Francisco Metropolitan Bay Area, located 35 miles south of San Francisco and 14 miles north of San Jose. The City is located within the County of Santa Clara, borders San Mateo County, and encompasses an area of approximately 26 square miles, one- third of which consists of open spacel. According to Quick facts data provided by the U.S. Census Bureau[1], the City's total resident population is 68,572, per the Census on April 1, 2020. The City has the most educated residents in the country and is one of the most expensive cities to live in. In Silicon Valley, the City is considered a central economic focal point and is home to over 9,483 businesses. The Action Plan provides a summary of how the City will utilize its CDBG allocation to the meet the needs of the City's lower income population. According to the U.S. census data, 6.1% of all residents within the City had incomes below the federal poverty level. Additionally, according to the 2019 Point in Time Homeless Census[2], there are 299 unsheltered homeless individuals living within the City of Palo Alto. This number represents an increase of 17% from the 256 individuals that were counted in 2017. As mentioned previously, a total of $653,168 is available for funding projects and programs during FY2022-23. In FY 2022-23 the City received $513,168 from the federal CDBG program and approximately $140,000 in program income. Table 1, "Fiscal Year 2023 CDBG Budget" below summarizes the uses of the funds proposed during FY 2022-23. Annual Action Plan 2022 Item 9: Staff Report Pg. 69 Packet Pg. 176 of 853 Substantial Amendment 04/10/2023 Table 1: Fiscal Year 2023 CDBG Budget Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Applicant Agency Allocation Public Services Alta H,-Jsing - SRC} Resident Supportive Services $22,413 Catholic Charities of Santa Clara County- Long Term Care Ombudsman $10,000 p' -- Case Management al Opportunity Center $26,660 Silicon Valley Independent Living Cenler— Case Management Services $14,021 Project Sentinel — Fair Housing Services $24,881 Su -tuta; $97,975 Planning and Administration City of Palo A.to Adm-nistratic n $121,816 Project Sentinel,rFair Housing Seri:es $8,817 Sub -total $130,633 Economic Development N/A 50,00 Sub -total $0.00 public Facilities and Improvement Mitchell Park Place — 525 Ea: Charleston Project $351,425 Sub -total $351,425 Housing Rehabilitation Rebu-lding Together Peninsula $73,135 Sub-tota. $73,135 Grand Total $653,163 Table 1: Fiscal Year 2023 CDBG Budget 3. Evaluation of past performance This is an evaluation of past performance that helped lead the grantee to choose its goals or projects. This is an evaluation of past performance that helped lead the grantee (the City) to choose its goals or projects. The City is responsible for ensuring compliance with all rules and regulations associated with the CDBG entitlement grant program. The City's Annual Action Plans and Consolidated Annual Performance and Evaluation Reports (CAPER) have provided many details about the goals, projects and programs completed by the City. A review of past CAPERS reveals a strong record of performance in the use of CDBG funds. For example, during the 2015-2020 Consolidated Plan period, 244 affordable rental units were rehabilitated, 130 jobs were created or retained, and nearly 2,600 households were assisted through public service activities for low- and moderate- income housing. 4 Annual Action Plan 2022 Item 9: Staff Report Pg. 70 Packet Pg. 177 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park The City evaluates the performance of subrecipients on a semiannual basis. Subrecipients are required to submit semiannual progress reports, which include client data, performance objectives, as well as data on outcome measures. Prior to the start of the program year, program objectives are developed collaboratively by the subrecipient and the City, ensuring that they are aligned with the City's overall goals and strategies. The City utilizes the semiannual reports to review progress towards annual goals. 4. Summary of Citizen Participation Process and consultation process Summary from citizen participation section of plan. The City solicited input throughout the development of the FY 2022-23 Annual Action Plan. As required by HUD, the City provides multiple opportunities for public review and comment on the Action Plan and on any substantial amendments to it. Per the City's adopted Citizen Participation Plan, the City held a 30 -day public review comment period for the Action Plan. The City published notifications of upcoming public hearings and the 30 -day public review comment period in a local newspaper of general circulation, on the City's CDBG webpage and via email blasts to stake holders. The City held two advertised public hearings on March 10, 2022, and May 20, 2022. The Action Plan 30 -day public review period occurred from May 20, 2022, through June 20, 2022. 5. Summary of public comments This could be a brief narrative summary or reference an attached document from the Citizen Participation section of the Con Plan. There were no public comments received during the public review period for both public hearings. However, six (6) members of the public provided comments during the Human Relations Committee meeting regarding the CDBG funding recommendations. Refer to Appendix A for a summary of comments. 6. Summary of comments or views not accepted and the reasons for not accepting them Refer to Appendix A for a summary of comments. The City accepts and responds to all comments that are submitted. 7. Summary Please see above. Annual Action Plan 2022 Item 9: Staff Report Pg. 71 Packet Pg. 178 of 853 Substantial Amendment 04/10/2023 PR -05 Lead & Responsible Agencies - 91.200(b) 1. Agency/entity responsible for preparing/administering the Consolidated Plan Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park The following are the agencies/entities responsible for preparing the Consolidated Plan and those responsible for administration of each grant program and funding source. Agency Role Name Department/Agency Lead Agency PALO ALTO CDBG Administrator PALO ALTO Department of Planning & Development Services HOPWA Administrator HOME Administrator HOPWA-C Administrator Table 1— Responsible Agencies Narrative The City is the Lead and Responsible Agency for the United States Department of Housing and Urban Development's (HUD) entitlement programs in Palo Alto. The Department of Planning and Development Services is responsible for administering the City's CDBG program. The City joined the HOME Consortium in 2015 and receives federal HOME Investment Partnership (HOME) funds through the County. Entitlement jurisdictions receive entitlement funding (i.e., non-competitive, formula funds) from HUD. HUD requires the City to submit a five- year Consolidated Plan and Annual Action Plan to HUD listing priorities and strategies for the use of its federal funds. Annual Action Plan 2022 Item 9: Staff Report Pg. 72 Packet Pg. 179 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park The Consolidated Plan helps local jurisdictions to assess their affordable housing and community development needs and market conditions to meet the housing and community development needs of its populations. As a part of the Consolidated Plan process for 2020-2025, the City collaborated with the County of Santa Clara (County) as the Urban County representing the cities of Campbell, Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Morgan Hill, and Saratoga; the cities of Cupertino, Gilroy, Mountain View, Sunnyvale, San Jose, and Santa Clara; and the Santa Clara County Housing Authority (SCCHA) to identify and prioritize housing and community development needs across the region, and to develop strategies to meet those needs. The FY 2022-23 Annual Action Plan represents the third year of CDBG funding of the 2020-2025 Consolidated Plan. Consolidated Plan Public Contact Information Clare Campbell, Manager of Long Range Planning City of Palo Alto Department of Planning and Development Services 250 Hamilton Avenue, 5th Floor Palo Alto, CA 94301 E-mail: clare.campbell@cityofpaloalto.org Phone: (650) 617-3191 Annual Action Plan 2022 Item 9: Staff Report Pg. 73 Packet Pg. 180 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park AP -10 Consultation - 91.100, 91.200(b), 91.215(l) 1. Introduction The Action Plan is a one-year plan which describes the eligible programs, projects, and activities to be undertaken with funds expected during FY 2022-23 and their relationship to the priority housing, homeless and community development needs outlined in the 2020-25 Consolidated Plan. Provide a concise summary of the jurisdiction's activities to enhance coordination between public and assisted housing providers and private and governmental health, mental health and service agencies (91.215(1)). During Fiscal Year 2022-23, the City will continue to work with non-profit organizations to provide programs and services for low-income households; private industry, including financial and housing development groups, to encourage the development of affordable housing opportunities regionally and within the City; and other local jurisdictions, including the County of Santa Clara, in carrying out and monitoring regional projects in a coordinated and cost-effective manner. The City will provide technical assistance to the public service agencies it funds with CDBG dollars and will continue to attend the biweekly Regional CDBG/Housing Coordinators meetings. Describe coordination with the Continuum of Care and efforts to address the needs of homeless persons (particularly chronically homeless individuals and families, families with children, veterans, and unaccompanied youth) and persons at risk of homelessness. The Santa Clara County Office of Supportive Housing is the administrator of the regional Continuum of Care (CoC). The Citys Office of Human Services Manager is in contact with the Santa Clara County Office of Supportive Housing and Destination Home regarding issues of homelessness in the community. The Santa Clara County CoC is a group comprising of stakeholders throughout the County, including governmental agencies, homeless service and shelter providers, homeless population, housing advocates, affordable housing developers, and various private parties, including businesses and foundations. City staff attend a bi-weekly CDBG/Housing Coordinator meeting. Members of the CoC meet monthly to plan CoC programs, identify gaps in homeless services, establish funding priorities, and pursue a systematic approach to addressing homelessness. The CoC is governed by the CoC Board, which takes a systems -change approach to preventing and ending homelessness. This same CoC Board is comprised of the same individuals who serve on the Annual Action Plan 2022 Item 9: Staff Report Pg. 74 Packet Pg. 181 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Destination: Home (Destination Home) Leadership Board. Destination Home is a public- private partnership that is committed to collective impact strategies to end chronic homelessness. Regional efforts of the CoC include the development of The Community Plan to End Homelessness, which identifies strategies to address the needs of people experiencing homelessness in the County, including chronically homeless individuals and families, families with children, veterans, and unaccompanied youth. The plan also addresses the needs of persons at risk of homelessness. The new community plan to end homelessness can be viewed at https://destinationhomesv.org/community-plan. Also, during the development of the 2020-25 Consolidated Plan, the City consulted both the CoC and County Office of Supportive Housing for their expertise and experience for identifying community needs. Describe consultation with the Continuum(s) of Care that serves the jurisdiction's area in determining how to allocate ESG funds, develop performance standards for and evaluate outcomes of projects and activities assisted by ESG funds, and develop funding, policies and procedures for the operation and administration of HMIS The City is not an ESG entitlement jurisdiction and therefore does not receive ESG funds. However, the City does administer federal grant programs that help homeless and low-income families in Santa Clara County. The City also helps fund and conduct the Point in Time (PIT) count, the biennial regional collaborative effort to count and survey people experiencing homelessness. The latest count and survey were conducted on February 24, 2022. The data from the 2022 County of Santa Clara PIT count is used to plan, fund, and implement actions for reducing chronic homelessness and circumstances that bring about homelessness. The Santa Clara County Office of Supportive Services takes the role of Homeless Management Information System (HMIS) administration. The County, and its consultant Bitfocus, work jointly to operate and oversee HMIS. Both software and HMIS system administration are now provided by Bitfocus. Funding for HMIS in Santa Clara County comes from HUD, the County of Santa Clara, and the City of San Jose. The Countys HMIS is used by many City service providers across the region to record information and report outcomes. 2. Agencies, groups, organizations and others who participated in the process and consultations Annual Action Plan 2022 Item 9: Staff Report Pg. 75 Packet Pg. 182 of 853 Substantial Amendment 04/10/2023 Iaole L— Agencies, groups, organizations wno 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 2 I Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 3 I Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 4 I Agency/Group/Organization Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Boys and Girls Clubs of Silicon Valley Services -Children Housing Need Assessment Agency attended Santa Clara focus group meeting on 11/7/19 as part of the 2020-25 Consolidated Plan process Healthier Kids Foundation Santa Clara County Services -Children Housing Need Assessment Agency attended Santa Clara focus group meeting on 11/7/19 as part of the 2020-25 Consolidated Plan process COMMUNITY SERVICES AGENCY OF MOUNTAIN VIEW AND LOS ALTOS Services -Elderly Persons Housing Need Assessment Agency attended stakeholder consultation conference call on 11/15/19 as part of the 2020-25 Consolidated Plan process San Jose Conservation Corps Charter Agency/Group/Organization Type I Services -Education What section of the Plan was addressed by Consultation? Housing Need Assessment Annual Action Plan 2022 10 Item 9: Staff Report Pg. 76 Packet Pg. 183 of 853 Substantial Amendment 04/10/2023 k, 6 7 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency/Group/Organization Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Agency attended Gilroy focus group meeting on 11/18/19 as part of the 2020-25 Consolidated Plan process CommUniverCity San Jose Agency/Group/Organization Type I Services -Education What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency/Group/Organization Strategic Plan Agency attended stakeholder consultation conference call on 11/25/19 and regional forum meeting in San Jose on 11/20/19 as part of the 2020-25 Consolidated Plan process. The Health Trust Services -Persons with Disabilities Services -Persons with HIV/AIDS Services -Health Housing Need Assessment Strategic Plan Agency attended stakeholder consultation on 11/21/19 as part of the 2020-25 Consolidated Plan process Rebuilding Together, Silicon Valley Agency/Group/Organization Type I Services - Housing What section of the Plan was addressed by Consultation? Housing Need Assessment Annual Action Plan 2022 11 Item 9: Staff Report Pg. 77 Packet Pg. 184 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Briefly describe how the Agency/Group/Organization was Agency attended stakeholder consultation conference call on consulted. What are the anticipated outcomes of the 11/21/19 and San Jose regional forum on 11/20/19 as part of the consultation or areas for improved coordination? 2020-25 Consolidated Plan process 8 Agency/Group/Organization City of Cupertino Community Development Department Housing Division Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs Homeless Needs - Chronically homeless Homeless Needs - Families with children Homelessness Needs - Veterans Homelessness Needs - Unaccompanied youth Homelessness Strategy Non -Homeless Special Needs Economic Development Anti -poverty Strategy Lead -based Paint Strategy Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 9 Agency/Group/Organization City of Gilroy Agency/Group/Organization Type Other government - Local 12 Annual Action Plan 2022 Item 9: Staff Report Pg. 78 Packet Pg. 185 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs Homeless Needs - Chronically homeless Homeless Needs - Families with children Homelessness Needs - Veterans Homelessness Needs - Unaccompanied youth Homelessness Strategy Non -Homeless Special Needs Market Analysis Economic Development Anti -poverty Strategy Lead -based Paint Strategy Briefly describe how the Agency/Group/Organization was Agency was consulted and provided emailed feedback as part of the consulted. What are the anticipated outcomes of the 2020-25 Consolidated Plan process consultation or areas for improved coordination? 10 Agency/Group/Organization City of Mountain View Agency/Group/Organization Type Other government - Local 13 Annual Action Plan 2022 Item 9: Staff Report Pg. 79 Packet Pg. 186 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs Homeless Needs - Chronically homeless Homeless Needs - Families with children Homelessness Needs - Veterans Homelessness Needs - Unaccompanied youth Homelessness Strategy Non -Homeless Special Needs Market Analysis Economic Development Anti -poverty Strategy Lead -based Paint Strategy Briefly describe how the Agency/Group/Organization was Agency attended regional forum meeting at Palo Alto on 11/7/19 as consulted. What are the anticipated outcomes of the part of the 2020-25 Consolidated Plan process consultation or areas for improved coordination? 11 Agency/Group/Organization BILL WILSON CENTER Agency/Group/Organization Type Services -Children What section of the Plan was addressed by Consultation? Housing Need Assessment Homeless Needs - Families with children Briefly describe how the Agency/Group/Organization was Agency attended Santa Clara focus group meeting on 11/7/19, consulted. What are the anticipated outcomes of the community meetings on 11/4/19 at Morgan Hill and 11/20/19 at consultation or areas for improved coordination? Roosevelt as part of the 2020-25 Consolidated Plan process 12 Agency/Group/Organization HEART OF THE VALLEY Agency/Group/Organization Type Services -Elderly Persons 14 Annual Action Plan 2022 Item 9: Staff Report Pg. 80 Packet Pg. 187 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency was consulted through interview questions. Agency provided emailed feedback as part of the 2020-25 Consolidated Plan process 13 Agency/Group/Organization City of San Jose Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency was contacted for consultation as a partner in addressing the needs of the County as part of the 2020-25 Consolidated Plan process 14 Agency/Group/Organization CITY OF MORGAN HILL Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency attended regional forum meeting at Morgan Hill on 11/4/19 as part of the 2020-25 Consolidated Plan process 15 Agency/Group/Organization City of Sunnyvale Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency attended regional forum meeting at Palo Alto on 11/7/19 and provided emailed feedback as part of the 2020-25 Consolidated Plan process 15 Annual Action Plan 2022 Item 9: Staff Report Pg. 81 1 Packet Pg. 188 of 853 Substantial Amendment 04/10/2023 16 I Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 17 1 Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? 18 I Agency/Group/Organization Agency/Group/Organization Type What section of the Plan was addressed by Consultation? Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Servant Partners Neighborhood Organization Neighborhood Organization Housing Need Assessment Attended community meeting on 11/13/19 at Hillview library as part of the 2020-25 Consolidated Plan process SENIOR ADULTS LEGAL ASSISTANCE (SALA) Service -Fair Housing Housing Need Assessment Agency attended Palo Alto and San Jose public engagement meeting on 11/17/19 and 11/19/19, regional forum meeting on 11/4/19 at Morgan Hill and 11/7/19 at Palo Alto as part of the 2020-25 Consolidated Plan process HomeFirst Services -homeless Housing Need Assessment Homeless Needs - Chronically homeless Agency attended regional forum meeting at Morgan Hill on 11/4/19 as part of the 2020-25 Consolidated Plan process Annual Action Plan 2022 16 Item 9: Staff Report Pg. 82 Packet Pg. 189 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park 19 Agency/Group/Organization Santa Clara County Office of Supportive Housing Agency/Group/Organization Type Other government - County What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency attended regional forum meeting at Morgan Hill on 11/4/19 and at Palo Alto on 11/7/19 as part of the 2020-25 Consolidated Plan process 20 Agency/Group/Organization City of Santa Clara Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency attended regional forum meeting at Morgan Hill on 11/4/19 and provided emailed feedback as part of the 2020-25 Consolidated Plan process 21 Agency/Group/Organization Vista Center for the Blind and Visually Impaired Agency/Group/Organization Type Services -Persons with Disabilities What section of the Plan was addressed by Consultation? Non -Homeless Special Needs Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the consultation or areas for improved coordination? Agency attended stakeholder consultation on 12/9/19 as part of the 2020-25 Consolidated Plan process 22 Agency/Group/Organization Destination: Home Agency/Group/Organization Type Services -homeless What section of the Plan was addressed by Consultation? Housing Need Assessment 17 Annual Action Plan 2022 Item 9: Staff Report Pg. 83 1 Packet Pg. 190 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Briefly describe how the Agency/Group/Organization was Agency attended stakeholder consultation on 11/11/19 as part of the consulted. What are the anticipated outcomes of the 2020-25 Consolidated Plan process consultation or areas for improved coordination? 23 Agency/Group/Organization COMMUNITY SOLUTIONS Agency/Group/Organization Type Services -Victims of Domestic Violence What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was Agency attended the AFH and ConPlan joint meeting on 12/11/19 at consulted. What are the anticipated outcomes of the the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan consultation or areas for improved coordination? process 24 Agency/Group/Organization St Mary Parish Agency/Group/Organization Type Neighborhood Organization Neighborhood Organization What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was Agency attended the AFH and ConPlan joint meeting on 12/11/19 at consulted. What are the anticipated outcomes of the the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan consultation or areas for improved coordination? process 25 Agency/Group/Organization Community and Neighborhood Revitalization Committee - Gilroy Agency/Group/Organization Type Community Organization What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was Agency co -hosted the AFH and ConPlan joint meeting on 12/11/18 at consulted. What are the anticipated outcomes of the the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan consultation or areas for improved coordination? process Annual Action Plan 2022 Item 9: Staff Report Pg. 84 1 Packet Pg. 191 of 853 Substantial Amendment 04/10/2023 Identify any Agency Types not consulted and provide rationale for not consulting Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Through the countywide development of the Consolidated Plan, AT@T was consulted regarding broadband. For Palo Alto specific information on this topic, staff in the future will contact the City of Palo Alto Utilities Advisory Commission regarding the City's Fiber Network Expansion Project. In regard to resilience specific organizations, Grid Alternatives, an environmental sustainability organization, provided a stakeholder interview during the Consolidated Plan process. Staff plans to expand outreach in this area through contact with the Santa Clara County Office of Emergency Management and the City of Palo Alto Emergency Services which has developed a local hazard mitigation plan. Other local/regional/state/federal planning efforts considered when preparing the Plan Name of Plan Lead Organization How do the goals of your Strategic Plan overlap with the goals of each plan? Regional Continuum of Identifies housing inventory count to facilitate the provision of housing services to those Continuum of Care Care Council experiencing homelessness City of Palo Alto Identifies barriers to affordable housing, such as land -use controls, inefficiencies of the Housing Element City of Palo Alto development review process, and strategies to alleviate such barriers (2015-2023) This plan provides a roadmap for the Santa Clara County HIV Planning Council for 2012-2014 Santa Clara County HIV Prevention and Care to provide a comprehensive and compassionate system of HIV Comprehensive HIV Planning Council for prevention and care services for the County. This effort aligns with the Strategic Plan's Prevention and Care PI Prevention and Care goal to support activities that strengthen neighborhoods through the provision of community services and public improvements SCCHA Moving to Work Santa Clara County Addresses housing authority updates and strategies pertaining to public housing and Annual Plan Housing Authority vouchers 19 Annual Action Plan 2022 Item 9: Staff Report Pg. 85 Packet Pg. 192 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Name of Plan Lead Organization How do the goals of your Strategic Plan overlap with the goals of each plan? Regional Housing Need This plan analyzes the total regional housing need for the County and all of the Bay Area. Association of Bay Area Plan for San Francisco This effort aligns with the Strategic Plan's goal to assist in the creation and preservation Bay A Governments of affordable housing. The Community Plan to End Homelessness in the County is a five-year plan to guide Community Plan to End governmental actors, nonprofits, and other community members as they make decisions Homelessness in Santa Destination: Home about funding, programs, priorities and needs. This effort aligns with the Strategic Plan's Clara goal to support activities to end homelessness This plan details recommendations for infrastructure maintenance and replace, as well Palo Alto's City of Palo Alto as identifies potential sources of funding. This effort aligns with the Strategic Plan's goal Infrastructure: Catching Infrastructure Blue to support activities that strengthen neighborhoods through the provision of community Up, Keeping U Ribbon Plan services and public improvements This plan is the primary tool for guiding future development in Palo Alto. It provides a City of Palo Alto guide for long-term choices and goals for the City future. This effort aligns with the Comprehensive Plan City of Palo Alto Strategic Plan's goal to support activities that strengthen neighborhoods through the (2030) provision of community services and public improvements Narrative Table 3 - Other local / regional / federal planning efforts 20 Annual Action Plan 2022 Item 9: Staff Report Pg. 86 Packet Pg. 193 of 853 Item 9 Attachment C - SA Palo Alto AAP Substantial Amendment 04/10/2023 2022-23 Draft -525 E. Charleston - Mitchel Park AP -12 Participation - 91.401, 91.105, 91.200(c) 1. Summary of citizen participation process/Efforts made to broaden citizen participation Summarize citizen participation process and how it impacted goal -setting The Planning and Development Services Department is the lead agency for overseeing the development of the Consolidated Plan and Action Plan. Per the City's adopted Citizen Participation Plan, the City is to allow a 30 -day public review and comment period for the Action Plan. The City has published notifications of upcoming public hearings and the 30 -day public review comment period in the local newspaper of general circulation, on its CDBG webpage and via email blasts. The City held two advertised public hearings on March 10, 2022, and June 20, 2022. The Action Plan 30 -day public review comment period occurred from May 20, 2022, through June 20, 2022. The City did not receive any public comments. OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 21 Item 9: Staff Report Pg. 87 Packet Pg. 194 of 853 Substantial Amendment 04/10/2023 Citizen Participation Outreach Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Sort Or der Mode of Out reach Target of Out reach Summary of response/atten dance Summary of comments rec eived Summary of com ments not accepted and reasons URL (If applicable) The Human Six members Relations of the public Commission provided met on March comments on 10, 2022 to the Non- discuss the Public CityAaACAaAL All comments targeted/broa FY2022-23 Hearing AaAzs funding were accepted. d community funding allocations. allocations and Refer to review the draft Appendix A for FY2022-23 detailed Annual Action Plan. summary The City Council met on June 20, 2022, to discuss Non - Public the FY2022-23 No comments No comments 2 targeted/broa Hearing funding were received, were received. d community allocations and adopt the draft FY2022-23 AAP. OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 22 Item 9: Staff Report Pg. 88 Packet Pg. 195 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Sort Or der Mode of Out reach Target of Out reach Summary of response/atten dance Summary of comments rec eived Summary of com ments not accepted and reasons URL (If applicable) Notice of Public Hearing and Public comment period on the Non- Second Draft Newspaper No comments No comments 3 targeted/broa AAP was Ad were received, were received. d community published in the Daily post on April 2, 2022, and May 20, 2022. Notice of Public Hearing and Public comment period on the Non- Second Draft Newspaper No comments No comments 4 targeted/broa AAP was Ad were received, were received. d community published in the Daily post on April 2, 2022, and May 20, 2022. OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 23 Item 9: Staff Report Pg. 89 Packet Pg. 196 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Sort Or der Mode of Out reach Target of Out reach Summary of response/atten dance Summary of comments rec eived Summary of com ments not accepted and reasons URL (If applicable) Draft AAP FY2022-23 for https://www.cityofpaloaIto.org/Departm public review Non- ents/Planning-Development- Internet and comments No comments No comments 5 targeted/broa Services/Long-Range- Outreach for posted at were received, were received. d community Planning/Community-Development- the City of Palo Block -Grant Alto's CDBG webpage. OMB Control No: 2506-0117 (exp. 09/30/2021) Table 4 —Citizen Participation Outreach Annual Action Plan 2022 24 Item 9: Staff Report Pg. 90 Packet Pg. 197 of 853 Substantial Amendment 04/10/2023 Expected Resources AP -15 Expected Resources - 91.420(b), 91.220(c)(1,2) Introduction Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park In FY2O22-23, the City will allocate $653,168 to eligible activities that address the needs identified in the Consolidated Plan. It should be noted that while the HUD CDBG allocations are critical, the allocations are not sufficient to overcome barriers and address all needs that low- income individuals and families face in attaining self-sufficiency. The City will continue to leverage additional resources as described below to provide support and services to the populations in need within the community. The following section discusses the anticipated resources available for community development activities during the next remaining three years of the City's 5 -Year Consolidated Plan. OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 25 Item 9: Staff Report Pg. 91 Packet Pg. 198 of 853 Substantial Amendment 04/10/2023 Anticipated Resources Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Program Source Uses of Funds Expected Amount Available Year 1 Expected Narrative Description Annual Program Prior Year Total: of Funds Amount Allocation: Income: Resources: $ Available $ $ $ Remainder of ConPlan CDBG public - Acquisition CDBG funds will be used for the creation federal Admin and and preservation of affordable rental Planning units, improvements in lower income Economic neighborhoods, and public services that Development benefit low income and special needs Housing households Public Improvements Public Services 513,168 140,000 0 653,168 1,026,336 Other public - Other federal 0 0 0 0 0 Table 5 - Expected Resources — Priority Table Explain how federal funds will leverage those additional resources (private, state and local funds), including a description of how matching requirements will be satisfied Entitlement Funds Leverage, in the context of the CDBG and HOME Investment Partnerships Program (HOME), means bringing other local, state, and federal financial resources to maximize the reach and impact of the City's HUD Programs. HUD, like many other federal agencies, encourages the OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 26 Item 9: Staff Report Pg. 92 Packet Pg. 199 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park recipients of federal monies to demonstrate that efforts are being made to strategically leverage additional funds in order to achieve greater results. The City joined the Santa Clara County's HOME Consortium in 2015 and does not receive federal HOME funds on an entitlement basis from HUD. The HOME Consortia consists of the cities of Cupertino, Gilroy, Palo Alto, and the Urban County. HOME funds can be used to fund eligible affordable housing projects for acquisition, construction, and rehabilitation. Starting in FY 2015-16 developers of affordable housing projects were eligible to competitively apply through an annual RFP process directly to the County for HOME funds to help subsidize affordable housing projects in Palo Alto. Applications will be directly submitted through the County's request for proposal process for available HOME funds. Certain nonprofit organizations known as Community Housing Development Organizations (CHDO5) may also apply for funding from State HCD for housing projects located within Palo Alto. The City received one HOME grant from 1992 HOME funding for the Barker Hotel project. Proceeds from HOME loan repayments must be deposited into a HOME Program Income Fund and used in accordance with the HOME program regulations. In addition, the County will only fund a project that has the local support of the City. If the City receives HOME dollars from its participation in the HOME consortium, the required 25% matching funds will be provided from the City's Affordable Housing Fund, which is comprised of two sub -funds: The Commercial Housing Fund and the Residential Housing Fund. To date, no projects within the City have been funded through the HOME Consortium. Moving forward, the City plans to increase outreach to developers in the City to provide additional information on the HOME Consortium and available funding. Other State and Federal Grant Programs In addition to the CDBG entitlement dollars, the federal government has several other funding programs for community development and affordable housing activities. These include Section 8 Housing Choice Voucher Program, Section 202, Section 811, the Federal Home Loan Bank Affordable Housing Program (AHP), and others. It should be noted that in most cases the City would not be the applicant for these funding sources as many of these programs offer assistance to affordable housing developers rather than local jurisdictions. OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 27 Item 9: Staff Report Pg. 93 Packet Pg. 200 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park The State of California has recently passed approximately 20 bills with the intent of increasing or preserving affordable housing with the State. According to the Governor's State of the State address, bills that help increase housing production, both market -rate and affordable, will be a priority in 2020. The City will continue to track and look for opportunities to leverage State resources for the City. Local Housing and Community Development Sources Other local resources that support housing and community development programs include: • Palo Alto Commercial Housing Fund, which is for the development of below market rate (BMR) housing units and paid by mitigation fees on commercial and industrial projects; and • Palo Alto Residential Housing Fund, which is for the development of below market rate (BMR) housing units and paid by miscellaneous funding sources. The City will continue to seek opportunities for projects that meet local bond requirements in order to bring additional resources to help the City's affordable housing shortage. If appropriate, describe publically owned land or property located within the jurisdiction that may be used to address the needs identified in the plan The City has no surplus public land. However, in 2019, the Governor Newsome signed Executive Order N-06-19 that ordered the California Department of General Services (DGS) and the California Department of Housing and Community Development (HCD) to identify and prioritize excess state-owned property and aggressively pursue sustainable, innovative, cost-effective housing projects. There is no excess state property in the City of Palo Alto. Discussion OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 28 2022 Item 9: Staff Report Pg. 94 Packet Pg. 201 of 853 Item 9 Attachment C - SA Palo Alto AAP Substantial Amendment 04/10/2023 2022-23 Draft -525 E. Charleston - Mitchel Park Please see information provided in previous sections. Annual Action Plan 29 2022 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 95 1 Packet Pg. 202 of 853 Substantial Amendment 04/10/2023 Annual Goals and Objectives AP -20 Annual Goals and Objectives - 91.420, 91.220(c)(3)&(e) Goals Summary Information Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park Sort Goal Name Start End Category Geographic Needs Addressed Funding Goal Outcome Indicator Order Year Year Area 1 Affordable 2020 2025 Affordable Affordable Housing CDBG: Homeowner Housing Housing Housing $424,560 Rehabilitated: 4 Household Housing Unit 2 Homelessness 2020 2025 Homeless Homelessness CDBG: Public service activities other $49,073 than Low/Moderate Income Housing Benefit: 161 Persons Assisted 3 Strengthen 2020 2025 Non -Homeless Community Services CDBG: Public service activities other Neighborhoods Special Needs and Public $24,021 than Low/Moderate Income Non -Housing Improvements Housing Benefit: 77 Persons Community Assisted Development 4 Fair Housing 2020 2025 Non -Housing Fair Housing CDBG: Public service activities other Community $33,698 than Low/Moderate Income Development Housing Benefit: 15 Persons Assisted 5 Economic 2015 2020 Non -Housing Economic CDBG: $0 Other: 0 Other Development Community Development Development OMB Control No: 2506-0117 (exp. 09/30/2021) Table 6— Goals Summary Annual Action Plan 2022 30 Item 9: Staff Report Pg. 96 Packet Pg. 203 of 853 Substantial Amendment 04/10/2023 Goal Descriptions Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park 1 Goal Name Affordable Housing Goal Assist in the creation and preservation of affordable housing for low income and special needs households. Description 2 Goal Name Homelessness Goal Support activities to prevent and end homelessness, such as funding affordable housing opportunities, resource centers Description for homeless individuals, and support for tenants of single -room occupancy units. 3 Goal Name Strengthen Neighborhoods Goal Provide community services and public improvements to benefit low-income and special needs households. This includes Description assisting those with disabilities to transition from unstable housing to permanent housing, supporting residents of long- term care facilities, and supporting individuals experiencing domestic violence. 4 Goal Name Fair Housing Goal Promote fair housing choice by funding fair housing organizations to provide fair housing services, such as education, Description tenant -landlord mediation, and testing. 5 Goal Name Economic Development Goal Support economic development activities that promote employment growth and help lower -income people secure and Description maintain jobs. This includes funding nonprofits working toward developing the skills of low-income and homeless individuals. OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 31 Item 9: Staff Report Pg. 97 Packet Pg. 204 of 853 Substantial Amendment 04/10/2023 OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park 32 Item 9: Staff Report Pg. 98 Packet Pg. 205 of 853 Substantial Amendment 04/10/2023 AP -35 Projects - 91.420, 91.220(d) Introduction Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park The Consolidated Plan goals below represent high priority needs for the City of Palo Alto (City) and serve as the basis for the strategic actions the City will use to meet these needs. The goals, listed in no particular order, are: 1. Assist in the creation and preservation of affordable housing for low income and special needs households.Support activities to end homelessness. 2. Support activities that strengthen neighborhoods through the provision of community services and public improvements to benefit low income and special needs households. Promote fair housing choice.Expand economic opportunities for low-income households. It is important to note, Project Sentinel, whom will be providing fair housing services will be under two categories, Planning and Administration and Public Services. # Project Name 1 Catholic Charities of Santa Clara County: Long Term Care Ombudsman 2 LifeMoves - Opportunity Services Center and Hotel De Zink (HDZ): Case Management 3 Alta Housing SRO Resident Support Program 4 Silicon Valley Independent Living Center: Housing and Emergency Housing Services 5 Project Sentinel - Fair Housing Services 6 City of Palo Alto - Planning and Administration 7 Rebuilding Together Peninsula Safe at Home 8 Mitchell Park Place 525 E. Charleston Road Table 7— Project Information Describe the reasons for allocation priorities and any obstacles to addressing underserved needs The City awards CDBG funding to projects and programs that will primarily benefit low-income, homeless, and special needs households. The City operates on a two-year grant funding cycle for CDBG public service grants and a one-year cycle for CDBG capital housing rehabilitation and public facilities and improvement projects. Projects are only considered for funding within the Consolidated Plan period if they address the goals discussed above. Annual Action Plan 2022 33 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 99 Packet Pg. 206 of 853 Substantial Amendment 04/10/2023 AP -38 Project Summary Project Summary Information OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park 34 Item 9: Staff Report Pg. 100 Packet Pg. 207 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Project Name Catholic Charities of Santa Clara County: Long Term Care Ombudsman Target Area Goals Supported Strengthen Neighborhoods Needs Addressed Community Services and Public Improvements Funding CDBG: $10,000 Description Long -Term Care Ombudsman Program. Eligible Activity (MatrixCode):05A. CDBG National Objective: LMC Target Date 6/30/2023 Estimate the number The program will provide advocacy and complaint investigation for 50 and type of families elderly residents of long-term care facilities in Palo Alto. that will benefit from the proposed activities Location Description Citywide Planned Activities Regular contact with Palo Alto Residential Care Facilities to observe and monitor conditions of care. 2 Project Name LifeMoves - Opportunity Services Center and Hotel De Zink (HDZ): Case Management Target Area Goals Supported Homelessness Needs Addressed Homelessness Funding CDBG: $26,660 Description Opportunity Services Center Eligible Activity (Matrix Code):03T CDBG National Objective: LMC Target Date 6/30/2023 Estimate the number 30 unduplicated individuals (homeless and/or very low-income and type of families individuals per year) will receive case management services including that will benefit from assistance with housing/job searches, referrals and mentoring at the the proposed activities Opportunity Services Center and Hotel De Zink. Location Description Citywide Planned Activities Case management services will be provided to Opportunity Services Center and Hotel De Zink clients in locating housing and/or employment and be connected to benefits. Annual Action Plan 2022 35 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 101 Packet Pg. 208 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park 3 Project Name Alta Housing SRO Resident Support Program Target Area Goals Supported Homelessness Needs Addressed Homelessness Funding CDBG: $22,413 Description SRO Resident Support Program. Eligible Activity (Matrix Code):05O CDBG National Objective: LMC Target Date 6/30/2023 Estimate the number Case management and support counseling services will be provided and type of families to residents of Barker Hotel and Alma Place that will benefit from the proposed activities Location Description Residents of Barker Hotel (25 units) and Alma Place (106 units) Planned Activities Planned Activities Alta Housing engages a service coordinator to provide 40 hours weekly services to provide case management and support counseling services to residents at Alma Place and Barker Hotel to help them maintain housing stability. Activities include financial counseling, health maintenance, information and referral, problem solving, employment assistance, crisis intervention and case management. Both Alma Place and Barker Hotel are single -room occupancy facilities. 4 Project Name Silicon Valley Independent Living Center: Housing and Emergency Housing Services Target Area Goals Supported Strengthen Neighborhoods Needs Addressed Community Services and Public Improvements Funding CDBG: $14,021 Description Housing and Emergency Housing Services. Eligible Activity (Matrix Code):05B. CDBG National Objective: LMC Target Date 6/30/2023 Estimate the number 27 unduplicated Palo Alto residents will benefit from one-on-one and type of families housing assistance. that will benefit from the proposed activities Annual Action Plan 2022 36 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 102 Packet Pg. 209 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Location Description Citywide Planned Activities Silicon Valley Independent Living Center provides assistance for individuals with disabilities and their families to transition from homelessness, health care facilities, unstable or temporary housing to permanent affordable, accessible, integrated housing with emergency assistance, security deposits, rent, information, and referral, and other basic essentials. 5 Project Name Project Sentinel - Fair Housing Services Target Area Goals Supported Fair Housing Needs Addressed Fair Housing Funding CDBG: $33,698 Description Description Planning & Administration - Fair Housing Services. Eligible Activity (Matrix Code):21D - $13,722. CDBG National Objective: LMC. Public Service - Fair Housing Services. Eligible Activity (Matrix Code):05J - $19,976. CDBG National Objective: LMC. Target Date 6/30/2023 Estimate the number 15 unduplicated individuals will be provided with fair housing services and type of families of complaint counseling, investigation, and where appropriate that will benefit from enforcement referral. the proposed activities Location Description Citywide Planned Activities Project Sentinel will provide community education and outreach regarding fair housing law and practices, investigation, counseling, and legal referral for victims of housing discrimination, and analyses for City staff and officials regarding fair housing practices. California and federal fair housing laws assure specific protected classes the right to be treated in terms of their individual merits and qualifications in seeking housing. Unfortunately, some people are not aware of the law or their rights. 6 Project Name City of Palo Alto - Planning and Administration Target Area Annual Action Plan 2022 37 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 103 Packet Pg. 210 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Goals Supported Affordable Housing Homelessness Strengthen Neighborhoods Fair Housing Economic Development Needs Addressed Affordable Housing Homelessness Community Services and Public Improvements Fair Housing Economic Development Funding CDBG: $116,911 Description Planning and Administration: CDBG Citation: 570.206(a) Target Date 6/30/2023 Estimate the number The City will provide general administrative support to the and type of families CDBG program. that will benefit from the proposed activities Location Description Citywide Planned Activities Administer the Administrative costs for the overall management, coordination, and evaluation of the CDBG program, and the project delivery costs associated with bringing projects to completion. 7 Project Name Rebuilding Together Peninsula Safe at Home Target Area Goals Supported Affordable Housing Needs Addressed Affordable Housing Funding CDBG: $73,135 Description Preserves affordable housing by transforming homes through critical repairs and accessibility modifications, at no cost to the service recipient. The majority of the low-income homeowners served will be elderly seniors and/or people with disabilities, who are physically and financially unable to maintain safe living conditions for themselves and their families Eligible Activity (Matrix Code):14A. CDBG National Objective: LMH Target Date 6/30/2023 Annual Action Plan 2022 38 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 104 Packet Pg. 211 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Estimate the number and type of families that will benefit from the proposed activities 4 households Location Description Citywide Planned Activities Provide home safety repairs, mobility, and accessibility improvements for low- income households in Palo Alto with the primary consideration being the correction of safety hazards. 8 Project Name Mitchell Park Place 525 E. Charleston Road Target Area Citywide Goals Supported Affordable Housing Strengthen Neighborhoods Needs Addressed nffordobin Housing Community Services and Public Improvements Funding CDBG: $356,330 Description The City intends to use the CDBG Funds for public facilities improvements near the proposed Eden Housing development site. Eden Housing is developing 50 units of affordable housing. Approximately half the units are for persons with disabilities. The parcel is owned by the County and will be a long-term lease with the developer. Th„ City intends t e GDB€- f nding for n edevelopment r HUD r lation Note:At the initial + i d costs as public A --rrrcv I,�rc-periva for the 202 2023 AAP, thre-projecc focused housing. The on affordable - City is reevaluating this and the details arc to be determined project The City follow the Citizen Participation Plan will and will proceed with protocols if a substantial amendment is required. Target Date 6/30/2023 -12/30/2023 Estimate the number and type of families that will benefit from the proposed activities TB- D 50 Families will benefit from public improvements Location Description 525 E. Charleston Road Planned Activities TBD Annual Action Plan 2022 39 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 105 Packet Pg. 212 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park AP -50 Geographic Distribution - 91.420, 91.220(f) Description of the geographic areas of the entitlement (including areas of low-income and minority concentration) where assistance will be directed The City allocates CDBG funds to benefit low -moderate income (LMI) households and does not have target areas. Instead, the City focuses its services and capital improvements across the City as a whole. Geographic Distribution Target Area Percentage of Funds Table 8 - Geographic Distribution Rationale for the priorities for allocating investments geographically Not applicable. Discussion Please see discussion above. Annual Action Plan 2022 40 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 106 Packet Pg. 213 of 853 Substantial Amendment 04/10/2023 OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park 41 Item 9: Staff Report Pg. 107 Packet Pg. 214 of 853 Item 9 Attachment C - SA Palo Alto AAP Substantial Amendment 04/10/2023 2022-23 Draft -525 E. Charleston - Mitchel Park AP -75 Barriers to affordable housing -91.420, 91.220(j) Introduction The incorporated and unincorporated jurisdictions within the County face barriers to affordable housing that are common throughout the Bay Area. High on the list of market barriers is the lack of developable land, which increases the cost of available lands and increases housing development costs. Local opposition is another common obstacle as many neighbors have strong reactions to infill and affordable housing developments. Their opposition is often based on misconceptions, such as a perceived increase in crime; erosion of property values; increase in parking and traffic congestion; and overwhelmed schools. However, to ensure a healthy economy the region must focus on strategies and investment that provide housing for much of the region's workforce — for example, sales clerkssalesclerks, secretaries, waiters, baristas, teachers, and health service workers — whose incomes significantly limit their housing choices. It should be noted that in a constrained housing supply market, when housing developments produce housing that is relatively affordable, higher income buyers and renters generally outbid lower income households. A home's final sale or rental price will typically exceed the projected sales or rental costs. Public subsidies are often needed to guarantee affordable homes for low- and moderate -income households. Actions it planned to remove or ameliorate the negative effects of public policies that serve as barriers to affordable housing such as land use controls, tax policies affecting land, zoning ordinances, building codes, fees and charges, growth limitations, and policies affecting the return on residential investment Palo Alto is addressing the barriers to affordable housing through: • Density Bonus Ordinance: The City recently updated its Density Bonus ordinance which lowered the eligibility requirements to qualify for a higher density bonus percentage up to 80% as well as providing more exceptions to applicable zoning and development standards. One significant update is if a 100% affordable development is located within a half a mile of a major transit stop, the City cannot impose any density limits and entitled to a maximum height increase of three additional stories or 33 feet. • Below Market Rate (BMR) Housing Program: Established in 1974, the City's BMR requires developers to provide a certain percentage Annual Action Plan 42 2022 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 108 Packet Pg. 215 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft -525 E. Charleston - Mitchel Park of units as BMR in every approved project of three units or more. The program originally required that for developments on sites of less than five acres, the developer must provide 15 percent of the total housing units as BMR housing units. If the site was larger than five acres, the developer was required to provide 20 percent of the units as BMR housing. The City of Palo Alto have historically used in -lieu fees and the use of development impact fees charged on new, market -rate housing and/or commercial development to finance 100% affordable developments. The City updated its Commercial and Residential Impact Fee Nexus Studies and adopted two ordinances to make changes to its BMR program and adopted a new fee structure. The ordinances became effective on June 19, 2017. • Fair Housing: The City provides funding to Project Sentinel. Project Sentinel provides expertise in fair housing law and tenant -landlord disputes. Services include information, referrals, community outreach and education. In addition, Project Sentinel resolve fair housing complaints via investigation, mediation, education and outreach to both property owners and tenants about fair housing policies. • Housing Incentive Program (HIP): Effective May 2, 2019, this Ordinance adopted changes to the following zoning districts: Citywide — where multifamily uses are permitted, Multifamily Residential Districts (RM), Downtown (CD -C), California Avenue (CC ((2)), and El Camino Real (CS and CN). • Affordable Housing (AH) Combining District: In 2018, The City Council adopted the Affordable Housing Combining District to provide flexible development standards beyond the State Density Bonus Law to allow 100% affordable housing projects located in a commercial zoned area. • Workforce Housing (WH) Combining District: The City Council also adopted in 2018 the Workforce Housing Combining District to encourage the development of housing within half -mile of major fixed rail transit by modifying flexible development standards for the public facilities (PF) zoning district. Discussion Please see above. OMB Control No: 2506-0117 (exp. 09/30/2021) Annual Action Plan 2022 43 Item 9: Staff Report Pg. 109 Packet Pg. 216 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park AP -85 Other Actions - 91.420, 91.220(k) Introduction This section discusses the City's efforts in addressing the underserved needs, expanding, and preserving affordable housing, reducing lead -based paint hazards, and developing institutional structure for delivering housing and community development activities. Actions planned to address obstacles to meeting underserved needs The diminishing amount of funds continues to be the most significant obstacle to addressing the needs of underserved populations. To address this, the City supplements its CDBG funding with other resources and funds, such as: • In FY2020-21, The City's Human Service Resource Allocation Process (HSRAP) provided $549,306 from the General Fund in support of human services. The HSRAP funds, in conjunction with the CDBG public service funds, are distributed to local non-profit agencies. Additionally, approximately $50,000 was provided to nonprofit organizations serving Palo Alto residents with short-term and/or urgent funding to address emergency, critical or emerging human services needs through the Emerging Needs Fund. • The Palo Alto Commercial Housing Fund is funded with mitigation fees provided under Palo Alto's BMR housing program from developers of commercial and industrial projects and used to assist new housing development or the acquisition, rehabilitation, or the preservation of existing housing for affordable housing • The Palo Alto Residential Housing Fund is funded with mitigation fees provided under Palo Alto's BMR housing program from residential developers and money from other miscellaneous sources, such as proceeds from the sale or lease of City property. The Residential Housing Fund is used to assist new housing development or the acquisition, rehabilitation, or the preservation of existing housing for affordable housing. • The City's Below Market Rate Emergency Fund was authorized in 2002 to provide funding on an ongoing basis for loans to BMR owners for special assessment loans and for rehabilitation and preservation of the City's stock of BMR ownership units. • HOME Program funds are available on an annual competitive basis through the State of California HOME program, and the County's HOME Consortium. • The Housing Authority of the County of Santa Clara (HACSC) administers the federal Section 8 program countywide. The program provides rental subsidies and develops affordable housing Annual Action Plan 2022 44 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 110 Packet Pg. 217 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park for low-income households, seniors and persons with disabilities living within the County. Actions planned to foster and maintain affordable housing The City will foster and maintain affordable housing by continuing the following programs and ordinances: • The Below Market Rate Emergency Fund which provides funding on an ongoing basis for loans to BMR owners for special assessment loans and for rehabilitation and preservation of the City's stock of BMR ownership units. • The Commercial Housing Fund and Residential Housing Fund are used to assist new housing development or the acquisition, rehabilitation, or the preservation of existing housing for affordable housing. • The Density Bonus Ordinance adopted by the City Council in January 2014. The density bonus regulations allow for bonuses of 20 to 35 percent, depending on the amount and type of affordable housing provided. • The City's participation in the County's HOME Consortium will allow developers of affordable housing projects to be eligible to competitively apply through an annual REP process directly to the County for HOME funds to help subsidize affordable housing projects in Palo Alto, including acquisition, construction, and rehabilitation. Actions planned to reduce lead -based paint hazards The City's housing and CDBG staff provides information and referral to property owners, developers, and non-profit organizations rehabilitating older housing about lead -based paint (LBP) hazards. Any house to be rehabilitated with City financial assistance is required to be inspected for the existence of LBP and LBP hazards. The City will provide financial assistance for the abatement of LBP hazards in units rehabilitated with City funding. The City also requires that contractors are trained and certified in an effort to decrease the risk of potential use of LBP in new units. All development and rehabilitation projects must be evaluated according to HUD's Lead Safe Housing Rule 24 CFR Part 35. Actions planned to reduce the number of poverty -level families The City, in its continuing effort to reduce poverty, will prioritize funding agencies that provide direct assistance to the homeless and those in danger of becoming homeless. In FY 2022-2023, these programs will include the following: • LifeMoves provides basic necessities for persons who are homeless or at risk of becoming Annual Action Plan 2022 45 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 111 Packet Pg. 218 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park homeless. The Opportunity Services Center is a comprehensive, one -stop, multi -service, day drop -in center that provides critical services for homeless Palo Alto residents. Specifically, the facility provides showers, laundry, clothing, snacks, case management, and shelter/housing referral services. • Alta Housing will provide counseling and supportive case management services for low-income residents of single -room occupancy facilities to help them maintain housing stability. Activities include financial counseling, health maintenance, information and referral, problem solving, employment assistance, crisis intervention, and case management. Actions planned to develop institutional structure • Regular bi-weekly meetings between entitlement jurisdictions at the CDBG Coordinators Meeting and Regional Housing Working Group. • Joint jurisdiction Request for Proposals and project review committees. • Coordination on project management for projects funded by multiple jurisdictions. • HOME Consortium meetings between member jurisdictions for affordable housing projects. Actions planned to enhance coordination between public and private housing and social service agencies The City benefits from a strong jurisdiction and region -wide network of housing and community development partners, such as the County and the Continuum of Care. To improve intergovernmental and private sector cooperation, the City will continue to participate with other local jurisdictions and developers in sharing information and resources. In addition to the actions listed above, the City will continue to coordinate with the City's human services funding efforts to comprehensively address community needs. Discussion Please see discussions above. Annual Action Plan 2022 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 112 Packet Pg. 219 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Program Specific Requirements AP -90 Program Specific Requirements - 91.420, 91.220(1)(1,2,4) Introduction The following provides additional information about the CDBG program income and program requirements. Community Development Block Grant Program (CDBG) Reference 24 CFR 91.220(1)(1) Projects planned with all CDBG funds expected to be available during the year are identified in the Projects Table. The following identifies program income that is available for use that is included in projects to be carried out. 1. The total amount of program income that will have been received before the start of the next program year and that has not yet been reprogrammed 2. The amount of proceeds from section 108 loan guarantees that will be used during the year to address the priority needs and specific objectives identified in the grantee's strategic plan. 3. The amount of surplus funds from urban renewal settlements 4. The amount of any grant funds returned to the line of credit for which the planned use has not been included in a prior statement or plan 5. The amount of income from float -funded activities Total Program Income: Other CDBG Requirements 1. The amount of urgent need activities 0 0 0 0 0 0 0 2. The estimated percentage of CDBG funds that will be used for activities that benefit persons of low and moderate income.Overall Benefit - A consecutive period of one, two or three years may be used to determine that a minimum overall benefit of 70% of CDBG funds is used to benefit persons of low and moderate income. Specify the years covered that include this Annual Action Plan. 70.00% Annual Action Plan 47 2022 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 113 Packet Pg. 220 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Discussion Please see discussion above. Annual Action Plan 2022 W. OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 114 Packet Pg. 221 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Attachments Annual Action Plan 2022 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 115 Packet Pg. 222 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Citizen Participation Comments Annual Action Plan 2022 50 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 116 Packet Pg. 223 of 853 Substantial Amendment 04/10/2023 APPENDIX A Public Comments Received Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Speaker #1 - Expressed concerns about the organization Downtown Streets Team recently had settled a wage theft lawsuit due to exploiting workers, etc. The speaker asked why give this organization a lot of money with all the issues they have. Speaker # 2 - incoming Director with Downtown Streets Team, The funding received in the post two years has helped with housing 11 people and 51 more maintain and obtain employment, as well ns remove over 700 additional barriers to self-sufffclency_ Despite the challenges faced in the public eye, they continue to dedicate themselves to the homeless population in the community. The director emphasized to the City Council and the Commission that the organization will act in good faith if they are awarded CDBG funding in year two. Speaker # - Programs Director at Silicon valley Independent Living Center, They provide the City of Palo Alto residents disabilities with education and training in all aspects of how to conduct housing search affordable accessible housing. Areas covered arc transition from homelessness, heolthoave focilities or unstable temporary housing, including providing food and shelter assistance, They provide security deposits, rental assistance, based on available resources, access to independent Firing. They are thankful for the funding recommendation and look forward to continue working with the City. Speaker #4 - Previous Director of Project Sentinel. Expressed the time it takes when putting together the funding recommendations for the organizations and the cost of delivering the services, The current staff recommendations will not make the cut. A 30% reduction of their recommended funding is not enough for the amount of work that goes Into assisting fornillles with fair housing issues and complaints. During the First six months of the year {FY2021-20221, Project Sentinel was reporting to HUD under a federal contract staff hours and case work. The organization can't charge its time under two federal contracts. They were planning to charge in the second half of the year to the City's CDBG grant. In the post, had to spend it out of the Administration category. Fair Housing is one of the few services that HUD will allow to be funded under Administration. If the City dogs not fund Project Sentinel in Admin and rather to Public Services then it will relieve the other public service ogencles In public service. Speaker #5- Praised Project Sentinel for assisting his son with the increase in rent. Expressed concern about Downtown Streets Team and the lawsuit they had. Annual Action Plan 2022 51 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 117 Packet Pg. 224 of 853 Substantial Amendment 04/10/2023 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Spcoker #6 - current Project ldianoger w/ Downtown Streets Teom. The Downtown Food Closet corilinued to serve the unhtioused the populotlon throughout the entire pandemic and never closed. Appreciate the City's support. Annual Action Plan 2022 52 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 118 Packet Pg. 225 of 853 Substantial Amendment O4/1O/2O23 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park NOTICE OF PUBLIC REVIEW PERIOD AND PUBLIC HEARING FOR THE FISCAL YEAR 2022-23 COMMUNITY *f• DEVELOPMENT BLOC K GRANT (CDBGW REVISED DRAFT - NNIJALACTION PLAN AND f !>,SUBSTANTIAL AMENDMENT TO FISCAL YEAR 2-21 RA LO AN NUAL ACTION PLAN ALTO This notice pr di iice ur public h$ rir19 arid Iporlurliti lOr (Public OOmmefll, Th0 City or Pak) J I1O i deI0r1P its F 2022-23 Annual i1 PL n (AAP). Thi Annual ALtiOf PLiNr1 idhrllilibg the Gilxh0tSifl and i c mutiny de lOI)mefll rtit dg and w0ii Orld-ye21r tn pI1 10 dcr'rl i we how tI I1y will irvem ilg CI38G rilnIS in ordrjr 10 idreS5 Most needs. Tho rued d aC1i++iliCS oft injerKW 10 rr Palo Altos AlTord le housing arsd C0rrw tiriity dOvelOprrrinl ob1jetrue Cribdd in 1ho 2O21 -2O2 C lit1 PIS. In addiG 1, the Oily LWriIo rII0Cte $1 (1.500 ir0r'i1Ihi GVBG-GonOna�+irus (CaB 3-+�V1) lullds. which rtiS1itul i as a SubslanV31 Arnondr 4 l0 the F? 2020-21 ArtrivaJ ACV Or' Plait, The detirelcpmanl of the AAP is algnlficantr9 uilomrad by public feedback A -daj public ra'r*w and comment penal on thre RE' 1 ed Drah Annual Action Plan for Iha allocailon of FY 2022-23 CDBC funds and the Draft Subatamlal Amend to FY 21021 Annual Action Plan will begin on May 20, 2f aM errs an Ju'a If you w+OWld like 10 pr0wie XOM6O S r ilhrr rr lh d0ctUlar ts. IhC CiLy we rrit s your AIlbrldarue AL the rn it IiSLed in Ih8 S bI& bcl0w. ELECTRONIC COPIES! Elaclronlc CopleE of the draft Annual Action Plan and draft SubslanhaJ Amendment will tie svellebla on 2g, 2J, on the Crtyretc lte: htlpr.)Nww.c4nfp31oa14a.org dbg_ CONTACT INFORMATION; For queSGOn5 And COrmidritS r jrdirip the AkP Cr 1h15 gul)GlOrllial ar iihriL plim OOnr, Maria C, CDBG C0r 3ull3rii i (951) 1-9008 Or 'ii a.irn l aL rn rill g�II S 'rrlb�ke<:dl•corri• PUBLIC HEARIINIi: The CityCounciwill hold ahyrbrid (In-persanrvirlual) Public Haaring on Monday. June 20, 2022 at $:CPPM, to adapt the F1? 2022-23 Annual Action Plan, the arssootsiad Fr -2 CDBe allacattorts, and Iha Substential Amandment in FY 2020-21 Annual ArdiOn Plan. Member& of 1ha public who wlto parlir�pais *irluallyr can dla as by vtsihng the link below: Zoom Li hIIMoa5nJ ID: 3B2 -C27-2'36 PhO06- 1(OO9) 900-6933 For Agenda, Mee!ing Link and eddltrorral Infctrrnetrion related to the rneeling please visit: httpathwww_cltyofpaloaltiD.orgIDepartmantEdCityr-Clerk/Councll-Agandaa-and- MinuIesr2l]r21,2f]22 5 %+r drys MVf 9is i1 regr re rneA5rrsi P ffn &8 ,3m.?.Pv brrnar, dtf�'�14iry9W pr rnc�d�+k��'�arrfi fo �r wog0prI9 Q i n95, pro67sr7. ar SQ-A c+ Wcwr tbe AL4 C c+d►rrsfor- eoe Hoyd eJ {50.329-2.35R fy') coo aks &B RwWlla br r bmapd as sear] as Pass a& be +ro J F' Th1 48 ruirs Al pr i m, 17rfVI11 Annual Action Plan 2O22 53 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 119 Packet Pg. 226 of 853 Substantial Amendment 04/10/2023 18 Rnh Pus: r'Jx5. r'la' 20.26'22 NOW HIRING 2021 - 2022 SCHOOL CROSSING GUARDS IMMEDIATE OPENINGS! Palo Allq, Menlo Park, Leo AIIos & cities throughput the Peni nsu I3. WORK SCHOOL DAYS ONLY! No nights, weekends, or holidays l 0lIIaCLAtIel wlttl _, ALL CITY MANAGEMENT SERVICES 4669M 275 5575 Ur Apply crane at: atmssaiary-cdmtcarkkrs "People you know and trust" Honoring all Pre -need ArrangemCnts CremaEians and Burials Services — Before need Planning Crippen & Flynn Fanrilrmmod, eniegollfai1Prsmidfnrnernllmdiriunssince.049 Woodside Chapel t Carlmont Chapel (OneblxktrainElCamia02Rea10 (polyUladt from itemCarlonl N1n Nl.adride Rd. Rndaanrd city ]1l] Alain 1e dr lea Purges, delmonE (050)M9•I103 FDSW {GSp}.9),d1t FPL625 www.crippenfivnn.com NOTICE OF PUBLIC REVIEW PERIOD AND PUBLIC HEARING FOR THE FISCAL YEAR 2022-23 COMMUNITY DEVELOPMENT BLOCK GRANT (CDBGI REVISED DRAFT l -1T1' OF ANNUAL ACTION PLAN AND PALO SUBSTANTIAL AMENDMENTTO FISCAL YEAR 2020-21 ALTO ANNUALACTION PLAN ThIn nenoa prowpgs a notncr 0l p'0 nearing 1110 0010 el rpr pubic commnnl. Tho Gily en Palo NCO is de+alopirlg its FY 2022.23 Amaral Acton Pen (AAP). The Annual Aulion Plan iienlilren the Gity's houurg and nnmmunhy davelo arri seem and proades a one-year acnon plan to demonairete how the CIty will Invest Its CI}BG grants in order to address Utssn reds. The Funded aciivilias are intended to meet Palo Mns alfordahle housing and mmmunily dewalopraenl objeadwas desnEed in the 2020-2025 Consolidated Plan. In addeian. the City 11104 is reaIkn le Sl94,500hm Ore CDOGCaownavirus ICU C-CVl) lumpy, whim caelAute a5 a S1ktLAnlial AnUdelmbnt to Orb FY 2020.21 Annual AdiOrl Plant. The didarIlOWWL Ol 41e AAP is s�nilieanl]y inlOrnygd cY Oud'C Igediyack, A 3l]•day pubic review arid mmmam period on the Revised Draft 2022.23Amral Aclion Plan for tine alloeehon of FY 2022-23 CDBG Lunde and the Draft Ruhstenaal Amendment 10 Fy 2020-21 Arlrrual Action Plan Will pe(llt On my 20, 2022, and end on Julie 20, 2022. II you would Yre to provide comments on adher or both dxuminls, the Clip welcomes your aiterdanca al1he maetig lisied in tine schedule below. ELECTRONIC COPIES: Ekchonic Cosies of the draft Annual Action Plan and draft Sat[+stemial Arnendmernl .in he aaailanle on May 2, 2022, on the Cllya wehsre: h1 Ws:In+w.011 ytu p a I o a I to. o r g rc d bg. CONTACT I ORMATION: For gre9tlonaanther commen s regarding me AAP or the subslantt?I amendmWtI. CICAds contact Maria Gallegos, GDBG Gonfullant, at (8510 961-90613 or via email al merie.gaiego®6 rrlakerintl.mm PUBDC FEARING: The City Colacil will hold a hybnd (n-peraorwlrtuar] PrtaC Nearrg on Monday, June 20 ,21122111 2071 al 5rOPM. to elStCpl the FY 202? -73 Annual Action Plan, 1110 associated FY 2022-23 COBG allocations, and the Substantial Amendment to FY 2020-21 Annual Action Plan. Montana of the pubic who wish to participate virtually can do so by vlrhling the we Merida. ]morn [Ink: httpylhpgm.Ury]t]In Meeiing 10:552-027-235 Phone: 1tr 4112(5-0S3 For Agertla, Meeting Link and addlional nlomnallon related to the meeting 1411011 41st: helps:/Iwww.ciryerfpalnallo.orgf DeparimemsiCity-Clerk(Council• Agendas-and- Minu[ea-2021-2022 Pa.smrs 1wn,r rain who min ore rnsrari ltd ld Cat sere as rinClh,a aimw. aurala ry aria. a rrwdtGcafrwrs to PPkaswpracadu'bc IC access City rrrmqheo pnrrr2cenr0 arsernrna ahcerkr oarrnc2 Me CAyx ADri Coorarraarcr George Hold a1 05 304-2510 rw'cnj or ay a'rru11 adada' CII}WASfG0aQ0Ip. RWueam rot asnsranee Of 80C01nnrextahcers 050141700 alflmfT,'aa ae 8109 Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Gunman sent diary before shooting 6 But newspaper did thetill e:"Diaryofan Angel Destroying Independence" in an apparent reference not read his writing The man accused of opening fire on :1 Southern £aiit4rnia chute h congrega• tion because of his political hatred of Taiwan dubbed himself a"destroying" angel in a yelen•volume diefy 11 111 to a newspaper befona the attack. the Cheneee-Irn- I12L10 paper said. David Chuu, 66, spent CHOU $16.10 w mail seven thick phuluoupied vidumer. rat' handwritten Chincsc text and a flash drive uI the World Journal ntlice in the LasAnyeles suburb of Mnntcrey Peck. The newspaper said the popes bore to Taiwan's 1011-govremment. The Chi- nese Cuninwnist Party uiniinues to de- mund Taiwan nwnify with China_ The diary re en were reocived in the daily mail Monday, mire day slier authorities say Chou opened fire at a lunch gathering erolder parishioners at Irvine Taiwanese Presbyterian Chutttl in the Community of Laguna Woods, killing one and wounding fine. The newcpaperdidn't report Slim con- temn of the diaries and nnhndy' there apparetnly read through them before sending them to the police though the paper'a attorney, said an employee. The rtewspepn'a lawyer, however, IoLJ The Orange County Reginlrr late Wedneralay he still had the page , Acne Woes? You're Not Alone! dirrumno with OW02 m le. M^la0 edC 4r}Cl,ae,4np wllh the leanyel-mil the 110th hlhcdllcon ernµuµ of uny uye, If you've tiled over4r e-cour ter Ognµrda li3n}ycne µrvtlucls for sever A wealre and limy hwen'rnalyad-A'atilm a to raw u derrr.SWynt. Clleevu how Dr. Khuu cal hey. Varian ymJ come in ld'iJ lklncr.reconrtJtksn. R. Snot w1 Werlorm u lhorouyh knh rCal exam and cr6ute in cuslominad trsmlrhervl Mort thin rnuy IncludetgAW Land 3nrl µlceefµtlon meacullone. comcostarold ryesHcr& n_rid uV)e exlluthSn3 Ivclhrr out bkatkh6l eh uhd wtalehetrdr. To elinalce heurment laid µrevent ruture (Y.au.la. Ce. khan recommends the ffuraAlho CWk µrodlrrri eID A disc and acarM. sidn. Acne eon 19LaY6llnyerrly aerr5 trrJt TWxe v toll d 081.0 0911 -CC rlTdeltO&. For minorsoun. Dr. IR1uu raeerrlriandsehemk;ul peek uhd rn1crodw rK4x,4oh Ihul mnig.e doudnln kryery and µOrdh rh1gdn, and ll-ati0 14 redr2CC r1dnP C For ails 0t aron. Duke ratan Lees Lei lean. the Teat Land only FDA -1 F4.roved mlcrcroedlny device to Ireut union arum. Or. Ireju cut enhuhcethe tra .mart he a lr0l' 52l wihRW*k*1 Ch F1uoIne 0 -WI 1dh nljnnt.0rurgh,o w1Hhu- edde µrocedure tteJtr.uee yorrown blond to reµuryourcells Now Aceepflng New Patients n1a k*g moor reap war mo mar..nrla }.kart:. Duke T. Khuu, MD, FAAD Sturuond Tinned MO . Bound C.ertlr e.d [ Trutoksyk7 . 9tJte-ur,11YgAR reulolnUlh• r5. titre m DµaaA9nCa +*+CP71rpti^CWar +id+Carr%ar4rnWtlr �u*+dra*CG es pnntde cur nn bier then 4d loom in adaun-e do a-hrdrrmd rnrew ira. or moraine. Item 9: Staff Report Pg. 120 Packet Pg. 227 of 853 Substantial Amendment 04/10/2023 CITY OF PALO ALTO — PROOF OF WE POSTING OF FY 2022-23 AAP Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park lino.' Lr Ln th , '.r. LvIm,r Planning & Development Community Development Block Grant In Fdon FrrYFF GOT: N ih+t va x.lsd.,o.r t. US 6.c.arta i ku .z.d ..flu- +I�1R �1 + - rcLiv?.4•' +Lx �C+' ':L: �'A..yr ... .4....... pL}'rii,kn 'r ha4 Y sskr�xr <r hibxah k,rarc ry — Lcm-,, Wxt[i.F-m'Th7zyvp.-.vl.uL LF.4erL.*E rrv�y rwvrcwrr JY.irr rv..r;lr4mYY,av:tr rr.'r;rr„kw r..r:tJv;ar:Y N.WiY.'k+1 +4'+r_ ZNF IV{ borax ndFe�.al�ier. xniie .Ncc. s. F+oFrr. Nerve Update - May 20, 2012 4rr.r�4'Pr.2Lrr¢. Ekes 4. r. 11:c rrN'abf.Ye 4{'asd i .d�S. aiRhnrl'a"r fir �-..m J:xbry IL+ae .,.,,, ., ..I..,.,,.. wr 3 iwdd;;rrriwri rI+x]S UU SS C r.",iiirx.boxlzru a fl . p trk k rA,d c t, rY . ror. cr .rc.c amra.-sli L.Y q flOS w.r..0.. i.•L FSL+rkxam xr.r Ax.yli. i3-On-L'L itr hl,Y i9 t,t]] i MdorFLr rL U l Arm rrrr. �'•, nrMrr.n� x .k, :liar.-rrix ih avrri Yr ra T3r.r^"� Annual Action Plan 2022 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 121 Packet Pg. 228 of 853 55 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Annual Action Plan 2022 56 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 122 Packet Pg. 229 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Grantee SF -424's and Certification(s) Annual Action Plan 2022 57 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 123 Packet Pg. 230 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Oi'cuSl9n Envwpe Id: 46b-O6CE 1e 41 O- 4 C131SF'1AGCF OMB Nlyntrar O4fl-OX11 u Exarelion Ea a 12^1,'J22 +k001iCaliorl for F40*1VI i#Fdr;Co SF.424 I. rtpc of SJbmisamn: ❑ P—Plolicalion ®Apglcaion CFmllged'Corrected Afi¢itzslian ' 2. - wpcnl Anpl cibrr: - Ic:apprcpr ale eUcrni ® M9w barrpadrl: ❑ Fi6°wisbn ' i. D I4l Rrd_MNc 1: .1. ApfO a,l Iticnlli r. II I 5a. Fadel'al En% IJlwifxrl. 5b. Federal Awtrd Ioar* r: e-22-kC-45-020 9rabk Lim Onlyr A. L7' Reuekwd br 31aW: I 7 SIaIIdullrirr: 1. APPLICANT IHMOl ATIQM: 'a.L%4Nlama4'_iY al. }e La h1.a ' b. EmployarLTawayarldarefisauarl Nunbxr ELNfJIH): 'a UEI: N L ZM61 w5v-7 ua-600n 389 I. Addraas: 250 II i11tan kvarva Shaal� 'VV Pale ,�1tq CwM Bari* `Blain: GAI Gnliiarnia Ras�nor 'Car+ry: ogk: G1117EG STkvice 'zlpIPaIgIc : Fh3�1-7533 a, OrgivilsMlordl Wrps DepaimertHama oMs�nHum Long Range Planoinq Planning d Deveb3pulrc Service T -Haan erla conled rnhhnnellon or para0rl to 4e 01on mollera iriwohc Ih1e applio : Prcnx: ' 1- r01Name: MI Ij Nanm'G' '-larr ' Leal Mane 11 Burk T711e: nagre of Lacy 1laoge PLaamiog OraytimI. eel A%elicn ' Tdeprr:rna Nun6rr 950-617-31BY =ax Nunticr. `Email olarff-oa alllcktya[palaa_ta_arg Annual Action Plan 2022 58 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 124 Packet Pg. 231 of 853 Substantial Amendment 04/10/2023 OocuSrgn Envgbpe Id: �6b-06CEisi6b.4C131SF7'19AGCF Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park AippliCaliprl }Or F*0*ral Asst tdnC* SF-4ga ' R. Type od Applic rrt 1: Soled Applicant Type. G_ty ar Ta inahip Goverrnrent Tree CfAW cenL 2 6e1 App4' Sne T, e: Type of AwkcanL 3: Selxl Applruart 1}pe: ` 10. Name of F6derall Agency; U.3_ creF,ertmen_ = I;ousing morn ULhao Dsvelapwent 11-CMgigg pi FoOgFol DompaticAs4lslonce Humhsr; CA Tae: :orrnurity crrve_opment 81ock Grant 12 FurrAYs¢Opp6rwr Nurrbm: 8 -22 -HC -06-0020 ' TIIIe: C tfltirity L1eve_Opffwit Kock GrarLt I Ggmpgtttlgn 1OgnfH11rpilgn Nu i qr. True: 1& Area6 A Hem ed by Prtjett {CiLie , Co .i i& Slte, n a.l: M.1Atmer1tI. • 1d L5utVdvrTWanfAPPILrs tl'i Pnt it City ur Pa_a Alto Community r valapaaRL BLCCk GYQrt (CDBS) pragt r SCL P=ogrum Year 2022. r A1Iach mppor" doarn nL+ As eF5tifr6d h agency rriu is . r--., Dalebs A11&%rm 3 Vle,a Mn'.I' I' Annual Action Plan 2022 59 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 125 Packet Pg. 232 of 853 Substantial Amendment 04/10/2023 0i'cuSlgn Enws+ope Id: �Gb-06CE it 4l pp Aht [J31SF7291y�(,F Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Applicalron for Federal Asaletsnee SF -4N 16 Car a Uiohg1 0191rkaIe Dl, - I. Applrmrt A —D15 h. rtLBra rwPrc1 L C7.-18 AILi h gn gQ¢ILgngl 19terpmnio%TtgHJ G1 congm slpgl I;x91r1c1itree 5, Arid ATladmrwry I�Strl9jLm�rlL til{�YrA*w*Mr1 i7_ Propneed Project: ' a.81grl Dgle UflulriC22 I 1g E911rreDap Fpn�ng ($j: - a. Federal 511, 16. as 'h. dpflrMA D. n0 'Late D. a4 J. Lacdl D Q e. 0Lher D Q 1. Prr am Fromre 1d 9, 0DD.e0 'c.TOTAL .?..3a no ' I. Is Appllaatlon Sa4Jurt W Fhwlew Uy 9t9I4 Un11rt EC,cL.lIle Ort%r 12372 Prowu? a. This appkrahm was mIDIbe Stale rndlerthe ll acijLi.p, Order 12371 Process for review m E. Prag n is s lb ml m E.O. 12372bLe Fos Inotbeen mlected by d-rcSlale for revkw. C. Frrsgram le lat woere 1 by E.O.12372. ' 7t}. Ip Ire nppuppM peIi1 L r 1 On Any FWFrgi PnbL? {Ir "Ve ," pro'.�It1l euprana119n In 9ltiChraFnl.) Yea ® Mo II'Ye6". prD'Ade ekplanebon and 9Ctacli ALM AtlaMrnerL[ Delele AlInchmerrt Vlew Adschrrent 21 'By r10n+19 IhIs i0lMitellan. P ee.11ly 11] to Ih&tChjemelta ealNainttl In 111Cr e,111ei1JCl C ard a1 LM the eee6emelHa hbreln are true, c mplele and accurate la the beel of my kriowiedge_ I also pravlde the required amesuranci& and agree Co complywlth arry n waning damn if I oupta baward. I asnawarrt thal any folio, Ilcllbous, oriraudultre slalumusrs cralarms may 4yI7f4S1 m4 Ia crlminal, clylk w u*1 r41,Wlve "witg1` jU,9, QuX . T+r1a 21a, 9u liars 11l ®"IAGREE -- Tip, iii of cerfficalro-r and or an rntemnL srh xi -r, ou rnry dia an This lie. is ccc rwtl tr the arrtirrcamenl or anerror n.n'1w Te Ir,MIN u. A,rthar11ae1 RnpraxonratIwa. Prefix: . c. ' Frrsl Name .d Mrddlo Nan -c ' La91 Ngrne, Sh1l:ads SUlrlr _Tills: .iT.y eaanagnr ' T, l%hr,e t+lntyr. 650-529-2790 Fn Ntrr{.tr. Emuit lra_5hi katlaie:ityotpaloe lto _orq St�Tatura al AuuroraDd Rnpmsurrihvo: ' Dale Scrod: 17114/202z I co«eKrrrarv: Annual Action Plan 2022 60 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 126 Packet Pg. 233 of 853 Substantial Amendment 04/10/2023 0oCuSi9n t5nws+ope If: �Gb-06C6�+t80 sr6bA&O.31SF729A6CF ASSURANCES - CONSTRUCTION PROGRAMS Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park *lB Hrll,B¢f. aU1D-EH9 Ea a ri t]gle- 2)2U2 25 Public reporting burden for Ihis collection of infcrrnaliocl is estimaled to avefege 15 mrrwles per response, Including Ilrne far reviewing instnietions, eeerching exiating tleta uroes, gathering and maintaining the dale needed, and aompletng and rewlev`ing lie amleebon of information- Send comments regarding the burden s1imele oranyolhar aspect of this colledlion of infomMalion, inukKkkg auggeetions for redudng this burden, to the Office of fYlana�emanl and Budget. Paperwork Reduction Project l034&0R42), Washirrglon, DC 205503 PLEASE DO NOT RETURN YOUR COMPLETED FORM TO THE OFFICE OF MANAGEMENT AND BUDGET. SEND IT TO THE ADDRESS PROVIDED YTHE SPONSORING AGENCY. NOTE: Certain Of these a surarrces rl�dy rr 1 t. a00li6 1 to yoax 0roie6l or Grogram, Iry4u have Questions, please cxxitact the AudrLing Agff y. Furtte, cer Fr+Jh'8l asSi318noe 8w$s}a agenOiM may require applicants 10 Certify to a00itoral aae 1aI as. if such is the case, you will be notified. As the dulyauthonzed reGresenlaiNeorthoapplicanc.II certify that the aGGlicanL- 1. Has the legal euthcnty to apply for Federal assisienoe, and ihe irshlutror►al, managerial and Finanrcial capability (inel d h uFfifin110 ley the eh Federal share of projeol ooslel Lo errs proper p n), rnarmgernent and cerr p eilon of prgect described on ttr® cation. 2. Nil give Itle aiYg agency, tI pvrlptr[ pe General of the Urrted Slates and, if appfapnalu. the Stale, the right to examine all records, books, papers, or domments related to the assistance; and will establish a It acoounern in acoardar`ce with generally acrepLl agDountiog standards or a wy dlrecilves. 3. WI not dispose of. ntidify the use of, or change the terrnsuf the real prcoerly tills or other interest in the site acrd I0cili6es without iermis!SiOn acrd insirudions rrgrr11h$ tiu8rding age•''C.y. Will rird the FeCer81 awarding agency arecttves end will nude a covenant in the litre of reel property acquired in whole or in part xdih Federal assistsrca funds to assure r- discrirNnalion dip" the us�Cful life of 1he iL Ct, 4. Ml comply wish the requirements of ihe ass'stars e awardr agency with regard 10 1h review and approval of [r)rl$tn l plans and SpecilO8llOns. 5, Will pr wk1 and maintain minoot xrl arid adequate engineering Supenngion t11he COngiruCllon sloe to ensure mil the complete work rxrrfomas with the approved plans and spacifiealions and will fumlor progressive reports and such otherinfomsation as may be required tnl the assistatrrce a warding affray or Stale, 6. 4VI initiate and complete thewak witho the applicable t!ne frame aher receipt of approval of the ewer o7 agency. 7, yytill establish safeguards to prohibit out yeas km using their poa long for a phase chat O * tiluLP-5 Ur presets the appearance of persarel orargarrzatranal acnilict of nlaresi or personal ga 1. Prmwus§ilium usahk: 9. Wd eomplywrlh Ina Intergpvemmenml Funnel Act of 1970 (42 U.S.C. §§4729-4763) relating toprescrbed standards of nredlsysterns for programs funded under one of Grs 19 skalutes or regulatkwd sGeoified in Appendix Aof.lw Standards IOr a Merit Sytem or Persaeel Adnrnrslmilon (8 C.F.R. 9UD, Sd past Fk 9. Will gpmply w91h 1he L gip -Bt ed PBinl POiSoning Prevention Act LLS.C. 441 et seq.}w lich prohibits the use of lead -based paint in oonsrnxaen or rehabilitation of residence swsb.ires. 1 CL r' 111 comply wrth all Federal statutes relatIng Io non- discrimination. These include but are nal limited tx je) Tills VI of the Civil Rights Act of 1984;P.L. 88-352) whirl prOhibil* diyorjminalioe On Rho tra!lSOf rae&. color or nsllonal origin: (ti) Title D of 1h Edu on Amendments of 19T2, as amended (20 U.S-C- §§1681 1693, end 1885-186). which prohibits disonrsenelion on the basis of sexy (c) Section 504 of the Rehatbilfotitn ACL 011973, u amended (39) U.S C 5791), which prehlbtls dIscrtminatlon on the basis of handicaps; r;d) the Aga Dlsaiminetlan Act of 1975, as amended X42 U.S.C. § 8101- 107), which prohibits discrimination on the basis of age; (e) the Drug Abuse Of1i6 itnd Tre*tment ACL of 1972 (P L. 9.55), as amended relauung to nondlscrlrninsilon en Ire beets of drug abuse; (f) Be Ccmprehensi eAkflhol Abuse and Alcoholism Prevention, Treelmentand Rehabilitation Act of 1970 (FL. 91-016), as amended- relating is nondiacrirrirwiij on the tIAEiS Of AICohoJ 8I}uRe Or oleohollem; (9) §§525 and 527 of the Public Health Serwca Act of 1912 (42 U.S-C- §§29U dd-3 and 29(3 we 3), as amended, relating to confidentiality of alcohol and drug abuse patient records; (h) Title VIII of the t isil Righf5 ACt Of 196E (4211,5 f. 9§,3 l(l1 Cl amended, reLsling io nondiscrimination in the sale, rental Orilnanairg or houelrrg; (I) any other nondisaimirretion pravisions in the specifre statue(a) under which application for Federal assistance is being r1 ei $'+d (j) the ru jiremwts oraiiyoLher nondlscrlminalion statues) which may apply to the application. Aulhariacrl far Loral Rgrroa Iicn Annual Action Plan 2022 Brerrtlerd Farm 4240 (face. 7-71 shed by cc C+tir#ir A-102 61 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 127 Packet Pg. 234 of 853 Substantial Amendment 04/10/2023 O_,ouSrgn Envabpe 10: 4651e410 M-D31SF72A6CF 11. Will comply- or her. already complied, Kith the requirements of Titles II and III of the Uniform Ralocaticii AssiSlarrCeArrd Fl I Prti�oe1y Apgui5iU c1 Policies ArCLOF 197U 3P.L. 1-46 whlrh provide for fair and equilable treatment of peraonsdieplaeed ort�tioae properly Is acquired sr..9 resultof Federal and laderally-aasiated programs. These requirements apply to all intaresfs in real property acquired for protect purposes r gardlessof Federal participation In purchases. 12. Will comply with the provisrora of the Hatch At t§ U.S.C. §§1501.1546 and 7324-7328 }which limitthe political adiaities of employees whi) a prinppol employment acllvilles are funded in whole or in part with Federal funds. 13. Will comply, as applicable, Kith the provisions of the Oevis- Bacon Ad (40 U.S.C. jf27a to 276e-7�, the Copeland Act (40 U.S C §2760 acid 14 U.S C §&4y, and & CWlfi)t1 Work I3aurs and Solely 31siWardsAct (44 La -$.C. §§$27- 333) regarding labor standards lorfaderelly-sasksted construction subegreements. 14. Will comply with flood Ineurarice purchase requirements of Secdcn 1O2(a) of the Flood GlsaaLer Protection Ad of 1973 fP-L. f33-234) whic+i requires recipients in a spacial (lucid hazard area to participate in the program and to purchase Hood iriSur0rm if Lhe LWWAI ppgl of insurable poris1rudlen and acquianlan Is $10,994 or more. 15. Will comply with environmental standards which may be prescribed purSuaril (0 the lOllow(0Q: la } ingtiluli0n of enYlronmenlal quallly mntrol rrmtgijres under the Nallonal Environmental Policy Ad of 1969 P.L. 91- 190) end Executive Order LEO) 11514; (b) nolitication of violating facilities pursuant to EO 11738. {o] pr omctiori Of we92r'ds pur'SUAnL LO EO 119t; Id exaluatian of flood hazards In fiocdplairis in accordance with EO 11988; 1e) assurance• of project consistency with the approved Stale manegamenl program deveIcped under the Coastal Zane Management Ac1 of 1977 (1$ U.S C §§1451 el FBI.); (rf Wnfarnnily of Item 9 Attachment C - SA Palo Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Federal actions lo State (GeanJUr) IrnplemerNahon Plans under Section 174c) of the Clean Ar Aul of 1955. as amended @2 U.S.C. §§7441 a1 seq. I; {9) piviimlipn Of urd lrcx id sOwoo& of drinkriq w�1or under the Safe Drinking Watef Ad oil974, as amended P.L. (l3-523); and, (h) proieollcin of endangered apeciaa underlhe Endangered Species Act of 1973, as anianded (P.L. 93-2{kri). 16. Will comply with the Wild and Scenic Powers Ad of 1968 (16 U.S.C. 1271 et rreq.) related to prctec1ing components or potential components of the national wild and ggeni0 rivers lem. 17. Will assist the awarding agency it ar.suring compliance with Section 105o1 the Nalional Historic Preservation Act of 1966. as amended (15 V.S.C. §470�.1iiO11593 li0eerltiliG9l;on and VVe lion Of hiSLrf, u dallied, 8ii4 the Arohaeeloglcal and Historic Preservation Act of 1971 (1 B U.S.C. §H4 1 at raq). 1 Q. Nil ca,r$s is 1 pe►r4rrri 1 the iw IrrlB eI am a3mpllanee audits in ar3eordance kWh the Se Audit Act Amendmeriis of 1996 and OMB CYcularNo. A-133, 'Audits of States, Local Gavemmenks- and Non -Profit organi�Mi0ns., 19. WWI cmlplyKith 01 appliciW6 requiren l5 of all OIher Federal laws, execute Orders, reguloLi i e, 8nd L)Ckie3 gaverreng tore program. 20. VAI comply with the regdrements of Sed ion 106(u) of U Tr811l kI Vli lntg PrY)4001lOn Act (1WA) or 2444, aS emended (22 U.S.G. 71)4) a4wch pralydis grant award recipients ors sub-reclplantfrcm (1) Engaging Ii severe fc�macf traOcking in personeduring 1he per d of tuna 9w1 the award is in effect {2) Prvaring a conmerd i ML during the pM<4 or Den$ that J5 Oil i5 iii effect cr (3) Using forced Ist it In 1he perforrm-iir_e of the award or subawards under the award. SIGNATURE OF AUTHORIZED CERTIFYING OFFICIAL TITLE F:ity Manager APPLIICANTCRGANIZATION DATE SUBMITTED �:itsr of Palo P.lr.o SF..*21D LRev. 7-B7) Back Annual Action Plan 2022 62 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 128 Packet Pg. 235 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park O_,wSi9n EnVWpe IC] sfib-09C6' i siL J .4 G31SF7'19AGCF CERTIFICATIONS Ln accruidanec with theapplicahle statutes and the mgulations governing the crmsnlidated plan regulations, the jurisdiction ce tile s that: Affirmatively Iurther }air Hnusink --IrtLe jurisdicunn will afFrmmtivcly fiuthcr fair housing_ LJnlform liefocatio■ Act and .&ntl-dfsplzp.enl i.d Rdgeptlian PIif — It will comply with the acquisition and eclocai[ims requirements of the Uniform Relocation A,ssistanoe and Rea] Property Acquisition Policies Act of 1970, as sniended, (42 U.S.C. 460] -4655) and implementing regulations at 49 CFR Part 24_ It has in cf1iiot and is following a residential anti-displae rnpnt and relocation assistang plan required under 24 CFR Par l 42 in Connection with any aftiviiy assisted with funding under the Community Development &lock Grant or HOME programs. Anil-Lobbying—Tu the best of the jurixiietion's knowledge end belief: 1. Ni I —deed appropriuttxd funds have been paid ur will be paid, by or on bcbalFufit, to any person Fur infl uancing or aocmpiing to iniueuce an offiocr or emplo, ee of any agony, a Member of Congress. an officer or crnploycc ofCongress, or an employee of Mcmbcr of C'ongress in conncction with the awarding of any Federal eonlnx L the making of sny Federal grans, the making of any Federal loan, the euteriiig into of any cooperative agreement, and die extension, continuation, renewal, amendment, or mrrdifwation of any Fpdcrai contract, gram, loan, orvwTcraiivc agr rnt'nt; 2. Irany funds other Than Federal appropriated fiends have been paid or will be paid to any person for influencing or attemptingto intluencc an officer nrcmpinypc cf any age y, a M rmb�r of 'posies, an officer or employee oFCongess, or an entp]oyee of a Member of Congress in aorineclion with ihis Federal contract, grant, loan, or cooperaliw agivurneot, it wil I complete and submit Standard Forni-LLL, 'Disclosure firm to [Report Lrbbying,- in accordance with its instructions; and 3. It will requite that the language of paragraph I and 2 of this anti -lobbying ceiti (cation be included in the award documents [or all hawards at all tiers (ingluding suhcontracts, subgrants, and contracts under grams, loans, anit coop,-aiiae egti:cmatts) ansd That a]I subrecipients shall certify and disc]osc accordingly. Authurity of Jurisdiction --The cunsolidutiv] plan is authorized under State and Ioee1 law {as applieuble) arcs the jurisdicliOEL possesses the legal avtherily to carry out the proems for which it iS seeking funding, in accordance with applicable HU]) regulations. Conalsieucy with pltln --Tlie housing acli ities to be u]sdertake,u with Community Dewe]opmenl Black (;rant, HOME, Fmcrgcncy Solutions Grant, and Housing Opportunities for Persons With AIDS fiords arc consistent with Lire stratcin pion in the jurisdiction's oansalidetud plan tiu>t 3 -- It will comply with sncuon -1 of the Housing and lirban L)evelopment Act of Ig6l$ { L 2 U_S-C- 1701u) and implementing rcngulations at 24 CFR Purt 75- 7/14/2022 Signature o Authorized Official Date City Managcr Tide Annual Action Plan 2022 63 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 129 Packet Pg. 236 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Oi'cuSi9n Enws+ope ID. �G6A6C5' +t80 siLJ.4G3�SF729A6CF Specirrc Community Development Block Cra■i Ci riif eatiionir The Entittemcnt Cnnrau rdty certifies that: Cithea Participation -- It is in full compliance and following a detai]ed citizen participation plan that satix1ex the requircmcnts of 24 CPR 9I-]05. Co m munity Development Plan -- Its consolidated plait idenli lies community development and housing needs and specifies both trhprt mi and Iong.lenn community tcIopmeii1 objectives that that ha3 c been dcvrlaped in accordam'e with the primary objectier of the CDBG pragrani (Le_, the devdopnrenI of viable urban oominunilics4 by providing decent housing and expmiding ccolsomnic opportutvties. primari Ly for per5ons of ]ow and mvdcratc incase) and ncquircmcnts of24 CFR Parts 9] and 570 - Following a Plan -- It is following a current consolidated p]an that has been approved by HUD. C st of Funds -- 1i has complied with the fol lowing criteria: .L Maxunuro Feasible priority, With respect to activities expected to bo assisted with CDBG funds, it has developed its Action PLan so as to give maximum feasible prianty to activities which benefit law- and mod mte-i nawnc families maid in the prevention oreliminaticm of slums or blight. The Action Plan may also include CDBG-asaisled activities which the gitrtee tifics arc designed to mcet vthcr community dcvcIopmcnt needs having particular urgency because existirt cxmditionn pose a serious and immediate threw Io the health UIr welfare of the cormvunily, and other financial resources are nol available (see Optioiral CDBG Certi Fication). 2.Overall Benefit, Theaggregate use of CDBG funds, i,1�.ludiiLg Section 108 guararrteed loans, during program ycar(s) [a period spccil9icd by the grantcc ofooc,two, or thtcc 5pocifiic uonsewlive prop -am years], shall principally benefit persrms of law and moderate income in a manner that enstues that at leasl 7U percent of the amowtt is expended for activities that beaef]l such persons during the designated pedod- I Special Assessments. It will not attempt to recover any capital costs of public impravenbe1to assisted with CDB(I funds, including Scclivn ]tit loan guaranteed funds. by a55Cs5ing any amuura apinst properties owned and occupied by persons of low and modem to inturrre, including any fee charged or assessmenr made as a uatdilion of oblaini ng access to such public irmpmvcmcnts. However, if CDBG ftutds are used to pay the proportion of a fee or assessment that relates to the capital casts of public improvements (assisted in pate with CDDG funds) f.nanced from usher revenue SOur00s, an assus,%munt or charge may be made a ainst the property with respct to the public irprove7]IenIS financed by a source other than CDBCr funds. III addiiicit., in the case of properties owned anti occupied by moderate income (not low-income} families. an assessment or charge may be made against the property for public improvements financed by a sourcc other then CUBC funds iFthe jurisdiction certifies that it lacks CDBG funds tO L o er the a5S4hSEttOIIL. F3aesuixe Farce — It has adopted and i5 enforcing: LA policy prohibiting the use of ex a sivc fume by law enforcement a needs within its jurisdiction against any individuals engaged in non-violenl civil rights demonstrations; and 2- A policy of enforcing appin:able Slam and local laws egai nst physically balnrin8 entruncn to or exit from a facility or location which is the subjel.t of such non-violent civil rights dcmanstratinns within its jurisdiction - Annual Action Plan 2022 64 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 130 Packet Pg. 237 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Oi'cuSi9n Envwpe Id: •&b-06CC 1e 41 O- 4 D31SF'1AGCF Compliance with All ti-#lr riminaliun lawx -- The grant wil l be conducted and udministeral in oonfolmiiy with title V] of the Chd] Righix Act of 1964 (42 u .S.C. 2040d)and the Fair Housing Act (42 U.S.C. 3601-31119) and inplemcnting regulations. Lend -Based Palid — Its activities concerning lead -based paint will comply with the requiremeiits of 24 t'F'R Part 35, Subparts A. B, J, K and R. Cempllance with Law -- It will comply with applicable 1a, 7114/2022 Signature of Authorized Official Date City Manager Title Annual Action Plan 2022 65 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 131 Packet Pg. 238 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park Oi'cuSi9n Envwpe Id: 46b-06CE i sib .4 D31SF'1AGCF OPTIONAL Comm anily Development Black Germ Ctrl i1cnlion Submit the Following ccrtikeation only when one or more of the aclivitics in the action plan arc di .3igned to ine I other community de�+ulupmcnt neods having pa]1iclLir urgency its spcxi had in 24 CFR 570.2O8(c): The �rIntee hcreby ccrtifies That the Annual Plan iiu:ludes one or more gecifical ly identified CORG- assistcd activities which are designed to LU other coinmunity develapmefl hoods having p�rticular urgency because existing conditions poee a serious ai]d immediate threat to the licaith or welfare of the camonunity and nlher finandal resources urn not uvailxble ttr meet such need_ o:sgma b? 1 _ _ 7/14/2022 Si ,inch uthwizdOfliciai Dale City Manager Title Annual Action Plan 2022 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 132 Packet Pg. 239 of 853 Item 9 Attachment C - SA Palo Substantial Amendment 04/10/2023 Alto AAP 2022-23 Draft - 525 E. Charleston -Mitchel Park OocuSi n Enverdpe ID: 6065-1 41 O- D31SF'1AGCF APPENDIIX TO CERTIFICATIONS INSTRUCTIONS COt4CERNT 4G LOBBYING CFRTIF1CATION: Lobbying Ccrtifeatinn This certi Fcalian is a material rres tatiwl of fact upon which teliaDce was planed whet this Iransac Lion was made or cntcrcd into Submission DP Eh is ccrtifieation is a prcrcquisito ror making or vntcring intn this [ranxac[ion imposed by sertiou 1352, Lille 3 [, U.S. Code. Auy person W[Lu fails to File the requiivd rerti 1cation steal I br subjtet to a civil penally of not Jess than $ I0,000 and not more than $ ICI11,00 } far cash such fai]uru, Annual Action Plan 2022 67 OMB Control No: 2506-0117 (exp. 09/30/2021) Item 9: Staff Report Pg. 133 Packet Pg. 240 of 853 Item 10 Item 10 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: Utilities ALTO Meeting Date: April 17, 2023 Staff Report:2303-1218 TITLE Staff Recommends that Council Approve Bringing the Water and Wastewater Rate Proposals to Council on June 19, 2023, Pending Proposition 218 Notifications, for a Public Hearing to Consider Two Resolutions: 1) Approving the Fiscal Year 2024 Wastewater Collection Utility Financial Plan, Proposed Reserve Transfers, and Increasing Wastewater Collection Utility Rates by Amending Wastewater Collection Rate Schedules S-1, S-2, S-6 and S-7; 2) Approving the Fiscal Year 2024 Water Utility Financial Plan, Proposed Reserve Transfers, and Increasing Water Rates by Amending Water Rate Schedules W-1, W-2, W-3, W-4, and W-7; CEQA Status: Not a project under Public Resources Code 15378(b)(5) RECOMMENDATION Staff recommends that Council direct staff to proceed with Proposition 218 notification of Water and Wastewater Rate changes recommended by Finance Committee on March 21, 20231, and agendize a public hearing for these rates on June 19, 2023. For the Water Financial Plan, staff presented a plan with a 3% distribution rate increase to the Finance Committee (Staff Report 2301-1011)2 on March 7, 2023, but on March 21, 2023 revised this recommendation to a 2% water distribution rate increase and the Finance Committee agreed with the staff recommendation. Staff will incorporate those changes and attach the updated Financial Plan and rate sheets to the June 19, 2023 Council report. The Finance Committee recommended approval of the Wastewater Financial Plan as written in Staff Report 2302-09443 and staff will include the Financial Plan and supporting documents in the June 19, 2023 Council report for Council consideration of the Wastewater Collection rate increase. Finance Committee recommended the Council adopt the following resolutions, after notice of the proposed rate changes is sent as required by Proposition 218: 1. For the Water Utility, a Resolution: a. Approving the FY 2024 Water Utility Financial Plan, including a 2% water distribution rate increase; and 1 Finance Committee Staff Report httos://citvofoaloaIto.orimegov.com/Portal/Meeting?meetingTemolateId=11228 2 Finance Committee Staff Report 2301-1011 httos://citvofoaloalto.orimeLiov.com/meeting/document/1759.odf?name=Staff%20ReDort 3 Utilities Advisory Commission Staff Report 2302-0944 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisory- commission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-item-1.pdf Item 10: Staff Report Pg. 1 Packet Pg. 241 of 853 Item 10 Item 10 Staff Report b. Approving a transfer of up to $3.746 million from the Capital Improvement Program (CIP) Reserve to the Operations Reserve in FY 2023; and c. Approving a transfer of up to $3.0 million from the Rate Stabilization Reserve to the Operations Reserve in FY 2023; and d. Increasing Water Utility Rates via the Amendment of Rate Schedules W-1 (General Residential Water service), W-2 (Water Service from Fire Hydrants), W3 (Fire Service Connections), W-4 (Residential Master -Metered and General Non -Residential Water Service), and W-7 (Non -Residential Irrigation Water Service) 2. For the Wastewater Collection Utility, a Resolution4: a. Approving the Fiscal Year 2024 Wastewater Collection Financial Plans, including a 9% wastewater rate increase; and Approving a transfer of up to $3.178 million from the Capital Improvement Projects Reserve to the Operations Reserve in FY 2023; and Approving a transfer of up to $342 thousand from the Rate Stabilization Reserve to the Operations Reserve in FY 2023; and Increasing the Wastewater Collection Utility Rates via the Amendment of Rate Schedules6 S- 1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal — Industrial Discharger) In March 2023, the Utilities Advisory Commission (UAC) and Finance Committee reviewed the proposed rate changes recommended by Staff for Fiscal Year (FY) 2024. The overall system average proposed rate changes are a 9% increase for wastewater, and 6% increase for water. This report summarizes the Water and Wastewater utilities rate proposals. Drivers of the rate changes include rising costs of construction inflation, commodity prices and the rising cost to transport water. Additionally, infrastructure is aging and investment is needed to maintain the health of utilities and protect reliability. This report requests Council approve moving forward with Proposition 218 customer notifications of the rate proposals recommended by the Finance Committee on March 21, 2023, with a Council public hearing on June 19, 2023 for Water and Wastewater utility rate changes. If approved, staff would proceed with Proposition 218 customer notifications and update the Financial Plans and proposed rate sheets for the water and wastewater utilities to reflect the motion above. 4 Draft Wastewater Resolution https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-ma nager-reports-cmrs/attach ments/03-01-2023-id-2301-0798-ww-resol ution. pdf 5 Fiscal Year 2024 Wastewater Financial Plan https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-ma nager-reports-cmrs/attach ments/03-07-2023-id-2302-0944-ww-financial-plan-1 isa. pdf 6 Wastewater Rate Schedules https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-ma nager-reports-cmrs/attach ments/03-07-2023-id-2302-0944-attach ment-b-ww-rate- schedules.pdf Item 10: Staff Report Pg. 2 Packet Pg. 242 of 853 Item 10 Item 10 Staff Report BACKGROUND Water Utilities staff presented to the UAC on March 1, 2023, the Finance Committee on March 7, 20238 and March 21, 20239 a recommendation that Council approve the FY 2024 Water Utility Financial Plan as follows: Staff recommended the following transfers at the end of FY 2023: 1. up to $3.746 million from the Capital Improvement Program (CIP) Reserve to the Operations Reserve in FY 2023; and 2. up to $3.0 million from the Rate Stabilization Reserve to the Operations Reserve in FY 2023; and Staff also recommended the following rate actions for FY 2024: 3. An increase to retail Water Distribution Utility Rates W-1 (General Residential Water service), W-2 (Water Service from Fire Hydrants), W3 (Fire Service Connections), W-4 (Residential Master -Metered and General Non -Residential Water Service), and W-7 (Non -Residential Irrigation Water Service) of 2% effective July 1, 2023 The Finance Committee unanimously recommended approval of this proposal on March 21, 2023. Wastewater Collection Utilities staff presented to the UAC on March 1, 2023,10 the Finance Committee on March 7, 202311 and March 21, 202312 a recommendation that Council approve the FY 2024 Wastewater Utility Financial Plan as follows: Staff recommended the following transfers at the end of FY 2023: 1. up to $3.178 million from the Capital Improvement Projects Reserve to the Operations Reserve; and 2. up to $342 thousand from the Rate Stabilization Reserve to the Operations Reserve; and Staff also recommended the following rate actions for FY 2024: 3. An increase to retail Wastewater Collection Utility Rates S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Utilities Advisory Commission March 1, 2023 Meeting https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisory- com m ission/a rch ived-agenda-and-minutes/agendas-a nd-m i n utes-2023/03-ma r -2023/03 -01 -2023 -agenda -a nd- packet.pdf 8 Finance Committee March 7, 2023 Staff Report 2302-1011 https://cityofpaloaIto.primegov.com/meeting/document/1759.pdf?name=Staff%20Report 9 Finance Committee March 21, 2023 Staff Report 2302-1125 https://cityofpaloaIto.primegov.com/meeting/document/1871.pdf?name=Item%201%20Staff%20Report 10 Utilities Advisory Commission March 1, 2023 Meeting https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisory- commission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-item-1.pdf 11 Finance Committee Staff Report 2302-0944 https://cityofpaloaIto.primegov.com/meeting/document/1691.pdf?name=Staff%20Report 12 Finance Committee Staff Report 2302-1107 https://cityofpaloaIto.primegov.com/meeting/document/1852.pdf?name=Item%202%20Staff%20Report Item 10: Staff Report Pg. 3 Packet Pg. 243 of 853 Item 10 Item 10 Staff Report Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal — Industrial Discharger) of 9% effective July 1, 2023 When staff first made this recommendation to the Finance Committee at the March 7, 2023 meeting the Finance Committee did not approve it, but instead asked staff to return with additional information for further evaluation for the Wastewater Utility. When staff returned to the Finance Committee on March 21, 2023 the Committee unanimously recommended approval of this proposal after reviewing the additional information. ANALYSIS Refer to the study session report 2304-1247 on the Council's agenda tonight (April 17, 2023). IIWd *Ik I By approving this item the Council would approve moving forward with rate proposals to the Council for a public hearing on June, 19, 2023; staff will provide notice to customers in accordance with Proposition 218 requirements during April and May. Additionally, for the water commodity pass -through rate, staff expects SFPUC to vote on a wholesale water rate increase in May that will become effective July 1, 2023. Upon final approval of the wholesale rate increase by the SFPUC, staff will provide Palo Alto customers with notice of any adjustments to the wholesale rate increase and pass through the increase. Should the City Council take action to approve any of these rates, they will become effective July 1, 2023. FISCAL/RESOURCE IMPACT Refer to the study session report 2304-1247 on the Council's agenda tonight. STAKEHOLDER ENGAGEMENT On March 1, 202313 the Utilities Advisory Commission (UAC) reviewed and approved the FY 2024 Water and Wastewater Collection Utility Financial Plans and Rate Proposals. On March 7, 202314, the Finance Committee reviewed the FY 2024 Water and Wastewater Collection Utility Financial Plans and Rate Proposals. The Finance Committee approved the Water Utility proposals and asked staff to return with additional information for further evaluation for the Wastewater Utility. 13 Utilities Advisory Commission Meeting of March 1, 2023 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisory- com m ission/a rch ived-agenda-and-minutes/agendas-a nd-m i n utes-2023/03-ma r -2023/03 -01 -2023 -agenda -a nd- packet.pdf 14 Finance Committee Meeting March 7, 2023 https://cityofpaloaIto.primegov.com/Portal/Meeting?meetingTemplate Id=11235 Item 10: Staff Report Pg. 4 Packet Pg. 244 of 853 Item 10 Item 10 Staff Report On March 21, 202315, the Finance Committee reviewed the FY 2024 Water, and Wastewater Collection Financial Plans and Rate Proposals and unanimously approved the Water and Wastewater Collection Proposals. ENVIRONMENTAL REVIEW The Council's approval to move the water and wastewater rate proposals forward to the June 19, 2023 Council public hearing does not meet the California Environmental Quality Act's definition of a project, under Public Resources Code Section 21065 and CEQA Guidelines section 15378(b)(5), because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment, and therefore, no environmental assessment is required. APPROVED BY: Dean Batchelor, Director Utilities Staff: Lisa Bilir, Sr. Resource Planner 11 Finance Committee Meeting March 21, 2023 https://cityofpaloaIto.primegov.com/Portal/Meeting?meetingTemplate Id=11228 Item 10: Staff Report Pg. 5 Packet Pg. 245 of 853 Item 11 Item 11 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: Human Resources ALTO Meeting Date: April 17, 2023 Report #:2303-1152 TITLE Adoption of a Memorandum of Agreement with the Palo Alto Police Officers' Association and the Police Management Association; Adopt an Amendment to correct the Fire Chiefs' Association salary schedules; and, Adopt revised Management and Professional salary schedules CEQA Status - Not a project RECOMMENDATION Staff recommends that Council: 1. Adopt a new memorandum of agreement between the City of Palo Alto and the Palo Alto Police Officers' Association (PAPOA) effective upon adoption through June 30, 2025 (Attachment A) and corresponding salary schedule (Attachment C), and 2. Adopt a new memorandum of agreement between the City of Palo Alto and the Palo Alto Police Management Association (PMA) effective upon adoption through June 30, 2025 (Attachment B) and corresponding salary schedule (Attachment D), and 3. Adopt a corrected Fire Chiefs' Association (FCA) salary schedule (Attachment E, corrected from February 27, 2023), and 4. Adopt revised Management and Professional salary schedules, effective December 31, 2022 through June 30, 2025 (Attachment F, revised from December 19, 2022). BACKGROUND In accordance with California state law regulating local public agencies, the City of Palo Alto (City) meets and confers in good faith with our recognized labor organizations. The team of negotiators representing the City, comprised of Human Resources staff, outside counsel and management representatives, met with labor representatives and successfully reached Tentative Agreement on successor Memoranda of Agreement (MOA). Item 11: Staff Report Pg. 1 Packet Pg. 246 of 853 Item 11 Item 11 Staff Report The Palo Alto Police Officers' Association (POA) currently has 76 FTE that are covered under the MOA. Employees in this unit include the City's Police Officers, Police Agents and Police Sergeants. The Palo Alto Police Managers' Association (PMA) currently has 6FTE that are covered under the MOA including the classifications of Lieutenant and Captain. Employees within PMA provide middle and upper -level management for the Police Department's personnel and training, field services including patrol and police response, and investigative services. The prior agreement with POA and PMA was in effect until December 31, 2022 and a summary of the agreement terms is included in this memo and the proposed MOAs are attached to this report. The Fire Chief's Association reached agreement with the City and the new Memorandum of Agreement was approved on February 27, 2023.1 ANALYSIS In alignment with the citywide workforce strategy on recruitment and retention, the parties negotiated the following terms and conditions targeting competitive market placement and prioritizing salary and flexibility in benefits increasing employee choice. When coming to agreement on the prior contract in 2018, the City faced significant vacancies in the Police Department and recognized the cost and challenges of turnover. The impact of each loss of an officer is estimated at $200,000 in turnover costs, 12 to 18 months to train a new officer and the loss of experience and institutional knowledge. The prior agreement helped stabilize vacancies; however, with the continued industry -wide sparseness of applicants it remains critical for the City to continue to provide competitive wages and benefits to support workforce retention. Recent exit survey results identify the top reasons for separation include career advancement, higher salary, commute, and cost -of -living. After evaluating the City's current market placement for these groups in accordance with the MOA, the MOAs before Council are intended to hold Palo Alto's targeted competitive market placement and provide continued uninterrupted services for the community. The following summarizes the changes to the terms of the agreement with POA and PMA: • A 2.5 year contract term ending June 30, 2025. • Targeted market adjustment of 5% upon adoption. • 4% general salary increase in the first full pay period following July 1, 2023, and 4% general salary increase in the first full pay period following July 1, 2024. 1 City Council February 27, 2023, Agenda Item #3, Staff Report 2301-0906 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82268 Item 11: Staff Report Pg. 2 Packet Pg. 247 of 853 Item 11 Item 11 Staff Report • Changes to specific specialty pays o POA: Traffic Team premium; Field Training Officer pay (for term of contract only) o PMA: POST Management Education Certification • Health Benefits Contributions — City's contributions will be increased to a maximum of $2,260 per month for calendar year 2023. This contribution, which reflects a 4% increase, brings POA and PMA into alignment with other groups including International Association of Firefighters (IAFF), FCA and Management and Professional employees and will not increase in Year 2 of the contract; employees will instead be provided with flexible compensation to increase employee choice. • Flexible Compensation — increase base salary in order to provide more flexibility for employees with different goals and interests allowing choices for employees o $100 per month compensation upon adoption o Additional $100 per month (for a total of $200/month) effective January 2024 • Addition of one floating holiday in recognition of days of historical significance (in -lieu Holiday Pay) Salary Schedule Corrections & Revisions: Fire Chiefs' Association (FCA) Staff recommends adopting the corrected salary schedule for the Fire Chiefs' Association (FCA). A decimal error was made in the calculation of the salary schedule presented and adopted by City Council on February 27, 2023 (Agenda Item #3). Attachment E to this report reflects the corrected salary schedule for the Fire Chief's Association for Council adoption. Management and Professional Salary Schedule Staff recommends adopting the revised Management and Professional salary schedule (Attachment F) adopted by Council on December 19, 20222 (ID#15004) for the following classifications in the unrepresented Management and Professional group: Fire Chief, Deputy Fire Chief, and Fire Marshal. These classifications supervise the staff in the FCA and/or the IAFF Firefighters group and their salary ranges were impacted by the FCA market adjustments (over term of Fire contracts, a 12% market adjustment was approved). The adjustment to these ranges are recommended in order to maintain an internal spread between the represented classifications that is consistent with the City's practices. The City Manager will review and 2 City Council December 19, 2022, Item #7, Staff Report 15004, https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82159 Item 11: Staff Report Pg. 3 Packet Pg. 248 of 853 Item 11 Item 11 Staff Report approve adjustments for these classifications within authority outlined in the Management and Professional Compensation Plan. FISCAL/RESOURCE IMPACT Approval of the staff recommendations outlined in this report for the Police Officer Association and Police Management Association will result in cumulative costs of approximately $5.2 million in the General Fund over the 2.5 year term of the agreements. Ongoing annual costs for these agreements once the contract term ends are estimated at $2.7 million in the General Fund. Below is a breakdown by unit: Total Contract Over 2.5-yr Term % Budget Change Over 2.5-yr Term Annual Ongoing Cost POA $4.5M 8.9% $2.3M PMA $0.7M 12.6% $0.4M There is no additional financial impact for the adoption of the corrected Salary Schedule for FCA (Attachment Q. Approval of the revised salary schedule for the unrepresented Management and Professional group will result in cumulative cost of $325,000 in the General Fund over the term of the agreement which extends until June 2025. Ongoing annual costs are estimated at approximately $130,000. STAKEHOLDER ENGAGEMENT City staff will post the Memoranda of Agreement and salary schedules on the City's website after Council adoption for public access. Human Resources will communicate the changed to the terms of these agreements to highlight in job postings to attract new talent, fill vacancies and support employee retention. ATTACHMENTS Attachment A: POA Memorandum of Agreement Attachment B: PMA Memorandum of Agreement Attachment C: POA Salary Schedule Attachment D: PMA Salary Schedule Attachment E: Corrected FCA Salary Schedule Attachment F: Revised Management and Professional Salary Schedule Item 11: Staff Report Pg. 4 Packet Pg. 249 of 853 Item 11 Item 11 Staff Report APPROVED BY: Sandra Blanch, Human Resources Director Item 11: Staff Report Pg. 5 Packet Pg. 250 of 853 Item 11 Attachment A POA Memorandum of Agreement CITY OF CITY OF PALO PALO ALTOALTO Palo Alto Peace Officers' Association Memorandum of Agreement July 1, 2n1QApr;l lOJanuary 1, 2023 -June 30, 20242025 Item 11: Staff Report Pg. 6 Packet Pg. 251 of 853 City of Palo Alto and PAPOA April 10January 1, 2023July 1, 2018 —June 30, 20212025 TABLE OF CONTENTS Item 11 Attachment A POA Memorandum of Agreement PREAMBLE 1 Section 1. Recognition 1 Section 2. No Discrimination 1 Section 3. Association Secu 2 Section 4. Payroll Deduction 2 Section 5. No Strikes 2 Section 6. Probationary Period 3 Section 7. Salary Provisions Section 8. Night Shift Differential 9 Section 9. Paid Holidays 9 Section 10. Working Out of Class P 10 Section 11. Retention/Career Incentive Program (Special Compensation) 11 Section 12. Dependent Care Assistance Program 11 Section 13. Court Pay 12 Section 14. Health Plans Section 15. Dental Benefits Section 16. Life Insurance Benefits 12 15 16 Item 11: Staff Report Pg. 7 Packet Pg. 252 of 853 Item 11 Attachment A POA Memorandum of City of Palo Alto and PAPOA Agreement April 10January 1, 2023July 1, 2018 —June 30, 20212025 Section 17. Effective date of Coverage for New Employees 16 Section 18. Retirement Benefits 16 Section 19. Retirement Medical Plan 18 Section 20. Psychological Counseling Program 20 Section 21. Uniforms 9E Section 22. Work Schedule 21 Section 23. Overtime Pay and Comoensatory Time Off 34 Section 24. Overtime Sign -Up 35 Section 25. Ju 36 Section 26. Vacation Accrual 36 Section 27. Use of Vacation 37 Section 28. Vacation Pay at Termination 39 Section 29. Vacation Benefits for Deceased EmDlovees 39 Section 30. Effect of Extended Military Leave 39 Section 31. Sick Leave 39 Section 32. Leaves of Absence Without Pay 42 Section 33. Leave of Absence With Pa Section 34. Reduction in Force 43 44 Section 35. Agents 44 Section 36. Commute Incentives and Parking in Civic Center Gar 44 Item 11: Staff Report Pg. 8 Packet Pg. 253 of 853 Item 11 Attachment A POA Memorandum of City of Palo Alto and PAPOA Agreement April 10January 1, 2023July 1, 2018 —June 30, 20212025 Section 37. Disciplinary Action and Unsatisfactory Work or Conduct 45 Section 38. Grievance Procedure 47 Section 39. Bulletin Boards and Telephones 50 Section 40. Access to Association Representatives 50 Section 41. Meeting Places 51 Section 42. Voluntary Leave Program: 51 Section 43. Utilization of Reserves for Field Services Division Events 52 Section 44. Overtime Meals for Investigative Services Division 53 Section 45. Hiring Incentives 53 Section 46. Full Understanding 54 Section 47. Printed Agreement 41 Section 48. Duration 55 IV Item 11: Staff Report Pg. 9 Packet Pg. 254 of 853 Item 11 Attachment A POA Memorandum of City of Palo Alto and PAPOA Agreement Januar 1, 2023 —June 30, 20212025 MEMORANDUM OF AGREEMENT CITY OF PALO ALTO and PALO ALTO PEACE OFFICERS' ASSOCIATION July 1, 2019 2021Aprir10, 2022January 1, 2023- June 30, 20212025 PREAMBLE This Memorandum of Agreement is pursuant to and subject to Sections 3500-3510 of the Government Code of the State of California, the Charter of the City of Palo Alto, and the City of Palo Alto Merit System Rules and Regulations. (This Memorandum of Agreement made and entered into at Palo Alto, California, by and between the City of Palo Alto, a municipal corporation (hereinafter referred to as "City") and the Palo Alto Peace Officers' Association, Incorporated, a California corporation (hereinafter referred to as "Association"), is intended to define agreements reached during the meet and confer process concerning wages, hours, working conditions, and other terms and conditions of employment for the represented group of employees. Section 1. Recognition The City recognizes the Association as the exclusive representative of an employee group consisting solely of Police Officer Trainees, Police Officers, Police Agents, and Police Sergeants who are regularly employed by the City and others who might be amended into the representation unit from time to time under existing law and the Merit System Rules and Regulations. Section 2. No Discrimination (a) The Association and the City hereby agree that there shall be no discrimination because of race, color, age, disability, sex, sexual orientation, national origin, political or religious affiliation, or any other protected classification as provided by applicable local, state or federal law. There shall be no discrimination in employment conditions or treatment of employees on the basis of membership or non -membership in the Association, or participation in the lawful activities of the Association. (b) The Association and the City hereby agree to protect the rights of all employees to exercise their free choice to join the Association and to abide by the express provisions of applicable State and local laws. Item 11: Staff Report Pg. 10 Packet Pg. 255 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, X7=2025 Section 3. Association Secu (a) When a person is hired in any of the covered job classifications, the City shall notify that person that the Association is the recognized bargaining representative forthe employee in said Unit and give the employee a current copy of the Memorandum of Agreement. (b). If there is no disruption of work, members of the Association Board of Directors may use a reasonable amount of on -duty time without loss of pay to attend to Association business specifically related to representation of employees. Such release time must be cleared in advance bythe appropriate division managerwho is a member of management. For purposes of this section, representation shall include: (i) Meetings with represented employees or management related to a grievance or disciplinary action, including investigation and preparation time. (ii) A meeting with management related to benefits, working conditions or other terms and conditions of employment. Section 4. Payroll Deduction The City shall deduct Association membership dues and any other mutually agreed upon payroll deduction from the bi-weekly pay of member employees. The dues deduction must be authorized in writing by the employee on an authorization card acceptable to the City and the Association. The City shall remit the deducted dues to the Association as soon as possible after deduction. Section 5. No Strikes The Association, its representatives, or members, shall not engage in or cause, instigate, encourage, sanction, or condone a strike, withholding of services, concerted abuse of leave of absence provisions, work stoppage or work slowdown of any kind. No employee shall refuse to cross any picket line in the conduct of Police Department business, nor shall the Association, its representatives, or members discriminate in any way toward anyone who refuses to participate in a strike, or any of the job actions cited above. 2 Item 11: Staff Report Pg. 11 Packet Pg. 256 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Section 6. Probationary Period (a) The probationary period for new employees entering the classifications of Police Academy Trainee or Police Officer shall end 12 months following the successful completion of Police Academy training. The probationary period for lateral entry positions, where Police Academy training is waived, shall be 12 months.- In the event a probationary employee is absent for a period exceeding one -hundred and twenty (120) hours during the probationary period, probation will be extended by an equivalent number of duty hours. (b) The probationary period shall be regarded as part of the testing process and shall be utilized for closely observing all aspects of the employee's qualifications, for ensuring the effective adjustment of a new employee to the position and for rejecting any probationary employee who in the opinion of management is not suitable to attain permanent status. (c) During the probationary period a new employee may be terminated at any time by the appointing authority without cause. The existence of cause for termination shall not be arbitrable. Probationary employees shall not be terminated for reasons that violate Section 2. No Discrimination, of this Agreement, or for reasons that are unconstitutional or unlawful. (d) Probationary Period for New Supervisors (1) The probationary period for newly promoted Agents and Sergeants shall end 12 months from the effective date of the promotion, excluding time off due to any unscheduled absence or leave. (2) The probationary period shall be regarded as part of the testing process and shall be utilized for closely observing all aspects of the employee's qualifications, for ensuring the effective adjustment of a newly promoted employee to the position and for rejecting any newly promoted probationary employee who in the opinion of management is not suitable to attain permanent status in the newly promoted rank. 3 Item 11: Staff Report Pg. 12 Packet Pg. 257 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1,2023 —June 30, 20212025 (3) During the 12 month promotional probationary period the newly promoted employee shall be evaluated by his/her direct supervisor on a quarterly basis. (4) Any on -going and/or significant perceived deficiencies in the probationary employee's work performance or supervisory aptitude shall be promptly communicated to the employee. When appropriate, the employee shall be provided with additional training and given opportunities to demonstrate their performance in response to the training. Such perceived deficiencies, any related training, and performance improvement or lack of response to training shall be documented by the employee's supervisor and recorded in the employee's quarterly evaluation for the quarter(s) in which the matter was addressed. (5) During the promotional probationary period, a newly promoted employee may be demoted to their previous rank at any time by the appointing authority if the employee demonstrates a lack of suitability for the newly promoted position. The demotion shall be based upon deficiencies in the performance or aptitude that have been addressed and documented as outlined in subsection (5). The existence of cause for demotion shall not be arbitrable. Promotional probationary employees shall; not be demoted for reasons that violate Section 2 of the Memorandum of Agreement, No Discrimination; or for reasons that are unconstitutional or unlawful. (6) In the event that management elects to demote an employee during his or her probationary period, pursuant to subsection (6), the affected employee may request a hearing with the Chief of Police. The hearing shall be held promptly and prior to the intended effective date of demotion, so as to afford the employee with a meaningful and timely opportunity to respond to the stated reason(s) for demotion. Section 7. Salary Provisions (a) Gencral Salary lncrcasc. Effcctivc the first full pay period following adoption of this MOA by City Council, salary ranges of all represented classifications will be increased by three percent (3%).Market Adjustment: Effective the first full pay period including City Council Adoption, salary ranges of all bargaining unit classifications will be increased by five percent (5.0%), which is sufficient to bring them to the top quartile of market median as determined by the City's market study. (b) Equity Adjustment: Effective the first full pay period following adoption of this MOA by 4 Item 11: Staff Report Pg. 13 Packet Pg. 258 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1,2023 —June 30, 20212025 City Council, salary rangcs of all rcprcscntcd classifications will bc incrcascd by onc and thYee quarters pcYeent (.75%`.General Salary Increase: Effective the first full pay period following July 1, 2023, salary ranges of all represented classifications will be increased by four percent (4.0%). (c) General Salary Increase. Effective the first full pay period folllowing July 1, 2O19 salary ranges of all represented classifications will he increased by threepercent (3%).2024 salary ranges of all represented classifications will be increased by four percent (4.0%.) (d) 1, 2019, salary ranges of all represented classifications will be increased byforty five one hundredths of a percent (9. Flexible Compensation: Effective the first full pay period following City Council Adoption, and in lieu of an increase to the City contribution towards medical premiums each represented classification will have their monthly income increased by $100. (e) General Salary Increase. Effective the first full pay period following July 1, 2020, salary ranges of aII represented classifications will he increased by three percent (3%).Flexible Compensation: Effective the first full pay period following January 1, 2024, and in lieu of an increase to the City contribution towards medical premiums, each represented classification will have their monthly income increased by an additional $100 (total of $200). (f) Total Compensation and Survey Database. Management and the Union have agreed to a compensation survey database structure. Survey Cities include: Alameda, Berkeley, Concord, Fremont, Hayward, Milpitas, Mountain View, Redwood City, San Leandro, San Mateo, Santa Clara, Vallejo, and Walnut Creek. Compensation Criteria includes: top step salary, maximum longevity, maximum education/POST, uniform allowance, holiday pay, deferred compensation, employee pick up of employer pension costs (Negative EPMC), and maximum City paid benefits (medical, dental, vision, life insurance, LTD, and EAP). The database is intended to provide one source of information concerning how the compensation paid to employees in bargaining unit job classifications compares to that paid by other employers. (g) Salary Steps & Ranges (Eligibility) New officers attending the basic police academy will be compensated at the "Police Trainee" level. Item 11: Staff Report Pg. 14 Packet Pg. 259 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Academy Graduates and Lateral Officers with less than two years experience will be compensated at the "Police Officer" "Step 1" Level or higher. Jr. First Class Exam: Officers become eligible to take the exam anytime after they complete the Field Training Program. However, the pay increase will not become effective until they have successfully completed the test and have been with the department for a year from the academy graduation (Laterals a year from hire date). For employees hired prior to July 1, 2018, the pay increase for Jr. First Class is compensated at the "Police Officer" "Step 4" level (Approximate 5% Increase). For employees hired on or after July 1, 2018, the pay increase for Jr. First Class is one step on the salary schedule (approximate 5% increase), no higher than Step 4. First Class Exam: Officers become eligible to take the exam anytime after they have successfully completed the Jr. First Class Exam. However, the pay increase will not take effect until one year from the date of the merit increase for the Jr. First Class exam. (Lateral officers' pay increase may be effective one year from the date of hire) For employees hired prior to July 1, 2018, the pay increase for First Class is compensated at the "Police Officer" "Step 5" Level (Approximate 5% Increase). For employees hired on or after July 1, 2018, the pay increase for First Class is one step on the salary schedule (approximate 5% increase), no higher than Step 5. Effective the first full pay period following adoption of this MOA by City Council, the City will Implement a new step 6 following the same percentage difference as steps 1-5. Employees with one (1) year or more of service with the City of Palo Alto at Step 5 will be moved to Step 6. (h) POST Certificate/Incentives Basic Post: Officers become eligible upon completion of their probationary period. The certificate must be obtained within 18 months of hire date. (No Salary Increase) Intermediate POST: Employees that qualify for the Intermediate POST certificate will be compensated at the corresponding salary schedule (e.g., "Police Officer/Inter"), effective the first full pay period after the employee provides proof of submission of the required paperwork to POST (approximate 5% increase). Advanced POST: Employees that qualify for the Advanced POST certificate will be compensated at the corresponding salary schedule (e.g., "Police Officer/Adv"), effective n Item 11: Staff Report Pg. 15 Packet Pg. 260 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1,2023 —June 30, 20212025 thefirstfull pay period afterthe employee provides proof of submission of the required paperwork to POST (approximate 2.5% increase). Employees are responsible for contacting Personnel & Training in order to arrange taking tests and application for POST certificates. (i) Special assignment premium pay Effective with the pay period including July 1, 2001, biweekly premium pay for employees assigned to the indicated specialties will be as follows: Field Training Premium: 5% of base pay per pay period. Applies to management -assigned Officers and Agents and Traffic Team members during each pay period in which they provide training to police recruits, Community Service Officers or Level II reserve officers who are working on their Level I certificate. Applies to management -assigned FTO Sergeants during each pay period in which they supervise assigned FTO Officers or Agents who are actively training police recruits, Community Service Officers or Level II reserve officers who are working on their Level I certificate. The parties agree that, for the period beginning the first full pay period following the City Council adoption of the agreement and ending the last full pay period in June 2025, Officers, Agents and Traffic Team members who management designates as Field Training Officers and Sergeants designated as FTO Sergeants will Receive the 5% FTO premium for all pay periods, without regard to whether they are assigned a police recruit during that pay period. The Parties also agree to revisit this section to determine whether to continue this program prior to June 30, 2025. Traffic Premium: 5% of base pay per pay period. Effective the first full pay period following City Council adoption of the MOA in 2023, Officers, Agents and Sergeants who management assigns to routinely and consistently oaerate or patrol on a motorcycle. K-9 Program Premium: 5% of base pay per pay period_; Effective January 1, 2008, K-9 Officers/Agents shall receive 5% of base pay per pay period to compensate for the time spent by the K-9 Officer/Agent outside regularly scheduled work hours to feed, groom, house, exercise, attend to the medical and dental needs of and otherwise maintain the dog. 7 Item 11: Staff Report Pg. 16 Packet Pg. 261 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, X7=2025 Bilingual Premium: 5% of base pay per pay period. Applies to representation unit employees certified by management as proficient in other languages as outlined below. (i) Approved Languages Spanish, Chinese (Mandarin and Cantonese), Japanese, Tagalog, Korean, Vietnamese, Russian, American Sign Language, and such other languages as determined by management. (ii) Proficiency Requirements Officers, Agents, and Sergeants who pass a basic "first responder" proficiency test administered by a professional linguist will be eligible for bilingual pay. This proficiency test will be a one time test to ensure the candidate has the ability to verbally communicate (with the exception of American Sign Language) as a first responder in the selected Language. First responder proficiency will include, but is not limited to, the ability to take basic crime and accident reports; issue a citation and explain the court process; complete a field interview card; give directions; give a Miranda admonition; and generally be able to communicate with a non-English speaking person in need of basic police services. Study material will be provided by the City to all employees to assist in test preparation. (iii) Testing Process In order to best accommodate the wide range of languages, proficiency testing will be conducted by professional linguists outside the Police Department that have been agreed upon by the Association and Management. A basic first responder proficiency exam has been developed based upon the needs of the organization. The City will pay for the initial test for each employee. Employees who do not pass the initial test may retest as many times as necessary. However, subsequent tests will be at the employee's expense. Item 11: Staff Report Pg. 17 Packet Pg. 262 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1,2023 —June 30, 20212025 Section 8. Night Shift Differential (a) Night shift differential shall be paid at the rate of 5% to all FSD personnel for all hours worked between 6:00 p.m. and 8:00 a.m. (b) All employees covered under Section 23(d) working a regular shift between 7:00 a.m. and 7:00 p.m. shall receive 5% night shift premium for hours worked between 7:00 p.m. and 7:00 a.m. Vacation and administrative leave pay for employees who regularly work night shifts shall include appropriate night shift premiums, relating to night shift hours regularly worked. Shift adjustment hours for employees who regularly work the 4-11 work schedule shall include the appropriate night shift premium based on the percentage of usual night shift hours worked to regular hours. Section 9. Paid Holidays (a) All represented employees on leave of absence without pay shall not receive in -lieu holiday accrual during such leave, or any compensation for holidays occurring during such leave. (b) Effcctivc with thc pay period following adoption of this MOA, cEmployees shall not receive paid holidays, but in lieu thereof shall receive 3.462 hours straight time pay each full pay period that they are in paid status, to a maximum payment of ninety (90) hours per year. Effective the first full pay period following City Council adoption of the MOU in 2023, this amount shall be increased to 3.846 hours straight time pay each pay period that they are in paid status, to a maximum payment of one hundred (100) hours per year. -Holiday hours will be pro -rated for employees in paid status a portion of a pay period. of each fiscal ,car, the manncr in which the in licu hours will be takcn Hours under this provision will accruc be paid each pay period while in a paidy status and will be paid scmi annually in Iunc and December. If time off is elected u ndcr this provision, such time off scheduling approval. Employees working non -field services assignments shall be eligible to use accrued holiday paid leave time balances for any of the following recognized City holidays subject to management scheduling approval: 9 Item 11: Staff Report Pg. 18 Packet Pg. 263 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1,2023 —June 30, 20212025 January 1 Third Monday in January Third Monday in February Last Monday in May July 4 First Monday in September Second Monday in October November 11 Thanksgiving Day Day after Thanksgiving Day December 25 Either December 24 or December 31, see below A Day of Reflection in recognition of a day of the employee's choosing, including Juneteenth Freedom Day (June 19) or Cesar Chavez/Dolores Huerta Day (March 31) Section 10. Working Out of Class Pay Officers, Agents and Sergeants working out of class for a period of four or more consecutiveshifts) shall be compensated with the following premium pay; Officers and Agents working as an Acting Sergeant: 7% of base pay for all shifts Sergeants working as an Acting Lieutenant: 10% of base pay for all shifts Agents, and Sergeants fulfilling the role of an Acting Sergeant and/or Acting Lieutenant for individual shifts and/or a number of hours within a shift, shall not receive additional compensation. Periodically working in this capacity shall be deemed a basic duty within an employee's job description. In accordance with Government Code 20480, an employee assigned to work in an out -of -class appointment may not exceed 960 hours worked in the appointment within a fiscal year if the employee is appointed to an upgraded position or higher classification that is vacant during 10 Item 11: Staff Report Pg. 19 Packet Pg. 264 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 recruitment for a permanent appointment. This limitation does not apply to a position that is temporarily available due to a leave of absence. Section 11. Retention/Career Incentive Program (Special Compensation) (a) Retention/Career Incentive Program On July 1, 2007 the City will initiate a Retention/Career Incentive Program. It is recognized that hiring, training, and retaining qualified law enforcement personnel is becoming increasingly difficult, time consuming, and very expensive. This program is designed to provide greater incentives for hiring new employees, retaining long-term employees, and attracting quality lateral candidates from other law enforcement agencies. This program will provide special compensation in the form of premium pay at various levels as employees reach different career milestones. Both parties acknowledge that in the 2007 negotiations, the cost of the program was partially offset through salary and/or benefit reductions agreed to elsewhere in this Memorandum of Agreement. All employees with more than 10 years of service shall receive special compensation in the form of retention pay at 3% of straight time base pay. All employees with more than 15 years service shall receive special compensation in the form of retention pay at 6% of straight time base pay. Maximum under this provision is 6%. As an incentive to recruit and hire lateral law enforcement personnel from other agencies, the following shall apply. At the Chiefs discretion, up to 5 years of full time law enforcement service may be counted towards the years of service outlined above. Special Compensation/Retention Pay outlined in the Retention/Career Incentive Program shall be deemed PERSable for the purpose of income and retirement however will not be a factor when calculating "MOU" (non-FLSA) overtime compensation. Section 12. Dependent Care Assistance Program and Medical Flexible Spending Accounts. The City will provide a Dependent Care Assistance Program (DCAP) and Medical Flexible Spending Account (FSA) for employees according to the provisions of the Federal Economic Recovery Act of 1981, Code Sections 125 and 129. With the exception of matters within the 11 Item 11: Staff Report Pg. 20 Packet Pg. 265 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 City's sole control (e.g., establishment of the FSA), all matters related to the FSA shall be excluded from the MOA grievance procedure. Disputes regarding the administration of the plan shall be subject to the dispute resolution procedure provided by the plan document. The FSA will be available to representation unit employees effective January 1, 2019, and remain in effect subject to a reasonable minimum participation level and availability of third -party administrative services at a reasonable cost. Section 13. Court Pay Sworn Police Personnel appearing in court or in an administrative forum in the course and scope of their normal duties will be compensated according to the following: Period Rate Minimum (a) Scheduled day off. Time and one-half 4 hours (b) During scheduled shift Straight time during shift. None or immediately preceding Time and one-half for period or following a shift before or after scheduled shift. (c) Appearance on a Time and one-half 3 hours scheduled work day by employees of Team #3 (prior to 12 p.m.) (d) Appearance on a Time and one-half 3 hours scheduled work day by employees of Team #4 or Team #5 (e) All other court Time and one- half 3 hours appearances Section 14. Health Plans 12 Item 11: Staff Report Pg. 21 Packet Pg. 266 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 — June 30, 20212025 (a) PEMHCA Health Plan During the term of this contract, the maximum City contribution towards medical premiums for eligible full time employees per employee category shall be up to a maximum of the following for any plan: Medical Premium Category PEMHCA Contribution* iuir Total Maximum City Contrrbution (inclusive of PEMHCA contribution) effective Janaury 1, 2019 first month following City Council Adoption Employee Only $4.3-3151.00 $304 $848871 Employee plus one $4-3-3151.00 $301742 Employee Family $4-3-3151.00 $2033 $21302260 The City's total maximum contribution towards medical premiums for eligible part time employees shall be prorated based on the number of hours per week the part-time employee is assigned to work. *PEMHCA minimum changes annually. Any increases to the PEMHCA minimum during the term of this contract will result in a corresponding decrease to the amount of the additional City contribution, so that the total maximum City contribution never exceeds the amount listed in the "Total Maximum City Contribution" columns above. 13 Item 11: Staff Report Pg. 22 Packet Pg. 267 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 If the State of California or federal government requires the City to participate and contribute toward coverage under any medical plan outside of PEMHCA including but not limited to the Affordable Care Act, the City's total liability for enrolled employees and retirees and their eligible family members shall not exceed what the City would have paid toward PEMHCA coverage in the absence of such state or federal plan. The parties will meet and confer over the impact of such change on matters within the scope of representation before implementing any change. (b) Vision Care The City will offer vision care coverage for employees and dependents. Coverage is equivalent to $20 deductible Plan A under the Vision Service Plan, with monthly premiums paid by the employer. Dependents will include domestic partners, as defined under Section 14 (c). (c) Active Employee Domestic Partners Active employee domestic partners whose domestic partnership is registered with the State of California may add their domestic partner as a dependent to their elected health plan coverage if the domestic partnership is registered with the Secretary of State. Active employee domestic partners whose domestic partnership is not registered with the State, but who meet the requirements of the City of Palo Alto Declaration of Domestic Partnership, and are registered with the Human Resources Department, will be eligible for a stipend of two hundred eighty four dollars ($284.00) per month toward the cost of an individual health plan. Evidence of premium payment will be required with request for stipend. (d) Alternative Medical Benefit Program If a regular employee and/or the employee's dependent(s) are eligible for and elect to receive medical insurance through any other non -City of Palo Alto employer -sponsored or association -sponsored medical plan, the Employee may choose to waive his/her rightto the City of Palo Alto's medical insurance and receive cash payments in the amount of two hundred eighty four dollars ($284) for each month City coverage is waived. Examples of waivers eligible for this payment are: • Employee waives all applicable City medical coverage; or 14 Item 11: Staff Report Pg. 23 Packet Pg. 268 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 • Employee is eligible to enroll his or her spouse or domestic partner and waives _medical coverage for the spouse or domestic partner; or • Employee has additional eligible dependents and waives family -level medical _coverage. Participation must result in a health insurance cost savings to the City and payments per employee shall not exceed a total of two hundred eighty four dollars ($284.00) per month. To participate in the program the employee and dependents must be eligible for coverage under PEMHCA medical plans, complete a waiver of medical coverage form, and provide proof of eligible alternative medical coverage. Payments will be made in the employee's paycheck beginning the first month following the employee's completion of the waiver form. Payments are subject to state and federal taxes and are not considered earnings under PERS law. Employees are responsible for notifyingthe City of any change in status affecting eligibility for this program (for example, life changes affecting dependent's eligibility for medical coverage through the employee) and will be responsible for repayment of amounts paid by the City contrary to the terms of this program due to the employee's failure to notify the City of a change in status. (e) Dual Coverage When a City employee is married to another City employee each shall be covered only once (as an individual or as a spouse of the other City employee, but not both) and dependent children, if any, shall be covered by only one spouse Section 15. Dental Benefits (a) The City will maintain the present level of benefits on the City -sponsored dental program for current employees and their dependents, except that the maximum benefits per calendar year shall be $2,000 effective in 1988. Dental Coverage shall include composite (tooth colored) fillings for all teeth. (b) The City provides a 50% of reasonable charges, $2,000 lifetime maximum orthodontic benefit for representation unit employees and their dependents. (c) Dependents will include domestic partner, as defined under Section 14 (c). 15 Item 11: Staff Report Pg. 24 Packet Pg. 269 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 (d) Dental implants in conjunction with one or more missing natural teeth, and removal of dental implants will be covered as a Major Dental Service at 50% usual, customary and reasonable (UCR). Section 16. Life Insurance Benefits The City agrees to continue the basic life insurance plan as currently in effect for the term of this Memorandum of Agreement. Section 17. Effective date of Coverage for New Employees For newly hired regular employees coverage begins on the first day of the month following date of hire for the health plan, dental plan, vision care plan, and life insurance plans if these benefits are elected. Section 18. Retirement Benefits (a) Safety Pension Group A: "3% at 50" Safety Retirement The City will continue the present benefits under the Public Employees' Retirement System (PERS) "3 percent at 50" (3% @ 50) Retirement Formula per California Government Code §21362.2 for employees hired before the effective date of the "3 percent at 55" (3% @ 55) formula for new hires as described herein. The final year compensation for employees hired under the 3% at 50 formula will continue to be the "single highest year" or the highest average annual compensation earnable by the member during one (1) year of employment immediately preceding retirement or the one-year period otherwise designated by the member (Government Code 20042). Current employees continued to be covered under Government Code 20692, Employer Paid Member Contribution, to the extent there is a City paid member contribution in the final year. (b) Safety Pension Group B: 3% at 55 Safety Retirement Effective December 7, 2012, the City amended its contract with CaIPERS to provide employees hired on or after that date who are not "new members" of CaIPERS as defined in the Public Employees' Pension reform act (often referred to as "Classic" CaIPERS members) with the CaIPERS retirement formula three percent of final salary at age 55 (3% at 55), with the final salary determination for such employees of "three highest consecutive years" based on the highest average annual compensation earnable by the member during three (3) consecutive years of employment immediately preceding retirement or the three year 16 Item 11: Staff Report Pg. 25 Packet Pg. 270 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 period otherwise designated by the member (Government Code Section 20037). This new tier also eliminated Section 20692, Employer Paid Member Contribution. (c) Safety Pension Group C: 2.7% at Age 57 Safety Retirement Employees hired on or after January 1, 2013 meeting the definition of "new member" under the Public Employees' Pension Reform Act (Gov't. Codes. 7522 et seq.) shall be subjectto all of the provisions of that law, including but not limited to the two point seven percent at age 57 (2.7%@57) retirement formula with a three year final compensation period. (d) Employee Share of PERS Contribution Employees in all sworn represented classes in Pension Groups A and B described above will make a 12% PERS member contributions by payroll deduction. Employees in all sworn represented classes in Pension Group C described above shall pay the employee contribution required by the Public Employees' Pension Reform Act, currently calculated at fifty percent (50%) of the normal cost, plus an additional 3%. Trainees will pay the same employee contribution as miscellaneous members while attending Basic Academy (see section (g) below). The City will continue to provide for member contributions to be made as allowed underthe provisions of IRS Code §414(h)(2). (e) Additional Employee PERS Contributions • Effective the first full pay period following July 1, 2019 or as soon as administratively possible, all employees regardless of pension formula in this unit shall contribute an additional 0.5% to the Employer share of pension for a total of 3.5% contribution toward the Employer share of pension. (Total Employee contribution will be 12.5% for Classic; 50% of Normal Cost plus 3.5% for PEPRA.) • Additional contributions will coincide with the City amending its contract with CaIPERS to reflect these changes. However, should CaIPERS delay or the Association fail to approve the CaIPERS amendment required to incorporate the additional 0.5% contribution, the City may implement the additional 0.5% effective July 1, 2019 without a contract amendment., and additional employee PERS contributions under CaIPERS 20516 will be provided on a pre-tax basis to the extent allowable by law. 17 Item 11: Staff Report Pg. 26 Packet Pg. 271 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 (f) 457 Deferred Compensation Plan Effective the first full pay period following July 1, 2019 all employees who are classified as "New Members" by PERS or "Group C' by the MOA will receive $50 per month contributed into their 457 deferred compensation plan. Eligible employees must have an active 457 plan in orderto receive City contirbutions. 1959 Survivor Benefit The City will continue to provide the basic level (Level 1) of 1959 Survivor Benefit to eligible employees in accordance with California Government Code §21571. (g) Military Service Credit The City's contract with the Public Employees' Retirement System provides for Section 20930.3, Military Service Credit as Public Service. (h)=Retirement Privileges All retired employees and spouses of deceased employees shall have residential privileges at City libraries, refuse disposal area, golf course, and swimming pools. (i) PERS Status While in Basic Academy. While an employee is attending Basic Academy, he or she shall participate in the City's PERS Miscellaneous Employee retirement plan with the same employee and employer contribution rates as applies to Miscellaneous City employees represented by SEIU (classified unit). When the employee successfully completes Basic Academy and is sworn in by the Police Chief, he or she shall prospectively participate in the PERS Safety Employee retirement plan. Section 19. Retirement Medical Plan (a) Retiree Medical Coverage - Employees hired before January 1, 2006 who have not voluntarily elected to participate in the Retirement Healthcare Benefits provided in Government Code section 22893: 18 Item 11: Staff Report Pg. 27 Packet Pg. 272 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Monthly City -paid premium contributions for a retiree -selected PEMHCA optional plan will be made in accordance with the Public Employees' Medical and Hospital Care Act Resolution for employees who retire on or before December 31, 2007. Effective March 1, 2009, for an employee retiring on or after that date, the City will pay up to the monthly medical premium for the second most expensive plan among the existing array of plans during the Agreement term. Effective April 1, 2015, for an employee retiring on or after that date, the City contribution shall be the same contribution amount it makes for active City employees. The parties mutually agree that the benefits provided in this paragraph for employees retiring on or after April 1, 2015 will fluctuate from time to time based on the City's contributions to health care for active employees. Accordingly, Association members who retire on or after April 1, 2015 and have not elected to participate in the Retirement Healthcare Benefits provided in Government Code section 22893, do not maintain a vested interest in any particular contribution by the City above the amount required under the I»► I.[wei (b) Retiree Medical Coverage - Employees who voluntarily elect to participate in Government Code section 22893, and all Employees hired on or after January 1. 2006: The CaIPERS vesting schedule set forth in California Government Code § 22893 will apply to all Association members hired on or after January 1, 2006, and employees hired prior to January 1, 2006 who voluntarily elect to participate in the Retirement Healthcare Benefits provided in Government Code § 22893. Under this law, an employee is eligible for 50% of the specified employer health premium contribution after ten (10) years of service credit, provided at least five (5) of those years were performed with the City of Palo Alto. After ten (10) years of service credit, each additional year of service credit will increase the employer contribution percentage by 5% until, at twenty (20) years' service credit, the employee will be eligible upon retirement for 100% of the specified employer contribution. However, the maximum contribution for family members will be 90% of the specified employer contribution. Notwithstanding any other term of this section, the City of Palo Alto's health premium contribution for employees hired on or after January 1, 2006, and employees who voluntarily elect to participate in Retirement Healthcare Benefits provided by Government Code § 22893, will be the minimum contribution set by CaIPERS under California Government Code § 22893 based on a weighted average of available health plan premiums. 19 Item 11: Staff Report Pg. 28 Packet Pg. 273 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1,2023 —June 30, 20212025 Section 20. Psychological Counseling Program The psychological counseling program currently in effect shall be continued. The program shall provide 24 -hour emergency counseling by independent professional consultants. Section 21. Uniforms (a) The City will supply complete uniforms to all sworn personnel. All uniform items are the property of the City. One complete uniform consists of: (1) three pair of trousers, (2) three short -sleeved shirts with patches and zippers if desired, (3) three long-sleeved shirts with patches and zippers if desired, (4) three cotton or two synthetic fiber turtleneck shirts, (5) hat, (6) duty jacket with patches, (7) necktie, and (8) rain gear. The value of the purchase, rental and/or maintenance of the required uniforms shall be reported as special compensation to the extent legally permissible, pursuant to Title 2 CCR, Section 571(a)(5) as Uniform Allowance. Based upon existing uniform standards and the City's cost experience, the value of this benefit shall be reported as $42.31 per pay period. (b) At the time of initial employment, every sworn employee will be issued one complete uniform. Uniform items will be replaced on an as -needed basis subject to verification by management. (c) The City shall provide uniform cleaning for sworn representation unit personnel. (d) Personnel are accountable for all uniform items issued to them. If a particular item is lost or damaged due to employee negligence, the employee will be required to reimburse the City for value of the item(s) lost or damaged. (e) The City shall reimburse employees for the full cost of job -related safety boots up to $400 per fiscal year. The City will make the reimbursement only upon proof that the previous boots have become unserviceable due to wear or damage and upon verification of such purchase by the employee. (Job -related safety boots shall mean well -constructed, high topped boots that provide full ankle and foot support, which are selected from list agreed to by Management and the Association.) All Department -provided safety boots shall be purchased through this program. Employees are responsible for the full cost of any low -top, black shoes that are worn with the uniform. 20 Item 11: Staff Report Pg. 29 Packet Pg. 274 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 — June 30, 20212025 Section 22. Work Schedule (a) Field Services Division 4/11 Schedule The patrol schedule will have two sides, "A -Side" and "B -Side." There will be ten patrol teams each supervised by a Sergeant or Acting Sergeant under the management of patrol lieutenants. Five Patrol teams will work an "A" schedule and five Patrol teams will work a "B" schedule. Patrol officers, agents, and sergeants will report for duty promptly at the designatedtimes for each team. Patrol team schedules are as follows. Patrol Division Team Schedules A -Side B -Side Team 1A 0500 to 1600 Team 1B 0500 to 1600 Team 2A 0700 to 1800 Team 2B 0700 to 1800 Team 3A 1400 to 0100 Team 3B 1400 to 0100 Team 4A 1800 to 0500 Team 4B 1800 to 0500 Team 5A 2000 to 0700 Team 5B 2000 to 0700 Team's 2A, 3A, and 4A are designated as field training teams. (1) 4/11 Work Schedule The work schedule will be based on an eight (8) day cycle with each employee working four (4) consecutive days on and having four (4) consecutive days off. The eight (8) day cycle will advance the employee's workdays and days off within the calendar week one day every cycle. The overall cycle repeats itself every eight (8) weeks. Over the course of a year (26 pay periods) each employee works 182 eleven (11) hour 21 Item 11: Staff Report Pg. 30 Packet Pg. 275 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 regular patrol shifts totaling 2002 hours, 78 -hours short of the required fulltime equivalent work year of 2080 hours. In the Patrol Division and with the approval of the Patrol Captain, a maximum of two (2) paired "fixed days" schedules (4 Employees) may be established, atthe employees' request. The regularly scheduled hours of work for such a position must cover the days off of the position with which it is paired. For example, one position could -have Sunday, Monday, and Tuesday off while the other could have Thursday, Friday, and Saturday off. It shall be the responsibility of employees interested in a paired fixed day schedule to identify another employee who is willing to participate in the paired arrangement. If either employee or the Department desires to terminate a paired schedule once it is in effect, the employee or Department, as applicable, must give the other affected parties to the arrangement at least one (1) full pay period advance written notice. Resumption of the employees' participation in the normal rotation shall begin on the first day of the second full pay period following the date notice is delivered to the other parties. Employees on a fixed schedule will be required to attend the designated CPT (Continued Professional Training) training days either on their regularly scheduled workday or on a day off. If they attend training on their regularly scheduled day off, they will be compensated by receiving an adjusted day off within the same pay period. Employees requesting a schedule different from the rotating 4/11 must submit their request in writing prior to the team selection process. The requests will only be considered on an extreme hardship basis The following hours and minimum staffing levels will be observed on both sides of the Patrol Division. During team overlaps, the combined staffing levels of the teams will serve to meet minimum staffing levels. 0700-2400 hours 1 Lieutenant/Sergeant 1 Sergeant/Agent 6 Officers/Agents 0001-0300hours 1 Lieutenant/Sergeant 1 Sergeant/Agent 5 Officers/Agents 0300- 0700 hours 1 Sergeant 5 Officers/Agents 22 Watch Commander Supervisor Watch Commander Supervisor Supervisor Item 11: Staff Report Pg. 31 Packet Pg. 276 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Under routine circumstances, personnel will be able to receive time off as long as minimum staffing numbers remain available for duty. Management may deny time off to maintain staffing greater than the minimum numbers outlined above. It's anticipated this will only occur in special situations where greater staffing is needed. (2) Designated CPT Training Days within the 4/11 Schedule: The 4/11 Schedule will have designated CPT training days and flexible training hours to make up the seventy-eight (78) hours necessary to complete a full work year. A training bank will be created for each employee on the 4/11 Schedule to track and monitor the use and balance of the 78 -hours. The training bank and its use are outlined in the next section. For CPT training days which require employees to travel outside the City of Palo Alto, an additional two (2) hours of training bank time will be made available to account for all travel time related to attendance at training. The Division Captain may authorize additional time on a case -by -case basis. Management will determine the number of designated CPT training days and stagger them throughout the year in order to avoid overtime insofar as possible. Designated CPT training days will be scheduled prior to the beginning of each shift year. Unless otherwise determined by the Department, there will be five (5) designated CPT training days each year. These training days will vary in duration but will in most cases be approximately eight (8) to ten (10) hours in duration. The exact number of designated CPT training days, their duration in hours, and the remaining flexible training bank time will be determined prior to shift change and vacation selection. If it's anticipated that the number of training days will vary in any given year, Management will notify and, on request, meet with PAPOA to consider any concerns the Association may have. Patrol personnel will not be permitted to take vacation on any one of these pre -designated CPT training days. The Division Captain may authorize an exception based on compelling circumstances. The course content and training provided on the designated CPT training days can vary from year to year to meet current and changing training needs. It will be the responsibility of the Personnel and Training Division to schedule and coordinate the training on designated CPT training days. Training days may be scheduled during daytime and/or nighttime hours to accommodate training needs. 23 Item 11: Staff Report Pg. 32 Packet Pg. 277 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Sworn employees not on the 4/11 Schedule will be required to attend designated C.P.T. training days. Each of the training days will be broken into two (2) single day sessions for Patrol (A side and B side). It is anticipated that approximately fifty percent (50%) of the non -4/11 employees will attend one (1) of the two (2) days during each of the training cycles. If the nature and/or complexity of the training does not allow for a larger groups, multiple sessions can be scheduled on additional training days. (3) Flexible Training Hours This schedule results in seventy-eightJ781 hours that will be made up during the year through designated CPT training days and flexible training time. It is anticipated that approximately fifty (50) hours will be set aside each year for designated CPT training days (exact number to be determined each year). Once the hours set aside for designated CPT training days is established, the remaining hours shall be used for flexible training as follows. Employees on the 4/11 Schedule attending training on a day off or outside their normal shift shall use their available Flexible Training Bank hours (Non -CPT Hours) prior to using overtime. All Flexible Training Bank hours must be used prior to earning overtime. The only limitation on the use of these training hours is that no employee can exceed the one hundred seventy-one (171) hour FLSA limit in any twenty-eight (28) day cycle. The combination of regular work shifts, designated CPT training days, and flexible training time cannot exceed one hundred seventy-one (1711 hours in any FLSA Cycle. Any hours worked over one hundred seventy-one (171) in a twenty-eight (28) day cycle are considered premiums hours and must therefore be paid at the overtime rate. bank; The following is a list of some of the forms of training that could use hours from the SWAT DRO Range Masters Quarterly Shoots FTO Meetings K-9 Sergeant's meetings FTO School 11550 School Radar School Supervisor school All other Training If an employee doesn't use his or her flexible training hours during the year, he or she will be required to make up the difference by either working extra shifts, partial shifts or by 24 Item 11: Staff Report Pg. 33 Packet Pg. 278 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 using vacation, compensatory time off, and/or holiday time from one of their banks at the end of each fiscal year. The Watch Commander and Supervisor will work with employees to schedule extra shifts or use vacation, holiday or compensatory time off balances. These hours are hours the employee is being compensated for during the normal twenty-six (26) pay periods. The employee must work the hours on a straight time basis or use vacation, holidays or compensatory time off for the compensation received throughout the year. (4) Other Training (not covered by the flexible training bank) The 4/11 Schedule significantly impacts designated CPT training days, shift training, and to some extent training compensated under the flexible training hours. The following guidelines should be followed when attending training not covered by the flexible training hours. All training bank hours, adjusted time off associated with training, and/or overtime associated to training shall be approved in advance by the employee's watch commander or supervisor. One full day of The employee will either receive overtime for the number training on a day off. of hours at training or adjustment for one patrol shift. Adjustments will be documented in the City timekeeping system. One full day of The employee will be adjusted off their patrol shift for the training on a day on. day. Adjustments will be documented in the City timekeeping system. More than one day, For each full day of training, the employee will be adjusted but less than a off one patrol shift. Adjustments will be documented in week. the City timekeeping system Partial day of Overtime or adjustment for the number of hours actually training on a day off. in training. Adjustments will be documented in the City timekeeping system. Partial day of The employee will be adjusted from duty for the time of training on day on. the training and be expected to work the remainder of their shift. Adjustments will be documented in the City timekeeping system. 25 Item 11: Staff Report Pg. 34 Packet Pg. 279 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 A four (4) or five (5) Whenever possible, and depending upon where the day (week) training employee is in their twenty-eight (28) day cycle, the session that doesn't employee will be adjusted off the patrol schedule when exceed forty-four attending four or five day training sessions. The employee (44) hours. will be adjusted from four (4) eleven (11) hour shifts as compensation for attending the course. The four (4) adjusted days will be as close to the days the employee attended training as possible. Employees will not receive overtime under this situation unless the total time training exceeds forty-four (44) hours. Adjustments will be noted in the comment section of the timekeeping system. (5) Assignments of Sworn Personnel on the 4/11 Schedule Each year assignments are made for management staff for the coming fiscal year. Subsequent to those assignments, officers, agents, and sergeants apply for specialty positions. At the conclusion of those specialty selections, the Patrol Team Selection process begins. Each year, the following process will be used for patrol team selection. Field Services Division Shift Assignment Process: Field Services sergeants, agents, and officers will select their work team based on the following criteria. a. Sergeants, in order of seniority, shall select one of the ten patrol teams. Sergeants may select any open team with the exception of those teams designated as Field Training teams. FTO Sergeants, in order of seniority, will select one of the designated FTO teams. b. Field Training Officers/Agents, in order of seniority, shall select one of the slots open and designated as FTO slots on one of the three FTO teams. The following teams have been pre -designated as training teams: Team 2A, Team 3A, and Team 4A. c. K-9 Officers/Agents — K-9 officers/agents will generally select one of the night shift teams: Teams 4 and 5. Selections will be based on rank and seniority. Only one K-9 will be allowed per team and K -9's will be evenly split between the two sides 26 Item 11: Staff Report Pg. 35 Packet Pg. 280 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, X7=2025 Any exception to these assignments must be requested and approved by the Field Services Coordinator prior to the start of the selection process. d. Agents, in order of seniority, shall select any of the open agent's slots remaining on any of the patrol teams. A minimum of three (3) agents will be assigned to the A - Side and a minimum of three (3) agents will be assigned to the B -Side. If a greater number of agents are assigned to patrol, management will evenly designate agent's slots insofar as possible to as many of the patrol teams as possible with the goal being to have one agent on each patrol team. Officers, in order of seniority, shall select any remaining slot available on any of the patrol teams. Probationary Officers - May be assigned to teams at the discretion of the Field Services Division Coordinator. These assignments will be made based on the developmental needs of the new employee, the staffing needs of the organization, and in a manner that minimizes the loss of prime bidding slots for more senior officers/ agents. Additional Team Selection Guidelines Prior to the selection process, management shall determine the number of agents, and officers assigned to each team. Additionally, management will determine which teams are available for selection by K-9 Officers/Agents. Field Training Officers/Agents, Field Training Sergeants, and probationary employees shall be subject to administrative assignment. In the spring of each year, all employees participating in the patrol team selection process will receive a schedule identifying available slots, the process forteam selection, and a date and time for the employee to make their selection Team Selection Reservations — Once Officers/Agents/Sergeants select a team, they will be guaranteed that team even if they are unable to work that team at the start of the shift year due to special assignment, internship, leave of absence, disability, illness etc. Officers, Agents and Sergeants may not remain in the same time slot for more then two consecutive years. Team change request will be considered with the approval of management. 27 Item 11: Staff Report Pg. 36 Packet Pg. 281 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Any request for an anticipated change to the assignment of sworn personnel shall be routed to the Field Services Division Coordinator prior to the selection process. (6) Vacation Selection Concurrent Vacation Authorization — Officers and Agents Patrol Division — Four (4) slots are authorized on the A -Side and four (4) slots are authorized on the B -Side. It is anticipated that this would equate to two (2) slots on night shift (Teams 3, 4, and 5) and two (2) slots on day shift (Teams 1, and 2) for each side. Any exceptions to these rules may be made by the Field Services Division Coordinator based on special circumstances. Concurrent Vacation Authorization - Sergeants Patrol Division — Two (2) slots are authorized in patrol on the A -Side and two (2) slots are authorized in patrol on the B -Side. It is anticipated that this would equate to one (1) slot on the night shift (Teams 3, 4, and 5) and one (1) slot on the dayshift (Teams 1 and 2) for each side. Exceptions to allow two (2) sergeants vacation at the same time for special circumstances may be made by the shift lieutenant. Other exceptions to this rule may be made by the Field Services Division Coordinator. a. The A -side and B-side will have separate vacation signups. It's also anticipated that the dayshift and nightshift will have separate signups. For agents and above, selection will be based on rank and time in rank. Personnel having the greatest tenure in rank will have priority. For officers, selection will be based on seniority. If seniority is equal, low badge number shall have priority. b. Sergeants will have a separate signup sheet from agents and officers. During the initial sign up sergeants will have two guaranteed slots per side, one (1) on day shift and one (1) on night shift. Agents/officers will have four (4) guaranteed slots per side, two (2) on day shift and two (2) on night shift. Vacation Selection Process: Vacation selection will occur within a few weeks of the team selection process each spring. Selections will take place on two days, one day for the A -Side and one day for the B -Side. Sergeant, agents, and officers will be 28 Item 11: Staff Report Pg. 37 Packet Pg. 282 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 — June 30, 20212025 given time slots to come in, call in, or may submit in advance written instructions on choice for vacation weeks. The selections will be made based on rank and seniority. Both sides agree to monitor the outcome of the process and enter into a mutual agreement to continue or discontinue the process. (7) Time Keeping and Payroll All employees working under the 4/11 schedule will work eleven (11) hours a day, four (4) consecutive days a week. These eleven (11) hours will be entered in the timekeeping system on the day they are worked and/or prior to pay period payroll deadlines. Employees attending one (1) of the designated CPT training days will enter the hours of training on a "training timesheet" and enter the time in the timekeeping system. Employees using hours from their flexible training bank shall complete a "training timesheet" and enter the time in the timekeeping system. Employees working the 4/11 Schedule will not receive overtime compensation for hours worked under the following conditions. • Hours worked as part of a regular 11 -hour work day. • Hours worked on a designated CPT training days. • Hours associated to training where hours from the flexible training bank could be used. • Non -Mandatory training where adjustments from the patrol schedule are possible. Overtime shall be paid for "Mandatory" training once training bank hours have been exhausted. Overtime shall be paid for "Mandatory" meetings that fall outside the specialty exemption listed below. Participation in department specialties including training, meetings, and other activities is not considered a mandatory activity when it comes to overtime compensation. Wherever possible, employees participating in department specialties and other non -mandatory activities will be adjusted off the patrol schedule for these activities. Schedule adjustments will occur as close to the activity outside the employee's normal work schedule as possible and within the same FLSA Cycle. Schedule adjustments for personnel working nights: All personnel attending a full day of training on a work day will be adjusted off the patrol schedule for their work shift that day. 29 Item 11: Staff Report Pg. 38 Packet Pg. 283 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 In addition to being adjusted off any shift that starts on the day the training occurs, employees working Teams 3, 4, and 5 the night before the training will be adjusted off the night before as follows. If the training is all day starting in the morning hours, these adjustments will apply. Team 3: Adjusted off at 2200 hours. Teams 4 & 5: Adjusted off the entire shift. If a night shift employee is scheduled for a full day of "Mandatory" training on the morning of his or her first day off, the same adjustments listed above will apply. In addition to the necessary adjustment, employees will receive compensation forthe training hours through the use of training bank hours. When training bank hours are exhausted, the employee will receive overtime. The time keeping system entries: Each employee must enter his or her time in the timekeeping system that accurately reflects the hours he or she works. When schedule adjustments are made, overtime is worked, or training bank time is used, employees must make appropriate notes in the comment section of the timekeeping system. Supervisors and timekeepers may complete the timekeeping system entries when employees are unavailable due to illness or other situations and employees will thereafter verify the timekeeping entry is accurate upon their return to work. Managers and supervisor will approve time entries made in the time keeping system. Managers and supervisors will pay special attention to the use of training bank time and overtime. Time entries should be reviewed for regular hours and training hours that may exceed the FLSA guideline of 171 hours in a 28 day cycle. With the 4 -day on 4 -day off rotation, employees will work either 66 or 88 hours in each pay period. The timekeeping system will shift adjust the appropriate number of hours into (+14) and out of (-8) the employees bi-weekly totals so each employee receives compensation for 80 hours. Regardless of the number of hours worked under the FLSA exemption, an employee will be compensated for 80 regular hours every bi-weekly payroll cycle. These shift adjusted hours (-8 or +14) will be added to or taken away from the timecard at the appropriate day/night shift differential rates for each employee. As an example, if an employee's normal shift is paid at 75 percent day rate and 25 percent night rate, all hours shift -adjusted on to or off the timecard will be adjusted using the same approximate ratio of 75/25 percent for day/night rates. 30 Item 11: Staff Report Pg. 39 Packet Pg. 284 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 If an employee leaves city service while on the 4/11 schedule, staff and payroll shall perform the training bank reconciliation of the number of hours the employee is over or under the normal forty (40) hour workweek rate since the beginning of the current one (1) year (twenty-six [26] pay period) 4/11 cycle. If the employee has worked more hours than the forty (40) hour a week average, he or she shall be compensated for those hours at the regular rate. If the employee is under the forty (40) hour a week average, the hours will be taken from the employee's vacation, holiday, or comp time bank and/or deducted at the regular rate from the employee's last check. If an employee's assignment changes from the 4/11 schedule orto the 4/11 schedule, his or her over/under rate will be calculated the same as above. Time off, extra shifts worked, and/or the adjustment of holiday, vacation, and/or comp. time banks will be used to resolve any differences between actual hours worked and the forty (40) hour weekly average. Daylight Savings Time/Pacific Standard Time Changes — Personnel on Team 4 and Team 5 will follow these guidelines when working eitherthe spring forward or fall back. Individuals working in the spring who would lose an hour of work due to the change to Daylight Savings Time will report for duty one (1) hour early and work an eleven (11) hour shift at straight time. Individuals working in the fall will work one (1) additional hour (for a total shift of twelve (12) hours) due to the change to Pacific Standard Time. Such employees will put in for one (1) hour of overtime. Nothing in this section prevents an employee from leaving early or using time off to offset the time when staffing allows and approved by the Supervisor or Watch Commander. (8) Maximum Hours Worked - Turn Around Time Sergeants, agents, and officers may work up to a maximum number of 16 hours in a 24 - hour period. Any work beyond 16 hours must be approved by a watch commander or member of management and only under exigent circumstances. Any time an employee works 16 hours or more, they must receive an 8 -hour break before returning to duty. If the 8 -hour break runs into the employees next shift, those hours are considered adjusted hours off. Sergeants, agents, and officers shall not exceed a maximum of one hundred forty (140) hours in a 14 day pay period. Any work beyond one hundred forty (140) hours must be approved by the employee's Lieutenant and Captain, and should rarely occur only under extreme situations. 31 Item 11: Staff Report Pg. 40 Packet Pg. 285 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Sergeants and Lieutenants authorizing overtime in excess of the daily limit (16 -hours) and/or the bi-weekly limit (140 hours) shall send a short email to their Lieutenant and Captain explaining the reason for the excess work. It is the employee's responsibility to monitor their hours and notify the supervisor and/or watch commander of their hours worked when approaching the daily or bi-weekly limits or being requested to work overtime. (9) Shift Exchanges Sergeants, agents, and officers may exchange work shifts with another employee of the same rank. Agents and officers may be interchangeable if simply filling the role ofan officer on the schedule. Personnel must submit a shift exchange request form to their supervisor and lieutenant. Shift exchanges require a lieutenant's approval except when short notice makes that impossible. Shift exchanges can only occur for entire shifts, Shift exchange request forms must contain the pay back date for the second half of the shift exchange. Both halves of the exchange must occur in the same 28 -day FLSA Cycle (referto Yearly4/11 patrol Schedule for FLSA Cycles). Once an employee agrees to an exchange shift, he or she is responsible for that shift. If he or she fails to show up for the shift and/or is sick, the time will be deducted from his or her applicable leave balance to the extent the employee qualifies for such deduction under the applicable leave policy. Failure to show up fora shift may also result in disciplinary action. (10) On -duty workout period and sign up: When staffing allows and with supervisory approval, employees may workout on -duty for a period of up to one (1)_hour. The hour shall include the work out, a shower, and dressing time. Specific guidelines and conditions are outlined in the Wellness Program Policy. (11) Upon written request of either party, Section 22(a) of this MOU will reopen and the parties will meet and confer over the issue of the patrol work schedule. Any changes will be by mutual agreement of the City and the Association. (b) Traffic Team Sworn members of the Traffic Team shall work a ten-hour (10) day, four (4) day workweek schedule. 32 Item 11: Staff Report Pg. 41 Packet Pg. 286 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Traffic Team officers/agents may be assigned as part of minimum staffing at the discretion of management. Effective July 1, 2008, the Take Home Motor Program will be discontinued. On a one time basis, employees assigned to motors who are in paid status the first full pay period after Council adoption of this MOU, will receive one time non PERSable stipend representing 2.5% of base salary of the employee's classification minus applicable state and federal taxes. (c) Special Operation Sergeant/Crime Suppression Team The Special Operations Sergeant and team members shall generally work a ten (10)_hour day, four (4) day workweek schedule. Given the nature of the team's assignment, it is anticipated and expected that their schedules should be flexible and adaptto organizational needs. (d) ISD and Other Sworn Classifications All sworn personnel assigned to ISD, Staff Assistant, Personnel and Training and Community Policing shall work a ten (10) hour day, four -day work week schedule. (1) Work Schedule The ten hours shall generally be worked between the hours of 0700 and 1900, with specific schedules subject to approval by appropriate supervisors. The ten (10) -hour work schedule shall be worked within a period of ten hours, with a working lunch period not to exceed thirty (301 minutes. As an alternative, with Management approval, the ten-hour work schedule may be worked within eleven hours, with a one (1) hour unpaid lunch break. Changing alternatives will require prior approval by Management. (2) Work Week For ISD personnel, one-half of the Division will work Monday through Thursday, while the other half will work Tuesday through Friday. All other sworn personnel covered under Section 23 (b) & (c) will also work either Monday through Thursday, or Tuesday through Friday. (3) _-Late Detective Shift 33 Item 11: Staff Report Pg. 42 Packet Pg. 287 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Two detectives will be assigned on a rotational basis to the late shift from 1200 to 2200 to provide evening coverage. Assignment to the late detective shift, where possible, will be by advanced sign up with each detective selecting two weeks each quarter according to a protocol determined by seniority, needs of the division and needs of the employee. Generally, there will be one detective from each half of the division working the late detective shift during each week. (e) Forty -hour Training Schedule For all sworn employees who attend training that is four (4) or five (5) days in duration (a week), their schedules will be adjusted from the normal work week. Employees will not receive overtime during scheduled training as described here unless it exceeds their normal forty (401 or forty-four 1441 hour workweek. Schedule adjustments will be documented in the notes section when making the timekeeping system entries. Section 23. Overtime Pay and Compensatory Time Off (a) Overtime pay shall be provided at the rate of time and one-half of the employee's regular rate, including night shift differential, working out of classification pay, and specialty assignment premium pay as defined under Section 7, 8 and 10. (b) Compensatory time off, which is approved by management in -lieu of overtime payment on a staffing available basis, will be taken at the rate of 1-1/2 hours for every hour of credited overtime. In the event compensatory time off is used as the method of compensating for overtime, the time off will be taken prior to the end of the quarter in which it is earned except as provided herein. All compensatory time balances over 80 hours shall be paid at the end of each quarter (i.e., employee to carry over 80 hours). During the final calendar year quarter only, employees have the option to: (1) Employees who have vacation accrual balances of less than two times their annual accrual rate, less 80 hours, may request in writing prior to the payroll deadline to convert up to 80 hours of unused compensatory time to vacation per calendar year, to be transferred in the first pay period of the calendar year. (2) Employees may cash out their entire compensatory balance but must make this request before payroll deadline. 34 Item 11: Staff Report Pg. 43 Packet Pg. 288 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 (c) Employees called out to perform work, attend meetings or required training shall be compensated for at least three hours pay for each occurrence at the appropriate overtime rate. Section 24. Overtime Sign -Up (a) Planned Overtime Planned overtime includes patrol staffing, special events, traffic control functions or any other overtime needs which can be identified prior to the 20th day of the preceding month. On or about the 20th of each month, watch commanders will post a list of dates/shifts requiring overtime for the next month. Officers, Agents, and Sergeants will be given a reasonable period of time to sign up for the available overtime assignments. On or about the 25th of the month, planned overtime will be filled from the sign up list using the rotational overtime call out list. Agents may place themselves on the sign up list for supervisor overtime, however will only be considered if no sergeant requests the shift. Overtime that isn't filled during the planned overtime process may be filled at management's discretion. Employees assigned to a fixed work schedule such as ISD, P&T, and Staff Assistant may adjust their work schedule with their manager's approval in order to work a planned patrol overtime assignment. This schedule adjustment must be completed within the same work week as the planned overtime assignment. Schedule adjustments will normally be approved unless there is a conflict with a previously scheduled activity within the work unit or the schedule adjustment would be disruptive to the operation of the unit. Employees bidding for planned overtime requiring a shift adjustment must make a notation next to the assignment indicating a shift adjustment would be necessary. Only one overtime shift requiring a shift adjustment can be worked per work week. (b) Unplanned Overtime. Unplanned overtime is overtime that wasn't identified prior to the 20th of the preceding month. Unplanned overtime will be filled by the following procedures. 1) The Watch Commander or Supervisor may request an employee extend their shift or come in early. If a volunteer cannot be identified to hold over or come in early, the rotational overtime list will be used. 35 Item 11: Staff Report Pg. 44 Packet Pg. 289 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 2) Employees interested in working unplanned overtime will be placed on a rotational overtime list in order of seniority. When an overtime shift is available, a manager or supervisor will call the next person on the list. If that person declines the opportunity, is not available, is already working, or takes the overtime, he/she will be placed at the bottom of the list. The lists will be continually updated in order to rotate the names. There will be separate lists for sergeants and officers/agents for unplanned overtime. A separate supervisory list will be maintained for agents interested in working supervisory overtime. Agents will be offered supervisory overtime positions only if no sergeants have accepted the opportunity. 3) If the watch commander or supervisor is unable to fill overtime through any of these procedures, he or she may order an individual to extend their shift, come in early, or come in on a day off. A log on those required to work mandatory overtime will be kept in the overtime book. Mandatory overtime should be rotated in order of reverse seniority. c) Overtime Minimum. With regard to both planned and unplanned patrol team overtime, there is no minimum number of hours. Planned overtime postings and unplanned overtime will be offered for the actual number of hours needed. If small blocks of overtime aren't filled by on -duty personnel adding them to an existing shift, managers may apply a 6 -hour minimum to a shift for personnel coming in on a day off. (d) These overtime procedures may be reviewed and/or modified at the mutual agreement of both management and PAPOA. Section 25. Jury Duty No employee shall be required to work a combination of jury duty and work time to exceed 12 hours during a 24 -hour period. The period shall commence at the required time of appearance for jury duty. Jury duty is defined as the time between required time of appearance and dismissal. Work time excused as a result of jury duty will be compensated at the regular rate of pay. Section 26. Vacation Accrual Vacation will be accrued when an employee is in pay status and will be credited on a bi-weekly basis. Such accrual and credit shall not exceed three times the annual rate of accrual. Each eligible employee shall accrue vacation at the following rate for continuous service performed in pay status: 36 Item 11: Staff Report Pg. 45 Packet Pg. 290 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 (a) Less than four (4) years - For employees completing less than four years continuous service; (8) Shifts vacation leave per year. (b) Four, but less than nine years - For employees completing four, but not more than nine (9) years continuous service; 12 Shifts vacation leave per year. (c) Nine (9), but less than fourteen (14) years - For employees completing nine (9), but not more than fourteen (14) years continuous service; (16) Shifts vacation per year. (d) Fourteen (14), but less than nineteen (19) years - For employees completing fourteen (14), but not more than nineteen (19) years continuous service; (18) Shifts vacation leave per year. (e) Nineteen (19) or more years - For employees completing nineteen (19) or more years continuous service; (20) Shifts vacation leave per year. Example: An employee with less than four (4) years working a 4/10 Schedule will receive eight (8) Shifts or eighty (80) hours of vacation. The same employee working the 4/11 Schedule will receive eight (8) Shifts or eighty-eight (88) hours of vacation. Section 27. Use of Vacation (a) When to be taken. The time at which an employee may use his/her accrued vacation leave and the amount to be taken at any one time shall be determined by the department head with particular regard for the needs of the City, but insofar as possible, considering the wishes of the employee. (b) Limitation on use. Employees may not use more than their annual rate of accrual in any calendar year period, provided, however, that a department head my grant exceptions to this limitation. (c) Waiting period. Employees shall complete six months continuous service before using accrued vacation leave. (d) Double compensation prohibited. Employees shall not work for the City during their vacation. (e) Vacation splitting. It is the intention of the City that vacation be taken in units of one week; however, with the approval of the department head, an employee may use one week of 37 Item 11: Staff Report Pg. 46 Packet Pg. 291 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 his/her accrued vacation in any calendar year in units of less than one work week, but in no instance in units of less than one-half of the normal workday or shift. Requests for exception to this procedure must be approved by the City Manager. (f) Vacation Cashout. Once each calendar year an employee may cash out eight or more hours of vacation accrual in excess of 80 hours to a maximum of 120 hours, provided that the employee has taken at least 80 hours as vacation in the previous 12 months. 1. Effective for the 2012 tax year and each subsequent year, to be eligible to cash out vacation, employees must pre -elect the number of vacation hours they will cash out during the following calendar year, up to the maximum of 120 hours, prior to the start of that calendar year. The election will apply only to vacation hours accrued in the next tax year and eligible for cash out. 2. The election to cash out vacation hours in each designated year will be irrevocable. This means that employees who elect to cash out vacation hours must cash out the number of accrued hours pre -designated on the election form provided by the City. 3. Employees who do not pre -designate or decline a cash out amount by the annual deadline established by the City will be deemed to have waived the right to cash out any leave in the following tax year and will not be eligible to cash out vacation hours in the next tax year. 4. Employees who pre -designate cash out amounts may request a cash out at anytime in the designated tax year by submitting a cash out form to payroll. Payroll will complete the cash out upon request, provided the requested cash out amount has accrued and is consistent with the amount the employee predesignated. If the full amount of hours designated for cash out is not available at the time of cash out request, the maximum available will be paid. 5. For employees who have not requested payment of the elected cash out amount by November 1 of each year, Payroll will automatically cash out the pre -designated amount in a paycheck issued on or after the payroll date including November 1. 38 Item 11: Staff Report Pg. 47 Packet Pg. 292 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Section 28. Vacation Pay at Termination Employees leaving the municipal service with accrued vacation leave shall be paid the amounts of accrued vacation to the date of termination. Payments for accrued vacation shall be at the employee's current rate of pay. Section 29. Vacation Benefits for Deceased Employees An employee who is eligible for vacation leave and who dies while in the municipal service shall have the amount of any accrued vacation paid to the employee's estate within thirty days. This proration will be computed at the last basic rate of pay. Section 30. Effect of Extended Military Leave An employee who interrupts his service because of an extended military leave shall be compensated for accrued vacation at the time the leave becomes effective. Section 31. Sick Leave (a) Statement of Policy. Sick leave shall be allowed and used only in case of actual personal sickness or disability, medical or dental treatment, or as authorized in Subsection 33 (e), personal business chargeable to sick leave. Up to 8 days sick leave per year maybe used for illness in the immediate family (spouse, child, parent, parent -in-law, brother, sister, registered domestic partner, or close relative residing in the household of the employee). (b) Eligibility. Regular and part-time employees shall be eligible to accrue and use sick leave. (c) Accrual. Sick leave shall be accrued bi-weekly provided the employee has been in a pay status for 50 percent or more of a bi-weekly pay period. Sick leave shall be accrued at the rate of 3.7 hours per bi-weekly pay period. (d) Accumulation. Accrued sick leave may be accumulated without limit, except as provided in Section 31(h). (e) Use. Sick leave may be used as needed and approved, to the point of depletion, at which time the employee will no longer receive pay for sick leave. A new employee may, if necessary, use up to forty-eight hours or shift equivalent of sick leave at any time during the first six months of employment. Any negative balances generated by such utilization will be charged against future accrual or deducted from final paycheck in the event of termination. 39 Item 11: Staff Report Pg. 48 Packet Pg. 293 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 An employee who has been disabled for 60 consecutive days and who is otherwise eligible both for payment underthe long-term disability group insurance coverage and accrued sick leave benefits may, at his/her option, choose either to receive the long-term disability benefits or to utilize the remainder of his/her accrued sick leave prior to applying for long-term disability benefits. Sick leave will not be granted for illness occurring during any leave of absence other than sick leave, unless the employee can demonstrate that it was necessary to come under the care of a doctor while on such other leave of absence. When an employee finds it necessary to be absent for any reason, he/she should cause the facts to be reported to the department within one hour after his/her regular starting time on the first working day of absence, and shall regularly report on, or account in advance for each work day thereafter unless hospitalized or otherwise indisposed. Such reports may be subject to written documentation if there is reasonable evidence that sick leave abuse has occurred. Sick leave shall not be granted unless such report or advance accounting has been made, provided, however, that the department head may grant exception to this policy where the circumstances warrant. Documentation may also be required if there is a reasonable basis to believe that the employee may not be medically fit to return to work. (f) Depletion of Sick Leave Benefits. Upon depletion of sick leave or the beginning of the period to be covered by payments under the long-term disability group insurance coverage, whichever comes first, an employee may be granted a medical leave of absence without pay for a period not exceeding sixty days. If the employee is unable to return to work at the end of this period, he/she must request further medical leave which will be subject to the approval of the City Manager. If further leave is granted, the employee must notify the City of intent to return to work every thirty days. If further leave is not granted, the employee's service with the City shall be considered terminated. (g) Forfeiture Upon Termination. Employees leaving the municipal service shall forfeit all accumulated sick leave, except as otherwise provided by law and Subsection 32(h). In the event that notice of resignation is given, sick leave may be used only through the day which was designated as the final day of work by such notice. (h) Payment for Accumulated Sick Leave. Employees hired before August 1, 1986 who leave the municipal service in good standing, or who die while employed in good standing by the 40 Item 11: Staff Report Pg. 49 Packet Pg. 294 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 City, and who have fifteen or more years of continuous service shall receive compensation for unused sick leave hours in a sum equal to two and one-half percent of their unused sick leave hours multiplied by their years of continuous service and their basic hourly rate of pay at termination. For all employees entering the service of the City prior to March 2, 1983, full sick leave accrual will be paid in the event of termination due to disability. For all employees hired after August 1, 1986, sick leave accrual accumulation shall be limited to 1,000 hours with no payoff provision for unused balance at termination. (i) Sick Leave Re -opener. Upon written request of either party, the parties agree to meet to confer over the issue of sick leave incentive, including but not limited to: (1) sick leave payout for employees hired after August 1, 1986 and (2) converting to a paid time off policy in lieu of both vacation and sick leave. Any changes will be by mutual agreement of the City and the Association. (j) Personal Business Leave Chargeable to Sick Leave. Up to 2 Shifts (20 -Hours for 4/10 employees and 22 -Hours for 4/11 employees) per year of personal business leave may be chargeable to sick leave. Time off under this provision is subject to management scheduling approval. (k) Return to Work or Continue Work With Limited/Alternative Duty. In cases of non -work -related injury, illness or pregnancy, an employee, upon approval of the department head, City Risk Manager and the employee's doctor, may elect to return to work or continue work with doctor -approved limited or alternative duty. Approval for such limited/alternative duty shall be based upon department ability to provide work consistent with medical limitations and the length of time of the limitations. Shift employees must be willing to accept any non -shift limited duty schedule work locations and may be subject to the reasonable availability of limited duty assignments. The City doctor may be consulted in determining work limitations. Any assignment to a limited/alternative duty will be on a temporary basis. The provisions of this section are not intended to create any permanent light/alternative duty assignments. Any assignment to a limited/alternative assignment shall not displace any other employee without consent of all parties, including the Association. 41 Item 11: Staff Report Pg. 50 Packet Pg. 295 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 — June 30, 20212025 Section 32. Leaves of Absence Without P (a) Disability. Leaves of absence without pay may be granted in cases of disability not covered by sick leave. Pregnancy will be considered as any other disability. Leaves of absence for disability are subject to physicians' verification including diagnosis and medical work restriction. (b) Other leaves. Leaves of absence without pay may be granted in cases of personal emergency or when such absences would not be contrary to the best interest of the City. Non -disability prenatal and/or postpartum leave is available under this provision, but such leave shall not begin more than six months prenatal nor extend more than six months postpartum. (c) During unpaid leaves of absence for disability or other reasons, the employee may elect to use accrued vacation credits. Requests for leaves without pay shall not be unreasonably denied. In order to avoid misunderstandings, all leaves without pay must be in writing to be effective. (d) Approval of department head. Leave of absence without pay for one week or less may be granted by the department head, depending on the merit of the individual case. (e) Approval by City Manager. Leave of absence without pay in excess of one week's duration may be granted by the City Manager on the merit of the case, but such leave shall not exceed twelve months' duration. (f) Absence without leave. Unauthorized leave of absence shall be considered to be without pay, and reductions in the employee's pay shall be made accordingly. Unauthorized leave of absence may result in termination of employment. (g) Leave of absence; death outside the immediate family. Leave without pay may be granted a regular employee by his/her department head in the event of death to family members other than one of the immediate family, such leave to be granted in accordance with Section 34 (b), (c) , (d) and (e). (h) Military leave of absence. State and federal law shall govern the granting of military leaves of absence and the rights of employees returning from such absence. 42 Item 11: Staff Report Pg. 51 Packet Pg. 296 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, X7=2025 Section 33. Leave of Absence With The City Manager may grant a regular employee under his/her control a leave of absence with pay for a period not exceeding thirty calendar days for reasons he/she deems adequate and in the best interest of the City. The City Council may grant a regular employee a leave of absence with pay for a period not to exceed one year for reasons the Council considers adequate and in the best interest of the City. (a) Subpoenas; leave of absence. Regular employees who are subpoenaed to appear as witnesses in behalf of the State of California or any of its agencies may be granted leaves of absence with pay from their assigned duties until released. The employee shall remit all fees received for such appearances to the City within thirty days from the termination of his or her services. Compensation for mileage or subsistence allowance shall not be considered as a fee and shall be retained by the employee. (b) Employee's time off to vote. Time off with pay to vote at any general or direct primary election shall be granted as provided in the State of California Elections Code, and notice that an employee desires such time off shall be given in accordance with the provisions of said Code. (c) Leave of absence; death in immediate family. Leave of absence with pay of three days shall be granted an employee by the head of his or her department in the event of death in the employee's immediate family, which is defined for purposes of this section as wife, husband, son, step -son, son-in-law daughter, step -daughter, daughter-in-law, father, step -father, father-in-law, mother, step -mother, mother-in-law, brother, step -brother, brother-in-law, sister, step -sister, sister-in-law, grandmother, grandmother -in-law, grandfather, grandfather -in-law, grandchildren, aunt, uncle, niece, nephew, registered domestic partner, or a close relative residing in the household of the employee. Such leave shall be at full pay and shall not be charged against the employee's accrued vacation or sick leave. Requests for leave in excess of three days shall be subject to the approval of the City Manager. Approval of additional leave will be based on the circumstances of each request with consideration given to the employee's need for additional time off. (d) Jury duty; leave of absence. Employees required to report for jury duty shall be granted a leave of absence with pay from their assigned duties until released by the court, provided the employee remits to the City all fees received for such duties other than mileage or subsistence allowances within thirty days from the termination of his/her jury service. 43 Item 11: Staff Report Pg. 52 Packet Pg. 297 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Section 34. Reduction in Force In the event of reductions in force, they shall be accomplished wherever possible through attrition. If the work force is reduced within the bargaining unit for reasons of change in duties or organization, abolition of position, shortage of work or funds, or completion of work, employees with the shortest length of service will be laid off first so long as employees retained are fully qualified, trained and capable of performing remaining work. Length of service for the purpose of this article will be based on total City service in a regular classification or classifications. Employees laid off due to the above reasons will be given written notice at least thirty days prior to the reduction in force. A copy of such notice will be given to the Association. Section 35. Agents The number of Agent positions shall be governed by the August 12, 1981, Arbitration Award. Section 36. Commute Incentives and Parking in Civic Center Ga Commute Incentives-- Represented employees who qualify may voluntarily elect one of the following commute incentives: Public Transit. The City will provide monthly Commuter Checks worth the value of: $40 for employees traveling three or more zones on Caltrain; $40 for employees using the Dumbarton Express, BART, the ACE train, or a commuter highway vehicle; $35 for employees traveling less than three zones on Caltrain; $35 for employees using VTA and other buses. These vouchers may be used toward the purchase of a monthly transit pass. Carpool. The City will provide carpool vouchers worth the value of $30 per month to each eligible employee in a carpool with two or more people. These vouchers may be used at designated service stations toward the purchase of fuel and other vehicle -related expenses. Vanpool Program. The City will provide Commuter Checks worth the value up to $60 to each employee voluntarily participating in the Vanpool Program. These vouchers may be used toward payment of the monthly cost. Employees must fulfill the basic requirements of the Employee Commute Alternatives Program to qualify. 44 Item 11: Staff Report Pg. 53 Packet Pg. 298 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Bicycle. The City will provide bicycle vouchers worth the value of $20 per month to eligible employees who ride a bicycle to work. These vouchers may be used at designated bicycle shops for related bicycle equipment and expenses. Walk. The City will provide walker vouchers worth the value of $20 per month to eligible employees who walk to work. These vouchers may be used at designated stores for expenses related to walking such as footwear and related accessories. Parking in the Civic Center Garage --Employees assigned to Civic Center and adjacent work locations will be provided with a Civic Center Garage parking permit. New employees hired after June 30, 1994 may initially receive a parking permit for another downtown lot, subject to the availability of space at the Civic Center Garage. Section 37. Disciplinary Action and Unsatisfactory Work or Conduct (a) Except as provided in Section 6 (Probationary Period) of this agreement, no employee shall be disciplined without just cause. For the purpose of this section, "discipline" shall be deemed to include discharge, demotion, reduction in salary, written reprimand, disciplinary probation and suspension. Discipline shall be deemed not to include verbal reprimands or reductions in force. (b) Non -probationary employees whose work or conduct is unsatisfactory but not sufficiently deficient to warrant discipline, demotion, or discharge will be given a written notification of unsatisfactory work or conduct and an opportunity to improve. Failure to correct deficiencies and improve to meet standards may result in discipline, demotion or discharge. (c) Notice of disciplinary action must be in writing and served on the employee in person or by registered mail prior to the disciplinary action becoming effective. However, in extreme situations where there is reasonable cause, the employee may be removed from duty immediately with pay pending such disciplinary action. The notice must be filed on a timely basis with the Human Resources Department and included in the employee's personnel file. The notice of disciplinary action shall include: (1) Statement of the nature of the disciplinary action; (2) Effective date of the action; (3) Statement of the cause thereof; 45 Item 11: Staff Report Pg. 54 Packet Pg. 299 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 (4) Statement in ordinary and concise language of the art or the omissions upon which the causes are based; (5) Copies of any documents or other items of evidence upon which the disciplinary action was fully or in part based; (6) Statement advising the employee of his/her right to appeal from such action, and the right to Association representation. (d) If the disciplinary action consists of suspension, any suspension time previously given shall be credited to the final disciplinary action. (e) Subject to state law requirements, employees may request that disciplinary actions be sealed according to the following schedule: (1) Written reprimands with no recurrence after one (1) year. (2) Disciplinary probation after three (3) years from the implementation of such probation, if no other disciplinary action has occurred during that period. (3) Suspensions less than three (3) days without recurrence, after two (2) years. (4) Suspensions more than three (3) days but less than six (6) days, after three (3) years. (5) Suspensions of six (6) days or more, after five (5) years. For the purpose of these sections, the time starts from the time of action following the Skelly process (day discipline is imposed). Written requests for the sealing of disciplinary actions should be directed to the Personnel and Training Coordinator. Sealing shall include all memos, letters, correspondence, complaint forms, and any other material pertaining to the disciplinary action that has been placed in the employee's personnel file. Sealing shall not include the sealing of any material related to criminal offenses for which the employee was charged except in concurrence with the sealing or expungement of criminal 46 Item 11: Staff Report Pg. 55 Packet Pg. 300 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 charges by a court of competent jurisdiction or in the event of a complete exoneration of the employee by the judicial system. The City Human Resources Department shall be notified in all cases where sealing of disciplinary action is taken. Human Resources Department copies of the disciplinary actions will be disposed of in a manner consistent with the Police Department's action. The sealed action shall not be held to discriminate against the employee in any subsequent disciplinary action, or in the event of promotion, merit step raise, transfer, request for educational leave, modification of duties, vacation selection, application for other employment, or against any other action the employee may take for his or her personal improvement. Once sealed, the file shall not be opened unless the employee requests such unsealing and then only for examination by the person or persons whom the employee specifies or at the discretion of the Chief of Police, who in the absence of a demonstrable emergency shall notify the employee a minimum of 48 hours before the opening of the sealed file and the reason for opening. In the event the employee cannot be notified in advance, notification must be made on the employee's first duty day after the sealed file is opened. Section 38. Grievance Procedure (a) The City and the Association recognize that early settlement of grievances is essential to sound employee -employer relations. The parties seek to establish a mutually satisfactory method for the settlement of employee grievances, or Association grievances, as provided for below. In presenting a grievance, the aggrieved and/or his or her representative is assured freedom from restraint, interference, coercion, discrimination or reprisal. (b) Definition. A Grievance is: (1) An unresolved complaint or dispute regarding the application or interpretation of Departmental rules, regulations, policies, and procedures, relating to terms conditions of employment, wages or fringe benefits; or this Memorandum of Agreement, . (2) An appeal from a disciplinary action of any kind against an employee covered by this Memorandum of Agreement. 47 Item 11: Staff Report Pg. 56 Packet Pg. 301 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 (c) Access to the Grievance Procedure. Except as provided in Section 6, Probationary Period, all employees represented by the Association may file and process a grievance. Such aggrieved employees may be represented by the Association or may represent themselves in preparing and presenting their grievance at any level of review. The Association may file a grievance when an Association right not directly related to an individual employee becomes subject to dispute. (d) Conduct of Grievance Procedure. (1) The time limits specified in this Article maybe extended by mutual agreement in writing of the aggrieved employee or the Association and the reviewer concerned. (2) Should a decision not be rendered within a stipulated time limit, the aggrieved employee may immediately appeal to the next step. (3) The grievance may be considered settled if the decision of any step is not appealed within the specified time limit. (4) If appropriate, the aggrieved employee or the Association and Management may mutually agree to waive any step of the grievance procedure. (5) Written grievances shall be submitted on forms provided by the City or on forms which are mutually agreeable to the City and the Association. (6) Any retroactivity on monetary grievances shall be limited to the date of occurrence, except in no case will retroactivity be granted prior to three months before the grievance was filed in writing. Step I. The aggrieved employee will first attempt to resolve the grievance through informal discussions with his or her immediate supervisor by the end of the tenth working dayfollowingthe discovery of or the incident upon which the grievance is based. Every attempt will be made to settle the issue at this level. (Note: For purposes of time limits, the working days are considered to be Monday through Friday, exclusive of City holidays.) Step II. If the grievance is not resolved through the informal discussion, the employee will reduce the grievance to writing and submit copies to the division head or equivalent level Management employee as designated by Management as appropriate within ten working days of the discussion with the immediate supervisor. 48 Item 11: Staff Report Pg. 57 Packet Pg. 302 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 The division head or equivalent level Management employee shall have ten working days from the receipt of a written grievance to review the matter and prepare a written statement. Step III. If the grievance is not resolved at Step II, the aggrieved employee may appeal to his or her department head in writing within ten working days of the receipt of the division head's response. The department head shall have ten working days from the receipt of a written grievance to review the matter and convey his or her decision by written statement. Step IV. If the grievance is not resolved at Step III, the aggrieved employee may choose between final and binding resolution of the grievance through appeal to the City Manager or through appeal to final and binding grievance arbitration. Appeals to final and binding arbitration may be processed only with Association approval. All Step IV appeals must be filed in writing at the Human Resources Department Office within ten working days of receipt of the Step III response. If the aggrieved employee elects final and binding resolution by the City Manager, the City Manager will choose the methods he or she considers appropriate to review and settle the grievance. The City Manager shall render a written decision to all parties directly involved within ten working days after receiving the employee's appeal. If the aggrieved employee elects final and binding arbitration in accordance with this provision, the parties shall mutually select an arbitrator. In the event the parties cannot agree on an arbitrator, they shall mutually request a panel of five arbitrators from the California State Conciliation Service or from the American Arbitration Association if either party objects to the State Conciliation Service, and select an arbitrator by the alternate strike method. The arbitrator shall have jurisdiction and authority only to interpret, apply, or determine compliance with the provisions of this Memorandum of Agreement and such Merit System Rules, regulations, policies, procedures, City ordinances, resolutions relating to terms or conditions of employment, wages or fringe benefits, as may hereafter be in effect in the City insofar as may be necessary to the determination of grievances appealed to the arbitrator. The arbitrator shall be without power to make any decision: (1) Regarding matters of interest. (2) Contrary to, or inconsistent with or modifying in any way, the terms of this Memorandum of Agreement. Item 11: Staff Report Pg. 58 Packet Pg. 303 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, X7=2025 (3) Granting any wage increases or decreases. The arbitrator shall be without authority to require the City to delegate or relinquish any powers which by State law or City Charter the City cannot delegate or relinquish. Where either party seeks arbitration and the other party claims the matter is not subject to the arbitration provisions of this Memorandum of Agreement, the issue of arbitrability shall first be decided by the arbitrator using the standards and criteria set forth in this section and without regard to the merits of the grievance. If the issue is held to be arbitrable, the arbitration proceedings will be recessed for up to five working days during which the parties shall attempt to resolve the grievance. If no resolution is reached, the arbitrator will resume the hearing and hear and resolve the issue on the merits. Copies of the arbitrator's decision shall be submitted to the City, the aggrieved employee and the Union. All direct costs emanating from the arbitration procedure shall be shared equally by the City and the aggrieved employee or the Association. Section 39. Bulletin Boards and TeleDhones The Association shall have access to existing bulletin boards in Unit employee work areas and to the City e-mail and voice mail systems for the purpose of posting notices or announcements including notices of social events, recreational events, membership meetings, results of elections and reports on minutes of Association meetings. Any other material must have prior approval of the Police Chief. Action on approval will be taken within 24 hours of submission. Emails sent for Association business shall be copied to the Human Resources Director at distribution. City telephones may be used for Association business so long as there is no disruption of work and all toll or message unit calls are charged to the Association credit card. Section 40. Access to Association Representatives Representatives of the Association are authorized access to City work locations for the purpose of conducting business within the scope of representation, provided that no disruption of work is involved and the business transacted is other than recruiting of members or collecting of dues, and the representative must notify the Human Resources Department office prior to entering the work location. 50 Item 11: Staff Report Pg. 59 Packet Pg. 304 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 Section 41. Meeting Places The Association shall have the right to reserve City meeting and conference rooms for use during non -working hours. Such meeting places will be made available in conformity with City's regulations and subject to the limitations of prior commitment. Section 42. Voluntary Leave Program: (a) The City of Palo Alto has established a Peace Officer Voluntary Leave Program to provide members of the Palo Alto Peace Officers' Association, Incorporated (hereafter referred to as "PAPOA") the opportunity to donate their accrued vacation time to assist fellow members of PAPOA either due to: (a) an employee's own verifiable non -industrial catastrophic illness or injury (as defined herein) or (b) in order to care for a member of the employee's immediate family (spouse, child, parent or registered domestic partner suffering from a verifiable catastrophic illness or injury) and have exhausted or will presently exhaust all of their paid leave. In order to be eligible to receive donated leave, an employee must have a catastrophic illness or injury or an employee's immediate family member must have a catastrophic illness or injury that requires the employee to provide full-time care for this family member. Care will be taken to emphasize the voluntary nature of the plan and to insure confidentiality of employee participants and medical conditions (where applicable). A Police Officer Voluntary Leave Sharing Program has been established to accept donations of vacation in accordance with the Program's guidelines. All donations shall be: 1. Voluntary 2. Irrevocable 3. Confidential, unless disclosure is required by law 4. In whole hour increments of at least (4) hours, with hours donated being converted to donee hours based on the donee's salary rate (so that there will be no cost to the City due to salary differential) 5. The employee shall be required to exhaust all other types of leave to request donated leave 6. It is understood that employees seeking or receiving leave under this program will apply for long-term disability benefits for which they may be eligible 7. Where any of the period during which an employee receives donated leave is designated as family leave under the California Family Rights Act (CFRA) or Family Medical Leave Act (FMLA), the employee will be eligible for continuation of medical and 51 Item 11: Staff Report Pg. 60 Packet Pg. 305 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 other available benefits during that family leave period (for up to 12 weeks), in accordance with the requirements of those laws. If the employee receiving donated leave is not eligible for CFRA/FMLA benefit continuation, or after the employee has exhausted the available CFRA/FMLA leave period, the employee will need to pay the premiums for continued medical and other available benefits if the employee chooses to continue such coverages through the City. 8. If the donation request is based on the need for an employee to care for an immediate family member, as defined above, the family member must require full-time care bythe employee. Certification of this requirement by a health care professional is required. 9. The maximum donated time a donee may receive is 12 months (if available). 10. Applications to donate leave or receive leave under this Program are made to the Human Resources Department. 11. This is a pilot program and is subject to cancellation by either party. PAPOA members interested in donating leave or in applying to receive donated leave shall complete forms provided by the Human Resources Department. If an applicant for leave is found to meet the criteria set forth herein, Human Resources will determine the availability of and (as applicable) allocation of donated paid leave. Payroll will be notified in writing of the number of hours to be deducted from each donating employee's vacation balance and transferred to the donee employee(s). (b) The City reserves the right to modify or terminate this program at any time. (c) Catastrophic Illness or Injury (also referred to as "medical emergency" in Revenue Ruling 90-29 and Sections 801(c) and 812 of the Merit Rules and Regulations): A non -occupational medical condition of an employee that will require the prolonged absence of the employee from duty and which will result in a substantial loss of income to the employee because the employee will have exhausted all paid leave available apart from the Voluntary Employee Leave Sharing Program. Non -disability postpartum leave as referenced in Merit Rule 801(b) shall not be considered a catastrophic illness or injury under this policy. (d) Nothing in this section precludes an Association member from utilizing or participating in the City's Voluntary Employee Leave Sharing Program. Section 43. Utilization of Reserves for Field Services Division Events (a) Management will determine staffing levels for each event. 52 Item 11: Staff Report Pg. 61 Packet Pg. 306 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, 20212025 (b) Events for which the department receives reimbursement will be staffed by regular officers, except that in the event a sufficient number of regular officers are unavailable, reserve officers may be used. (c) Reserves may be used for the May Day Parade, Stanford University or NFL football games, park patrol, Black and White Ball, and supplemental patrol staffing in excess of levels set forth in the Field Services Staffing Levels general order. (d) Events, for which the department does not receive reimbursement, may be staffed in the ratio of two reserve officers to one regular officer. Reserves may be used in any situation where an insufficient number of regular officers are available. (e) Staffing for the University Avenue Street Fair will consist of no less than a 1:1 ratio of — regular officers to reserve officers. Section 44. Overtime Meals for Investigative Services Division Effective July 1, 1996, for ISD personnel who are working authorized investigative overtime extending for a period either four hours after the conclusion of their normal work shift, or four hours prior to the beginning of the normal work shift, shall be entitled to reimbursement for the appropriate meal at the City per diem rate. The meal reimbursement shall also apply for any authorized investigative overtime on a weekend or holiday in excess of four hours. Section 45. Hiring Incentives Qualified lateral officers, who have a current basic or higher POST certificate, hired during the term of this agreement may upon City Manager approval: (a) Accrue vacation leave at a beginning rate equal to the rate they were earning at their previous employer, subject to a maximum of 160 hours per year with progression to higher accrual rates as provided in Section 27, Vacation Accrual; and (b) Begin their employment with the City with a sick leave balance not to exceed 96 hours. (c) Receive a hiring incentive. Any future hiring incentive program will be discussed with the Association prior to implementation and the Department will reasonably consider any recommendations from the Association regarding internal referral programs to be utilized in conjunction with that program. 53 Item 11: Staff Report Pg. 62 Packet Pg. 307 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, X7=2025 (d) Laterals returning to the Palo Alto Police Department must have been separated from the City for a minimum of 2 years to be eligible for this incentive program. (e) Based on years of service, level of experience, and educational achievement, experienced lateral officers may receive a starting salary at any appropriate level within the "Police Officer" classification as deemed appropriate by the City Manager on recommendation of the Chief of Police. Section 46. Full Understanding (a) The Memorandum of Agreement contains the full and entire understanding of the parties regarding the matters set forth herein. (b) It is the intent of the parties that ordinances, resolutions, rules and regulations enacted pursuant to this Memorandum of Agreement be administered and observed in good faith. (c) Nothing in this agreement shall preclude the parties from mutually agreeing to meet and confer on any subject within the scope of representation during the term of this agreement. (d) Should any of the provisions herein contained be rendered or declared invalid by reason of any existing State or Federal legislation or by reason of State Supreme Court or U. S. Supreme Court ruling, such invalidation of such part or portion of this Memorandum of Agreement shall not invalidate the remaining portions hereof, and they shall remain in full force and effect, insofar as such remaining portions are severable. (e) Prior Agreements & Side Letters: Upon Implementation of this agreement, all prior agreements and side letters become null and void. In any instance where internal department polices and/or practices are in conflict with this agreement, this agreement shall take precedence. (f) During the term of this Memorandum of Agreement, Management may propose certain changes in the City Merit System Rules and regulations. With regard to such changes which pertain to the representation unit, the parties agree to review, and upon request, meet and confer regarding the changes. 54 Item 11: Staff Report Pg. 63 Packet Pg. 308 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, X7=2025 Section 47. Printed Agreement The City will provide copies of the Memorandum of Agreement resulting from these negotiations in booklet form to all represented employees. Section 48. Duration Except as expressly and specifically provided otherwise herein for the retroactive application of a specific provision(s), this Memorandum of Agreement shall become effective upon ratification by both parties hereto and remain in effect through June 30, 20254. 55 Item 11: Staff Report Pg. 64 Packet Pg. 309 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA Januar 1, 2023 —June 30, X7=2025 EXECUTED: FOR: PALO ALTO PEACE OFFICERS' /!VXY.I re11IIQ01 Ken Kratt Chistopher Correira Joel Hornung Joshua Salkeld Alex Afanasiev Peter Hoffmann, Rains Lucia Stern, PC FOR: CITY OF PALO ALTO Ed Shikada, City Manager Sandra Blanch, Human Resources Director Tori Anthony,Manager Employee and Labor Relations Charles Sakai, Counsel Sloan Sakai Yeung & Wong, LLP Andrew Binder, Chief of Police Maria Patino, Senior Human Resources Administrator 56 Item 11: Staff Report Pg. 65 Packet Pg. 310 of 853 Item 11 Attachment A POA Memorandum of Agreement CITY OF PALO ALTO Palo Alto Peace Officers' Association Memorandum of Agreement January 1, 2023 -June 30, 2025 Item 11: Staff Report Pg. 66 Packet Pg. 311 of 853 City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 TABLE OF CONTENTS PREAMBLE Item 11 Attachment A POA Memorandum of Agreement 1 Section 1. Recognition 1 Section 2. No Discrimination 1 Section 3. Association Security 2 Section 4. Payroll Deduction 2 Section 5. No Strikes 2 Section 6. Probationary Period 3 Section 7. Salary Provisions 4 Section 8. Night Shift Differential D Section 9. Paid Holidays 9 Section 10. Working Out of Class P 10 Section 11. Retention/Career Incentive Program (Special Compensation) 10 Section 12. Dependent Care Assistance Program 11 Section 13. Court Pay 11 Section 14. Health Plans 12 Section 15. Dental Benefits 14 Section 16. Life Insurance Benefits 15 Section 17. Effective date of Coverage for New Employees 15 Item 11: Staff Report Pg. 67 Packet Pg. 312 of 853 City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Section 18. Retirement Benefits Item 11 Attachment A POA Memorandum of Agreement 15 Section 19. Retirement Medical Plan 18 Section 20. Psychological Counseling Program 19 Section 21. Uniforms 19 Section 22. Work Schedule 9E Section 23. Overtime Pay and Compensatory Time Off 33 Section 24. Overtime Sign -U 34 Section 25. Jury Duty 35 Section 26. Vacation Accrual 36 Section 27. Use of Vacation 36 Section 28. Vacation Pay at Termination Section 29. Vacation Benefits for Deceased Employees 38 Section 30. Effect of Extended Military Leave Section 31. Sick Leave 38 Section 32. Leaves of Absence Without P 41 Section 33. Leave of Absence With Pay 42 Section 34. Reduction in Force Section 35. Agents 43 43 Section 36. Commute Incentives and Parking in Civic Center Garage 43 Section 37. Disciolinary Action and Unsatisfactory Work or Conduct 44 Item 11: Staff Report Pg. 68 Packet Pg. 313 of 853 City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Section 38. Grievance Procedure Item 11 Attachment A POA Memorandum of Agreement 46 Section 39. Bulletin Boards and Telephones 49 Section 40. Access to Association Representatives 50 Section 41. Meeting Places 50 Section 42. Voluntary Leave Program: 50 Section 43. Utilization of Reserves for Field Services Division Events 52 Section 44. Overtime Meals for Investigative Services Division 52 Section 45. Hiring Incentives 52 Section 46. Full Understandi 53 Section 47. Printed Agreement 54 Section 48. Duration Iv 54 Item 11: Staff Report Pg. 69 Packet Pg. 314 of 853 City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Item 11 Attachment A POA Memorandum of Agreement MEMORANDUM OF AGREEMENT CITY OF PALO ALTO and PALO ALTO PEACE OFFICERS' ASSOCIATION January 1, 2023- June 30, 2025 PREAMBLE This Memorandum of Agreement is pursuant to and subject to Sections 3500-3510 of the Government Code of the State of California, the Charter of the City of Palo Alto, and the City of Palo Alto Merit System Rules and Regulations. (This Memorandum of Agreement made and entered into at Palo Alto, California, by and between the City of Palo Alto, a municipal corporation (hereinafter referred to as "City") and the Palo Alto Peace Officers' Association, Incorporated, a California corporation (hereinafter referred to as "Association"), is intended to define agreements reached during the meet and confer process concerning wages, hours, working conditions, and other terms and conditions of employment for the represented group of employees. Section 1. Recognition The City recognizes the Association as the exclusive representative of an employee group consisting solely of Police Officer Trainees, Police Officers, Police Agents, and Police Sergeants who are regularly employed by the City and others who might be amended into the representation unit from time to time under existing law and the Merit System Rules and Regulations. Section 2. No Discrimination (a) The Association and the City hereby agree that there shall be no discrimination because of race, color, age, disability, sex, sexual orientation, national origin, political or religious affiliation, or any other protected classification as provided by applicable local, state or federal law. There shall be no discrimination in employment conditions or treatment of employees on the basis of membership or non -membership in the Association, or participation in the lawful activities of the Association. (b) The Association and the City hereby agree to protect the rights of all employees to exercise their free choice to join the Association and to abide by the express provisions of applicable State and local laws. Item 11: Staff Report Pg. 70 Packet Pg. 315 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Section 3. Association Secu (a) When a person is hired in any of the covered job classifications, the City shall notify that person that the Association is the recognized bargaining representative forthe employee in said Unit and give the employee a current copy of the Memorandum of Agreement. (b) If there is no disruption of work, members of the Association Board of Directors may use a reasonable amount of on -duty time without loss of pay to attend to Association business specifically related to representation of employees. Such release time must be cleared in advance bythe appropriate division managerwho is a member of management. For purposes of this section, representation shall include: (i) Meetings with represented employees or management related to a grievance or disciplinary action, including investigation and preparation time. (ii) A meeting with management related to benefits, working conditions or other terms and conditions of employment. Section 4. Payroll Deduction The City shall deduct Association membership dues and any other mutually agreed upon payroll deduction from the bi-weekly pay of member employees. The dues deduction must be authorized in writing by the employee on an authorization card acceptable to the City and the Association. The City shall remit the deducted dues to the Association as soon as possible after deduction. Section 5. No Strikes The Association, its representatives, or members, shall not engage in or cause, instigate, encourage, sanction, or condone a strike, withholding of services, concerted abuse of leave of absence provisions, work stoppage or work slowdown of any kind. No employee shall refuse to cross any picket line in the conduct of Police Department business, nor shall the Association, its representatives, or members discriminate in any way toward anyone who refuses to participate in a strike, or any of the job actions cited above. 2 Item 11: Staff Report Pg. 71 Packet Pg. 316 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Section 6. Probationary Period (a) The probationary period for new employees entering the classifications of Police Academy Trainee or Police Officer shall end 12 months following the successful completion of Police Academy training. The probationary period for lateral entry positions, where Police Academy training is waived, shall be 12 months. In the event a probationary employee is absent for a period exceeding one -hundred and twenty (120) hours during the probationary period, probation will be extended by an equivalent number of duty hours. (b) The probationary period shall be regarded as part of the testing process and shall be utilized for closely observing all aspects of the employee's qualifications, for ensuring the effective adjustment of a new employee to the position and for rejecting any probationary employee who in the opinion of management is not suitable to attain permanent status. (c) During the probationary period a new employee may be terminated at any time by the appointing authority without cause. The existence of cause for termination shall not be arbitrable. Probationary employees shall not be terminated for reasons that violate Section 2. No Discrimination, of this Agreement, or for reasons that are unconstitutional or unlawful. (d) Probationary Period for New Supervisors (1) The probationary period for newly promoted Agents and Sergeants shall end 12 months from the effective date of the promotion, excluding time off due to any unscheduled absence or leave. (2) The probationary period shall be regarded as part of the testing process and shall be utilized for closely observing all aspects of the employee's qualifications, for ensuring the effective adjustment of a newly promoted employee to the position and for rejecting any newly promoted probationary employee who in the opinion of management is not suitable to attain permanent status in the newly promoted rank. 3 Item 11: Staff Report Pg. 72 Packet Pg. 317 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (3) During the 12 month promotional probationary period the newly promoted employee shall be evaluated by his/her direct supervisor on a quarterly basis. (4) Any on -going and/or significant perceived deficiencies in the probationary employee's work performance or supervisory aptitude shall be promptly communicated to the employee. When appropriate, the employee shall be provided with additional training and given opportunities to demonstrate their performance in response to the training. Such perceived deficiencies, any related training, and performance improvement or lack of response to training shall be documented by the employee's supervisor and recorded in the employee's quarterly evaluation for the quarter(s) in which the matter was addressed. (5) During the promotional probationary period, a newly promoted employee may be demoted to their previous rank at any time by the appointing authority if the employee demonstrates a lack of suitability for the newly promoted position. The demotion shall be based upon deficiencies in the performance or aptitude that have been addressed and documented as outlined in subsection (5). The existence of cause for demotion shall not be arbitrable. Promotional probationary employees shall; not be demoted for reasons that violate Section 2 of the Memorandum of Agreement, No Discrimination; or for reasons that are unconstitutional or unlawful. (6) In the event that management elects to demote an employee during his or her probationary period, pursuant to subsection (6), the affected employee may request a hearing with the Chief of Police. The hearing shall be held promptly and prior to the intended effective date of demotion, so as to afford the employee with a meaningful and timely opportunity to respond to the stated reason(s) for demotion. Section 7. Salary Provisions (a) Market Adjustment: Effective the first full pay period including City Council Adoption, salary ranges of all bargaining unit classifications will be increased by five percent (5.0%), which is sufficient to bring them to the top quartile of market median as determined by the City's market study. (b) General Salary Increase: Effective the first full pay period following July 1, 2023, salary ranges of all represented classifications will be increased by four percent (4.0%). 2 Item 11: Staff Report Pg. 73 Packet Pg. 318 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (c) General Salary Increase. Effective the first full pay period folllowing July 1, 2024 salary ranges of all represented classifications will be increased by four percent (4.0%.) (d) Flexible Compensation: Effective the first full pay period following City Council Adoption, and in lieu of an increase to the City contribution towards medical premiums, each represented classification will have their monthly income increased by $100. (e) Flexible Compensation: Effective the first full pay period following January 1, 2024, and in lieu of an increase to the City contribution towards medical premiums, each represented classification will have their monthly income increased by an additional $100 (total of $200). (f) Total Compensation and Survey Database. Management and the Union have agreed to a compensation survey database structure. Survey Cities include: Alameda, Berkeley, Concord, Fremont, Hayward, Milpitas, Mountain View, Redwood City, San Leandro, San Mateo, Santa Clara, Vallejo, and Walnut Creek. Compensation Criteria includes: top step salary, maximum longevity, maximum education/POST, uniform allowance, holiday pay, deferred compensation, employee pick up of employer pension costs (Negative EPMC), and maximum City paid benefits (medical, dental, vision, life insurance, LTD, and EAP). The database is intended to provide one source of information concerning how the compensation paid to employees in bargaining unit job classifications compares to that paid by other employers. (g) Salary Steps & Ranges (Eligibility) New officers attending the basic police academy will be compensated at the "Police Trainee" level. Academy Graduates and Lateral Officers with less than two years experience will be compensated at the "Police Officer" "Step 1" Level or higher. Jr. First Class Exam: Officers become eligible to take the exam anytime after they complete the Field Training Program. However, the pay increase will not become effective until they have successfully completed the test and have been with the department for a year from the academy graduation (Laterals a year from hire date). For employees hired prior to July 1, 2018, the pay increase for Jr. First Class is compensated at the "Police Officer" "Step 4" level (Approximate 5% Increase). For employees hired on or after July 1, 2018, the pay increase for Jr. First Class is one step on the salary schedule (approximate 5% increase), no higher than Step 4. 5 Item 11: Staff Report Pg. 74 Packet Pg. 319 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 First Class Exam: Officers become eligible to take the exam anytime after they have successfully completed the Jr. First Class Exam. However, the pay increase will not take effect until one year from the date of the merit increase for the Jr. First Class exam. (Lateral officers' pay increase may be effective one year from the date of hire) For employees hired prior to July 1, 2018, the pay increase for First Class is compensated at the "Police Officer" "Step 5" Level (Approximate 5% Increase). For employees hired on or after July 1, 2018, the pay increase for First Class is one step on the salary schedule (approximate 5% increase), no higher than Step 5. Effective the first full pay period following adoption of this MOA by City Council, the City will Implement a new step 6 following the same percentage difference as steps 1-5. Employees with one (1) year or more of service with the City of Palo Alto at Step 5 will be moved to Step 6. (h) POST Certificate/Incentives Basic Post: Officers become eligible upon completion of their probationary period. The certificate must be obtained within 18 months of hire date. (No Salary Increase) Intermediate POST: Employees that qualify for the Intermediate POST certificate will be compensated at the corresponding salary schedule (e.g., "Police Officer/Inter"), effective thefirstfull pay period after the employee provides proof of submission of the required paperwork to POST (approximate 5% increase). Advanced POST: Employees that qualify for the Advanced POST certificate will be compensated at the corresponding salary schedule (e.g., "Police Officer/Adv"), effective thefirstfull pay period afterthe employee provides proof of submission of the required paperwork to POST (approximate 2.5% increase). Employees are responsible for contacting Personnel & Training in order to arrange taking tests and application for POST certificates. (i) Special assignment premium pay Effective with the pay period including July 1, 2001, biweekly premium pay for employees assigned to the indicated specialties will be as follows: Field Training Premium: 5% of base pay per pay period. 6 Item 11: Staff Report Pg. 75 Packet Pg. 320 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Applies to management -assigned Officers and Agents and Traffic Team members during each pay period in which they provide training to police recruits, Community Service Officers or Level II reserve officers who are working on their Level I certificate. Applies to management -assigned FTO Sergeants during each pay period in which they supervise assigned FTO Officers or Agents who are actively training police recruits, Community Service Officers or Level II reserve officers who are working on their Level I certificate. The parties agree that, for the period beginning the first full pay period following the City Council adoption of the agreement and ending the last full pay period in June 2025, Officers, Agents and Traffic Team members who management designates as Field Training Officers and Sergeants designated as FTO Sergeants will Receive the 5% FTO premium for all pay periods, without regard to whether they are assigned a police recruit during that pay period. The Parties also agree to revisit this section to determine whether to continue this program prior to June 30, 2025. Traffic Premium: 5% of base pay per pay period. Effective the first full pay period following City Council adoption of the MOA in 2023, Officers, Agents and Sergeants who management assigns to routinely and consistently operate or patrol on a motorcycle. K-9 Program Premium: 5% of base pay per pay period. Effective January 1, 2008, K-9 Officers/Agents shall receive 5% of base pay per pay period to compensate for the time spent by the K-9 Officer/Agent outside regularly scheduled work hours to feed, groom, house, exercise, attend to the medical and dental needs of and otherwise maintain the dog. Bilingual Premium: 5% of base pay per pay period. Applies to representation unit employees certified by management as proficient in other languages as outlined below. (i) Approved Languages Spanish, Chinese (Mandarin and Cantonese), Japanese, Tagalog, Korean, Vietnamese, Russian, American Sign Language, and such other languages as determined by management. 7 Item 11: Staff Report Pg. 76 Packet Pg. 321 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (ii) Proficiency Requirements Officers, Agents, and Sergeants who pass a basic "first responder" proficiency test administered by a professional linguist will be eligible for bilingual pay. This proficiency test will be a one time test to ensure the candidate has the ability to verbally communicate (with the exception of American Sign Language) as a first responder in the selected Language. First responder proficiency will include, but is not limited to, the ability to take basic crime and accident reports; issue a citation and explain the court process; complete a field interview card; give directions; give a Miranda admonition; and generally be able to communicate with a non-English speaking person in need of basic police services. Study material will be provided by the City to all employees to assist in test preparation. (iii) Testing Process In order to best accommodate the wide range of languages, proficiency testing will be conducted by professional linguists outside the Police Department that have been agreed upon by the Association and Management. A basic first responder proficiency exam has been developed based upon the needs of the organization. The City will pay for the initial test for each employee. Employees who do not pass the initial test may retest as many times as necessary. However, subsequent tests will be at the employee's expense. Section 8. Night Shift Differential (a) Night shift differential shall be paid at the rate of 5% to all FSD personnel for all hours worked between 6:00 p.m. and 8:00 a.m. (b) All employees covered under Section 23(d) working a regular shift between 7:00 a.m. and 7:00 p.m. shall receive 5% night shift premium for hours worked between 7:00 p.m. and 7:00 a.m. Vacation and administrative leave pay for employees who regularly work night shifts shall include appropriate night shift premiums, relating to night shift hours regularly worked. Item 11: Staff Report Pg. 77 Packet Pg. 322 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Shift adjustment hours for employees who regularly work the 4-11 work schedule shall include the appropriate night shift premium based on the percentage of usual night shift hours worked to regular hours. Section 9. Paid Holidays (a) All represented employees on leave of absence without pay shall not receive in -lieu holiday accrual during such leave, or any compensation for holidays occurring during such leave. (b) Employees shall not receive paid holidays, but in lieu thereof shall receive 3.462 hours straight time pay each full pay period that they are in paid status, to a maximum payment of ninety (90) hours per year. Effective the first full pay period following City Council adoption of the MOU in 2023, this amount shall be increased to 3.846 hours straight time pay each pay period that they are in paid status, to a maximum payment of one hundred (100) hours per year. Holiday hours will be pro -rated for employees in paid status a portion of a pay period. Hours under this provision will be paid each pay period while in a paid status. Employees working non -field services assignments shall be eligible to use accrued paid leave time balances for any of the following recognized City holidays subject to management scheduling approval: January 1 Third Monday in January Third Monday in February Last Monday in May July 4 First Monday in September Second Monday in October November 11 Thanksgiving Day Day after Thanksgiving Day December 25 Either December 24 or December 31, A Day of Reflection in recognition of a day of the employee's choosing, including Juneteenth Freedom Day (June 19) or Cesar Chavez/Dolores Huerta Day (March 31) 9 Item 11: Staff Report Pg. 78 Packet Pg. 323 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1,2023 —June 30, 2025 Section 10. Working Out of Class Pay Officers, Agents and Sergeants working out of class for a period of four or more consecutiveshifts) shall be compensated with the following premium pay; Officers and Agents working as an Acting Sergeant: 7% of base pay for all shifts Sergeants working as an Acting Lieutenant: 10% of base pay for all shifts Agents, and Sergeants fulfilling the role of an Acting Sergeant and/or Acting Lieutenant for individual shifts and/or a number of hours within a shift, shall not receive additional compensation. Periodically working in this capacity shall be deemed a basic duty within an employee's job description. In accordance with Government Code 20480, an employee assigned to work in an out -of -class appointment may not exceed 960 hours worked in the appointment within a fiscal year if the employee is appointed to an upgraded position or higher classification that is vacant during recruitment for a permanent appointment. This limitation does not apply to a position that is temporarily available due to a leave of absence. Section 11. Retention/Career Incentive Program (Special Compensation) (a) Retention/Career Incentive Program On July 1, 2007 the City will initiate a Retention/Career Incentive Program. It is recognized that hiring, training, and retaining qualified law enforcement personnel is becoming increasingly difficult, time consuming, and very expensive. This program is designed to provide greater incentives for hiring new employees, retaining long-term employees, and attracting quality lateral candidates from other law enforcement agencies. This program will provide special compensation in the form of premium pay at various levels as employees reach different career milestones. Both parties acknowledge that in the 2007 negotiations, the cost of the program was partially offset through salary and/or benefit reductions agreed to elsewhere in this Memorandum of Agreement. 10 Item 11: Staff Report Pg. 79 Packet Pg. 324 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 All employees with more than 10 years of service shall receive special compensation in the form of retention pay at 3% of straight time base pay. All employees with more than 15 years service shall receive special compensation in the form of retention pay at 6% of straight time base pay. Maximum under this provision is 6%. As an incentive to recruit and hire lateral law enforcement personnel from other agencies, the following shall apply. At the Chiefs discretion, up to 5 years of full time law enforcement service may be counted towards the years of service outlined above. Special Compensation/Retention Pay outlined in the Retention/Career Incentive Program shall be deemed PERSable for the purpose of income and retirement however will not be a factor when calculating "MOU" (non-FLSA) overtime compensation. Section 12. Dependent Care Assistance Program and Medical Flexible Spending Accounts. The City will provide a Dependent Care Assistance Program (DCAP) and Medical Flexible Spending Account (FSA) for employees according to the provisions of the Federal Economic Recovery Act of 1981, Code Sections 125 and 129. With the exception of matters within the City's sole control (e.g., establishment of the FSA), all matters related to the FSA shall be excluded from the MOA grievance procedure. Disputes regarding the administration of the plan shall be subject to the dispute resolution procedure provided by the plan document. The FSA will be available to representation unit employees effective January 1, 2019, and remain in effect subject to a reasonable minimum participation level and availability of third -party administrative services at a reasonable cost. Section 13. Court Pay Sworn Police Personnel appearing in court or in an administrative forum in the course and scope of their normal duties will be compensated according to the following: Period Rate Minimum (a) Scheduled day off. Time and one-half 4 hours 11 Item 11: Staff Report Pg. 80 Packet Pg. 325 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (b) During scheduled shift Straight time during shift. None or immediately preceding Time and one-half for period or following a shift before or after scheduled shift. (c) Appearance on a Time and one-half 3 hours scheduled work day by employees of Team #3 (prior to 12 p.m.) (d) Appearance on a Time and one-half 3 hours scheduled work day by employees of Team #4 or Team #5 (e) All other court Time and one- half 3 hours appearances Section 14. Health Plans (a) PEMHCA Health Plan During the term of this contract, the maximum City contribution towards medical premiums for eligible full time employees per employee category shall be up to a maximum of the following for any plan: Medical Premium PEMHCA Total Maximum City Category Contribution* Contirbution (inclusive of PEMHCA contribution) effective first month following City Council Adoption Employee Only $151.00 $871 Employee plus one $151.00 $1742 Employee Family $151.00 $2260 12 Item 11: Staff Report Pg. 81 Packet Pg. 326 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 The City's total maximum contribution towards medical premiums for eligible part time employees shall be prorated based on the number of hours per week the part-time employee is assigned to work. *PEMHCA minimum changes annually. Any increases to the PEMHCA minimum during the term of this contract will result in a corresponding decrease to the amount of the additional City contribution, so that the total maximum City contribution never exceeds the amount listed in the "Total Maximum City Contribution" columns above. If the State of California or federal government requires the City to participate and contribute toward coverage under any medical plan outside of PEMHCA including but not limited to the Affordable Care Act, the City's total liability for enrolled employees and retirees and their eligible family members shall not exceed what the City would have paid toward PEMHCA coverage in the absence of such state or federal plan. The parties will meet and confer over the impact of such change on matters within the scope of representation before implementing any change. (b) Vision Care The City will offer vision care coverage for employees and dependents. Coverage is equivalent to $20 deductible Plan A under the Vision Service Plan, with monthly premiums paid by the employer. Dependents will include domestic partners, as defined under Section 14 (c). (c) Active Employee Domestic Partners Active employee domestic partners whose domestic partnership is registered with the State of California may add their domestic partner as a dependent to their elected health plan coverage if the domestic partnership is registered with the Secretary of State. Active employee domestic partners whose domestic partnership is not registered with the State, but who meet the requirements of the City of Palo Alto Declaration of Domestic Partnership, and are registered with the Human Resources Department, will be eligible for a stipend of two hundred eighty four dollars ($284.00) per month toward the cost of an individual health plan. Evidence of premium payment will be required with request for stipend. (d) Alternative Medical Benefit Program 13 Item 11: Staff Report Pg. 82 Packet Pg. 327 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 If a regular employee and/or the employee's dependent(s) are eligible for and elect to receive medical insurance through any other non -City of Palo Alto employer -sponsored or association -sponsored medical plan, the Employee may choose to waive his/her rightto the City of Palo Alto's medical insurance and receive cash payments in the amount of two hundred eighty four dollars ($284) for each month City coverage is waived. Examples of waivers eligible for this payment are: • Employee waives all applicable City medical coverage; or • Employee is eligible to enroll his or her spouse or domestic partner and waives medical coverage for the spouse or domestic partner; or • Employee has additional eligible dependents and waives family -level medical coverage. Participation must result in a health insurance cost savings to the City and payments per employee shall not exceed a total of two hundred eighty four dollars ($284.00) per month. To participate in the program the employee and dependents must be eligible for coverage under PEMHCA medical plans, complete a waiver of medical coverage form, and provide proof of eligible alternative medical coverage. Payments will be made in the employee's paycheck beginning the first month following the employee's completion of the waiver form. Payments are subject to state and federal taxes and are not considered earnings under PERS law. Employees are responsible for notifyingthe City of any change in status affecting eligibility for this program (for example, life changes affecting dependent's eligibility for medical coverage through the employee) and will be responsible for repayment of amounts paid by the City contrary to the terms of this program due to the employee's failure to notify the City of a change in status. (e) Dual Coverage When a City employee is married to another City employee each shall be covered only once (as an individual or as a spouse of the other City employee, but not both) and dependent children, if any, shall be covered by only one spouse Section 15. Dental Benefits (a) The City will maintain the present level of benefits on the City -sponsored dental program for current employees and their dependents, except that the maximum benefits per calendar 14 Item 11: Staff Report Pg. 83 Packet Pg. 328 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 year shall be $2,000 effective in 1988. Dental Coverage shall include composite (tooth colored) fillings for all teeth. (b) The City provides a 50% of reasonable charges, $2,000 lifetime maximum orthodontic benefit for representation unit employees and their dependents. (c) Dependents will include domestic partner, as defined under Section 14 (c). (d) Dental implants in conjunction with one or more missing natural teeth, and removal of dental implants will be covered as a Major Dental Service at 50% usual, customary and reasonable (UCR). Section 16. Life Insurance Benefits The City agrees to continue the basic life insurance plan as currently in effect for the term of this Memorandum of Agreement. Section 17. Effective date of Coverage for New Employees For newly hired regular employees coverage begins on the first day of the month following date of hire for the health plan, dental plan, vision care plan, and life insurance plans if these benefits are elected. Section 18. Retirement Benefits (a) Safety Pension Group A: "3% at 50" Safety Retirement The City will continue the present benefits under the Public Employees' Retirement System (PERS) "3 percent at 50" (3% @ 50) Retirement Formula per California Government Code §21362.2 for employees hired before the effective date of the "3 percent at 55" (3% @ 55) formula for new hires as described herein. The final year compensation for employees hired under the 3% at 50 formula will continue to be the "single highest year" or the highest average annual compensation earnable by the member during one (1) year of employment immediately preceding retirement or the one-year period otherwise designated by the member (Government Code 20042). Current employees continued to be covered under Government Code 20692, Employer Paid Member Contribution, to the extent there is a City paid member contribution in the final year. (b) Safety Pension Group B: 3% at 55 Safety Retirement 15 Item 11: Staff Report Pg. 84 Packet Pg. 329 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Effective December 7, 2012, the City amended its contract with CalPERS to provide employees hired on or after that date who are not "new members" of CaIPERS as defined in the Public Employees' Pension reform act (often referred to as "Classic" CaIPERS members) with the CaIPERS retirement formula three percent of final salary at age 55 (3% at 55), with the final salary determination for such employees of "three highest consecutive years" based on the highest average annual compensation earnable by the member during three (3) consecutive years of employment immediately preceding retirement or the three year period otherwise designated by the member (Government Code Section 20037). This new tier also eliminated Section 20692, Employer Paid Member Contribution. (c) Safety Pension Group C: 2.7% at Age 57 Safety Retirement Employees hired on or after January 1, 2013 meeting the definition of "new member" under the Public Employees' Pension Reform Act (Gov't. Codes. 7522 et seq.) shall be subjectto all of the provisions of that law, including but not limited to the two point seven percent at age 57 (2.7%@57) retirement formula with a three year final compensation period. (d) Employee Share of PERS Contribution Employees in all sworn represented classes in Pension Groups A and B described above will make a 12% PERS member contributions by payroll deduction. Employees in all sworn represented classes in Pension Group C described above shall pay the employee contribution required by the Public Employees' Pension Reform Act, currently calculated at fifty percent (50%) of the normal cost, plus an additional 3%. Trainees will pay the same employee contribution as miscellaneous members while attending Basic Academy (see section (g) below). The City will continue to provide for member contributions to be made as allowed underthe provisions of IRS Code §414(h)(2). (e) Additional Employee PERS Contributions • Effective the first full pay period following July 1, 2019 or as soon as administratively possible, all employees regardless of pension formula in this unit shall contribute an additional 0.5% to the Employer share of pension for a total of 3.5% contribution toward 16 Item 11: Staff Report Pg. 85 Packet Pg. 330 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 the Employer share of pension. (Total Employee contribution will be 12.5% for Classic; 50% of Normal Cost plus 3.5% for PEPRA.) • Additional contributions will coincide with the City amending its contract with CaIPERS to reflect these changes. However, should CaIPERS delay or the Association fail to approve the CaIPERS amendment required to incorporate the additional 0.5% contribution, the City may implement the additional 0.5% effective July 1, 2019 without a contract amendment., and additional employee PERS contributions under CaIPERS 20516 will be provided on a pre-tax basis to the extent allowable by law. (f) 457 Deferred Compensation Plan Effective the first full pay period following July 1, 2019 all employees who are classified as "New Members" by PERS or "Group C' by the MOAwill receive $50 per month contributed into their457 deferred compensation plan. Eligible employees must have an active 457 plan in order to receive City contirbutions. 1959 Survivor Benefit The City will continue to provide the basic level (Level 1) of 1959 Survivor Benefit to eligible employees in accordance with California Government Code §21571. (g) Military Service Credit The City's contract with the Public Employees' Retirement System provides for Section 20930.3, Military Service Credit as Public Service. (h) Retirement Privileges All retired employees and spouses of deceased employees shall have residential privileges at City libraries, refuse disposal area, golf course, and swimming pools. (i) PERS Status While in Basic Academy. While an employee is attending Basic Academy, he or she shall participate in the City's PERS Miscellaneous Employee retirement plan with the same employee and employer contribution rates as applies to Miscellaneous City employees represented by SEIU (classified unit). When the employee successfully completes Basic Academy and is sworn in by the Police Chief, he or she shall prospectively participate in the PERS Safety Employee retirement plan. 17 Item 11: Staff Report Pg. 86 Packet Pg. 331 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Section 19. Retirement Medical Plan (a) Retiree Medical Coverage - Employees hired before January 1, 2006 who have not voluntarily elected to participate in the Retirement Healthcare Benefits provided in Government Code section 22893: Monthly City -paid premium contributions for a retiree -selected PEMHCAoptional plan will be made in accordance with the Public Employees' Medical and Hospital Care Act Resolution for employees who retire on or before December 31, 2007. Effective March 1, 2009, for an employee retiring on or after that date, the City will pay up to the monthly medical premium for the second most expensive plan among the existing array of plans during the Agreement term. Effective April 1, 2015, for an employee retiring on or after that date, the City contribution shall be the same contribution amount it makes for active City employees. The parties mutually agree that the benefits provided in this paragraph for employees retiring on or after April 1, 2015 will fluctuate from time to time based on the City's contributions to health care for active employees. Accordingly, Association members who retire on or after April 1, 2015 and have not elected to participate in the Retirement Healthcare Benefits provided in Government Code section 22893, do not maintain a vested interest in any particular contribution by the City above the amount required under the 19:11A1120161-111 (b) Retiree Medical Coverage - Employees who voluntarily elect to participate in Government Code section 22893, and all Employees hired on or after January 1. 2006: The CaIPERS vesting schedule set forth in California Government Code § 22893 will apply to all Association members hired on or after January 1, 2006, and employees hired prior to January 1, 2006 who voluntarily elect to participate in the Retirement Healthcare Benefits provided in Government Code § 22893. Under this law, an employee is eligible for 50% of the specified employer health premium contribution after ten (10) years of service credit, provided at least five (5) of those years were performed with the City of Palo Alto. After ten (10) years of service credit, each additional year of service credit will increase the employer contribution percentage by 5% until, at twenty (20) years' service credit, the employee will be eligible upon retirement for 100% of the specified employer contribution. However, the maximum contribution for family members will be 90% of the specified employer contribution. Notwithstanding any other term of this section, the City of Palo Alto's health premium contribution for employees hired on or after January 1, 2006, and employees who voluntarily elect to participate in 18 Item 11: Staff Report Pg. 87 Packet Pg. 332 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Retirement Healthcare Benefits provided by Government Code § 22893, will be the minimum contribution set by CaIPERS under California Government Code § 22893 based on a weighted average of available health plan premiums. Section 20. Psychological Counseling Program The psychological counseling program currently in effect shall be continued. The program shall provide 24 -hour emergency counseling by independent professional consultants. Section 21. Uniforms (a) The City will supply complete uniforms to all sworn personnel. All uniform items are the property of the City. One complete uniform consists of: (1) three pair of trousers, (2) three short -sleeved shirts with patches and zippers if desired, (3) three long-sleeved shirts with patches and zippers if desired, (4) three cotton or two synthetic fiber turtleneck shirts, (5) hat, (6) duty jacket with patches, (7) necktie, and (8) rain gear. The value of the purchase, rental and/or maintenance of the required uniforms shall be reported as special compensation to the extent legally permissible, pursuant to Title 2 OCR, Section 571(a)(5) as Uniform Allowance. Based upon existing uniform standards and the City's cost experience, the value of this benefit shall be reported as $42.31 per pay period. (b) At the time of initial employment, every sworn employee will be issued one complete uniform. Uniform items will be replaced on an as -needed basis subject to verification by management. (c) The City shall provide uniform cleaning for sworn representation unit personnel. (d) Personnel are accountable for all uniform items issued to them. If a particular item is lost or damaged due to employee negligence, the employee will be required to reimburse the City for value of the item(s) lost or damaged. (e) The City shall reimburse employees for the full cost of job -related safety boots up to $400 per fiscal year. The City will make the reimbursement only upon proof that the previous boots have become unserviceable due to wear or damage and upon verification of such purchase by the employee. (Job -related safety boots shall mean well -constructed, high topped boots that provide full ankle and foot support, which are selected from list agreed to 19 Item 11: Staff Report Pg. 88 Packet Pg. 333 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1,2023 —June 30, 2025 by Management and the Association.) All Department -provided safety boots shall be purchased through this program. Employees are responsible for the full cost of any low -top, black shoes that are worn with the uniform. Section 22. Work Schedule (a) Field Services Division 4/11 Schedule The patrol schedule will have two sides, "A -Side" and "B -Side." There will be ten patrol teams each supervised by a Sergeant or Acting Sergeant under the management of patrol lieutenants. Five Patrol teams will work an "A" schedule and five Patrol teams will work a "B" schedule. Patrol officers, agents, and sergeants will report for duty promptly at the designatedtimes for each team. Patrol team schedules are as follows. Patrol Division Team Schedules A -Side B -Side Team 1A 0500 to 1600 Team 1B 0500 to 1600 Team 2A 0700 to 1800 Team 3A 1400 to 0100 Team 4A 1800 to 0500 Team 5A 2000 to 0700 Team 2B 0700 to 1800 Team 3B 1400 to 0100 Team 4B 1800 to 0500 Team 5B 2000 to 0700 Team's 2A, 3A, and 4A are designated as field training teams. (1) 4/11 Work Schedule The work schedule will be based on an eight (8) day cycle with each employee working four 20 Item 11: Staff Report Pg. 89 Packet Pg. 334 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (4) consecutive days on and having four (4) consecutive days off. The eight (8) day cycle will advance the employee's workdays and days off within the calendar week one day every cycle. The overall cycle repeats itself every eight (8) weeks. Over the course of a year (26 pay periods) each employee works 182 eleven (11) hour regular patrol shifts totaling 2002 hours, 78 -hours short of the required fulltime equivalent work year of 2080 hours. In the Patrol Division and with the approval of the Patrol Captain, a maximum of two (2) paired "fixed days" schedules (4 Employees) may be established, atthe employees' request. The regularly scheduled hours of work for such a position must cover the days off of the position with which it is paired. For example, one position could have Sunday, Monday, and Tuesday off while the other could have Thursday, Friday, and Saturday off. It shall be the responsibility of employees interested in a paired fixed day schedule to identify another employee who is willing to participate in the paired arrangement. If either employee or the Department desires to terminate a paired schedule once it is in effect, the employee or Department, as applicable, must give the other affected parties to the arrangement at least one (1) full pay period advance written notice. Resumption of the employees' participation in the normal rotation shall begin on the first day of the second full pay period following the date notice is delivered to the other parties. Employees on a fixed schedule will be required to attend the designated CPT (Continued Professional Training) training days either on their regularly scheduled workday or on a day off. If they attend training on their regularly scheduled day off, they will be compensated by receiving an adjusted day off within the same pay period. Employees requesting a schedule different from the rotating 4/11 must submit their request in writing prior to the team selection process. The requests will only be considered on an extreme hardship basis The following hours and minimum staffing levels will be observed on both sides of the Patrol Division. During team overlaps, the combined staffing levels of the teams will serve to meet minimum staffing levels. 0700-2400 hours 1 Lieutenant/Sergeant 1 Sergeant/Agent 6 Officers/Agents 0001-0300hours 1 Lieutenant/Sergeant 21 Watch Commander Supervisor Watch Commander Item 11: Staff Report Pg. 90 Packet Pg. 335 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 0300- 0700 hours 1 Sergeant/Agent 5 Officers/Agents 1 Sergeant 5 Officers/Agents Supervisor Supervisor Under routine circumstances, personnel will be able to receive time off as long as minimum staffing numbers remain available for duty. Management may deny time off to maintain staffing greater than the minimum numbers outlined above. It's anticipated this will only occur in special situations where greater staffing is needed. (2) Designated CPT Training Days within the 4/11 Schedule: The 4/11 Schedule will have designated CPT training days and flexible training hours to make up the seventy-eight (78) hours necessary to complete a full work year. A training bank will be created for each employee on the 4/11 Schedule to track and monitor the use and balance of the 78 -hours. The training bank and its use are outlined in the next section. For CPT training days which require employees to travel outside the City of Palo Alto, an additional two (2) hours of training bank time will be made available to account for all travel time related to attendance at training. The Division Captain may authorize additional time on a case -by -case basis. Management will determine the number of designated CPT training days and stagger them throughout the year in order to avoid overtime insofar as possible. Designated CPT training days will be scheduled prior to the beginning of each shift year. Unless otherwise determined by the Department, there will be five (5) designated CPT training days each year. These training days will vary in duration but will in most cases be approximately eight (8) to ten (10) hours in duration. The exact number of designated CPT training days, their duration in hours, and the remaining flexible training bank time will be determined prior to shift change and vacation selection. If it's anticipated that the number of training days will vary in any given year, Management will notify and, on request, meet with PAPOA to consider any concerns the Association may have. Patrol personnel will not be permitted to take vacation on any one of these pre -designated CPT training days. The Division Captain may authorize an exception based on compelling circumstances. 22 Item 11: Staff Report Pg. 91 Packet Pg. 336 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 The course content and training provided on the designated CPT training days can vary from yearto yearto meet current and changing training needs. It will be the responsibility of the Personnel and Training Division to schedule and coordinate the training on designated CPT training days. Training days may be scheduled during daytime and/or nighttime hours to accommodate training needs. Sworn employees not on the 4/11 Schedule will be required to attend designated C.P.T. training days. Each of the training days will be broken into two (2) single day sessions for Patrol (A side and B side). It is anticipated that approximately fifty percent (50%) of the non -4/11 employees will attend one (1) of the two (2) days during each of the training cycles. If the nature and/or complexity of the training does not allow for a larger groups, multiple sessions can be scheduled on additional training days. (3) Flexible Training Hours This schedule results in seventy-eightJ781 hours that will be made up during the year through designated CPT training days and flexible training time. It is anticipated that approximately fifty (50) hours will be set aside each year for designated CPT training days (exact number to be determined each year). Once the hours set aside for designated CPT training days is established, the remaining hours shall be used for flexible training as follows. Employees on the 4/11 Schedule attending training on a day off or outside their normal shift shall use their available Flexible Training Bank hours (Non -CPT Hours) prior to using overtime. All Flexible Training Bank hours must be used prior to earning overtime. The only limitation on the use of these training hours is that no employee can exceed the one hundred seventy-one (171) hour FLSA limit in any twenty-eight (28) day cycle. The combination of regular work shifts, designated CPTtraining days, and flexible training time cannot exceed one hundred seventy-one (1711 hours in any FLSA Cycle. Any hours worked over one hundred seventy-one (171) in a twenty-eight (28) day cycle are considered premiums hours and must therefore be paid at the overtime rate. The following is a list of some of the forms of training that could use hours from the bank; SWAT DRO Range Masters Quarterly Shoots FTO Meetings K-9 Sergeant's meetings FTO School 11550 School 23 Item 11: Staff Report Pg. 92 Packet Pg. 337 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Radar School Supervisor school All other Training If an employee doesn't use his or her flexible training hours during the year, he or she will be required to make up the difference by either working extra shifts, partial shifts or by using vacation, compensatory time off, and/or holiday time from one of their banks at the end of each fiscal year. The Watch Commander and Supervisor will work with employees to schedule extra shifts or use vacation, holiday or compensatory time off balances. These hours are hours the employee is being compensated for during the normal twenty-six (26) pay periods. The employee must work the hours on a straight time basis or use vacation, holidays or compensatory time off for the compensation received throughout the year. (4) Other Training (not covered by the flexible training bank) The 4/11 Schedule significantly impacts designated CPT training days, shift training, and to some extent training compensated under the flexible training hours. The following guidelines should be followed when attending training not covered by the flexible training hours. All training bank hours, adjusted time off associated with training, and/or overtime associated to training shall be approved in advance by the employee's watch commander or supervisor. One full day of The employee will either receive overtime for the number training on a day off. of hours at training or adjustment for one patrol shift. Adjustments will be documented in the City timekeeping system. One full day of The employee will be adjusted off their patrol shift for the training on a day on. day. Adjustments will be documented in the City timekeeping system. More than one day, For each full day of training, the employee will be adjusted but less than a off one patrol shift. Adjustments will be documented in week. the City timekeeping system Partial day of Overtime or adjustment for the number of hours actually training on a day off. in training. Adjustments will be documented in the City timekeeping system. 24 Item 11: Staff Report Pg. 93 Packet Pg. 338 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1,2023 —June 30, 2025 Partial day of training on day on. The employee will be adjusted from duty for the time of the training and be expected to work the remainder of their shift. Adjustments will be documented in the City timekeeping system. A four (4) or five (5) Whenever possible, and depending upon where the day (week) training employee is in their twenty-eight (28) day cycle, the session that doesn't employee will be adjusted off the patrol schedule when exceed forty-four attending four or five day training sessions. The employee (44) hours. will be adjusted from four (4) eleven (11) hour shifts as compensation for attending the course. The four (4) adjusted days will be as close to the days the employee attended training as possible. Employees will not receive overtime under this situation unless the total time training exceeds forty-four (44) hours. Adjustments will be noted in the comment section of the timekeeping system. (5) Assignments of Sworn Personnel on the 4/11 Schedule Each year assignments are made for management staff for the coming fiscal year. Subsequent to those assignments, officers, agents, and sergeants apply for specialty positions. At the conclusion of those specialty selections, the Patrol Team Selection process begins. Each year, the following process will be used for patrol team selection. Field Services Division Shift Assignment Process: Field Services sergeants, agents, and officers will select their work team based on the following criteria. a. Sergeants, in order of seniority, shall select one of the ten patrol teams. Sergeants may select any open team with the exception of those teams designated as Field Training teams. FTO Sergeants, in order of seniority, will select one of the designated FTO teams. b. Field Training Officers/Agents, in order of seniority, shall select one of the slots open and designated as FTO slots on one of the three FTO teams. The following teams have been pre -designated as training teams: Team 2A, Team 3A, and Team 4A. 25 Item 11: Staff Report Pg. 94 Packet Pg. 339 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1,2023 —June 30, 2025 c. K-9 Officers/Agents— K-9 officers/agents will generally select one of the night shift teams: Teams 4 and 5. Selections will be based on rank and seniority. Only one K-9 will be allowed per team and K -9's will be evenly split between the two sides Any exception to these assignments must be requested and approved by the Field Services Coordinator prior to the start of the selection process. Agents, in order of seniority, shall select any of the open agent's slots remaining on any of the patrol teams. A minimum of three (3) agents will be assigned to the A - Side and a minimum of three (3) agents will be assigned to the B -Side. If a greater number of agents are assigned to patrol, management will evenly designate agent's slots insofar as possible to as many of the patrol teams as possible with the goal being to have one agent on each patrol team. Officers, in order of seniority, shall select any remaining slot available on any of the patrol teams. Probationary Officers - May be assigned to teams at the discretion of the Field Services Division Coordinator. These assignments will be made based on the developmental needs of the new employee, the staffing needs of the organization, and in a manner that minimizes the loss of prime bidding slots for more senior officers/ agents. Additional Team Selection Guidelines Prior to the selection process, management shall determine the number of agents, and officers assigned to each team. Additionally, management will determine which teams are available for selection by K-9 Officers/Agents. Field Training Officers/Agents, Field Training Sergeants, and probationary employees shall be subject to administrative assignment. In the spring of each year, all employees participating in the patrol team selection process will receive a schedule identifying available slots, the process for team selection, and a date and time for the employee to make their selection Team Selection Reservations — Once Officers/Agents/Sergeants select a team, they will be guaranteed that team even if they are unable to work that team at the start of the shift year due to special assignment, internship, leave of absence, disability, illness etc. 26 Item 11: Staff Report Pg. 95 Packet Pg. 340 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Officers, Agents and Sergeants may not remain in the same time slot for more then two consecutive years. Team change request will be considered with the approval of management. Any request for an anticipated change to the assignment of sworn personnel shall be routed to the Field Services Division Coordinator prior to the selection process. (6) Vacation Selection Concurrent Vacation Authorization — Officers and Agents Patrol Division — Four (4) slots are authorized on the A -Side and four (4) slots are authorized on the B -Side. It is anticipated that this would equate to two (2) slots on night shift (Teams 3, 4, and 5) and two (2) slots on day shift (Teams 1, and 2) for each side. Any exceptions to these rules may be made by the Field Services Division Coordinator based on special circumstances. Concurrent Vacation Authorization - Sergeants Patrol Division — Two (2) slots are authorized in patrol on the A -Side and two (2) slots are authorized in patrol on the B -Side. It is anticipated that this would equate to one (1) slot on the night shift (Teams 3, 4, and 5) and one (1) slot on the dayshift (Teams 1 and 2) for each side. Exceptions to allow two (2) sergeants vacation at the same time for special circumstances may be made by the shift lieutenant. Other exceptions to this rule may be made by the Field Services Division Coordinator. a. The A -side and B-side will have separate vacation signups. It's also anticipated that the dayshift and nightshift will have separate signups. For agents and above, selection will be based on rank and time in rank. Personnel having the greatest tenure in rank will have priority. For officers, selection will be based on seniority. If seniority is equal, low badge number shall have priority. b. Sergeants will have a separate signup sheet from agents and officers. During the initial sign up sergeants will have two guaranteed slots per side, one (1) on day shift and one (1) on night shift. Agents/officers will have four (4) guaranteed slots per side, two (2) on day shift and two (2) on night shift. 27 Item 11: Staff Report Pg. 96 Packet Pg. 341 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Vacation Selection Process: Vacation selection will occur within a few weeks of the team selection process each spring. Selections will take place on two days, one day for the A -Side and one day for the B -Side. Sergeant, agents, and officers will be given time slots to come in, call in, or may submit in advance written instructions on choice for vacation weeks. The selections will be made based on rank and seniority. Both sides agree to monitor the outcome of the process and enter into a mutual agreement to continue or discontinue the process. (7) Time Keeping and Payroll All employees working under the 4/11 schedule will work eleven (11) hours a day, four (4) consecutive days a week. These eleven (11) hours will be entered in the timekeeping system on the day they are worked and/or prior to pay period payroll deadlines. Employees attending one (1) of the designated CPT training days will enter the hours of training on a "training timesheet" and enter the time in the timekeeping system. Employees using hours from their flexible training bank shall complete a "trainingtimesheet" and enterthe time in the timekeeping system. Employees working the 4/11 Schedule will not receive overtime compensation for hours worked under the following conditions. • Hours worked as part of a regular 11 -hour work day. • Hours worked on a designated CPT training days. • Hours associated to training where hours from the flexible training bank could be used. • Non -Mandatory training where adjustments from the patrol schedule are possible. Overtime shall be paid for "Mandatory" training once training bank hours have been exhausted. Overtime shall be paid for "Mandatory" meetings that fall outside the specialty exemption listed below. Participation in department specialties including training, meetings, and other activities is not considered a mandatory activity when it comes to overtime compensation. Wherever possible, employees participating in department specialties and other non -mandatory activities will be adjusted off the patrol schedule for these activities. Schedule adjustments will occur as close to the activity outside the employee's normal work schedule as possible 28 Item 11: Staff Report Pg. 97 Packet Pg. 342 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 and within the same FLSA Cycle. Schedule adjustments for personnel working nights: All personnel attending a full day of training on a work day will be adjusted off the patrol schedule for their work shift that day. In addition to being adjusted off any shift that starts on the day the training occurs, employees working Teams 3, 4, and 5 the night before the training will be adjusted off the night before as follows. If the training is all day starting in the morning hours, these adjustments will apply. Team 3: Adjusted off at 2200 hours. Teams 4 & 5: Adjusted off the entire shift. If a night shift employee is scheduled for a full day of "Mandatory" training on the morning of his or her first day off, the same adjustments listed above will apply. In addition to the necessary adjustment, employees will receive compensation forthe training hours through the use of training bank hours. When training bank hours are exhausted, the employee will receive overtime. The time keeping system entries: Each employee must enter his or her time in the timekeeping system that accurately reflects the hours he or she works. When schedule adjustments are made, overtime is worked, or training bank time is used, employees must make appropriate notes in the comment section of the timekeeping system. Supervisors and timekeepers may complete the timekeeping system entries when employees are unavailable due to illness or other situations and employees will thereafter verify the timekeeping entry is accurate upon their return to work. Managers and supervisor will approve time entries made in the time keeping system. Managers and supervisors will pay special attention to the use of training bank time and overtime. Time entries should be reviewed for regular hours and training hours that may exceed the FLSA guideline of 171 hours in a 28 day cycle. With the 4 -day on 4 -day off rotation, employees will work either 66 or 88 hours in each pay period. The timekeeping system will shift adjust the appropriate number of hours into (+14) and out of (-8) the employees bi-weekly totals so each employee receives compensation for 80 hours. Regardless of the number of hours worked under the FLSA exemption, an employee will be compensated for 80 regular hours every bi-weekly payroll cycle. These shift adjusted hours (-8 or +14) will be added to or taken away from the timecard at the appropriate day/night shift differential rates for each employee. As an example, if an 29 Item 11: Staff Report Pg. 98 Packet Pg. 343 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 employee's normal shift is paid at 75 percent day rate and 25 percent night rate, all hours shift -adjusted on to or off the timecard will be adjusted using the same approximate ratio of 75/25 percent for day/night rates. If an employee leaves city service while on the 4/11 schedule, staff and payroll shall perform the training bank reconciliation of the number of hours the employee is over or under the normal forty (40) hour workweek rate since the beginning of the current one (1) year (twenty-six [26] pay period) 4/11 cycle. If the employee has worked more hours than the forty (40) hour a week average, he or she shall be compensated for those hours at the regular rate. If the employee is under the forty (40) hour a week average, the hours will be taken from the employee's vacation, holiday, or comp time bank and/or deducted at the regular rate from the employee's last check. If an employee's assignment changes from the 4/11 schedule orto the 4/11 schedule, his or her over/under rate will be calculated the same as above. Time off, extra shifts worked, and/or the adjustment of holiday, vacation, and/or comp. time banks will be used to resolve any differences between actual hours worked and the forty (40) hour weekly average. Daylight Savings Time/Pacific Standard Time Changes — Personnel on Team 4 and Team 5 will follow these guidelines when working eitherthe spring forward or fall back. Individuals working in the spring who would lose an hour of work due to the change to Daylight Savings Time will report for duty one (1) hour early and work an eleven (11) hour shift at straight time. Individuals working in the fall will work one (1) additional hour (for a total shift of twelve (12) hours) due to the change to Pacific Standard Time. Such employees will put in for one (1) hour of overtime. Nothing in this section prevents an employee from leaving early or using time off to offset the time when staffing allows and approved by the Supervisor or Watch Commander. (8) Maximum Hours Worked - Turn Around Time Sergeants, agents, and officers may work up to a maximum number of 16 hours in a 24 - hour period. Any work beyond 16 hours must be approved by a watch commander or member of management and only under exigent circumstances. Any time an employee works 16 hours or more, they must receive an 8 -hour break before returning to duty. If the 8 -hour break runs into the employees next shift, those hours are considered adjusted hours off. Sergeants, agents, and officers shall not exceed a maximum of one hundred forty (140) 30 Item 11: Staff Report Pg. 99 Packet Pg. 344 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 hours in a 14 day pay period. Any work beyond one hundred forty (140) hours must be approved by the employee's Lieutenant and Captain, and should rarely occur only under extreme situations. Sergeants and Lieutenants authorizing overtime in excess of the daily limit (16 -hours) and/or the bi-weekly limit (140 hours) shall send a short email to their Lieutenant and Captain explaining the reason for the excess work. It is the employee's responsibility to monitor their hours and notify the supervisor and/or watch commander of their hours worked when approaching the daily or bi-weekly limits or being requested to work overtime. (9) Shift Exchanges Sergeants, agents, and officers may exchange work shifts with another employee of the same rank. Agents and officers may be interchangeable if simply filling the role ofan officer on the schedule. Personnel must submit a shift exchange request form to their supervisor and lieutenant. Shift exchanges require a lieutenant's approval except when short notice makes that impossible. Shift exchanges can only occur for entire shifts, Shift exchange request forms must contain the pay back date for the second half of the shift exchange. Both halves of the exchange must occur in the same 28 -day FLSA Cycle (referto Yearly4/11 patrol Schedule for FLSA Cycles). Once an employee agrees to an exchange shift, he or she is responsible for that shift. If he or she fails to show up for the shift and/or is sick, the time will be deducted from his or her applicable leave balance to the extent the employee qualifies for such deduction under the applicable leave policy. Failure to show up fora shift may also result in disciplinary action. (10) On -duty workout period and sign up: When staffing allows and with supervisory approval, employees may workout on -duty for a period of up to one (1)_hour. The hour shall include the work out, a shower, and dressing time. Specific guidelines and conditions are outlined in the Wellness Program Policy. (11) Upon written request of either party, Section 22(a) of this MOU will reopen and the parties will meet and confer over the issue of the patrol work schedule. Any changes will be by mutual agreement of the City and the Association. (b) Traffic Team 31 Item 11: Staff Report Pg. 100 Packet Pg. 345 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1,2023 —June 30, 2025 Sworn members of the Traffic Team shall work a ten-hour (10) day, four (4) day workweek schedule. Traffic Team officers/agents may be assigned as part of minimum staffing at the discretion of management. Effective July 1, 2008, the Take Home Motor Program will be discontinued. On a one time basis, employees assigned to motors who are in paid status the first full pay period after Council adoption of this MOU, will receive one time non PERSable stipend representing 2.5% of base salary of the employee's classification minus applicable state and federal taxes. (c) Special Operation Sergeant/Crime Suppression Team The Special Operations Sergeant and team members shall generally work a ten (10)_hour day, four (4) day workweek schedule. Given the nature of the team's assignment, it is anticipated and expected that their schedules should be flexible and adapt to organizational needs. (d) ISD and Other Sworn Classifications All sworn personnel assigned to ISD, Staff Assistant, Personnel and Training and Community Policing shall work a ten (10) hour day, four -day work week schedule. (1) Work Schedule The ten hours shall generally be worked between the hours of 0700 and 1900, with specific schedules subject to approval by appropriate supervisors. The ten (10) -hour work schedule shall be worked within a period of ten hours, with a working lunch period not to exceed thirty (301 minutes. As an alternative, with Management approval, the ten-hour work schedule may be worked within eleven hours, with a one (1) hour unpaid lunch break. Changing alternatives will require prior approval by Management. (2) Work Week For ISD personnel, one-half of the Division will work Monday through Thursday, while the other half will work Tuesday through Friday. All other sworn personnel 32 Item 11: Staff Report Pg. 101 Packet Pg. 346 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 covered under Section 23 (b) & (c) will also work either Monday through Thursday, or Tuesday through Friday. (3) Late Detective Shift Two detectives will be assigned on a rotational basis to the late shift from 1200 to 2200 to provide evening coverage. Assignment to the late detective shift, where possible, will be by advanced sign up with each detective selecting two weeks each quarter according to a protocol determined by seniority, needs of the division and needs of the employee. Generally, there will be one detective from each half of the division working the late detective shift during each week. (e) Forty -hour Training Schedule For all sworn employees who attend training that is four (4) or five (5) days in duration (a week), their schedules will be adjusted from the normal work week. Employees will not receive overtime during scheduled training as described here unless it exceeds their normal forty (401 or forty-four 1441 hour workweek. Schedule adjustments will be documented in the notes section when making the timekeeping system entries. Section 23. Overtime Pay and Compensatory Time Off (a) Overtime pay shall be provided at the rate of time and one-half of the employee's regular rate, including night shift differential, working out of classification pay, and specialty assignment premium pay as defined under Section 7, 8 and 10. (b) Compensatory time off, which is approved by management in -lieu of overtime payment on a staffing available basis, will be taken at the rate of 1-1/2 hours for every hour of credited overtime. In the event compensatory time off is used as the method of compensating for overtime, the time off will be taken prior to the end of the quarter in which it is earned except as provided herein. All compensatory time balances over 80 hours shall be paid at the end of each quarter (i.e., employee to carry over 80 hours). During the final calendar year quarter only, employees have the option to: (1) Employees who have vacation accrual balances of less than two times their annual accrual rate, less 80 hours, may request in writing prior to the payroll deadline to convert up to 80 hours of unused compensatory time to vacation per calendar year, to be transferred in the first pay period of the calendar year. 33 Item 11: Staff Report Pg. 102 Packet Pg. 347 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (2) Employees may cash out their entire compensatory balance but must make this request before payroll deadline. (c) Employees called out to perform work, attend meetings or required training shall be compensated for at least three hours pay for each occurrence at the appropriate overtime rate. Section 24. Overtime Sign -Up (a) Planned Overtime Planned overtime includes patrol staffing, special events, traffic control functions or any other overtime needs which can be identified prior to the 20th day of the preceding month. On or about the 20th of each month, watch commanders will post a list of dates/shifts requiring overtime for the next month. Officers, Agents, and Sergeants will be given a reasonable period of time to sign up for the available overtime assignments. On or about the 25th of the month, planned overtime will be filled from the sign up list using the rotational overtime call out list. Agents may place themselves on the sign up list for supervisor overtime, however will only be considered if no sergeant requests the shift. Overtime that isn't filled during the planned overtime process may be filled at management's discretion. Employees assigned to a fixed work schedule such as ISD, P&T, and Staff Assistant may adjust their work schedule with their manager's approval in order to work a planned patrol overtime assignment. This schedule adjustment must be completed within the same work week as the planned overtime assignment. Schedule adjustments will normally be approved unless there is a conflict with a previously scheduled activity within the work unit or the schedule adjustment would be disruptive to the operation of the unit. Employees bidding for planned overtime requiring a shift adjustment must make a notation next to the assignment indicating a shift adjustment would be necessary. Only one overtime shift requiring a shift adjustment can be worked per work week. (b) Unplanned Overtime. Unplanned overtime is overtime that wasn't identified prior to the 20th of the preceding month. Unplanned overtime will be filled by the following procedures. 1) The Watch Commander or Supervisor may request an employee extend their 34 Item 11: Staff Report Pg. 103 Packet Pg. 348 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 shift or come in early. If a volunteer cannot be identified to hold over or come in early, the rotational overtime list will be used. 2) Employees interested in working unplanned overtime will be placed on a rotational overtime list in order of seniority. When an overtime shift is available, a manager or supervisor will call the next person on the list. If that person declines the opportunity, is not available, is already working, or takes the overtime, he/she will be placed at the bottom of the list. The lists will be continually updated in order to rotate the names. There will be separate lists for sergeants and officers/agents for unplanned overtime. A separate supervisory list will be maintained for agents interested in working supervisory overtime. Agents will be offered supervisory overtime positions only if no sergeants have accepted the opportunity. 3) If the watch commander or supervisor is unable to fill overtime through any of these procedures, he or she may order an individual to extend their shift, come in early, or come in on a day off. A log on those required to work mandatory overtime will be kept in the overtime book. Mandatory overtime should be rotated in order of reverse seniority. c) Overtime Minimum. With regard to both planned and unplanned patrol team overtime, there is no minimum number of hours. Planned overtime postings and unplanned overtime will be offered for the actual number of hours needed. If small blocks of overtime aren't filled by on -duty personnel adding them to an existing shift, managers may apply a 6 -hour minimum to a shift for personnel coming in on a day off. (d) These overtime procedures may be reviewed and/or modified at the mutual agreement of both management and PAPOA. Section 25. Jury Duty No employee shall be required to work a combination of jury duty and work time to exceed 12 hours during a 24 -hour period. The period shall commence at the required time of appearance for jury duty. Jury duty is defined as the time between required time of appearance and dismissal. Work time excused as a result of jury duty will be compensated at the regular rate of pay. 35 Item 11: Staff Report Pg. 104 Packet Pg. 349 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Section 26. Vacation Accrual Vacation will be accrued when an employee is in pay status and will be credited on a bi-weekly basis. Such accrual and credit shall not exceed three times the annual rate of accrual. Each eligible employee shall accrue vacation at the following rate for continuous service performed in pay status: (a) Less than four (4) years - For employees completing less than four years continuous service; (8) Shifts vacation leave per year. (b) Four, but less than nine years - For employees completing four, but not more than nine (9) years continuous service; 12 Shifts vacation leave per year. (c) Nine (9), but less than fourteen (14) years - For employees completing nine (9), but not more than fourteen (14) years continuous service; (16) Shifts vacation per year. (d) Fourteen (14), but less than nineteen (19) years - For employees completing fourteen (14), but not more than nineteen (19) years continuous service; (18) Shifts vacation leave per year. (e) Nineteen (19) or more years - For employees completing nineteen (19) or more years continuous service; (20) Shifts vacation leave per year. Example: An employee with less than four (4) years working a 4/10 Schedule will receive eight (8) Shifts or eighty (80) hours of vacation. The same employee working the 4/11 Schedule will receive eight (8) Shifts or eighty-eight (88) hours of vacation. Section 27. Use of Vacation (a) When to be taken. The time at which an employee may use his/her accrued vacation leave and the amount to be taken at any one time shall be determined by the department head with particular regard for the needs of the City, but insofar as possible, considering the wishes of the employee. (b) Limitation on use. Employees may not use more than their annual rate of accrual in any calendar year period, provided, however, that a department head my grant exceptions to this limitation. 36 Item 11: Staff Report Pg. 105 Packet Pg. 350 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (c) Waiting period. Employees shall complete six months continuous service before using accrued vacation leave. (d) Double compensation prohibited. Employees shall not work for the City during their vacation. (e) Vacation splitting. It is the intention of the City that vacation be taken in units of one week; however, with the approval of the department head, an employee may use one week of his/her accrued vacation in any calendar year in units of less than one work week, but in no instance in units of less than one-half of the normal workday or shift. Requests for exception to this procedure must be approved by the City Manager. (f) Vacation Cashout. Once each calendar year an employee may cash out eight or more hours of vacation accrual in excess of 80 hours to a maximum of 120 hours, provided that the employee has taken at least 80 hours as vacation in the previous 12 months. 1. Effective for the 2012 tax year and each subsequent year, to be eligible to cash out vacation, employees must pre -elect the number of vacation hours they will cash out during the following calendar year, up to the maximum of 120 hours, prior to the start of that calendar year. The election will apply only to vacation hours accrued in the next tax year and eligible for cash out. 2. The election to cash out vacation hours in each designated year will be irrevocable. This means that employees who elect to cash out vacation hours must cash out the number of accrued hours pre -designated on the election form provided by the City. 3. Employees who do not pre -designate or decline a cash out amount by the annual deadline established by the City will be deemed to have waived the right to cash out any leave in the following tax year and will not be eligible to cash out vacation hours in the next tax year. 4. Employees who pre -designate cash out amounts may request a cash out at anytime in the designated tax year by submitting a cash out form to payroll. Payroll will complete the cash out upon request, provided the requested cash out amount has accrued and is consistent with the amount the employee predesignated. If the full amount of hours designated for cash out is not available at the time of cash out request, the maximum available will be paid. 37 Item 11: Staff Report Pg. 106 Packet Pg. 351 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 5. For employees who have not requested payment of the elected cash out amount by November 1 of each year, Payroll will automatically cash out the pre -designated amount in a paycheck issued on or after the payroll date including November 1. Section 28. Vacation Pay at Termination Employees leaving the municipal service with accrued vacation leave shall be paid the amounts of accrued vacation to the date of termination. Payments for accrued vacation shall be at the employee's current rate of pay. Section 29. Vacation Benefits for Deceased EmDl An employee who is eligible for vacation leave and who dies while in the municipal service shall have the amount of any accrued vacation paid to the employee's estate within thirty days. This proration will be computed at the last basic rate of pay. Section 30. Effect of Extended Military Leave An employee who interrupts his service because of an extended military leave shall be compensated for accrued vacation at the time the leave becomes effective. Section 31. Sick Leave (a) Statement of Policy. Sick leave shall be allowed and used only in case of actual personal sickness or disability, medical or dental treatment, or as authorized in Subsection 33 (e), personal business chargeable to sick leave. Up to 8 days sick leave per year maybe used for illness in the immediate family (spouse, child, parent, parent -in-law, brother, sister, registered domestic partner, or close relative residing in the household of the employee). (b) Eligibility. Regular and part-time employees shall be eligible to accrue and use sick leave. (c) Accrual. Sick leave shall be accrued bi-weekly provided the employee has been in a pay status for 50 percent or more of a bi-weekly pay period. Sick leave shall be accrued at the rate of 3.7 hours per bi-weekly pay period. (d) Accumulation. Accrued sick leave may be accumulated without limit, except as provided in Section 31(h). 38 Item 11: Staff Report Pg. 107 Packet Pg. 352 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (e) Use. Sick leave may be used as needed and approved, to the point of depletion, at which time the employee will no longer receive pay for sick leave. A new employee may, if necessary, use up to forty-eight hours or shift equivalent of sick leave at any time during the first six months of employment. Any negative balances generated by such utilization will be charged against future accrual or deducted from final paycheck in the event of termination. An employee who has been disabled for 60 consecutive days and who is otherwise eligible both for payment underthe long-term disability group insurance coverage and accrued sick leave benefits may, at his/her option, choose either to receive the long-term disability benefits or to utilize the remainder of his/her accrued sick leave prior to applying for long-term disability benefits. Sick leave will not be granted for illness occurring during any leave of absence other than sick leave, unless the employee can demonstrate that it was necessary to come under the care of a doctor while on such other leave of absence. When an employee finds it necessary to be absent for any reason, he/she should cause the facts to be reported to the department within one hour after his/her regular starting time on the first working day of absence, and shall regularly report on, or account in advance for each work day thereafter unless hospitalized or otherwise indisposed. Such reports may be subject to written documentation if there is reasonable evidence that sick leave abuse has occurred. Sick leave shall not be granted unless such report or advance accounting has been made, provided, however, that the department head may grant exception to this policy where the circumstances warrant. Documentation may also be required if there is a reasonable basis to believe that the employee may not be medically fit to return to work. (f) Depletion of Sick Leave Benefits. Upon depletion of sick leave or the beginning of the period to be covered by payments under the long-term disability group insurance coverage, whichever comes first, an employee may be granted a medical leave of absence without pay for a period not exceeding sixty days. If the employee is unable to return to work at the end of this period, he/she must request further medical leave which will be subject to the approval of the City Manager. If further leave is granted, the employee must notify the City of intent to return to work every thirty days. If further leave is not granted, the employee's service with the City shall be considered terminated. 39 Item 11: Staff Report Pg. 108 Packet Pg. 353 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (g) Forfeiture Upon Termination. Employees leaving the municipal service shall forfeit all accumulated sick leave, except as otherwise provided by law and Subsection 32(h). In the event that notice of resignation is given, sick leave may be used only through the day which was designated as the final day of work by such notice. (h) Payment for Accumulated Sick Leave. Employees hired before August 1, 1986 who leave the municipal service in good standing, or who die while employed in good standing by the City, and who have fifteen or more years of continuous service shall receive compensation for unused sick leave hours in a sum equal to two and one-half percent of their unused sick leave hours multiplied by their years of continuous service and their basic hourly rate of pay at termination. For all employees entering the service of the City prior to March 2, 1983, full sick leave accrual will be paid in the event of termination due to disability. For all employees hired after August 1, 1986, sick leave accrual accumulation shall be limited to 1,000 hours with no payoff provision for unused balance at termination. (i) Sick Leave Re -opener. Upon written request of either party, the parties agree to meet to confer over the issue of sick leave incentive, including but not limited to: (1) sick leave payout for employees hired after August 1, 1986 and (2) converting to a paid time off policy in lieu of both vacation and sick leave. Any changes will be by mutual agreement of the City and the Association. (j) Personal Business Leave Chargeable to Sick Leave. Up to 2 Shifts (20 -Hours for 4/10 employees and 22 -Hours for 4/11 employees) per year of personal business leave may be chargeable to sick leave. Time off under this provision is subject to management scheduling approval. (k) Return to Work or Continue Work With Limited/Alternative Duty. In cases of non -work -related injury, illness or pregnancy, an employee, upon approval of the department head, City Risk Manager and the employee's doctor, may elect to return to work or continue work with doctor -approved limited or alternative duty. Approval for such limited/alternative duty shall be based upon department ability to provide work consistent with medical limitations and the length of time of the limitations. Shift employees must be willing to accept any non -shift limited duty schedule work locations and may be subject to the reasonable availability of limited duty assignments. The City doctor may be consulted in determining work limitations. Any assignment to a limited/alternative duty will be on a 40 Item 11: Staff Report Pg. 109 Packet Pg. 354 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 temporary basis. The provisions of this section are not intended to create any permanent light/alternative duty assignments. Any assignment to a limited/alternative assignment shall not displace any other employee without consent of all parties, including the Association. Section 32. Leaves of Absence Without Pay (a) Disability. Leaves of absence without pay may be granted in cases of disability not covered by sick leave. Pregnancy will be considered as any other disability. Leaves of absence for disability are subject to physicians' verification including diagnosis and medical work restriction. (b) Other leaves. Leaves of absence without pay may be granted in cases of personal emergency or when such absences would not be contrary to the best interest of the City. Non -disability prenatal and/or postpartum leave is available under this provision, but such leave shall not begin more than six months prenatal nor extend more than six months postpartum. (c) During unpaid leaves of absence for disability or other reasons, the employee may elect to use accrued vacation credits. Requests for leaves without pay shall not be unreasonably denied. In order to avoid misunderstandings, all leaves without pay must be in writing to be effective. (d) Approval of department head. Leave of absence without pay for one week or less may be granted by the department head, depending on the merit of the individual case. (e) Approval by City Manager. Leave of absence without pay in excess of one week's duration may be granted by the City Manager on the merit of the case, but such leave shall not exceed twelve months' duration. (f) Absence without leave. Unauthorized leave of absence shall be considered to be without pay, and reductions in the employee's pay shall be made accordingly. Unauthorized leave of absence may result in termination of employment. (g) Leave of absence; death outside the immediate family. Leave without pay may be granted a regular employee by his/her department head in the event of death to family members 41 Item 11: Staff Report Pg. 110 Packet Pg. 355 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 other than one of the immediate family, such leave to be granted in accordance with Section 34 (b), (c) , (d) and (e). (h) Military leave of absence. State and federal law shall govern the granting of military leaves of absence and the rights of employees returning from such absence. Section 33. Leave of Absence With Pay The City Manager may grant a regular employee under his/her control a leave of absence with pay for a period not exceeding thirty calendar days for reasons he/she deems adequate and in the best interest of the City. The City Council may grant a regular employee a leave of absence with pay for a period not to exceed one year for reasons the Council considers adequate and in the best interest of the City. (a) Subpoenas; leave of absence. Regular employees who are subpoenaed to appear as witnesses in behalf of the State of California or any of its agencies may be granted leaves of absence with pay from their assigned duties until released. The employee shall remit all fees received for such appearances to the City within thirty days from the termination of his or her services. Compensation for mileage or subsistence allowance shall not be considered as a fee and shall be retained by the employee. (b) Employee's time off to vote. Time off with pay to vote at any general or direct primary election shall be granted as provided in the State of California Elections Code, and notice that an employee desires such time off shall be given in accordance with the provisions of said Code. (c) Leave of absence; death in immediate family. Leave of absence with pay of three days shall be granted an employee by the head of his or her department in the event of death in the employee's immediate family, which is defined for purposes of this section as wife, husband, son, step -son, son-in-law daughter, step -daughter, daughter-in-law, father, step -father, father-in-law, mother, step -mother, mother-in-law, brother, step -brother, brother-in-law, sister, step -sister, sister-in-law, grandmother, grandmother -in-law, grandfather, grandfather -in-law, grandchildren, aunt, uncle, niece, nephew, registered domestic partner, or a close relative residing in the household of the employee. Such leave shall be at full pay and shall not be charged against the employee's accrued vacation or sick leave. Requests for leave in excess of three days shall be subject to the approval of the City Manager. Approval of additional leave will be based on the circumstances of each request with consideration given to the employee's need for additional time off. 42 Item 11: Staff Report Pg. 111 Packet Pg. 356 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (d) Jury duty; leave of absence. Employees required to report for jury duty shall be granted a leave of absence with pay from their assigned duties until released by the court, provided the employee remits to the City all fees received for such duties other than mileage or subsistence allowances within thirty days from the termination of his/her jury service. Section 34. Reduction in Force In the event of reductions in force, they shall be accomplished wherever possible through attrition. If the work force is reduced within the bargaining unit for reasons of change in duties or organization, abolition of position, shortage of work or funds, or completion of work, employees with the shortest length of service will be laid off first so long as employees retained are fully qualified, trained and capable of performing remaining work. Length of service for the purpose of this article will be based on total City service in a regular classification or classifications. Employees laid off due to the above reasons will be given written notice at least thirty days prior to the reduction in force. A copy of such notice will be given to the Association. Section 35. Agents The number of Agent positions shall be governed by the August 12, 1981, Arbitration Award. Section 36. Commute Incentives and Parking in Civic Center Garage Commute Incentives-- Represented employees who qualify may voluntarily elect one of the following commute incentives: Public Transit. The City will provide monthly Commuter Checks worth the value of: $40 for employees traveling three or more zones on Caltrain; $40 for employees using the Dumbarton Express, BART, the ACE train, or a commuter highway vehicle; $35 for employees traveling less than three zones on Caltrain; $35 for employees using VTA and other buses. These vouchers may be used toward the purchase of a monthly transit pass. Carpool. The City will provide carpool vouchers worth the value of $30 per month to each eligible employee in a carpool with two or more people. These vouchers may be used at 43 Item 11: Staff Report Pg. 112 Packet Pg. 357 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 designated service stations toward the purchase of fuel and other vehicle -related expenses. Vanpool Program. The City will provide Commuter Checks worth the value up to $60 to each employee voluntarily participating in the Vanpool Program. These vouchers may be used toward payment of the monthly cost. Employees must fulfill the basic requirements of the Employee Commute Alternatives Program to qualify. Bicycle. The City will provide bicycle vouchers worth the value of $20 per month to eligible employees who ride a bicycle to work. These vouchers may be used at designated bicycle shops for related bicycle equipment and expenses. Walk. The City will provide walker vouchers worth the value of $20 per month to eligible employees who walk to work. These vouchers may be used at designated stores for expenses related to walking such as footwear and related accessories. Parking in the Civic Center Garage --Employees assigned to Civic Center and adjacent work locations will be provided with a Civic Center Garage parking permit. New employees hired after June 30, 1994 may initially receive a parking permit for another downtown lot, subject to the availability of space at the Civic Center Garage. Section 37. Disciplinary Action and Unsatisfactory Work or Conduct (a) Except as provided in Section 6 (Probationary Period) of this agreement, no employee shall be disciplined without just cause. For the purpose of this section, "discipline" shall be deemed to include discharge, demotion, reduction in salary, written reprimand, disciplinary probation and suspension. Discipline shall be deemed not to include verbal reprimands or reductions in force. (b) Non -probationary employees whose work or conduct is unsatisfactory but not sufficiently deficient to warrant discipline, demotion, or discharge will be given a written notification of unsatisfactory work or conduct and an opportunity to improve. Failure to correct deficiencies and improve to meet standards may result in discipline, demotion or discharge. (c) Notice of disciplinary action must be in writing and served on the employee in person or by registered mail prior to the disciplinary action becoming effective. However, in extreme situations where there is reasonable cause, the employee may be removed from duty immediately with pay pending such disciplinary action. The notice must be filed on a timely basis with the Human Resources Department and included in the employee's personnel file. The notice of disciplinary action shall include: 44 Item 11: Staff Report Pg. 113 Packet Pg. 358 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (1) Statement of the nature of the disciplinary action; (2) Effective date of the action; (3) Statement of the cause thereof; (4) Statement in ordinary and concise language of the art or the omissions upon which the causes are based; (5) Copies of any documents or other items of evidence upon which the disciplinary action was fully or in part based; (6) Statement advising the employee of his/her right to appeal from such action, and the right to Association representation. (d) If the disciplinary action consists of suspension, any suspension time previously given shall be credited to the final disciplinary action. (e) Subject to state law requirements, employees may request that disciplinary actions be sealed according to the following schedule: (1) Written reprimands with no recurrence after one (1) year. (2) Disciplinary probation after three (3) years from the implementation of such probation, if no other disciplinary action has occurred during that period. (3) Suspensions less than three (3) days without recurrence, after two (2) years. (4) Suspensions more than three (3) days but less than six (6) days, after three (3) years. (5) Suspensions of six (6) days or more, after five (5) years. For the purpose of these sections, the time starts from the time of action following the Skelly process (day discipline is imposed). Written requests for the sealing of disciplinary actions should be directed to the Personnel and Training Coordinator. 45 Item 11: Staff Report Pg. 114 Packet Pg. 359 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Sealing shall include all memos, letters, correspondence, complaint forms, and any other material pertaining to the disciplinary action that has been placed in the employee's personnel file. Sealing shall not include the sealing of any material related to criminal offenses for which the employee was charged except in concurrence with the sealing or expungement of criminal charges by a court of competent jurisdiction or in the event of a complete exoneration of the employee by the judicial system. The City Human Resources Department shall be notified in all cases where sealing of disciplinary action is taken. Human Resources Department copies of the disciplinary actions will be disposed of in a manner consistent with the Police Department's action. The sealed action shall not be held to discriminate against the employee in any subsequent disciplinary action, or in the event of promotion, merit step raise, transfer, request for educational leave, modification of duties, vacation selection, application for other employment, or against any other action the employee may take for his or her personal improvement. Once sealed, the file shall not be opened unless the employee requests such unsealing and then only for examination by the person or persons whom the employee specifies or at the discretion of the Chief of Police, who in the absence of a demonstrable emergency shall notify the employee a minimum of 48 hours before the opening of the sealed file and the reason for opening. In the event the employee cannot be notified in advance, notification must be made on the employee's first duty day after the sealed file is opened. Section 38. Grievance Procedure (a) The City and the Association recognize that early settlement of grievances is essential to sound employee -employer relations. The parties seek to establish a mutually satisfactory method for the settlement of employee grievances, or Association grievances, as provided for below. In presenting a grievance, the aggrieved and/or his or her representative is assured freedom from restraint, interference, coercion, discrimination or reprisal. (b) Definition. A Grievance is: (1) An unresolved complaint or dispute regarding the application or interpretation of Departmental rules, regulations, policies, and procedures, relating to terms conditions of employment, wages or fringe benefits; or this Memorandum of Agreement, 46 Item 11: Staff Report Pg. 115 Packet Pg. 360 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1,2023 —June 30, 2025 (2) An appeal from a disciplinary action of any kind against an employee covered by this Memorandum of Agreement. (c) Access to the Grievance Procedure. Except as provided in Section 6, Probationary Period, all employees represented by the Association may file and process a grievance. Such aggrieved employees may be represented by the Association or may represent themselves in preparing and presenting their grievance at any level of review. The Association may file a grievance when an Association right not directly related to an individual employee becomes subject to dispute. (d) Conduct of Grievance Procedure. (1) The time limits specified in this Article maybe extended by mutual agreement in writing of the aggrieved employee or the Association and the reviewer concerned. (2) Should a decision not be rendered within a stipulated time limit, the aggrieved employee may immediately appeal to the next step. (3) The grievance may be considered settled if the decision of any step is not appealed within the specified time limit. (4) If appropriate, the aggrieved employee or the Association and Management may mutually agree to waive any step of the grievance procedure. (5) Written grievances shall be submitted on forms provided by the City or on forms which are mutually agreeable to the City and the Association. (6) Any retroactivity on monetary grievances shall be limited to the date of occurrence, except in no case will retroactivity be granted prior to three months before the grievance was filed in writing. Step I. The aggrieved employee will first attempt to resolve the grievance through informal discussions with his or her immediate supervisor by the end of the tenth working dayfollowing the discovery of or the incident upon which the grievance is based. Every attempt will be made to settle the issue at this level. (Note: For purposes of time limits, the working days are considered to be Monday through Friday, exclusive of City holidays.) 47 Item 11: Staff Report Pg. 116 Packet Pg. 361 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Step II. If the grievance is not resolved through the informal discussion, the employee will reduce the grievance to writing and submit copies to the division head or equivalent level Management employee as designated by Management as appropriate within ten working days of the discussion with the immediate supervisor. The division head or equivalent level Management employee shall have ten working days from the receipt of a written grievance to review the matter and prepare a written statement. Step III. If the grievance is not resolved at Step II, the aggrieved employee may appeal to his or her department head in writing within ten working days of the receipt of the division head's response. The department head shall have ten working days from the receipt of a written grievance to review the matter and convey his or her decision by written statement. Step IV. If the grievance is not resolved at Step III, the aggrieved employee may choose between final and binding resolution of the grievance through appeal to the City Manager or through appeal to final and binding grievance arbitration. Appeals to final and binding arbitration may be processed only with Association approval. All Step IV appeals must be filed in writing at the Human Resources Department Office within ten working days of receipt of the Step III response. If the aggrieved employee elects final and binding resolution by the City Manager, the City Manager will choose the methods he or she considers appropriate to review and settle the grievance. The City Manager shall render a written decision to all parties directly involved within ten working days after receiving the employee's appeal. If the aggrieved employee elects final and binding arbitration in accordance with this provision, the parties shall mutually select an arbitrator. In the event the parties cannot agree on an arbitrator, they shall mutually request a panel of five arbitrators from the California State Conciliation Service or from the American Arbitration Association if either party objects to the State Conciliation Service, and select an arbitrator by the alternate strike method. The arbitrator shall have jurisdiction and authority only to interpret, apply, or determine compliance with the provisions of this Memorandum of Agreement and such Merit System Rules, regulations, policies, procedures, City ordinances, resolutions relating to terms or conditions of employment, wages or fringe benefits, as may hereafter be in effect in the City insofar as may be necessary to the determination of grievances appealed to the arbitrator. The arbitrator shall be without power to make any decision: Item 11: Staff Report Pg. 117 Packet Pg. 362 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (1) Regarding matters of interest. (2) Contrary to, or inconsistent with or modifying in any way, the terms of this Memorandum of Agreement. (3) Granting any wage increases or decreases. The arbitrator shall be without authority to require the City to delegate or relinquish any powers which by State law or City Charter the City cannot delegate or relinquish. Where either party seeks arbitration and the other party claims the matter is not subject to the arbitration provisions of this Memorandum of Agreement, the issue of arbitrability shall first be decided by the arbitrator using the standards and criteria set forth in this section and without regard to the merits of the grievance. If the issue is held to be arbitrable, the arbitration proceedings will be recessed for up to five working days during which the parties shall attempt to resolve the grievance. If no resolution is reached, the arbitrator will resume the hearing and hear and resolve the issue on the merits. Copies of the arbitrator's decision shall be submitted to the City, the aggrieved employee and the Union. All direct costs emanating from the arbitration procedure shall be shared equally by the City and the aggrieved employee or the Association. Section 39. Bulletin Boards and Telephones The Association shall have access to existing bulletin boards in Unit employee work areas and to the City e-mail and voice mail systems for the purpose of posting notices or announcements including notices of social events, recreational events, membership meetings, results of elections and reports on minutes of Association meetings. Any other material must have prior approval of the Police Chief. Action on approval will be taken within 24 hours of submission. Emails sent for Association business shall be copied to the Human Resources Director at distribution. City telephones may be used for Association business so long as there is no disruption of work and all toll or message unit calls are charged to the Association credit card. Item 11: Staff Report Pg. 118 Packet Pg. 363 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 Section 40. Access to Association Representatives Representatives of the Association are authorized access to City work locations for the purpose of conducting business within the scope of representation, provided that no disruption of work is involved and the business transacted is other than recruiting of members or collecting of dues, and the representative must notify the Human Resources Department office prior to entering the work location. Section 41. Meeting Places The Association shall have the right to reserve City meeting and conference rooms for use during non -working hours. Such meeting places will be made available in conformity with City's regulations and subject to the limitations of prior commitment. Section 42. Voluntary Leave Program: (a) The City of Palo Alto has established a Peace Officer Voluntary Leave Program to provide members of the Palo Alto Peace Officers' Association, Incorporated (hereafter referred to as "PAPOA") the opportunity to donate their accrued vacation time to assist fellow members of PAPOA either due to: (a) an employee's own verifiable non -industrial catastrophic illness or injury (as defined herein) or (b) in order to care for a member of the employee's immediate family (spouse, child, parent or registered domestic partner suffering from a verifiable catastrophic illness or injury) and have exhausted or will presently exhaust all of their paid leave. In order to be eligible to receive donated leave, an employee must have a catastrophic illness or injury or an employee's immediate family member must have a catastrophic illness or injury that requires the employee to provide full-time care forthisfamily member. Care will be taken to emphasize the voluntary nature of the plan and to insure confidentiality of employee participants and medical conditions (where applicable). A Police Officer Voluntary Leave Sharing Program has been established to accept donations of vacation in accordance with the Program's guidelines. All donations shall be: 1. Voluntary 2. Irrevocable 3. Confidential, unless disclosure is required by law 50 Item 11: Staff Report Pg. 119 Packet Pg. 364 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 4. In whole hour increments of at least (4) hours, with hours donated being converted to donee hours based on the donee's salary rate (so that there will be no cost to the City due to salary differential) 5. The employee shall be required to exhaust all other types of leave to request donated leave 6. It is understood that employees seeking or receiving leave under this program will apply for long-term disability benefits for which they may be eligible 7. Where any of the period during which an employee receives donated leave is designated as family leave under the California Family Rights Act (CFRA) or Family Medical Leave Act (FMLA), the employee will be eligible for continuation of medical and other available benefits during that family leave period (for up to 12 weeks), in accordance with the requirements of those laws. If the employee receiving donated leave is not eligible for CFRA/FMLA benefit continuation, or after the employee has exhausted the available CFRA/FMLA leave period, the employee will need to pay the premiums for continued medical and other available benefits if the employee chooses to continue such coverages through the City. 8. If the donation request is based on the need for an employee to care for an immediate family member, as defined above, the family member must require full-time care bythe employee. Certification of this requirement by a health care professional is required. 9. The maximum donated time a donee may receive is 12 months (if available). 10. Applications to donate leave or receive leave under this Program are made to the Human Resources Department. 11. This is a pilot program and is subject to cancellation by either party. PAPOA members interested in donating leave or in applying to receive donated leave shall complete forms provided by the Human Resources Department. If an applicant for leave is found to meet the criteria set forth herein, Human Resources will determine the availability of and (as applicable) allocation of donated paid leave. Payroll will be notified in writing of the number of hours to be deducted from each donating employee's vacation balance and transferred to the donee employee(s). (b) The City reserves the right to modify or terminate this program at any time. (c) Catastrophic Illness or Injury (also referred to as "medical emergency" in Revenue Ruling 90-29 and Sections 801(c) and 812 of the Merit Rules and Regulations): A non -occupational medical condition of an employee that will require the prolonged absence of the employee from duty and which will result in a substantial loss of income to the employee because the employee will have exhausted all paid leave available apart from the Voluntary Employee Leave Sharing Program. Non -disability postpartum leave as referenced in Merit Rule 801(b) 51 Item 11: Staff Report Pg. 120 Packet Pg. 365 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1,2023 —June 30, 2025 shall not be considered a catastrophic illness or injury under this policy. (d) Nothing in this section precludes an Association member from utilizing or participating in the City's Voluntary Employee Leave Sharing Program. Section 43. Utilization of Reserves for Field Services Division Events (a) Management will determine staffing levels for each event. (b) Events for which the department receives reimbursement will be staffed by regular officers, except that in the event a sufficient number of regular officers are unavailable, reserve officers may be used. (c) Reserves may be used for the May Day Parade, Stanford University or NFL football games, park patrol, Black and White Ball, and supplemental patrol staffing in excess of levels set forth in the Field Services Staffing Levels general order. (d) Events, for which the department does not receive reimbursement, may be staffed in the ratio of two reserve officers to one regular officer. Reserves may be used in any situation where an insufficient number of regular officers are available. (e) Staffing for the University Avenue Street Fair will consist of no less than a 1:1 ratio of regular officers to reserve officers. Section 44. Overtime Meals for Investigative Services Division Effective July 1, 1996, for ISD personnel who are working authorized investigative overtime extending for a period either four hours after the conclusion of their normal work shift, or four hours prior to the beginning of the normal work shift, shall be entitled to reimbursement for the appropriate meal at the City per diem rate. The meal reimbursement shall also apply for any authorized investigative overtime on a weekend or holiday in excess of four hours. Section 45. Hiring Incentives Qualified lateral officers, who have a current basic or higher POST certificate, hired during the term of this agreement may upon City Manager approval: 52 Item 11: Staff Report Pg. 121 Packet Pg. 366 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 (a) Accrue vacation leave at a beginning rate equal to the rate they were earning at their previous employer, subject to a maximum of 160 hours per year with progression to higher accrual rates as provided in Section 27, Vacation Accrual; and (b) Begin their employment with the City with a sick leave balance not to exceed 96 hours. (c) Receive a hiring incentive. Any future hiring incentive program will be discussed with the Association prior to implementation and the Department will reasonably consider any recommendations from the Association regarding internal referral programs to be utilized in conjunction with that program. (d) Laterals returning to the Palo Alto Police Department must have been separated from the City for a minimum of 2 years to be eligible for this incentive program. (e) Based on years of service, level of experience, and educational achievement, experienced lateral officers may receive a starting salary at any appropriate level within the "Police Officer" classification as deemed appropriate by the City Manager on recommendation of the Chief of Police. Section 46. Full Understandi (a) The Memorandum of Agreement contains the full and entire understanding of the parties regarding the matters set forth herein. (b) It is the intent of the parties that ordinances, resolutions, rules and regulations enacted pursuant to this Memorandum of Agreement be administered and observed in good faith. (c) Nothing in this agreement shall preclude the parties from mutually agreeing to meet and confer on any subject within the scope of representation during the term of this agreement. (d) Should any of the provisions herein contained be rendered or declared invalid by reason of any existing State or Federal legislation or by reason of State Supreme Court or U. S. Supreme Court ruling, such invalidation of such part or portion of this Memorandum of Agreement shall not invalidate the remaining portions hereof, and they shall remain in full force and effect, insofar as such remaining portions are severable. (e) Prior Agreements & Side Letters: Upon Implementation of this agreement, all prior agreements and side letters become null and void. In any instance where internal department polices and/or practices are in conflict with this agreement, this agreement shall 53 Item 11: Staff Report Pg. 122 Packet Pg. 367 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 take precedence. (f) During the term of this Memorandum of Agreement, Management may propose certain changes in the City Merit System Rules and regulations. With regard to such changes which pertain to the representation unit, the parties agree to review, and upon request, meet and confer regarding the changes. Section 47. Printed Agreement The City will provide copies of the Memorandum of Agreement resulting from these negotiations in booklet form to all represented employees. Section 48. Duration Except as expressly and specifically provided otherwise herein for the retroactive application of a specific provision(s), this Memorandum of Agreement shall become effective upon ratification by both parties hereto and remain in effect through June 30, 2025. 54 Item 11: Staff Report Pg. 123 Packet Pg. 368 of 853 Item 11 Attachment A POA Memorandum of Agreement City of Palo Alto and PAPOA January 1, 2023 —June 30, 2025 EXECUTED: FOR: PALO ALTO PEACE OFFICERS' ASSOCIATION FOR: CITY OF PALO ALTO Ken Kratt Ed Shikada, City Manager Chistopher Correira Sandra Blanch, Human Resources Director Joel Hornung Tori Anthony,Manager Employee and Labor Relations Joshua Salkeld Charles Sakai, Counsel Sloan Sakai Yeung & Wong, LLP Alex Afanasiev Andrew Binder, Chief of Police Peter Hoffmann, Rains Lucia Stern, PC Maria Patino, Senior Human Resources Administrator 55 Item 11: Staff Report Pg. 124 Packet Pg. 369 of 853 Item 11 Attachment B PMA Memorandum of Agreement Memorandum of Agreement City of Palo Alto and Palo Alto Police Management Association (PAPMA) October 1, 201 June 30, 2021January 1, 2023 — June 30, 2025 CITY OF PALO ALTO Item 11: Staff Report Pg. 125 Packet Pg. 370 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of October 1, 2018 �30,22021January 1, 2023 — June 30, 2025 Agreement TABLE OF CONTENTS ARTICLE I PREAMBLE................................................................................................................... 4 Section1 — Recognition..................................................................................................................... 4 Section 2 — Non-Discrimination......................................................................................................... 4 ARTICLE II COMPENSATION........................................................................................................ 4 Section3 Salary............................................................................................................................... 4 Section 4 — Working Out of Class Pay............................................................................................... 5 Section 5 Night Shift Differential................................................................................................... 5 ARTICLE III HEALTH CARE BENEFITS....................................................................................... 5 Section 6 — Active Employee Health Plans........................................................................................ 5 Section7 Dental Benefits................................................................................................................ 6 Section8 Vision Care..................................................................................................................... 6 Section 9 — Basic Life Insurance....................................................................................................... 6 Section 10 Supplemental Life And AD&D Insurance.................................................................... 6 Section 11 Effective date of Coverage for New Employees........................................................... 7 ARTICLE IV - OTHER BENEFITS..................................................................................................... 7 Section 12 Holiday Compensation................................................................................................. 7 Section13 Vacation........................................................................................................................ 7 Section 14 — Long Term Disability.................................................................................................... 8 Section 15 — Dependent Care Assistance Program........................................................................... 8 Section 16 — Medical Flexible Spending Program............................................................................. 8 Section 17 — Employee Assistance Plan............................................................................................. 9 Section 18 — Commute Incentives and Parking.................................................................................. 9 Reopener............................................................................................................................................. 9 ARTICLE V -RETIREMENT............................................................................................................... 9 Section 19 — Retirement Benefits....................................................................................................... 9 Section 20 — Retirement Medical Plan............................................................................................ 10 Section 21 — ICMA - Retirement Health Savings Plan................................................................... 11 Section 22 — Deferred Compensation Program............................................................................... 11 ARTICLE VI - MANAGEMENT BENEFIT PROGRAM................................................................. 11 Section 23 — Professional Development Reimbursement................................................................ 11 Section 24 — Physical Examinations............................................................................................... 12 Page 2 of 23 Item 11: Staff Report Pg. 126 Packet Pg. 371 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of October 1, 2018 30, 2 1January 1, 2023 — June 30, 2025 Agreement Section25 Excess Benefit............................................................................................................. 12 Section 26 — Management Annual Leave........................................................................................ 13 ARTICLE VII - OPERATIONAL ISSUES....................................................................................... 14 Section 27 — Management Assignments.......................................................................................... 14 Section 28 — Basic Work Schedules................................................................................................ 14 Section 29 — On Duty Workouts...................................................................................................... 14 Section 30 — Take Home Emergency Response Vehicles................................................................ 14 Section 31 — Modified Duty Assignments....................................................................................... 14 Section 32 — Meal Allowance......................................................................................................... 15 Section33 — Uniforms...................................................................................................................... 15 ARTICLE VIII - ASSOCIATION AGREEMENTS........................................................................... 15 Section 34 — Association Security................................................................................................... 15 Section 35 — Association Representative Access to Work Locations ..............................................16 16 Section36 — Release Time............................................................................................................... 16 Section 37 — Use of City Facilities for Association Business.......................................................... 16 Section 38 — Payroll Deduction........................................................................................................ 16 ARTICLE IX — LEAVE PROGRAMS................................................................................................ 16 Section39 — Sick Leave................................................................................................................... 16 Section 40 — Voluntary Catastrophic Leave Program...................................................................... 18 Section 41 — Leave of Absence With Pay....................................................................................... 18 Section 42 — Leave of Absence Without Pay................................................................................... 19 ARTICLE X - EMPLOYEE/EMPLOYER RELATIONS.................................................................. 20 Section 43 — Probationary Period..................................................................................................... 20 Section 44 — Disciplinary Action and Unsatisfactory Work or Conduct .........................................20 20 Section 45 — Grievance Procedure................................................................................................... 20 Section46 — No Strikes.................................................................................................................... 22 Section 47 — Reduction in Workforce............................................................................................. 23 ARTICLE XI - LOOKING FORWARD............................................................................................. 23 Section 48 — Full Understanding...................................................................................................... 23 Section 49 — Legal Compliance/Severability................................................................................... 23 Section50 — Duration....................................................................................................................... 23 APPENDIX A-1....................................................................................Error! Bookmark not defined. Page 3 of 23 Item 11: Staff Report Pg. 127 Packet Pg. 372 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of Oetebcr 1, 2018—Ju,c 30, 2021January 1, 2023 —June 30, 2025 Agreement 20234$ - 20254 MEMORANDUM OF AGREEMENT City of Palo Alto and Palo Alto Police Managers' Association ARTICLE I — PREAMBLE This Memorandum of Agreement is pursuant to and subject to Sections 3500-3510 of the Government Code of the State of California, the Charter of the City of Palo Alto, and the City of Palo Alto Merit System Rules and Regulations. This Memorandum of Agreement made and entered into at Palo Alto, California, by and between the City of Palo Alto, a municipal corporation (hereinafter referred to as "City") and the Palo Alto Police Managers' Association (hereinafter referred to as "Association"), is intended to define agreements reached during the meet and confer process concerning wages, hours, working conditions, and other terms and conditions of employment for the represented group of employees. Section 1— Recognition. On October 29, 2009, the City of Palo Alto certified the Palo Alto Police Managers' Association (Association) as a bargaining unit within the City. The City recognizes the Association as the exclusive representative of an employee group consisting solely of Police Lieutenants and Police Captains who are regularly employed by the City and others who might be amended into the representation unit from time to time under existing law and the Merit System Rules and Regulations. Section 2 — Non -Discrimination. The City and the Union agree that there shall be no discrimination of any kind because of age (over 40), race, creed, color, religion national origin, ancestry), veterans status, physical or mental disability, marital status, sexual orientation, sex (sexual, gender based or gender identity, pregnancy/childbirth), medical condition (cancer related and genetic characteristics), or on any other basis prohibited by applicable federal and State law against any employee or applicant for employment. The Association shall cooperate with the City, to the extent required by federal and State laws and regulations, in furthering the objective of Equal Employment Opportunities, as defined by Federal and State regulations. ARTICLE II— COMPENSATION Section 3 — Salary a) Market Adiustment: Effective the first full nay period includine City Council Adoption. sala ranges of all bargaining unit classifications will be increased by five percent (5.0%), which is sufficient to bring them to the top quartile of market median as determined by the City's market study. b) General Salary Increase: Effective the first full nay aeriod following July 1. 2023. salary ranees of all represented classifications will be increased by four aercent (4.0%). Page 4 of 23 Item 11: Staff Report Pg. 128 Packet Pg. 373 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of October 1, 2018 —June 30,2021January 1, 2023 —June 30, 2025 Agreement c) General Salary Increase: Effective the first full pay period followine July 1. 2024 salary ran of all represented classifications will be increased by four percent (4.0%). d) Flexible Compensation: Effective the first full pay period following City Council Adoption, and in lieu of an increase to the City contribution towards medical premiums. each represented classification will have their monthly income increased by S100. e) Flexible Compensation: Effective the first full pay period following January 1, 2024, and in lieu of an increase to the City contribution towards medical premiums, each represented classification will have their monthly income increased by an additional $100 (Total of $200).Effective the first full pziy period 3fter rzitific3tion by the Associ3tion 3nd 3doption by the City Council, the b35e 5313ry r3tes 3nd ronges for clossificotions covered by this borgoining unit sholl be clossificotions covered by this borgoining unit sholl be increosed on the first full poy period following - Section 4— Working Out of Class Pay. Lieutenants or Captains fulfilling the role of an acting captain, assistant chief, or chief for individual shifts and/or a number of hours within a shift, shall not receive additional compensation. Periodically working in this capacity shall be deemed a basic duty within an employee's job description. Lieutenants and Captains working out of class for a period of four or more consecutive shifts shall be compensated at the start of the pay period with premium pay determined by the Chief of Police or his or her designee up to 10% of base pay. In accordance with Government Code 20480, an employee assigned to work in an out -of -class appointment may not exceed 960 hours worked in the appointment within a fiscal year if the employee is appointed to an upgraded position or higher classification that is vacant during recruitment for a permanent appointment. This limitation does not apply to a position that is temporarily available due to a leave of absence. Section 5 — Night Shift Differential. Night shift differential shall be paid at the rate of 5% to all personnel for all hours worked between 6:00 p.m. and 8:00 a.m. ARTICLE III - HEALTH CARE BENEFITS Section 6 — Active Employee Health Plans. The maximum City contribution towards medical premiums for eligible full time employees per employee category shall be up to a maximum of the following for any plan: Medical Premium PEMHCA Total Maximum City Category Contribution* Contribution (inclusive of PEMHCA contribution) effective January 1, 2 19First Page 5 of 23 Item 11: Staff Report Pg. 129 Packet Pg. 374 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of Qetebe�- 1z�1$� �3Az202 January 1, 2023 — June 30, 2025 Agreement month following City Council Adoption Employee Only $4. 151.00 $949871 Employee plus one $493151.00 $16801,742 Employee Family $493151.00 $21802,260 *Total City contribution includes both PEMHCA minimum contributions pursuant to Government Code section 22892 and an additional City contribution necessary to pay the cost of medical premiums up to the amount listed in the "Total maximum City contribution" columns above. Section 7 — Dental Benefits. a) The City will maintain the present level of benefits on the City -sponsored dental program for current employees and their dependents, except that the maximum benefits per calendar year shall be $2,000 effective in 1988. Dental Coverage shall include composite (tooth colored) fillings for all teeth. Effective July I, 2007, the City will provide 50% of reasonable charges, $2,000 lifetime maximum orthodontic benefit for representation unit employees and their dependents. b) Dependents will include domestic partners, as defined in the Active Employee Domestic Partners Section below. c) During the term of the agreement, the City and the Union will work together to review benefit provisions of the City's self -funded dental program. The purpose of this review is to contain benefit cost increases. Joint recommendations will be prepared for discussion during successor agreement negotiations. d) Dental implants in conjunction with one or more missing natural teeth, and removal of dental implants will be covered as a Major Dental Service at 50% usual, customary and reasonable (UCR). Section 8 — Vision Care. The City will offer vision care coverage for employees and dependents. Coverage is equivalent to $20 deductible Plan A under the Vision Service Plan, with monthly premiums paid by the employer. Dependents will include domestic partners, as defined in the Active Employee Domestic Partners Section below. Section 9 — Basic Life Insurance. The City shall provide a basic group term life insurance with Accidental Death and Dismemberment (AD&D) coverage, in an amount equal to the employee's annual basic pay (rounded to the next highest $1,000) at no -cost to the employee. AD&D pays an additional amount equal to the employee's annual basic pay (rounded to the next highest $1,000). Section 10 — Supplemental Life And AD&D Insurance. An employee may, at his/her cost, purchase additional life insurance and additional AD&D coverage equal to one -or two-times his or her annual salary. The maximum amount of life insurance available to the employee is up to $325,000 and the maximum amount of AD&D coverage available is up to $325,000. Page 6 of 23 Item 11: Staff Report Pg. 130 Packet Pg. 375 of 853 City of Palo Alto and PAPMA October 1, 2018 —Junc 30, 2021January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Section 11— Effective date of Coverage for New Employees. For newly hired regular employees coverage begins on the first day of the month following date of hire for the health plan, dental plan, vision care plan, and life insurance plans if these benefits are elected. ARTICLE IV — OTHER BENEFITS Section 12 — Holiday Compensation. Police Managers will receive the twelve (12) paid City holidays outlined in the City of Palo Alto Merit Rules. Floating Holiday — Days of Historical Significance. Employees will be provided one floating holiday each calendar year in acknowledgement of days of historical significance. The employee with prior approval from their supervisor can use this floating holiday. any time during the year. This holiday has no cash value and will expire if unused. Section 13 — Vacation. a) Vacation Accrual. Vacation will be accrued when an employee is in pay status and will be credited on a bi-weekly basis. Total vacation accrual at any one time may not exceed three times the annual rate of accrual. Each eligible employee shall accrue vacation at the following rate for continuous service performed in pay status: 1. Less than nine (9) years - For employees completing less than nine (9) years continuous service; one hundred twenty (120) hours vacation leave per year. The City Manager may adjust the annual vacation accrual of employees hired on or after July 1, 2001 to provide up to forty (40) additional hours (i.e. to a maximum annual accrual of one hundred sixty (160) hours) for service with a prior employer. 2. Nine (9), but less than fourteen (14) years - For employees completing nine (9), but not more than fourteen (14) years continuous service; one hundred sixty (160) hours vacation leave per year. 3. Fourteen (14), but less than nineteen (19) years - For employees completing fourteen (14), but not more than nineteen (19) years continuous service; one hundred eighty (180) hours vacation leave per year. 4. Nineteen (19) or more years - For employees completing nineteen (19) or more years continuous service; two hundred (200) hours vacation leave per year. b) Vacation Use. Vacation use by police managers will be subject to approval by the Chief of Police or his/her designee. All reasonable efforts will be made to approve vacation requests while maintaining appropriate oversight of public safety operations. Page 7 of 23 Item 11: Staff Report Pg. 131 Packet Pg. 376 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of October 1, 2018 e- 30,22021January 1, 2023 — June 30, 2025 Agreement Employees shall complete six months continuous service before using accrued vacation leave. c) Vacation Cashout. Once each calendar year an employee may cash out eight (8) or more hours of vacation accrual in excess of eighty (80) hours from a minimum of eight (8) hours to a maximum of one hundred ( 120) hours, provided that the employee has taken at least eighty (80) hours of vacation in the previous twelve (12) months. Effective for the 2012 tax year and each subsequent year, employees must pre -elect an irrevocable number of vacation hours they will cash out during the upcoming year, up to a maximum of one hundred twenty (120) hours, prior to the start of the calendar year. Employees who do not pre- designate or elect to cash out hours will be deemed to have waived the right to cash out any vacation leave in the following year. Employees who pre -designate cash out amounts may request a cash out at any time in the designated tax year by submitting a cash out form to payroll. For employees who have not requested payment of pre -designated cash out amounts by November 1 of each year, Payroll will automatically cash out the pre -designated amount in a paycheck issued on or after November 1. d) Vacation Pay at Termination. Employees leaving the municipal service with accrued vacation leave shall be paid the amounts of accrued vacation to the date of termination. Payments for accrued vacation shall be at the employee's current rate of pay. e) Vacation Benefits for Deceased Employees. An employee who is eligible for vacation leave and who dies while in the municipal service shall have the amount of any accrued vacation paid to the employee's estate within thirty days. This proration will be computed at the last basic rate of pay. Section 14 — Long Term Disability. The City shall provide long term disability (LTD) insurance with a benefit of 2/3 monthly salary, up to a maximum benefit of $10,000 per month. The City shall pay the premium for the first $6,000 of base monthly salary. For employees whose base monthly salary exceeds $6,000, the employee shall pay the cost of the required premium based upon their monthly salary between $6,000 and $15,000. Section 15 — Dependent Care Assistance Program. The City will provide a Dependent Care Assistance Program for employees according to the provisions of the Federal Economic Recovery Act of 1981, Code Sections 125 and 129. The program will be available to representation unit employees beginning with pay period number 1 of 1992, and remain in effect subject to a reasonable minimum participation level and availability of third -party administrative services at a reasonable cost. Section 16 — Medical Flexible Spending Program. The City will provide a Medical Flexible Spending Program for Association members allowing them to use pre-tax deferrals for reimbursement of excess or uncovered medical, dental and vision expenses. The plan will follow existing plan guidelines and conform to all applicable laws and regulations. Page 8 of 23 Item 11: Staff Report Pg. 132 Packet Pg. 377 of 853 City of Palo Alto and PAPMA October 1, 2018 — Junc 30,22021January 1, 2023 — June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Section 17 — Employee Assistance Plan. The Employee Assistance Plan (EAP) provides employees with confidential personal counseling, work and family related issues, eldercare, substance abuse, etc. Section 18 — Commute Incentives and Parking. 1. Civic Center Parking. Employees assigned to Civic Center and adjacent work locations. The City will provide a Civic Center Garage parking permit. Employees hired after June 30, 1994 may initially receive a parking permit for another downtown lot, subject to the availability of space at the Civic Center Garage. 2. Alternative Commute Incentives: Employees who qualify may voluntarily elect one commute incentives, including but not limited to the following options, for those using an eligible commute alternative on 60% or more of their scheduled work days per month: a. Public Transit and Vanpool. The City provides tax-free commute incentives up to the current IRS limit, as may be amended from time to time, (currently $125/month) are available through the Commuter Check Direct (CCD) website for employees using Bay Area public transportation or riding in a registered vanpool at least 60% of their scheduled work days. Administration of the Commuter Check benefit shall be subject to the rules and regulations of the third- party administrator. b. Go Pass. The Go Pass program will offer civic center and other downtown -based employees a Caltrans Go Pass that allows unlimited rides on Caltrain in all zones seven days per week, to any City of Palo Alto employee. c. Bicycle. The City will provide employees with a tax-free incentive of $20 per month to eligible employees who ride a bicycle to work. d. Carpool. The City will provide with a taxable incentive of $30 per month to each eligible employee in a carpool with two or more licensed drivers. e. Walk. The City will provide employees with a taxable incentive of $20 per month to eligible employees who walk to work. Reopener. It is the City's interest to reduce single occupancy vehicle trips to the extent possible in order to address current challenges. During the term of this agreement, upon written request by the City, the parties shall meet and confer through the impasse process if necessary on changes to the City's commute incentive and parking program adopted by the City Council. ARTICLE V —RETIREMENT Section 19 — Retirement Benefits. A. "3%@50" Safety Retirement (Employees hired on or before December 7, 2012) For employees hired by the City of Palo Alto on or before December 7, 2012, the California Public Employees' Retirement System (CaIPERS) retirement formula benefit known as the "3 percent at 50 (3%@50)," per California Government Code section 21362.2, shall continue in effect with the final salary determination for such employees of the "single highest one (1) year period" per California Government Code section 20042. All unit members in the 3% @ 50 safety retirement plan shall pay the full 9% CaIPERS member contribution. This contribution is pre-tax to the extent allowable by law. Page 9 of 23 Item 11: Staff Report Pg. 133 Packet Pg. 378 of 853 City of Palo Alto and PAPMA Octobcr 1, 2018—Ju„c 30, 2o21January 1, 2023 —June 30, 2025 B. Second Tier "3% at 55" Safety Retirement ("Classic" Employees) Item 11 Attachment B PMA Memorandum of Agreement For those employees hired on or after December 8, 2012 through December 31, 2012 or are classic members as defined by CaIPERS, the CaIPERS retirement formula benefit known as the "3 percent at 55 (3%@55)," per Government Code section 21363.1, with the final salary determination for such employees of the "three (3) highest consecutive years" based on the highest average annual compensation earnable by the member during three (3) consecutive years of employment immediately preceding retirement or the three-year period otherwise designated by the member per Government Code section 20037. All unit members in the second tier shall pay the full 9% CaIPERS member contribution. This contribution is pre-tax to the extent allowable by law. C. Third Tier "2.7% at 57" Safety Retirement ("New" PEPRA Employees) For those employees hired on or after January 1, 2013, the CAPERS retirement formula benefit known as "2.7 percent at 57 (2.7% at 57)," with the final salary determination for such employees of the "three (3) highest consecutive years." The initial contribution rate will be at least 50% of the normal cost rate at retirement as determined by CAPERS. This contribution is pre-tax to the extent allowable by law. D. Additional Employee PERS Contributions Effective the pay period that includes June 30, 2017, all employees regardless of pension formula in this unit shall, in addition to the Member Contribution required, pay a3% towards the Employer share of Pension. Effective the pay period that includes June 30, 2021, all employees regardless of pension formula in this unit shall, in addition to the Member Contribution required, pay an additional 1% towards the Employer share of Pension for a total of 4%. Such contributions under CaIPERS 20516 will be provided on a pre-tax basis to the extent allowable by law. Section 20 — Retirement Medical Plan. A. Retiree Medical Coverage for Unit Employees Hired Before January 1, 2004: Monthly City -paid premium contributions for a retiree -selected PEMHCA optional plan will be made in accordance with the Public Employees' Medical and Hospital Care Act Resolution for employees hired before January 1, 2004 as outlined below. For employees who retire before June 1, 2012, the City will pay up to the monthly medical premium for the 2nd most expensive plan offered to PMA employees among the existing array of plans. For employees who retire on or after June 1, 2012, The City contribution towards retiree medical shall be the same contribution amount it makes for active City employees. Effective upon ratification and adoption of this Agreement (Scheduled for January 11, 2016), the City shall provide active unit employees who were hired before January 1, 2004 with a one-time opportunity to opt -in to retiree health benefits provided under California Government Code section 22893. Eligible employees who wish to exercise this option shall inform the People, Strategy, and Operations department of their election in writing no later than 90 days following the ratification and adoption of this Agreement. Page 10 of 23 Item 11: Staff Report Pg. 134 Packet Pg. 379 of 853 City of Palo Alto and PAPMA October 1, 2018 — Junc 30,22021January 1, 2023 — June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement B. 20 -Year Vesting Schedule for Retiree Medical Coverage for Unit Employees Hired on or After January 1, 2004 and employees who chose to opt -in to retiree health benefits provided under California Government Code section 22893 as outlined above: The retiree health benefit provided in California Government Code section 22893 shall apply to all employees hired on or after January I, 2004 and employees who opt -in as outlined above. Under this law, an employee is eligible to receive Fifty (50) percent of benefit after ten (10) years; each additional service credit year after Ten (10) years will increase employer credit by Five (5%) percent until Twenty (20) years is reached at which time employee is eligible for One Hundred (100%) percent of annuitant -only coverage and Ninety (90%) percent of the additional premium for dependents. Section 21— ICMA - Retirement Health Savings Plan. The City provides an ICMA retirement health savings plan for Association members. The ICMA retirement health savings plan is subject to applicable IRS rules and plan guidelines as well as any other applicable laws. Each Association member shall make a pre-tax contribution to the plan as follows: 1. Each member shall contribute 1% of their base salary bi-weekly into the plan. 2. Failure by each member to contribute will deem the health savings plan out of compliance with IRS and plan guidelines. 3. The administrative fee shall be paid by the Association member. The manner and amount of contributions may be periodically modified by agreement of both parties. Section 22 — Deferred Compensation Program. The City will provide a Deferred Compensation Program for employees according to the provisions of the plans and applicable IRS guidelines. ARTICLE VI — MANAGEMENT BENEFIT PROGRAM Section 23 — Professional Development Reimbursement. The purpose of this program is to provide employees with resources to improve and supplement their job and professional skills. Reimbursement for authorized self-improvement activities may be granted to each Association employee up to a maximum of five hundred dollars ($500) per fiscal year. A departmental training fund of one thousand dollars per employee ($1,000) will be established for subject matter, leadership or other training that the Department Director identifies as a need for employees within that Department. The following items are eligible for reimbursement: a) Civic and professional association memberships b) Conference participation and travel expenses, which must occur within the compensation plan period. c) Educational programs, books and videos, and tuition reimbursement designed to maintain or improve the employee's skills in performing his or her job or future job opportunities, should support the City's mission or be necessary to meet the educational requirements for Page 11 of 23 Item 11: Staff Report Pg. 135 Packet Pg. 380 of 853 City of Palo Alto and PAPMA October 1,2018— Junc 30, 2021January 1, 2023 — June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement qualification for employment. Permissible educational expenses are refresher courses, courses dealing with current developments, academic or vocational courses, as well as the travel expenses associated with the courses as defined by the City's travel expense report from the Policy & Procedures Manual Section 1-02 ASD. d) Professional and trade journal subscriptions not to exceed 12 months. Approval will be at discretion of department head and signature is required on reimbursement form. Amounts under this professional development program will be pro -rated in the first year of employment or promotion. Section 24 — Physical Examinations. All management and professional employees are eligible to receive an annual physical examination as follows: a) Use the periodic health exam benefit as provided under the PERS Health Plan option you have selected. Each of the PERS Health Plans provides for a periodic physical examination. The examination must be performed by your primary care physician — unless he/she refers you to another physician. b) The types of tests and the frequency of the tests cannot exceed AMA guidelines. The guidelines are a suggested minimum based on research studies concerning preventative care. The judgment of your physician is the final determinant for your care. c) Any additional necessary asymptomatic tests that are required by your physician that are not covered by your health plan will be reimbursed by the City. Any symptomatic tests will be covered under your PERS Health Plan. The Reimbursement for Periodic Physical Exam Form is available on the Human Resources Intranet site. This benefit will not be pro -rated. Section 25 — Excess Benefit. This benefit is designed to meet the requirements of Section 125 of the Internal Revenue Code. Every calendar year, each employee will be provided with $2,500 annually that they can designate among the following options: a) Medical Flexible Spending Account (Medical FSA). Provides reimbursement for excess medical/dental/vision, or expenses that are incurred by employees and their dependents which are not covered or reimbursed by any other source, including existing City -sponsored plans. This includes prescribed medications and co -payments as well as over-the-counter drugs, including: antacids, allergy medicines, pain relievers and cold medicines. However, nonprescription dietary supplements (e.g. vitamins, etc.) toiletries (e.g. toothpaste), cosmetics (e.g. face cream), and items used for cosmetic purposes (e.g. Rogaine) are not acceptable. b) Dependent Care Flexible Spending Account (Dependent Care FSA). Provides reimbursement for qualified dependent care expenses under the City's Dependent Care Assistance Program (DCAP), subject to the following limits: Dependent care expenses will be reimbursed only to the extent that the amount of such expenses reimbursed under this Management Benefit Program, when added to the amount (if any) of annual dependent care Page 12 of 23 Item 11: Staff Report Pg. 136 Packet Pg. 381 of 853 City of Palo Alto and PAPMA Oetebcr 1, 2018—Ju„c 30,202-1January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement expenses that the participant has elected under the City's Flexible Benefits Plan, do not exceed the maximum permitted under the DCAP. 1) The annual amount submitted for reimbursement cannot exceed the income of the lower -paid spouse. 2) The expenses must be employment -related expenses for the care of one or more dependents who are under 13 years of age and entitled to a dependent deduction under Internal Revenue Code section 151 (e) or a dependent who is physically or mentally incapable of caring for himself or herself. 3) The payments cannot be made to a child under 19 years of age or to a person claimed as a dependent. 4) If the services are provided by a dependent care center, the center must comply with all state and local laws and must provide care for more than six individuals (other than a resident of the facility). 5) Dependent care expenses not submitted under this section are eligible under the City Dependent Care Assistance Plan (DCAP). However, the maximum amount reimbursed under DCAP will be reduced by any amount reimbursed under the Excess Benefit Plan. c) Non-taxable Professional Development Spending Account. Provides reimbursement for Non -Taxable professional development expenses (e.g., job -related training and education, seminars, training manuals, etc.) to the extent they are not paid or reimbursed under any other plan of the City. d) Gym or Health Club Memberships. Provides reimbursement for annual or monthly memberships, including personal trainers. Reimbursement of this expense is taxable to the employee. e) Deferred Compensation. The $2,500 excess benefit provided in this section made on a one-time contribution basis on election by the employee towards the employee's City -sponsored 457 Deferred Compensation plan with either ICMA-RC or the Hartford. Amounts designated by employees to either the Medical FSA, Dependent Care FSA, or Professional Development options are done so on a "use -it -or -lose -it" basis. This means that any amounts designated and not used by the end of the calendar year ( or end of the extended grace period for the medical FSA) will be forfeited by the employee and returned to the plan. Specified amounts under this benefit will be applied on a pro -rata basis for employees who are part- time or who are in a management or professional pay status for less than the full fiscal year. Such benefits will be pro -rated in the first year of employment (based on hire date) but will not be pro- rated upon separation of employment. Section 26 — Management Annual Leave. At the beginning of each calendar year regular management employees will be credited with 80 hours of management annual leave. This leave is granted in recognition of the extra hours management employees work over their regular schedule. Page 13 of 23 Item 11: Staff Report Pg. 137 Packet Pg. 382 of 853 City of Palo Alto and PAPMA October 1,2 2018 0, 2021January 1,2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement This leave may be taken as paid time off, added to vacation accrual (subject to vacation accrual limitations), taken as cash or taken as deferred compensation. When time off is taken under this provision, I 0 -hour shift workers will receive one shift off for each 8 hours charged; 24 -hour shift workers will receive one-half shift off for each 8 hours charged. Entitlement under this provision will be reduced on a prorated basis for part-time status, or according to the number of months in paid status during the fiscal year; employees who have used more than the pro -rated share at the time they leave City service shall be required to repay the balance or have it deducted from their final check. Unused balances as of the end of the calendar year will be paid in cash unless a different option as indicated above is elected by the employee. Section 27 - POST Certificate/Incentive Management POST Certification: Employees that qualify for the Management POST certificate will receive a four percent (4%) increase to base pay effective the first full pay period after the employee provides proof of submission of the required paperwork to POST. ARTICLE VII — OPERATIONAL ISSUES Section 28-7— Management Assignments. The Chief of Police or his/her designee shall have the authority to make management assignments at his or her discretion. Where possible, these assignments should take into account the needs of the organization, development of the employee and individual employee desires. Section 289 — Basic Work Schedules. Generally, police managers will be expected to work flexible schedules and reasonably adjust their hours to oversee their employee groups, manage 24/7 law enforcement operations, perform routine work, complete daily assignments, and occasionally attend meetings or other events outside their normal work shifts. Basic work schedules will be the 4/10 schedule. Section 2-9-30 — On Duty Workouts. Police managers who complete the yearly Wellness Program requirements may participate in an on -duty workout for a reasonable period as determined by the Chief, as long as it does not interfere with the performance of the employee's job duties, for which the employee will remain accountable. Applicable guidelines and conditions are outlined in the Department's Wellness Program Policy which the City may change from time to time. Section 310 —Take Home Emergency Response Vehicles. Subject to approval by the City Manager and the Police Chief, Police Captains will continue the current take home emergency response vehicle program which allows for the immediate and emergent response to public safety incidents involving the City. The specific use and restrictions for driving these vehicles shall adhere to the guidelines outlined in the then current version of City Policy and Procedure 4-01. Section 342 — Modified Duty Assignments. In cases of non -work -related injury, illness or pregnancy, an employee, upon approval of the department head, City Risk Manager and the employee's doctor, may return to work or continue work with doctor -approved limited or alternative duty pursuant to Policy & Procedure 2-04. Approval for reasonable accommodation such as limited/alternative duty Page 14 of 23 Item 11: Staff Report Pg. 138 Packet Pg. 383 of 853 City of Palo Alto and PAPMA October 1, 2018 — June 30,22021January 1, 2023 — June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement shall be based upon department ability to provide work consistent with medical limitations and the length of time of the limitations. The City doctor may be consulted in determining work limitations. Any assignment to a limited/alternative duty will be on a temporary basis. Section 32-3 — Meal Allowance. Police managers attending night meetings will be eligible for meal re-imbursement under the guidelines set forth in the then current version of City Policy and Procedure No. 1-02. Section 343— Uniforms. a) The City will supply complete uniforms to all sworn personnel. All uniform items are the property of the City. One complete uniform consists of: (I) three pair of trousers, (2) three short -sleeved shirts with patches and zippers if desired, (3) three long-sleeved shirts with patches and zippers if desired, (4) three cotton or two synthetic fiber turtleneck shirts, (5) hat, (6) duty jacket with patches, (7) dress jacket with patches, (8) necktie, and (9) rain gear. b) At the time of initial employment, every sworn employee will be issued one complete uniform. Uniform items will be replaced on an as -needed basis subject to verification by management. c) The City shall provide uniform cleaning for sworn representation unit personnel. d) Personnel are accountable for all uniform items issued to them. If a particular item is lost or damaged due to employee negligence, the employee will be required to reimburse the City for value of the item(s) lost or damaged. e) The City shall reimburse employees for the full cost of job -related boots upon verification of such purchase by the employees. The City will make the reimbursement only upon proof that the previous boots have become unserviceable due to wear or damage. (Job -related boots shall mean well -constructed, high topped boots that provide full ankle and foot support, which are selected from list agreed to by Management and the Association.) Employees are responsible for the full cost of any low -top, black shoes that are worn with the uniform. ARTICLE VIII— ASSOCIATION AGREEMENTS Section 354— Association Security. a) When a person is hired in any of the covered job classifications, the City shall notify that person that the Association is the recognized bargaining representative for the employee in said Unit and give the employee a current copy of the Memorandum of Agreement. b) If there is no disruption of work, members of the Association Board of Directors may use a reasonable amount of on -duty time without loss of pay to meet with Management specifically related to representation of employees. Such release time must be cleared in advance by the Chief (or his/her Designee) who is a member of management. For purposes of this section, representation shall include: Page 15 of 23 Item 11: Staff Report Pg. 139 Packet Pg. 384 of 853 City of Palo Alto and PAPMA October 1, 2018 — June 30,22021January 1, 2023 — June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement (i) Meetings with represented employees or management related to a grievance or disciplinary action, including investigation and preparation time. (ii) A meeting with management related to benefits, working conditions or other terms and conditions of employment. Section 3-56 —Association Representative Access to Work Locations. Employee and non -employee representatives of the Association will be granted access to City work locations to conduct business related to the administration or negotiation of the parties' Memorandum of Understanding, as long as advance arrangements for such visits have been made with the affected department manager and no disruption of work occurs. Advance arrangement shall normally include not less than one hour's notice in the case of an employee Association representative, two hours in the case of non - employee Association representatives. Non -employee representatives must also notify the Human Resources Department Manager (or designee) of the time, date and location of the representative's intended visit. Section 376— Release Time. The Association President or his or her -designee in the representation unit may use a reasonable amount of time without loss of pay for matters related to the bargaining process, labor relations, and administration of the MOA, violations of the MOA, grievances, disciplinary issues, and training for association members. Release time shall normally be approved in advance by the department head and must not detract from the performance of the representative's City job duties, for which he or she will remain accountable. Section 38-7— Use of City Facilities for Association Business. Any use of City facilities shall be governed by the then current version of City Policy and Procedure No. 4-07. Section 399— Payroll Deduction. The City shall deduct Association membership dues and any other mutually agreed upon payroll deduction from the bi-weekly pay of member employees. The dues deduction must be authorized in writing by the employee on an authorization card acceptable to the City and the Association. The City shall remit the deducted dues to the Association as soon as possible after deduction. ARTICLE IX — LEAVE PROGRAMS Section 4039 — Sick Leave. a) Statement of Policy. Sick leave shall be allowed and used only in case of actual personal sickness or disability, medical or dental treatment, or as authorized in Subsection (i), personal business chargeable to sick leave. Up to 8 days sick leave per year may be used for illness in the immediate family (spouse, child, parent, parent -in-law, brother, sister, registered domestic partner, or close relative residing in the household of the employee). b) Eligibility. Regular and part-time employees shall be eligible to accrue and use sick leave. Page 16 of 23 Item 11: Staff Report Pg. 140 Packet Pg. 385 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of QetebeF 1, 201$�IRe 3oz2021January 1, 2023 — June 30, 2025 Agreement c) Accrual. Sick leave shall be accrued bi-weekly provided the employee has been in a pay status for 50 percent or more of a bi-weekly pay period. Sick leave shall be accrued at the rate of 3.7 hours per bi-weekly pay period. d) Accumulation. Sick leave accrual accumulation shall be limited to 1,000 hours with no payoff provision for unused balance at termination. e) Use. Sick leave may be used as needed and approved, to the point of depletion, at which time the employee will no longer receive pay for sick leave. A new employee may, if necessary, use up to forty-eight hours or shift equivalent of sick leave at any time during the first six months of employment. Any negative balances generated by such utilization will be charged against future accrual or deducted from final paycheck in the event of termination. An employee who has been disabled for 60 consecutive days and who is otherwise eligible both for payment under the long-term disability group insurance coverage and accrued sick leave benefits may, at his/her option, choose either to receive the long-term disability benefits or to utilize the remainder of his/her accrued sick leave prior to applying for long-term disability benefits. Sick leave will not be granted for illness occurring during any leave of absence other than sick leave, unless the employee can demonstrate that it was necessary to come under the care of a doctor while on such other leave of absence. When an employee finds it necessary to be absent for any reason, he/she should contact the Department as soon as possible, but no later than the start of the scheduled shift on the first working day of absence, and shall regularly report by the start of each subsequent shift unless hospitalized. Such reports may be subject to written documentation if there is reasonable evidence that sick leave abuse has occurred. Sick leave shall not be granted unless such report or advance accounting has been made, provided, however, that the department head may grant exception to this policy where the circumstances warrant. Documentation may also be required if there is a reasonable basis to believe that the employee may not be medically fit to return to work. f) Depletion of Sick Leave Benefits. Upon depletion of sick leave or the beginning of the period to be covered by payments under the long-term disability group insurance coverage, whichever comes first, an employee may be granted a medical leave of absence without pay for a period not exceeding sixty days. If the employee is unable to return to work at the end of this period, he/she must request further medical leave which will be subject to the approval of the City Manager. If further leave is granted, the employee must notify the City of intent to return to work every thirty days. If further leave is not granted, the employee's service with the City shall be considered terminated. g) Forfeiture Upon Termination. Page 17 of 23 Item 11: Staff Report Pg. 141 Packet Pg. 386 of 853 City of Palo Alto and PAPMA Oetebcr 1, 2018 —Ju„c 30, 2021January 1, 2023 — June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Employees leaving the municipal service shall forfeit all accumulated sick leave, except as otherwise provided by law. In the event that notice of resignation is given, sick leave may be used only through the day which was designated as the final day of work by such notice. h) Personal Business Leave Chargeable to Sick Leave. Employees may use up to twenty (20) hours of sick leave per calendar year for personal business. The scheduling of such leave is subject to the approval of the appropriate level of management. Section 418— Voluntary Catastrophic Leave Program. If permitted by agreement between the City and the Palo Alto Police Officers' Association (P.O.A.) members of the Palo Alto Police Managers' Association representation unit may participate in the "Voluntary Leave Program" applicable to the P.O.A. representation unit to assist in maintaining the pay of an employee who is eligible by virtue of a qualifying catastrophic medical condition. Such participation, when authorized by City- P.O.A. agreement, shall be allowed only as long as the donors remain anonymous (unless disclosure is required by law). Otherwise, said program shall be governed by the conditions and restrictions set forth in the City-P.O.A. Memorandum of Agreement. Section 4-12 — Leave of Absence With Pay. The City Manager may grant a regular employee under his/her control a leave of absence with pay for a period not exceeding thirty calendar days for reasons he/she deems adequate and in the best interest of the City. The City Council may grant a regular employee a leave of absence with pay for a period not to exceed one year for reasons the Council considers adequate and in the best interest of the City. a) Subpoenas: leave of absence. Regular employees who are subpoenaed in their capacity as a City employee to appear as witnesses on behalf of the State of California or any of its agencies may be granted leaves of absence with pay from their assigned duties until released. The employee shall remit all fees received for such appearances to the City within thirty days from the termination of his or her services as a witness. Compensation for mileage or subsistence allowance shall not be considered as a fee and shall be retained by the employee. b) Employee's time off to vote. Pursuant to Elections Code section 14000, when the employee is unable to vote outside of the employee's work hours, up to two (2) hours' time off with pay to vote at any general or direct primary election shall be granted at the beginning or end of the employee's scheduled shift, whichever allows the most free time for voting and the least time off from the regular working shift. Such time off with pay to vote shall only be granted if the employee provides at least two working days' notice that time off for voting is desired, unless the nature of the employee's schedule prevents the employee from anticipating the need for time off to vote. c) Leave of absence; death in fami Leave of absence with pay of three (3) days shall be granted an employee by the head of his or her department in the event of death in the employee's family, but shall not exceed a total of six (6) paid work days per calendar year. For purposes of this section, family is defined as wife, husband, Page 18 of 23 Item 11: Staff Report Pg. 142 Packet Pg. 387 of 853 City of Palo Alto and PAPMA Oetebcr 1, 2018 —Ju,c 30, 2021January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement son, step -son, son-in-law, daughter, step -daughter, daughter-in-law, father, step -father, father-in- law, mother, step -mother, mother-in-law, brother, step -brother, brother-in-law, sister, step -sister, sister-in-law, grandmother, grandmother -in-law, grandfather, grandfather -in-law, grandchildren, aunt, uncle, niece, nephew, registered domestic partner, or a close relative residing in the household of the employee. Such leave shall be at full pay and shall not be charged against the employee's accrued vacation or sick leave. Requests for leave in excess of three (3) days shall be subject to the approval of the City Manager. Approval of additional leave will be based on the circumstances of each request with consideration given to the employee's need for additional time off. d) Jury duty: leave of absence. Employees required to report for jury duty shall be granted a leave of absence with pay from their assigned duties until released by the court, provided the employee remits to the City all fees received for such duties other than mileage or subsistence allowances within thirty days from the termination of his/her jury service. Section 432— Leave of Absence Without P a) Disability. Leaves of absence without pay may be granted in cases of disability not covered by sick leave. Pregnancy will be considered as any other disability. Leaves of absence for disability are subject to physicians' verification including diagnosis and medical work restriction. b) Other leaves. Leaves of absence without pay is at the discretion and approval of management. Unauthorized leave of absence/job abandonment may result in disciplinary action up to and including termination of employment. During unpaid leaves of absence for disability or other reasons, the employee may elect and the City may require the employee to use accrued paid vacation and sick leave in a manner consistent with state and federal law. All leaves without pay must be approved in advance and in writing by the department to be effective. c) Approval of department head. Leave of absence without pay for one week or less may be granted by the department head, depending on the merit of the individual case. d) Approval by City Manager. Leave of absence without pay in excess of one week's duration may be granted by the City Manager on the merit of the case, but such leave shall not exceed twelve months' duration. e) Absence without leave. Unauthorized leave of absence shall be considered to be without pay, and reductions in the employee's pay shall be made accordingly. Unauthorized leave of absence may result in termination of employment. Page 19 of 23 Item 11: Staff Report Pg. 143 Packet Pg. 388 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of Octobcr 1, 2018 — Ju,c 30, 2p2lJanuary 1, 2023 — June 30, 2025 Agreement f) Leave of absence; death outside the immediate family. Leave without pay may be granted a regular employee by his/her department head in the event of death to family members other than one of the immediate family, such leave to be granted in accordance with Subsections (b), (c), (d) and (e). g) Military leave of absence. State and federal law shall govern the granting of military leaves of absence and the rights of employees returning from such absence. ARTICLE X — EMPLOYEE/EMPLOYER RELATIONS Section 444— Probationary Period. a) All original appointments to full-time or part-time regular municipal service positions shall be tentative and subject to a probationary period of twelve months for management employees b) The probationary period shall be regarded as part of the testing process and shall be utilized for closely observing the employees work, for securing the effective adjustment of a new employee to his/her position, and for rejecting any probationary employee whose performance does not meet the acceptable standards of work. c) A report of performance of each probationary employee shall be made by the department head and shown to the probationary employee on or before expiration of the probationary period. d) During the probationary period a new employee may be suspended, demoted or terminated at any time by the appointing authority without cause and without right of appeal or to submit a grievance. Section 454— Disciplinary Action and Unsatisfactory Work or Conduct. Disciplinary action shall be governed by the City's Merit Rules and Regulation, Palo Alto Police Department Policy 340 on Conduct, the Palo Alto Police Department Internal Affairs and Complaint Investigations Guidelines, and the Police Officer Procedural Bill of Rights Act. Section 46-5— Grievance Procedure. a) The City and the Association recognize that early settlement of grievances is essential to sound employee -employer relations. The parties seek to establish a mutually satisfactory method for the settlement of employee grievances, or Association grievances, as provided for below. In presenting a grievance, the aggrieved and/or his or her representative is assured freedom from restraint, interference, coercion, discrimination or reprisal. b) Definition. A Grievance is: 1. An unresolved complaint or dispute regarding the application or interpretation of this Memorandum of Agreement 2. An appeal from a disciplinary action of any kind against an employee covered by this Memorandum of Agreement. c) Access to the Grievance Procedure. Except as otherwise provided in the Memorandum of Agreement for probationary employees, all employees represented by the Association may file and process a grievance. Such aggrieved employees may be represented by the Page 20 of 23 Item 11: Staff Report Pg. 144 Packet Pg. 389 of 853 City of Palo Alto and PAPMA October 1, 2018— Junc 30,22021January 1, 2023 — June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Association or may represent themselves in preparing and presenting their grievance at any level of review. The Association may file a grievance when an Association right under this Memorandum of Agreement not directly related to an individual employee becomes subject to dispute. d) Conduct of Grievance Procedure. 1. The time limits specified in this Article may be extended by written mutual agreement of the aggrieved employee or the Association and the reviewer concerned. 2. If a decision is not rendered within a stipulated time limit, the aggrieved employee may immediately appeal to the next step. 3. The grievance will be considered settled if the decision at any step is not appealed within the specified time limit. 4. The aggrieved employee or the Association and Human Resources Director may mutually agree in writing to waive any step of the grievance procedure. 5. Written grievances shall be submitted on forms provided by the City or on forms that are mutually agreeable to the City and the Association. 6. Any retroactive monetary arbitrator award or settlement by mutual agreement shall not extend more than ninety (90) days before the date that the grievance was filed in writing at Step 2 below. The following steps shall apply: Step I. The aggrieved employee will first attempt to resolve the grievance through informal discussions with his or her immediate supervisor by the end of the tenth working day following the discovery of or the incident upon which the grievance is based. Every attempt will be made to settle the issue at this level. (Note: For purposes of time limits, the working days are considered to be Monday through Friday, exclusive of City holidays.) Appeals of disciplinary action should be processed through the procedures outlined in Step 2-3 of the Grievance Procedure. Step 11. If the grievance is not resolved through the informal discussion, the employee will reduce the grievance to writing and submit copies to the department head or his/her designee within ten (10) working days of the discussion with the immediate supervisor. The department head or his/her designee shall have ten (10) working days from the receipt of a written grievance to review the matter and prepare a written statement. Step III. If the grievance is not resolved at Step II, the aggrieved employee may choose between final and binding resolution of the grievance through appeal to the City Manager or through appeal to final and binding grievance arbitration. For the term of this Memorandum of Agreement, appeals to final and binding arbitration may be processed only with Association approval. All Step III appeals must be filed in writing at the Human Resources Department Office within ten (10) working days of receipt of the Step II appeal. Page 21 of 23 Item 11: Staff Report Pg. 145 Packet Pg. 390 of 853 City of Palo Alto and PAPMA October 1, 2O18 — Junc3O,2021January 1, 2023 — June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement If the aggrieved employee elects final and binding resolution by the City Manager, the City Manager will choose the methods he or she considers appropriate to review and settle the grievance. The City Manager shall render a written decision to all parties directly involved within ten working days after receiving the employee's appeal. If the aggrieved employee elects final and binding arbitration in accordance with this provision, the parties shall mutually select an arbitrator. In the event the parties cannot agree on an arbitrator, they shall mutually request a panel of five arbitrators from the California State Conciliation Service or from the American Arbitration Association if either party objects to the State Conciliation Service, and select an arbitrator by the alternate strike method. The arbitrator shall have jurisdiction and authority only to interpret, apply, or determine compliance with the provisions of this Memorandum of Agreement and such Merit System Rules, regulations, policies, procedures, City ordinances, resolutions relating to terms or conditions of employment, wages or fringe benefits, as may hereafter be in effect in the City insofar as may be necessary to the determination of grievances appealed to the arbitrator. The arbitrator shall be without power to make any decision: 1) Regarding matters of interest. 2) Contrary to, or inconsistent with or modifying in any way, the terms of this Memorandum of Agreement. 3) Granting any wage increases or decreases. The arbitrator shall be without authority to require the City to delegate or relinquish any powers which by State law or City Charter the City cannot delegate or relinquish. If either party seeks arbitration and the other party claims the matter is not subject to the arbitration provisions of this Memorandum of Agreement, the issue of arbitrability shall first be decided by the arbitrator using the standards and criteria set forth in this section and without regard to the merits of the grievance. If the issue is held to be arbitrable, the arbitration proceedings will be recessed for up to five working days during which the parties shall attempt to resolve the grievance. If no resolution is reached, the arbitrator will resume the hearing and hear and resolve the issue on the merits. Copies of the arbitrator's decision shall be submitted to the City, the aggrieved employee and the Association. All direct costs emanating from the arbitration procedure shall be shared equally by the City and the aggrieved employee or the Association. Section 47ra— No Strikes. The Association, its representatives, or members, shall not engage in or cause, instigate, encourage, sanction, or condone a strike, withholding of services, concerted abuse of leave of absence provisions, work stoppage or work slowdown of any kind. No employee shall refuse to cross any picket line in the conduct of Police Department business, nor shall the Association, its representatives, or members discriminate in any way toward anyone who refuses to participate in a strike, or any of the job actions cited above. Page 22 of 23 Item 11: Staff Report Pg. 146 Packet Pg. 391 of 853 City of Palo Alto and PAPMA Octobcr 1,2018-- Junc 30,22021January 1, 2023 — June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Section 487-- Reduction in Workforce. In the event of reductions in force, they shall be accomplished wherever possible through attrition. If the work force is reduced in the Association, the City will give an employee impacted by a potential lay off 30 days' notice prior to any reduction in force. ARTICLE XI — LOOKING FORWARD Section 489 — Full Understanding. This Memorandum of Agreement contains the full and entire understanding of the parties regarding the matters set forth herein. The parties agree that they shall each carry out their responsibilities under the M0A in good faith. Section 5049— Legal Compliance/Severability. If any provision herein contained is rendered or declared invalid by reason of existing State or Federal legislation or by reason of State Supreme Court or U. S. Supreme Court ruling, such invalidation of such part or portion of this Memorandum of Agreement shall not invalidate the remaining portions hereof, and they shall remain in full force and effect, insofar as such remaining portions are severable. Section 510— Duration. The term of this Agreement shall commence on October 1, 20l8become effective upon ratification and adoption by both parties and shall expire on June 30, 2025-1. Page 23 of 23 Item 11: Staff Report Pg. 147 Packet Pg. 392 of 853 Item 11 Attachment B PMA Memorandum of Agreement Memorandum of Agreement City of Palo Alto and Palo Alto Police Management Association (PAPMA) January 1, 2023 —June 30, 2025 CITY OF PALO ALTO Item 11: Staff Report Pg. 148 Packet Pg. 393 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 TABLE OF CONTENTS Item 11 Attachment B PMA Memorandum of Agreement ARTICLE I PREAMBLE................................................................................................................... 4 Section1 — Recognition..................................................................................................................... 4 Section 2 — Non-Discrimination......................................................................................................... 4 ARTICLE II COMPENSATION........................................................................................................ 4 Section3 Salary............................................................................................................................... 4 Section 4 — Working Out of Class Pay............................................................................................... 5 Section 5 Night Shift Differential................................................................................................... 5 ARTICLE III HEALTH CARE BENEFITS....................................................................................... 5 Section 6 — Active Employee Health Plans........................................................................................ 5 Section7 Dental Benefits................................................................................................................ 6 Section8 Vision Care..................................................................................................................... 6 Section 9 — Basic Life Insurance....................................................................................................... 6 Section 10 Supplemental Life And AD&D Insurance.................................................................... 6 Section 11 Effective date of Coverage for New Employees........................................................... 6 ARTICLE IV - OTHER BENEFITS..................................................................................................... 7 Section 12 Holiday Compensation................................................................................................. 7 Section13 Vacation........................................................................................................................ 7 Section 14 — Long Term Disability.................................................................................................... 8 Section 15 — Dependent Care Assistance Program........................................................................... 8 Section 16 — Medical Flexible Spending Program............................................................................. 8 Section 17 — Employee Assistance Plan............................................................................................. 8 Section 18 — Commute Incentives and Parking.................................................................................. 9 Reopener............................................................................................................................................. 9 ARTICLE V -RETIREMENT............................................................................................................... 9 Section 19 — Retirement Benefits....................................................................................................... 9 Section 20 — Retirement Medical Plan............................................................................................ 10 Section 21 — ICMA - Retirement Health Savings Plan................................................................... 11 Section 22 — Deferred Compensation Program............................................................................... 11 ARTICLE VI - MANAGEMENT BENEFIT PROGRAM................................................................. 11 Section 23 — Professional Development Reimbursement................................................................ 11 Section 24 — Physical Examinations............................................................................................... 12 Page 2 of 23 Item 11: Staff Report Pg. 149 Packet Pg. 394 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Section25 Excess Benefit............................................................................................................. 12 Section 26 — Management Annual Leave........................................................................................ 13 ARTICLE VII - OPERATIONAL ISSUES....................................................................................... 14 Section 27 — Management Assignments.......................................................................................... 14 Section 28 — Basic Work Schedules................................................................................................ 14 Section 29 — On Duty Workouts...................................................................................................... 14 Section 30 — Take Home Emergency Response Vehicles................................................................ 14 Section 31 — Modified Duty Assignments....................................................................................... 14 Section 32 — Meal Allowance......................................................................................................... 15 Section33 — Uniforms...................................................................................................................... 15 ARTICLE VIII - ASSOCIATION AGREEMENTS........................................................................... 15 Section 34 — Association Security................................................................................................... 15 Section 35 — Association Representative Access to Work Locations ..............................................16 16 Section36 — Release Time............................................................................................................... 16 Section 37 — Use of City Facilities for Association Business.......................................................... 16 Section 38 — Payroll Deduction........................................................................................................ 16 ARTICLE IX - LEAVE PROGRAMS................................................................................................ 16 Section39 — Sick Leave................................................................................................................... 16 Section 40 — Voluntary Catastrophic Leave Program...................................................................... 18 Section 41 — Leave of Absence With Pay....................................................................................... 18 Section 42 — Leave of Absence Without Pay................................................................................... 19 ARTICLE X - EMPLOYEE/EMPLOYER RELATIONS.................................................................. 20 Section 43 — Probationary Period..................................................................................................... 20 Section 44 — Disciplinary Action and Unsatisfactory Work or Conduct .........................................20 20 Section 45 — Grievance Procedure................................................................................................... 20 Section46 — No Strikes.................................................................................................................... 22 Section 47 — Reduction in Workforce............................................................................................. 22 ARTICLE XI - LOOKING FORWARD............................................................................................. 23 Section 48 — Full Understanding...................................................................................................... 23 Section 49 — Legal Compliance/Severability................................................................................... 23 Section50 — Duration....................................................................................................................... 23 APPENDIX A-1....................................................................................Error! Bookmark not defined. Page 3 of 23 Item 11: Staff Report Pg. 150 Packet Pg. 395 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of January 1, 2023 —June 30, 2025 L Agreement 2023 - 2025 MEMORANDUM OF AGREEMENT City of Palo Alto and Palo Alto Police Managers' Association ARTICLE I — PREAMBLE This Memorandum of Agreement is pursuant to and subject to Sections 3500-3510 of the Government Code of the State of California, the Charter of the City of Palo Alto, and the City of Palo Alto Merit System Rules and Regulations. This Memorandum of Agreement made and entered into at Palo Alto, California, by and between the City of Palo Alto, a municipal corporation (hereinafter referred to as "City") and the Palo Alto Police Managers' Association (hereinafter referred to as "Association"), is intended to define agreements reached during the meet and confer process concerning wages, hours, working conditions, and other terms and conditions of employment for the represented group of employees. Section 1— Recognition. On October 29, 2009, the City of Palo Alto certified the Palo Alto Police Managers' Association (Association) as a bargaining unit within the City. The City recognizes the Association as the exclusive representative of an employee group consisting solely of Police Lieutenants and Police Captains who are regularly employed by the City and others who might be amended into the representation unit from time to time under existing law and the Merit System Rules and Regulations. Section 2 — Non -Discrimination. The City and the Union agree that there shall be no discrimination of any kind because of age (over 40), race, creed, color, religion national origin, ancestry), veterans status, physical or mental disability, marital status, sexual orientation, sex (sexual, gender based or gender identity, pregnancy/childbirth), medical condition (cancer related and genetic characteristics), or on any other basis prohibited by applicable federal and State law against any employee or applicant for employment. The Association shall cooperate with the City, to the extent required by federal and State laws and regulations, in furthering the objective of Equal Employment Opportunities, as defined by Federal and State regulations. ARTICLE II— COMPENSATION Section 3 — Salary a) Market Adjustment: Effective the first full pay period including City Council Adoption, salary ranges of all bargaining unit classifications will be increased by five percent (5.0%), which is sufficient to bring them to the top quartile of market median as determined by the City's market study. b) General Salary Increase: Effective the first full pay period following July 1, 2023, salary ranges of all represented classifications will be increased by four percent (4.0%). Page 4 of 23 Item 11: Staff Report Pg. 151 Packet Pg. 396 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement c) General Salary Increase: Effective the first full pay period following July 1, 2024 salary ranges of all represented classifications will be increased by four percent (4.0%). d) Flexible Compensation: Effective the first full pay period following City Council Adoption, and in lieu of an increase to the City contribution towards medical premiums, each represented classification will have their monthly income increased by $100. e) Flexible Compensation: Effective the first full pay period following January 1, 2024, and in lieu of an increase to the City contribution towards medical premiums, each represented classification will have their monthly income increased by an additional $100 (Total of $200). Section 4— Working Out of Class Pay. Lieutenants or Captains fulfilling the role of an acting captain, assistant chief, or chief for individual shifts and/or a number of hours within a shift, shall not receive additional compensation. Periodically working in this capacity shall be deemed a basic duty within an employee's job description. Lieutenants and Captains working out of class for a period of four or more consecutive shifts shall be compensated at the start of the pay period with premium pay determined by the Chief of Police or his or her designee up to 10% of base pay. In accordance with Government Code 20480, an employee assigned to work in an out -of -class appointment may not exceed 960 hours worked in the appointment within a fiscal year if the employee is appointed to an upgraded position or higher classification that is vacant during recruitment for a permanent appointment. This limitation does not apply to a position that is temporarily available due to a leave of absence. Section 5 — Night Shift Differential. Night shift differential shall be paid at the rate of 5% to all personnel for all hours worked between 6:00 p.m. and 8:00 a.m. ARTICLE III - HEALTH CARE BENEFITS Section 6 — Active Employee Health Plans. The maximum City contribution towards medical premiums for eligible full time employees per employee category shall be up to a maximum of the following for any plan: Medical Premium PEMHCA Total Maximum City Category Contribution* Contribution (inclusive of PEMHCA contribution) effective First month following City Council Adoption Employee Only $151.00 $871 Employee plus one $151.00 $1,742 Employee Family $151.00 $2,260 Page 5 of 23 Item 11: Staff Report Pg. 152 Packet Pg. 397 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of January 1, 2023 —June 30, 2025 L Agreement *Total City contribution includes both PEMHCA minimum contributions pursuant to Government Code section 22892 and an additional City contribution necessary to pay the cost of medical premiums up to the amount listed in the "Total maximum City contribution" columns above. Section 7 — Dental Benefits. a) The City will maintain the present level of benefits on the City -sponsored dental program for current employees and their dependents, except that the maximum benefits per calendar year shall be $2,000 effective in 1988. Dental Coverage shall include composite (tooth colored) fillings for all teeth. Effective July I, 2007, the City will provide 50% of reasonable charges, $2,000 lifetime maximum orthodontic benefit for representation unit employees and their dependents. b) Dependents will include domestic partners, as defined in the Active Employee Domestic Partners Section below. c) During the term of the agreement, the City and the Union will work together to review benefit provisions of the City's self -funded dental program. The purpose of this review is to contain benefit cost increases. Joint recommendations will be prepared for discussion during successor agreement negotiations. d) Dental implants in conjunction with one or more missing natural teeth, and removal of dental implants will be covered as a Major Dental Service at 50% usual, customary and reasonable (UCR). Section 8 — Vision Care. The City will offer vision care coverage for employees and dependents. Coverage is equivalent to $20 deductible Plan A under the Vision Service Plan, with monthly premiums paid by the employer. Dependents will include domestic partners, as defined in the Active Employee Domestic Partners Section below. Section 9 — Basic Life Insurance. The City shall provide a basic group term life insurance with Accidental Death and Dismemberment (AD&D) coverage, in an amount equal to the employee's annual basic pay (rounded to the next highest $1,000) at no -cost to the employee. AD&D pays an additional amount equal to the employee's annual basic pay (rounded to the next highest $1,000). Section 10 — Supplemental Life And AD&D Insurance. An employee may, at his/her cost, purchase additional life insurance and additional AD&D coverage equal to one -or two-times his or her annual salary. The maximum amount of life insurance available to the employee is up to $325,000 and the maximum amount of AD&D coverage available is up to $325,000. Section 11— Effective date of Coverage for New Employees. For newly hired regular employees coverage begins on the first day of the month following date of hire for the health plan, dental plan, vision care plan, and life insurance plans if these benefits are elected. Page 6 of 23 Item 11: Staff Report Pg. 153 Packet Pg. 398 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 ARTICLE IV - OTHER BENEFITS Item 11 Attachment B PMA Memorandum of Agreement Section 12 — Holiday Compensation. Police Managers will receive the twelve (12) paid City holidays outlined in the City of Palo Alto Merit Rules. Floating Holiday — Days of Historical Significance. Employees will be provided one floating holiday each calendar year in acknowledgement of days of historical significance. The employee with prior approval from their supervisor can use this floating holiday at any time during the year. This holiday has no cash value and will expire if unused. Section 13 — Vacation. a) Vacation Accrual. Vacation will be accrued when an employee is in pay status and will be credited on a bi-weekly basis. Total vacation accrual at any one time may not exceed three times the annual rate of accrual. Each eligible employee shall accrue vacation at the following rate for continuous service performed in pay status: 1. Less than nine (9) years - For employees completing less than nine (9) years continuous service; one hundred twenty (120) hours vacation leave per year. The City Manager may adjust the annual vacation accrual of employees hired on or after July 1, 2001 to provide up to forty (40) additional hours (i.e. to a maximum annual accrual of one hundred sixty (160) hours) for service with a prior employer. 2. Nine (9), but less than fourteen (14) years - For employees completing nine (9), but not more than fourteen (14) years continuous service; one hundred sixty (160) hours vacation leave per year. 3. Fourteen (14), but less than nineteen (19) years - For employees completing fourteen (14), but not more than nineteen (19) years continuous service; one hundred eighty (180) hours vacation leave per year. 4. Nineteen (19) or more years - For employees completing nineteen (19) or more years continuous service; two hundred (200) hours vacation leave per year. b) Vacation Use. Vacation use by police managers will be subject to approval by the Chief of Police or his/her designee. All reasonable efforts will be made to approve vacation requests while maintaining appropriate oversight of public safety operations. Employees shall complete six months continuous service before using accrued vacation leave. c) Vacation Cashout. Page 7 of 23 Item 11: Staff Report Pg. 154 Packet Pg. 399 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Once each calendar year an employee may cash out eight (8) or more hours of vacation accrual in excess of eighty (80) hours from a minimum of eight (8) hours to a maximum of one hundred ( 120) hours, provided that the employee has taken at least eighty (80) hours of vacation in the previous twelve (12) months. Effective for the 2012 tax year and each subsequent year, employees must pre -elect an irrevocable number of vacation hours they will cash out during the upcoming year, up to a maximum of one hundred twenty (120) hours, prior to the start of the calendar year. Employees who do not pre- designate or elect to cash out hours will be deemed to have waived the right to cash out any vacation leave in the following year. Employees who pre -designate cash out amounts may request a cash out at any time in the designated tax year by submitting a cash out form to payroll. For employees who have not requested payment of pre -designated cash out amounts by November 1 of each year, Payroll will automatically cash out the pre -designated amount in a paycheck issued on or after November 1. d) Vacation Pay at Termination. Employees leaving the municipal service with accrued vacation leave shall be paid the amounts of accrued vacation to the date of termination. Payments for accrued vacation shall be at the employee's current rate of pay. e) Vacation Benefits for Deceased Employees. An employee who is eligible for vacation leave and who dies while in the municipal service shall have the amount of any accrued vacation paid to the employee's estate within thirty days. This proration will be computed at the last basic rate of pay. Section 14 — Long Term Disability. The City shall provide long term disability (LTD) insurance with a benefit of 2/3 monthly salary, up to a maximum benefit of $10,000 per month. The City shall pay the premium for the first $6,000 of base monthly salary. For employees whose base monthly salary exceeds $6,000, the employee shall pay the cost of the required premium based upon their monthly salary between $6,000 and $15,000. Section 15 — Dependent Care Assistance Program. The City will provide a Dependent Care Assistance Program for employees according to the provisions of the Federal Economic Recovery Act of 1981, Code Sections 125 and 129. The program will be available to representation unit employees beginning with pay period number 1 of 1992, and remain in effect subject to a reasonable minimum participation level and availability of third -party administrative services at a reasonable cost. Section 16 — Medical Flexible Spending Program. The City will provide a Medical Flexible Spending Program for Association members allowing them to use pre-tax deferrals for reimbursement of excess or uncovered medical, dental and vision expenses. The plan will follow existing plan guidelines and conform to all applicable laws and regulations. Section 17 — Employee Assistance Plan. The Employee Assistance Plan (EAP) provides employees with confidential personal counseling, work and family related issues, eldercare, substance abuse, etc. Page 8 of 23 Item 11: Staff Report Pg. 155 Packet Pg. 400 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Section 18 — Commute Incentives and Parking. 1. Civic Center Parking. Employees assigned to Civic Center and adjacent work locations. The City will provide a Civic Center Garage parking permit. Employees hired after June 30, 1994 may initially receive a parking permit for another downtown lot, subject to the availability of space at the Civic Center Garage. 2. Alternative Commute Incentives: Employees who qualify may voluntarily elect one commute incentives, including but not limited to the following options, for those using an eligible commute alternative on 60% or more of their scheduled work days per month: a. Public Transit and Vanpool. The City provides tax-free commute incentives up to the current IRS limit, as may be amended from time to time, (currently $125/month) are available through the Commuter Check Direct (CCD) website for employees using Bay Area public transportation or riding in a registered vanpool at least 60% of their scheduled work days. Administration of the Commuter Check benefit shall be subject to the rules and regulations of the third- party administrator. b. Go Pass. The Go Pass program will offer civic center and other downtown -based employees a Caltrans Go Pass that allows unlimited rides on Caltrain in all zones seven days per week, to any City of Palo Alto employee. c. Bicycle. The City will provide employees with a tax-free incentive of $20 per month to eligible employees who ride a bicycle to work. d. Carpool. The City will provide with a taxable incentive of $30 per month to each eligible employee in a carpool with two or more licensed drivers. e. Walk. The City will provide employees with a taxable incentive of $20 per month to eligible employees who walk to work. Reopener. It is the City's interest to reduce single occupancy vehicle trips to the extent possible in order to address current challenges. During the term of this agreement, upon written request by the City, the parties shall meet and confer through the impasse process if necessary on changes to the City's commute incentive and parking program adopted by the City Council. ARTICLE V —RETIREMENT Section 19 — Retirement Benefits. A. "3%@50" Safety Retirement (Employees hired on or before December 7, 2012) For employees hired by the City of Palo Alto on or before December 7, 2012, the California Public Employees' Retirement System (CaIPERS) retirement formula benefit known as the "3 percent at 50 (3%@50)," per California Government Code section 21362.2, shall continue in effect with the final salary determination for such employees of the "single highest one (1) year period" per California Government Code section 20042. All unit members in the 3% @ 50 safety retirement plan shall pay the full 9% CaIPERS member contribution. This contribution is pre-tax to the extent allowable by law. B. Second Tier "3% at 55" Safety Retirement ("Classic" Employees) For those employees hired on or after December 8, 2012 through December 31, 2012 or are classic members as defined by CaIPERS, the CaIPERS retirement formula benefit known as the "3 percent at 55 (3%@55)," per Government Code section 21363.1, with the final salary determination for such Page 9 of 23 Item 11: Staff Report Pg. 156 Packet Pg. 401 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement employees of the "three (3) highest consecutive years" based on the highest average annual compensation earnable by the member during three (3) consecutive years of employment immediately preceding retirement or the three-year period otherwise designated by the member per Government Code section 20037. All unit members in the second tier shall pay the full 9% CaIPERS member contribution. This contribution is pre-tax to the extent allowable by law. C. Third Tier "2.7% at 57" Safety Retirement ("New" PEPRA Employees) For those employees hired on or after January 1, 2013, the CaIPERS retirement formula benefit known as "2.7 percent at 57 (2.7% at 57)," with the final salary determination for such employees of the "three (3) highest consecutive years." The initial contribution rate will be at least 50% of the normal cost rate at retirement as determined by CaIPERS. This contribution is pre-tax to the extent allowable by law. D. Additional Employee PERS Contributions Effective the pay period that includes June 30, 2017, all employees regardless of pension formula in this unit shall, in addition to the Member Contribution required, pay a3% towards the Employer share of Pension. Effective the pay period that includes June 30, 2021, all employees regardless of pension formula in this unit shall, in addition to the Member Contribution required, pay an additional 1% towards the Employer share of Pension for a total of 4%. Such contributions under CaIPERS 20516 will be provided on a pre-tax basis to the extent allowable by law. Section 20 — Retirement Medical Plan. A. Retiree Medical Coverage for Unit Employees Hired Before January 1, 2004: Monthly City -paid premium contributions for a retiree -selected PEMHCA optional plan will be made in accordance with the Public Employees' Medical and Hospital Care Act Resolution for employees hired before January 1, 2004 as outlined below. For employees who retire before June 1, 2012, the City will pay up to the monthly medical premium for the 2nd most expensive plan offered to PMA employees among the existing array of plans. For employees who retire on or after June 1, 2012, The City contribution towards retiree medical shall be the same contribution amount it makes for active City employees. Effective upon ratification and adoption of this Agreement (Scheduled for January 11, 2016), the City shall provide active unit employees who were hired before January 1, 2004 with a one-time opportunity to opt -in to retiree health benefits provided under California Government Code section 22893. Eligible employees who wish to exercise this option shall inform the People, Strategy, and Operations department of their election in writing no later than 90 days following the ratification and adoption of this Agreement. B. 20 -Year Vesting Schedule for Retiree Medical Coverage for Unit Employees Hired on or After January 1, 2004 and employees who chose to opt -in to retiree health benefits provided under California Government Code section 22893 as outlined above: Page 10 of 23 Item 11: Staff Report Pg. 157 Packet Pg. 402 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement The retiree health benefit provided in California Government Code section 22893 shall apply to all employees hired on or after January I, 2004 and employees who opt -in as outlined above. Under this law, an employee is eligible to receive Fifty (50) percent of benefit after ten (10) years; each additional service credit year after Ten (10) years will increase employer credit by Five (5%) percent until Twenty (20) years is reached at which time employee is eligible for One Hundred (100%) percent of annuitant -only coverage and Ninety (90%) percent of the additional premium for dependents. Section 21— ICMA - Retirement Health Savings Plan. The City provides an ICMA retirement health savings plan for Association members. The ICMA retirement health savings plan is subject to applicable IRS rules and plan guidelines as well as any other applicable laws. Each Association member shall make a pre-tax contribution to the plan as follows: 1. Each member shall contribute 1% of their base salary bi-weekly into the plan. 2. Failure by each member to contribute will deem the health savings plan out of compliance with IRS and plan guidelines. The administrative fee shall be paid by the Association member. The manner and amount of contributions may be periodically modified by agreement of both parties. Section 22 — Deferred Compensation Program. The City will provide a Deferred Compensation Program for employees according to the provisions of the plans and applicable IRS guidelines. ARTICLE VI — MANAGEMENT BENEFIT PROGRAM Section 23 — Professional Development Reimbursement. The purpose of this program is to provide employees with resources to improve and supplement their job and professional skills. Reimbursement for authorized self-improvement activities may be granted to each Association employee up to a maximum of five hundred dollars ($500) per fiscal year. A departmental training fund of one thousand dollars per employee ($1,000) will be established for subject matter, leadership or other training that the Department Director identifies as a need for employees within that Department. The following items are eligible for reimbursement: a) Civic and professional association memberships b) Conference participation and travel expenses, which must occur within the compensation plan period. c) Educational programs, books and videos, and tuition reimbursement designed to maintain or improve the employee's skills in performing his or her job or future job opportunities, should support the City's mission or be necessary to meet the educational requirements for qualification for employment. Permissible educational expenses are refresher courses, courses dealing with current developments, academic or vocational courses, as well as the Page 11 of 23 Item 11: Staff Report Pg. 158 Packet Pg. 403 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of January 1, 2023 —June 30, 2025 L Agreement travel expenses associated with the courses as defined by the City's travel expense report from the Policy & Procedures Manual Section 1-02 ASD. d) Professional and trade journal subscriptions not to exceed 12 months. Approval will be at discretion of department head and signature is required on reimbursement form. Amounts under this professional development program will be pro -rated in the first year of employment or promotion. Section 24 — Physical Examinations. All management and professional employees are eligible to receive an annual physical examination as follows: a) Use the periodic health exam benefit as provided under the PERS Health Plan option you have selected. Each of the PERS Health Plans provides for a periodic physical examination. The examination must be performed by your primary care physician — unless he/she refers you to another physician. b) The types of tests and the frequency of the tests cannot exceed AMA guidelines. The guidelines are a suggested minimum based on research studies concerning preventative care. The judgment of your physician is the final determinant for your care. c) Any additional necessary asymptomatic tests that are required by your physician that are not covered by your health plan will be reimbursed by the City. Any symptomatic tests will be covered under your PERS Health Plan. The Reimbursement for Periodic Physical Exam Form is available on the Human Resources Intranet site. This benefit will not be pro -rated. Section 25 — Excess Benefit. This benefit is designed to meet the requirements of Section 125 of the Internal Revenue Code. Every calendar year, each employee will be provided with $2,500 annually that they can designate among the following options: a) Medical Flexible Spending Account (Medical FSA). Provides reimbursement for excess medical/dental/vision, or expenses that are incurred by employees and their dependents which are not covered or reimbursed by any other source, including existing City -sponsored plans. This includes prescribed medications and co -payments as well as over-the-counter drugs, including: antacids, allergy medicines, pain relievers and cold medicines. However, nonprescription dietary supplements (e.g. vitamins, etc.) toiletries (e.g. toothpaste), cosmetics (e.g. face cream), and items used for cosmetic purposes (e.g. Rogaine) are not acceptable. b) Dependent Care Flexible Spending Account (Dependent Care FSA). Provides reimbursement for qualified dependent care expenses under the City's Dependent Care Assistance Program (DCAP), subject to the following limits: Dependent care expenses will be reimbursed only to the extent that the amount of such expenses reimbursed under this Management Benefit Program, when added to the amount (if any) of annual dependent care expenses that the participant has elected under the City's Flexible Benefits Plan, do not exceed the maximum permitted under the DCAP. Page 12 of 23 Item 11: Staff Report Pg. 159 Packet Pg. 404 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of January 1, 2023 —June 30, 2025 L Agreement 1) The annual amount submitted for reimbursement cannot exceed the income of the lower -paid spouse. 2) The expenses must be employment -related expenses for the care of one or more dependents who are under 13 years of age and entitled to a dependent deduction under Internal Revenue Code section 151 (e) or a dependent who is physically or mentally incapable of caring for himself or herself. 3) The payments cannot be made to a child under 19 years of age or to a person claimed as a dependent. 4) If the services are provided by a dependent care center, the center must comply with all state and local laws and must provide care for more than six individuals (other than a resident of the facility). 5) Dependent care expenses not submitted under this section are eligible under the City Dependent Care Assistance Plan (DCAP). However, the maximum amount reimbursed under DCAP will be reduced by any amount reimbursed under the Excess Benefit Plan. c) Non-taxable Professional Development Spending Account. Provides reimbursement for Non -Taxable professional development expenses (e.g., job -related training and education, seminars, training manuals, etc.) to the extent they are not paid or reimbursed under any other plan of the City. d) Gym or Health Club Memberships. Provides reimbursement for annual or monthly memberships, including personal trainers. Reimbursement of this expense is taxable to the employee. e) Deferred Compensation. The $2,500 excess benefit provided in this section made on a one-time contribution basis on election by the employee towards the employee's City -sponsored 457 Deferred Compensation plan with either ICMA-RC or the Hartford. Amounts designated by employees to either the Medical FSA, Dependent Care FSA, or Professional Development options are done so on a "use -it -or -lose -it" basis. This means that any amounts designated and not used by the end of the calendar year ( or end of the extended grace period for the medical FSA) will be forfeited by the employee and returned to the plan. Specified amounts under this benefit will be applied on a pro -rata basis for employees who are part- time or who are in a management or professional pay status for less than the full fiscal year. Such benefits will be pro -rated in the first year of employment (based on hire date) but will not be pro- rated upon separation of employment. Section 26 — Management Annual Leave. At the beginning of each calendar year regular management employees will be credited with 80 hours of management annual leave. This leave is granted in recognition of the extra hours management employees work over their regular schedule. This leave may be taken as paid time off, added to vacation accrual (subject to vacation accrual limitations), taken as cash or taken as deferred compensation. When time off is taken under this provision, I 0 -hour shift workers will receive one shift off for each 8 hours charged; 24 -hour shift Page 13 of 23 Item 11: Staff Report Pg. 160 Packet Pg. 405 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement workers will receive one-half shift off for each 8 hours charged. Entitlement under this provision will be reduced on a prorated basis for part-time status, or according to the number of months in paid status during the fiscal year; employees who have used more than the pro -rated share at the time they leave City service shall be required to repay the balance or have it deducted from their final check. Unused balances as of the end of the calendar year will be paid in cash unless a different option as indicated above is elected by the employee. Section 27 - POST Certificate/Incentive Management POST Certification: Employees that qualify for the Management POST certificate will receive a four percent (4%) increase to base pay effective the first full pay period after the employee provides proof of submission of the required paperwork to POST. ARTICLE VII — OPERATIONAL ISSUES Section 28 — Management Assignments. The Chief of Police or his/her designee shall have the authority to make management assignments at his or her discretion. Where possible, these assignments should take into account the needs of the organization, development of the employee and individual employee desires. Section 29 — Basic Work Schedules. Generally, police managers will be expected to work flexible schedules and reasonably adjust their hours to oversee their employee groups, manage 24/7 law enforcement operations, perform routine work, complete daily assignments, and occasionally attend meetings or other events outside their normal work shifts. Basic work schedules will be the 4/10 schedule. Section 30 — On Duty Workouts. Police managers who complete the yearly Wellness Program requirements may participate in an on -duty workout for a reasonable period as determined by the Chief, as long as it does not interfere with the performance of the employee's job duties, for which the employee will remain accountable. Applicable guidelines and conditions are outlined in the Department's Wellness Program Policy which the City may change from time to time. Section 31— Take Home Emergency Response Vehicles. Subject to approval by the City Manager and the Police Chief, Police Captains will continue the current take home emergency response vehicle program which allows for the immediate and emergent response to public safety incidents involving the City. The specific use and restrictions for driving these vehicles shall adhere to the guidelines outlined in the then current version of City Policy and Procedure 4-01. Section 32 — Modified Duty Assignments. In cases of non -work -related injury, illness or pregnancy, an employee, upon approval of the department head, City Risk Manager and the employee's doctor, may return to work or continue work with doctor -approved limited or alternative duty pursuant to Policy & Procedure 2-04. Approval for reasonable accommodation such as limited/alternative duty shall be based upon department ability to provide work consistent with medical limitations and the length of time of the limitations. The City doctor may be consulted in determining work limitations. Any assignment to a limited/alternative duty will be on a temporary basis. Page 14 of 23 Item 11: Staff Report Pg. 161 Packet Pg. 406 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Section 33 — Meal Allowance. Police managers attending night meetings will be eligible for meal re- imbursement under the guidelines set forth in the then current version of City Policy and Procedure No. 1-02. Section 34 — Uniforms. a) The City will supply complete uniforms to all sworn personnel. All uniform items are the property of the City. One complete uniform consists of: (I) three pair of trousers, (2) three short -sleeved shirts with patches and zippers if desired, (3) three long-sleeved shirts with patches and zippers if desired, (4) three cotton or two synthetic fiber turtleneck shirts, (5) hat, (6) duty jacket with patches, (7) dress jacket with patches, (8) necktie, and (9) rain gear. b) At the time of initial employment, every sworn employee will be issued one complete uniform. Uniform items will be replaced on an as -needed basis subject to verification by management. c) The City shall provide uniform cleaning for sworn representation unit personnel. d) Personnel are accountable for all uniform items issued to them. If a particular item is lost or damaged due to employee negligence, the employee will be required to reimburse the City for value of the item(s) lost or damaged. e) The City shall reimburse employees for the full cost of job -related boots upon verification of such purchase by the employees. The City will make the reimbursement only upon proof that the previous boots have become unserviceable due to wear or damage. (Job -related boots shall mean well -constructed, high topped boots that provide full ankle and foot support, which are selected from list agreed to by Management and the Association.) Employees are responsible for the full cost of any low -top, black shoes that are worn with the uniform. ARTICLE VIII— ASSOCIATION AGREEMENTS Section 35 — Association Secur a) When a person is hired in any of the covered job classifications, the City shall notify that person that the Association is the recognized bargaining representative for the employee in said Unit and give the employee a current copy of the Memorandum of Agreement. b) If there is no disruption of work, members of the Association Board of Directors may use a reasonable amount of on -duty time without loss of pay to meet with Management specifically related to representation of employees. Such release time must be cleared in advance by the Chief (or his/her Designee) who is a member of management. For purposes of this section, representation shall include: (i) Meetings with represented employees or management related to a grievance or disciplinary action, including investigation and preparation time. (ii) A meeting with management related to benefits, working conditions or other terms and conditions of employment. Page 15 of 23 Item 11: Staff Report Pg. 162 Packet Pg. 407 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement Section 36 — Association Representative Access to Work Locations. Employee and non -employee representatives of the Association will be granted access to City work locations to conduct business related to the administration or negotiation of the parties' Memorandum of Understanding, as long as advance arrangements for such visits have been made with the affected department manager and no disruption of work occurs. Advance arrangement shall normally include not less than one hour's notice in the case of an employee Association representative, two hours in the case of non - employee Association representatives. Non -employee representatives must also notify the Human Resources Department Manager (or designee) of the time, date and location of the representative's intended visit. Section 37 — Release Time. The Association President or his or her -designee in the representation unit may use a reasonable amount of time without loss of pay for matters related to the bargaining process, labor relations, and administration of the M0A, violations of the M0A, grievances, disciplinary issues, and training for association members. Release time shall normally be approved in advance by the department head and must not detract from the performance of the representative's City job duties, for which he or she will remain accountable. Section 38 — Use of City Facilities for Association Business. Any use of City facilities shall be governed by the then current version of City Policy and Procedure No. 4-07. Section 39 — Payroll Deduction. The City shall deduct Association membership dues and any other mutually agreed upon payroll deduction from the bi-weekly pay of member employees. The dues deduction must be authorized in writing by the employee on an authorization card acceptable to the City and the Association. The City shall remit the deducted dues to the Association as soon as possible after deduction. ARTICLE IX — LEAVE PROGRAMS Section 40 — Sick Leave. a) Statement of Policy. Sick leave shall be allowed and used only in case of actual personal sickness or disability, medical or dental treatment, or as authorized in Subsection (i), personal business chargeable to sick leave. Up to 8 days sick leave per year may be used for illness in the immediate family (spouse, child, parent, parent -in-law, brother, sister, registered domestic partner, or close relative residing in the household of the employee). b) Eligibility. Regular and part-time employees shall be eligible to accrue and use sick leave. c) Accrual. Sick leave shall be accrued bi-weekly provided the employee has been in a pay status for 50 percent or more of a bi-weekly pay period. Sick leave shall be accrued at the rate of 3.7 hours per bi-weekly pay period. Page 16 of 23 Item 11: Staff Report Pg. 163 Packet Pg. 408 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 d) Accumulation. Item 11 Attachment B PMA Memorandum of Agreement Sick leave accrual accumulation shall be limited to 1,000 hours with no payoff provision for unused balance at termination. e) Use. Sick leave may be used as needed and approved, to the point of depletion, at which time the employee will no longer receive pay for sick leave. A new employee may, if necessary, use up to forty-eight hours or shift equivalent of sick leave at any time during the first six months of employment. Any negative balances generated by such utilization will be charged against future accrual or deducted from final paycheck in the event of termination. An employee who has been disabled for 60 consecutive days and who is otherwise eligible both for payment under the long-term disability group insurance coverage and accrued sick leave benefits may, at his/her option, choose either to receive the long-term disability benefits or to utilize the remainder of his/her accrued sick leave prior to applying for long-term disability benefits. Sick leave will not be granted for illness occurring during any leave of absence other than sick leave, unless the employee can demonstrate that it was necessary to come under the care of a doctor while on such other leave of absence. When an employee finds it necessary to be absent for any reason, he/she should contact the Department as soon as possible, but no later than the start of the scheduled shift on the first working day of absence, and shall regularly report by the start of each subsequent shift unless hospitalized. Such reports may be subject to written documentation if there is reasonable evidence that sick leave abuse has occurred. Sick leave shall not be granted unless such report or advance accounting has been made, provided, however, that the department head may grant exception to this policy where the circumstances warrant. Documentation may also be required if there is a reasonable basis to believe that the employee may not be medically fit to return to work. f) Depletion of Sick Leave Benefits. Upon depletion of sick leave or the beginning of the period to be covered by payments under the long-term disability group insurance coverage, whichever comes first, an employee may be granted a medical leave of absence without pay for a period not exceeding sixty days. If the employee is unable to return to work at the end of this period, he/she must request further medical leave which will be subject to the approval of the City Manager. If further leave is granted, the employee must notify the City of intent to return to work every thirty days. If further leave is not granted, the employee's service with the City shall be considered terminated. g) Forfeiture Upon Termination. Employees leaving the municipal service shall forfeit all accumulated sick leave, except as otherwise provided by law. In the event that notice of resignation is given, sick leave may be used only through the day which was designated as the final day of work by such notice. h) Personal Business Leave Chargeable to Sick Leave. Page 17 of 23 Item 11: Staff Report Pg. 164 Packet Pg. 409 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of January 1, 2023 —June 30, 2025 L Agreement Employees may use up to twenty (20) hours of sick leave per calendar year for personal business. The scheduling of such leave is subject to the approval of the appropriate level of management. Section 41— Voluntary Catastrophic Leave Program. If permitted by agreement between the City and the Palo Alto Police Officers' Association (P.O.A.) members of the Palo Alto Police Managers' Association representation unit may participate in the "Voluntary Leave Program" applicable to the P.O.A. representation unit to assist in maintaining the pay of an employee who is eligible by virtue of a qualifying catastrophic medical condition. Such participation, when authorized by City- P.O.A. agreement, shall be allowed only as long as the donors remain anonymous (unless disclosure is required by law). Otherwise, said program shall be governed by the conditions and restrictions set forth in the City-P.O.A. Memorandum of Agreement. Section 42 — Leave of Absence With Pay. The City Manager may grant a regular employee under his/her control a leave of absence with pay for a period not exceeding thirty calendar days for reasons he/she deems adequate and in the best interest of the City. The City Council may grant a regular employee a leave of absence with pay for a period not to exceed one year for reasons the Council considers adequate and in the best interest of the City. a) Subpoenas: leave of absence. Regular employees who are subpoenaed in their capacity as a City employee to appear as witnesses on behalf of the State of California or any of its agencies may be granted leaves of absence with pay from their assigned duties until released. The employee shall remit all fees received for such appearances to the City within thirty days from the termination of his or her services as a witness. Compensation for mileage or subsistence allowance shall not be considered as a fee and shall be retained by the employee. b) Employee's time off to vote. Pursuant to Elections Code section 14000, when the employee is unable to vote outside of the employee's work hours, up to two (2) hours' time off with pay to vote at any general or direct primary election shall be granted at the beginning or end of the employee's scheduled shift, whichever allows the most free time for voting and the least time off from the regular working shift. Such time off with pay to vote shall only be granted if the employee provides at least two working days' notice that time off for voting is desired, unless the nature of the employee's schedule prevents the employee from anticipating the need for time off to vote. c) Leave of absence; death in fami Leave of absence with pay of three (3) days shall be granted an employee by the head of his or her department in the event of death in the employee's family, but shall not exceed a total of six (6) paid work days per calendar year. For purposes of this section, family is defined as wife, husband, son, step -son, son-in-law, daughter, step -daughter, daughter-in-law, father, step -father, father-in- law, mother, step -mother, mother-in-law, brother, step -brother, brother-in-law, sister, step -sister, sister-in-law, grandmother, grandmother -in-law, grandfather, grandfather -in-law, grandchildren, aunt, uncle, niece, nephew, registered domestic partner, or a close relative residing in the household of the employee. Such leave shall be at full pay and shall not be charged against the Page 18 of 23 Item 11: Staff Report Pg. 165 Packet Pg. 410 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement employee's accrued vacation or sick leave. Requests for leave in excess of three (3) days shall be subject to the approval of the City Manager. Approval of additional leave will be based on the circumstances of each request with consideration given to the employee's need for additional time off. d) Jury duty: leave of absence. Employees required to report for jury duty shall be granted a leave of absence with pay from their assigned duties until released by the court, provided the employee remits to the City all fees received for such duties other than mileage or subsistence allowances within thirty days from the termination of his/her jury service. Section 43 — Leave of Absence Without Pay. a) Disability. Leaves of absence without pay may be granted in cases of disability not covered by sick leave. Pregnancy will be considered as any other disability. Leaves of absence for disability are subject to physicians' verification including diagnosis and medical work restriction. b) Other leaves. Leaves of absence without pay is at the discretion and approval of management. Unauthorized leave of absence/job abandonment may result in disciplinary action up to and including termination of employment. During unpaid leaves of absence for disability or other reasons, the employee may elect and the City may require the employee to use accrued paid vacation and sick leave in a manner consistent with state and federal law. All leaves without pay must be approved in advance and in writing by the department to be effective. c) Approval of department head. Leave of absence without pay for one week or less may be granted by the department head, depending on the merit of the individual case. d) Approval by City Manager. Leave of absence without pay in excess of one week's duration may be granted by the City Manager on the merit of the case, but such leave shall not exceed twelve months' duration. e) Absence without leave. Unauthorized leave of absence shall be considered to be without pay, and reductions in the employee's pay shall be made accordingly. Unauthorized leave of absence may result in termination of employment. f) Leave of absence; death outside the immediate family. Leave without pay may be granted a regular employee by his/her department head in the event of death to family members other than one of the immediate family, such leave to be granted in accordance with Subsections (b), (c), (d) and (e). g) Military leave of absence. Page 19 of 23 Item 11: Staff Report Pg. 166 Packet Pg. 411 of 853 Item 11 Attachment B PMA City of Palo Alto and PAPMA Memorandum of January 1, 2023 —June 30, 2025 LAgreement State and federal law shall govern the granting of military leaves of absence and the rights of employees returning from such absence. ARTICLE X — EMPLOYEE/EMPLOYER RELATIONS Section 44 — Probationary Period. a) All original appointments to full-time or part-time regular municipal service positions shall be tentative and subject to a probationary period of twelve months for management employees b) The probationary period shall be regarded as part of the testing process and shall be utilized for closely observing the employees work, for securing the effective adjustment of a new employee to his/her position, and for rejecting any probationary employee whose performance does not meet the acceptable standards of work. c) A report of performance of each probationary employee shall be made by the department head and shown to the probationary employee on or before expiration of the probationary period. d) During the probationary period a new employee may be suspended, demoted or terminated at any time by the appointing authority without cause and without right of appeal or to submit a grievance. Section 45 — Disciplinary Action and Unsatisfactory Work or Conduct. Disciplinary action shall be governed by the City's Merit Rules and Regulation, Palo Alto Police Department Policy 340 on Conduct, the Palo Alto Police Department Internal Affairs and Complaint Investigations Guidelines, and the Police Officer Procedural Bill of Rights Act. Section 46 — Grievance Procedure. a) The City and the Association recognize that early settlement of grievances is essential to sound employee -employer relations. The parties seek to establish a mutually satisfactory method for the settlement of employee grievances, or Association grievances, as provided for below. In presenting a grievance, the aggrieved and/or his or her representative is assured freedom from restraint, interference, coercion, discrimination or reprisal. b) Definition. A Grievance is: 1. An unresolved complaint or dispute regarding the application or interpretation of this Memorandum of Agreement 2. An appeal from a disciplinary action of any kind against an employee covered by this Memorandum of Agreement. c) Access to the Grievance Procedure. Except as otherwise provided in the Memorandum of Agreement for probationary employees, all employees represented by the Association may file and process a grievance. Such aggrieved employees may be represented by the Association or may represent themselves in preparing and presenting their grievance at any level of review. The Association may file a grievance when an Association right under this Memorandum of Agreement not directly related to an individual employee becomes subject to dispute. d) Conduct of Grievance Procedure. Page 20 of 23 Item 11: Staff Report Pg. 167 Packet Pg. 412 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement 1. The time limits specified in this Article may be extended by written mutual agreement of the aggrieved employee or the Association and the reviewer concerned. 2. If a decision is not rendered within a stipulated time limit, the aggrieved employee may immediately appeal to the next step. 3. The grievance will be considered settled if the decision at any step is not appealed within the specified time limit. 4. The aggrieved employee or the Association and Human Resources Director may mutually agree in writing to waive any step of the grievance procedure. 5. Written grievances shall be submitted on forms provided by the City or on forms that are mutually agreeable to the City and the Association. 6. Any retroactive monetary arbitrator award or settlement by mutual agreement shall not extend more than ninety (90) days before the date that the grievance was filed in writing at Step 2 below. The following steps shall apply: Step 1. The aggrieved employee will first attempt to resolve the grievance through informal discussions with his or her immediate supervisor by the end of the tenth working day following the discovery of or the incident upon which the grievance is based. Every attempt will be made to settle the issue at this level. (Note: For purposes of time limits, the working days are considered to be Monday through Friday, exclusive of City holidays.) Appeals of disciplinary action should be processed through the procedures outlined in Step 2-3 of the Grievance Procedure. Step 11. If the grievance is not resolved through the informal discussion, the employee will reduce the grievance to writing and submit copies to the department head or his/her designee within ten (10) working days of the discussion with the immediate supervisor. The department head or his/her designee shall have ten (10) working days from the receipt of a written grievance to review the matter and prepare a written statement. Step III. If the grievance is not resolved at Step II, the aggrieved employee may choose between final and binding resolution of the grievance through appeal to the City Manager or through appeal to final and binding grievance arbitration. For the term of this Memorandum of Agreement, appeals to final and binding arbitration may be processed only with Association approval. All Step III appeals must be filed in writing at the Human Resources Department Office within ten (10) working days of receipt of the Step II appeal. If the aggrieved employee elects final and binding resolution by the City Manager, the City Manager will choose the methods he or she considers appropriate to review and settle the grievance. The City Manager shall render a written decision to all parties directly involved within ten working days after receiving the employee's appeal. Page 21 of 23 Item 11: Staff Report Pg. 168 Packet Pg. 413 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 Item 11 Attachment B PMA Memorandum of Agreement If the aggrieved employee elects final and binding arbitration in accordance with this provision, the parties shall mutually select an arbitrator. In the event the parties cannot agree on an arbitrator, they shall mutually request a panel of five arbitrators from the California State Conciliation Service or from the American Arbitration Association if either party objects to the State Conciliation Service, and select an arbitrator by the alternate strike method. The arbitrator shall have jurisdiction and authority only to interpret, apply, or determine compliance with the provisions of this Memorandum of Agreement and such Merit System Rules, regulations, policies, procedures, City ordinances, resolutions relating to terms or conditions of employment, wages or fringe benefits, as may hereafter be in effect in the City insofar as may be necessary to the determination of grievances appealed to the arbitrator. The arbitrator shall be without power to make any decision: 1) Regarding matters of interest. 2) Contrary to, or inconsistent with or modifying in any way, the terms of this Memorandum of Agreement. 3) Granting any wage increases or decreases. The arbitrator shall be without authority to require the City to delegate or relinquish any powers which by State law or City Charter the City cannot delegate or relinquish. If either party seeks arbitration and the other party claims the matter is not subject to the arbitration provisions of this Memorandum of Agreement, the issue of arbitrability shall first be decided by the arbitrator using the standards and criteria set forth in this section and without regard to the merits of the grievance. If the issue is held to be arbitrable, the arbitration proceedings will be recessed for up to five working days during which the parties shall attempt to resolve the grievance. If no resolution is reached, the arbitrator will resume the hearing and hear and resolve the issue on the merits. Copies of the arbitrator's decision shall be submitted to the City, the aggrieved employee and the Association. All direct costs emanating from the arbitration procedure shall be shared equally by the City and the aggrieved employee or the Association. Section 47 — No Strikes. The Association, its representatives, or members, shall not engage in or cause, instigate, encourage, sanction, or condone a strike, withholding of services, concerted abuse of leave of absence provisions, work stoppage or work slowdown of any kind. No employee shall refuse to cross any picket line in the conduct of Police Department business, nor shall the Association, its representatives, or members discriminate in any way toward anyone who refuses to participate in a strike, or any of the job actions cited above. Section 48 — Reduction in Workforce. In the event of reductions in force, they shall be accomplished wherever possible through attrition. If the work force is reduced in the Association, the City will give an employee impacted by a potential lay off 30 days' notice prior to any reduction in force. Page 22 of 23 Item 11: Staff Report Pg. 169 Packet Pg. 414 of 853 City of Palo Alto and PAPMA January 1, 2023 —June 30, 2025 ARTICLE XI — LOOKING FORWARD Item 11 Attachment B PMA Memorandum of Agreement Section 49 — Full Understanding. This Memorandum of Agreement contains the full and entire understanding of the parties regarding the matters set forth herein. The parties agree that they shall each carry out their responsibilities under the M0A in good faith. Section 50 — Legal Compliance/Severability. If any provision herein contained is rendered or declared invalid by reason of existing State or Federal legislation or by reason of State Supreme Court or U. S. Supreme Court ruling, such invalidation of such part or portion of this Memorandum of Agreement shall not invalidate the remaining portions hereof, and they shall remain in full force and effect, insofar as such remaining portions are severable. Section 51— Duration. The term of this Agreement shall become effective upon ratification and adoption by both parties and shall expire on June 30, 2025. Page 23 of 23 Item 11: Staff Report Pg. 170 Packet Pg. 415 of 853 Palo Alto Peace Officers' Association (PAPOA) PALO Salary Schedule Item 11 Attachment C POA Salary Schedule Job Code FLSA b Title Effective 04/08/2023 (5% Increase + Med Ben) Effective 07/15/2023 (4% Increase) Effective 01/13/2024 (Med Be) Effective (4% Increase) Ste Rate Monthly Annual Ste Rate Monthly Annual Ste Rate Monthly Annual Step Rate Monthly Annual 617 Non-exempt Police Trainee -Bilingual 1 $ 55.27 1 $ 57.49 1 $ 58.07 1 $60.40 2 $ 55.27 2 $ 57.49 2 $ 58.07 2 $60.40 3 $ 55.27 3 $ 57.49 3 $ 58.07 3 $60.40 4 $ 55.27 4 $ 57.49 4 $ 58.07 4 $60.40 5 $ 55.27 5 $ 57.49 5 $ 58.07 5 $60.40 6 $ 55.27 $ 9,580.13 $ 114,962 6 $ 57.49 $ 9,964.93 $ 119,579 6 $ 58.07 $ 10,065.47 $ 120,786 6 $60.40 $ 10,469.33 $ 125,632 620 Non-exempt Police Trainee 1 $ 52.69 1 $ 54.80 1 $ 55.38 1 $57.60 2 $ 52.69 2 $ 54.80 2 $ 55.38 2 $57.60 3 $ 52.69 3 $ 54.80 3 $ 55.38 3 $57.60 4 $ 52.69 4 $ 54.80 4 $ 55.38 4 $57.60 5 $ 52.69 5 $ 54.80 5 $ 55.38 5 $57.60 6 $ 52.69 $ 9,132.93 $ 109,595 6 $ 54.80 $ 9,498.67 $ 113,984 6 $ 55.38 $ 9,599.20 $ 115,190 6 $57.60 $ 9,984.00 $ 119,808 621 Non-exempt Police Officer 1 $ 55.32 1 $ 57.40 1 $ 57.98 1 $60.17 2 $ 58.20 2 $ 60.42 2 $ 61.00 2 $63.34 3 $ 61.23 3 $ 63.60 3 $ 64.18 3 $66.67 4 $ 64.42 4 $ 66.95 4 $ 67.53 4 $70.18 5 $ 67.78 5 $ 70.47 5 $ 71.05 5 $73.87 6 $ 71.32 $ 12,362.13 $ 148,346 6 $ 74.18 $ 12,857.87 $ 154,294 6 $ 74.76 $ 12,958.40 $ 155,501 6 $77.76 $ 13,478.40 $ 161,741 622 Non-exempt Police Officer -Inter 1 $ 58.06 1 $ 60.25 1 $ 60.83 1 $63.13 2 $ 61.09 2 $ 63.42 2 $ 64.00 2 $66.45 3 $ 64.27 3 $ 66.76 3 $ 67.34 3 $69.95 4 $ 67.62 4 $ 70.27 4 $ 70.85 4 $73.63 5 $ 71.15 5 $ 73.97 5 $ 74.55 5 $77.50 6 $ 74.86 $ 12,975.73 $ 155,709 6 $ 77.86 $ 13,495.73 $ 161,949 6 $ 78.44 $ 13,596.27 $ 163,155 6 $81.58 $ 14,140.53 $ 169,686 623 Non-exempt Police Officer-Adv 1 $ 59.30 1 $ 61.51 1 $ 62.09 1 $64.46 2 $ 62.39 2 $ 64.75 2 $ 65.33 2 $67.85 3 $ 65.64 3 $ 68.16 3 $ 68.74 3 $71.42 4 $ 69.06 4 $ 71.75 4 $ 72.33 4 $75.18 5 $ 72.66 5 $ 75.53 5 $ 76.11 5 $79.14 6 $ 76.45 $ 13,251.33 $ 159,016 6 $ 79.51 $ 13,781.73 $ 165,381 6 $ 80.09 $ 13,882.27 $ 166,587 6 $83.30 $ 14,438.67 $ 173,264 624 Non-exempt Police Officer-Adv-Bilingual 1 $ 62.24 1 $ 64.60 1 $ 65.18 1 $67.66 2 $ 65.48 2 $ 68.00 2 $ 68.58 2 $71.22 3 $ 68.90 3 $ 71.58 3 $ 72.16 3 $74.97 4 $ 72.50 4 $ 75.35 4 $ 75.93 4 $78.92 5 $ 76.29 5 $ 79.32 5 $ 79.90 5 $83.07 6 $ 80.27 $ 13,913.47 $ 166,962 6 $ 83.49 $ 14,471.60 $ 173,659 6 $ 84.07 $ 14,572.13 $ 174,866 6 $87.44 $ 15,156.27 $ 181,875 625 Non-exempt Police Off Training -Bilingual 1 $ 58.06 1 $ 60.25 1 $ 60.83 1 $63.13 2 $ 61.09 2 $ 63.42 2 $ 64.00 2 $66.45 3 $ 64.27 3 $ 66.76 3 $ 67.34 3 $69.95 4 $ 67.62 4 $ 70.27 4 $ 70.85 4 $73.63 5 $ 71.15 5 $ 73.97 5 $ 74.55 5 $77.50 6 $ 74.86 $ 12,975.73 $ 155,709 6 $ 77.86 $ 13,495.73 $ 161,949 6 $ 78.44 $ 13,596.27 $ 163,155 6 $81.58 $ 14,140.53 $ 169,686 626 Non-exempt Police Sergeant -Bilingual 1 $ 70.15 1 $ 72.82 1 $ 73.40 1 $76.21 2 $ 73.81 2 $ 76.65 2 $ 77.23 2 $80.22 3 $ 77.66 3 $ 80.68 3 $ 81.26 3 $84.44 4 $ 81.72 4 $ 84.93 4 $ 85.51 4 $88.88 5 $ 85.99 5 $ 89.40 5 $ 89.98 5 $93.56 6 $ 90.49 $ 15,684.93 $ 188,219 6 $ 94.11 $ 16,312.40 $ 195,749 6 $ 94.69 $ 16,412.93 $ 196,955 6 $98.48 $ 17,069.87 $ 204,838 627 Non-exempt Police Off Training 1 $ 55.32 1 $ 57.40 1 $ 57.98 1 $60.17 2 $ 60.42 2 $ 61.00 2 $63.34 3 $ 63.60 3 $ 64.18 3 $66.67 4 $ 66.95 4 $ 67.53 4 $70.18 Item 11: Staff Report Pg. 171 $ 12,3 p Packet Pg. 416 of 853 .478.40 $ 161,741 2 $ 58.20 3 $ 61.23 4 $ 64.42 5 $ 67.78 6 $ 71.32 1 $ 73.78 1 $ 76.59 1 $ 77.17 1 $80.12 Palo Alto Peace Officers' Association (PAPOA) PALO Salary Schedule Item 11 Attachment C POA Salary Schedule Job Code FLSA Job Title Effective 04/08/2023 (5% Increase + Med Ben) Effective 07/15/2023 (4% Increase) Effective 01/13/2024 (Med BenEffective (4% Increase) Ste Rate Monthly Annual Ste Rate Monthly Annual Ste Rate Monthly Annual Step Rate Monthly Annual 628 Non-exempt Police Sgt/Inter-Bilingual 2 $ 77.63 2 $ 80.62 2 $ 81.20 2 $94.34 3 $ 81.68 3 $ 84.86 3 $ 85.44 3 $88.78 4 $ 85.95 4 $ 89.33 4 $ 89.91 4 $93.45 5 $ 90.44 5 $ 94.03 5 $ 94.61 5 $98.37 6 $ 95.17 $ 16,496.13 $ 197,954 6 $ 98.98 $ 17,156.53 $ 205,878 6 $ 99.56 $ 17,257.07 $ 207,085 6 $103.55 $ 17,948.67 $ 215,384 629 Non-exempt Police Sgt/Adv-Bilingual 1 $ 75.42 1 $ 78.30 1 $ 78.88 1 $81.91 2 $ 79.36 2 $ 82.42 2 $ 83.00 2 $86.22 3 $ 83.51 3 $ 86.76 3 $ 87.34 3 $90.76 4 $ 87.87 4 $ 91.33 4 $ 91.91 4 $95.54 5 $ 92.46 5 $ 96.14 5 $ 96.72 5 $100.57 6 $ 97.30 $ 16,865.33 $ 202,384 6 $ 101.20 $ 17,541.33 $ 210,496 6 $ 101.78 $ 17,641.87 $ 211,702 6 $105.86 $ 18,349.07 $ 220,189 631 Non-exempt Police Sergeant 1 $ 66.81 1 $ 69.36 1 $ 69.94 1 $72.60 2 $ 70.30 2 $ 73.01 2 $ 73.59 2 $76.42 3 $ 73.97 3 $ 76.85 3 $ 77.43 3 $80.44 4 $ 77.83 4 $ 80.89 4 $ 81.47 4 $84.67 5 $ 81.90 5 $ 85.15 5 $ 85.73 5 $89.13 6 $ 86.18 $ 14,937.87 $ 179,254 6 $ 89.63 $ 15,535.87 $ 186,430 6 $ 90.21 $ 15,636.40 $ 187,637 6 $93.82 $ 16,262.13 $ 195,146 632 Non-exempt Police Sgt/Inter 1 $ 70.35 1 $ 73.02 1 $ 73.60 1 $76.41 2 $ 74.02 2 $ 76.86 2 $ 77.44 2 $80.43 3 $ 77.88 3 $ 80.91 3 $ 81.49 3 $84.66 4 $ 81.95 4 $ 85.17 4 $ 85.75 4 $89.12 5 $ 86.23 5 $ 89.65 5 $ 90.23 5 $93.81 6 $ 90.74 $ 15,728.27 $ 188,739 6 $ 94.37 $ 16,357.47 $ 196,290 6 $ 94.95 $ 16,458.00 $ 197,496 6 $98.75 $ 17,116.67 $ 205,400 633 Non-exempt Police Sgt/Adv 1 $ 71.88 1 $ 74.63 1 $ 75.21 1 $78.08 2 $ 75.63 2 $ 78.56 2 $ 79.14 2 $82.19 3 $ 79.58 3 $ 82.69 3 $ 83.27 3 $86.52 4 $ 83.74 4 $ 87.04 4 $ 87.62 4 $91.07 5 $ 88.12 5 $ 91.62 5 $ 92.20 5 $95.86 6 $ 92.73 $ 16,073.20 $ 192,878 6 $ 96.44 $ 16,716.27 $ 200,595 6 $ 97.02 $ 16,816.80 $ 201,802 6 $100.91 $ 17,491.07 $ 209,893 Item 11: Staff Report Pg. 172 1 Packet Pg. 417 of 853 Item 11 [Attachment D PMA Salary Schedule Palo Alto Police Managers' Association (PAPMA) PALO Salary Schedule ALTO Adoption - Effective 04/08/2023: 5% Market + Benefit Offset Job Code FLSA Exempt Exempt Classification Police Captain-Adv Grade Code Min Hourly Rate Mid Hourly Rate Max Hourly Rate Approx Max Monthly Salary Approx Max Annual Salary 147 149 023 086 1 88.05 $ 78.72 110.06 $ 98.40 132.08 $ 118.08 22,894 $ 20,467 274,726 $ 245,606 Police Liet-Adv Effective 07/15/2023: 4% General Increase Job Code FLSA Exempt Exempt Classification Police Captain-Adv Grade Code Min Hourly Rate Mid Hourly Rate Max Hourly Rate Approx Max Monthly Salary Approx Max Annual Salary 147 149 023 086 91.58 $ 81.88 114.47 $ 102.34 137.37 $ 122.81 23,811 $ 21,287 285,730 $ 255,445 Police Liet-Adv Effective 01/13/2024: Benefit Offset Job Code FLSA Exempt Exempt Classification Police Captain-Adv Grade Code Min Hourly Rate Mid Hourly Rate Max Hourly Rate Approx Max Monthly Salary Approx Max Annual Salary 147 149 023 086 92.04 $ 82.34 115.05 $ 102.92 138.06 $ 123.51 23,930 $ 21,408 1 287,165 $ 256,901 Police Liet-Adv Effective 07/13/2024: 4% General Increase Job Code FLSA Classification Grade Code Min Hourly Rate Mid Hourly Rate Max Hourly Rate Approx Max Monthly Salary Approx Max Annual Salary 147 149 Exempt Exempt Police Captain-Adv 023 086 95.73 $ 85.64 119.66 $ 107.04 143.60 $ 128.45 24,891 $ 22,265 298,688 $ 267,176 Police Liet-Adv Item 11: Staff Report Pg. 173 Packet Pg. 418 of 853 Item 11 Attachment E Corrected FCA Salary Schedule () PALO ALTO Palo Alto Fire Chiefs' Association (PAFCA) Salary Schedule Non -Shift Adoption (11% Increase+Benefit Offset) Job Code Classifications Grade Codes Hourly Rate Approx Monthly Salary Approx. Annual Salary 018 Battalion Chief 40 -hour workweek 28 $116.99 $20,278 $243,339 015 Battalion Chief EMT 40 -hour workweek 28E $120.17 $20,829 $249,954 2019 Battalion Chief EMT, Training 40 -hour workweek 28E $120.17 $20,829 $249,954 Shift Job Code Classifications Grade Codes Approx Monthly Salary Approx. Annual Salary 116 Battalion Chief 56 -hour workweek 030 $79.81 $19,367 $232,407 016 Battalion Chief EMT 56 -hour workweek 030E $81.97 $19,891 $238,697 Non -Shift 07/15/2023 (4% Increase) Job Code Classifications Grade Codes Hourly Rate Approx Monthly Salary Approx. Annual Salary 018 Battalion Chief 40 -hour workweek 28 $121.67 $21,089 $253,074 015 Battalion Chief EMT 40 -hour workweek 28E $124.98 $21,663 $259,958 2019 Battalion Chief EMT, Training 40 -hour workweek 28E $124.98 $21,663 $259,958 Shift Job Code Classifications Grade Codes Approx Monthly Salary Approx. Annual Salary 116 Battalion Chief 56 -hour workweek 030 $83.01 $20,144 $241,725 016 Battalion Chief EMT 56 -hour workweek 030E $85.25 $20,687 $248,248 Non -Shift 1/13/2024 (Benefit Offset) Job Code Classifications Grade Codes Hourly Rate Approx Monthly Salary Approx. Annual Salary 018 Battalion Chief 40 -hour workweek 28 $122.25 $21,190 $254,280 015 Battalion Chief EMT 40 -hour workweek 28E $125.56 $21,764 $261,165 2019 Battalion Chief EMT, Training 40 -hour workweek 28E $125.56 $21,764 $261,165 Shift Job Code Classifications Grade Codes Approx Monthly Salary Approx. Annual Salary 116 Battalion Chief 56 -hour workweek 030 $83.59 $20,285 $243,414 016 Battalion Chief EMT 56 -hour workweek 030E $85.83 $20,828 $249,937 Non -Shift 07/12/2024(4% Increase) Job Code Classifications Grade Codes Hourly Rate Approx Monthly Salary Approx. Annual Salary 018 Battalion Chief 40 -hour workweek 28 $127.14 $22,038 $264,451 015 Battalion Chief EMT 40 -hour workweek 28E $130.59 $22,636 $271,627 2019 Battalion Chief EMT, Training 40 -hour workweek 28E $130.59 $22,636 $271,627 Shift Job Code Classifications Grade Codes Approx Monthly Salary Approx Annual Salary 116 Battalion Chief 56 -hour workweek 030 $86.94 $21,097 $253,169 016 Battalion Chief EMT 56 -hour workweek 030E $89.27 $21,663 $259,954 Non -Shift 1/11/2025(2% Increase) Job Code Classifications Grade Codes Hourly Rate Approx Monthly Salary Approx. Annual Salary 018 Battalion Chief 40 -hour workweek 28 $129.69 $22,480 $269,755 015 Battalion Chief EMT 40 -hour workweek 28E $133.21 $23,090 $277,077 2019 Battalion Chief EMT, Training 40 -hour workweek 28E $133.21 $23,090 $277,077 Shift Job Code Classifications Grade Codes Approx Monthly Salary Approx. Annual Salary 116 Battalion Chief 56 -hour workweek 030 $88.68 $21,520 $258,236 016 Battalion Chief EMT 56 -hour workweek 030E $91.06 $22,097 $265,167 Item 11: Staff Report Pg. 174 1 Packet Pg. 419 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule PALO Effective 12/31/2022 (Market and Benefits Offset) ALTO Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 190 Non -Exempt Accountant 690P $40.52 $50.65 $60.78 $84,282 $105,352 $126,422 76 Exempt Administrative Assistant 750P $32.40 $40.50 $48.60 $67,392 $84,240 $101,088 115 Exempt Assistant Chief Building Official 405M $58.82 $73.52 $88.23 $122,346 $152,922 $183,518 132 Exempt Assistant Chief of Police 100A $96.40 $120.49 $144.59 $200,512 $250,619 $300,747 108 Exempt Assistant City Attorney 165A $73.98 $92.47 $110.97 $153,878 $192,338 $230,818 109 Exempt Assistant City Clerk 630M $44.79 $55.98 $67.18 $93,163 $116,438 $139,734 107 Exempt Assistant City Manager 20E $96.15 $120.18 $144.22 $199,992 $249,974 $299,978 73 Exempt Assistant Director Administrative Services 120A $79.80 $99.74 $119.69 $165,984 $207,459 $248,955 126 Exempt Assistant Director Community Services 150A $76.40 $95.50 $114.60 $158,912 $198,640 $238,368 1007 Exempt Assistant Director Human Resources 155A $73.88 $92.34 $110.81 $153,670 $192,067 $230,485 2001 Exempt Assistant Director Library Services 160A $68.99 $86.23 $103.48 $143,499 $179,358 $215,238 10 Exempt Assistant Director Planning & Community Environment 130A $77.70 $97.12 $116.55 $161,616 $202,010 $242,424 143 Exempt Assistant Director Public Works 140A $76.80 $96.00 $115.20 $159,744 $199,680 $239,616 168 Exempt Assistant Fleet Manager 585M $44.50 $55.62 $66.75 $92,560 $115,690 $138,840 102 Exempt Assistant Manager WQCP 240D $63.52 $79.40 $95.28 $132,122 $165,152 $198,182 30 Exempt Assistant to the City Manager 390M $62.29 $77.86 $93.44 $129,563 $161,949 $194,355 118 Exempt Chief Building Official 290M $75.35 $94.18 $113.02 $156,728 $195,894 $235,082 2008 Exempt Chief Communications Officer 135A $73.47 $91.83 $110.20 $152,818 $191,006 $229,216 112 Exempt Chief Planning Official 220D $67.39 $84.23 $101.08 $140,171 $175,198 $210,246 95 Exempt Chief Procurement Officer 235D $57.56 $71.94 $86.33 $119,725 $149,635 $179,566 82 Exempt Chief Transportation Official 140A $73.01 $91.26 $109.52 $151,861 $189,821 $227,802 96 Exempt Claims Investigator 660P $39.36 $49.20 $59.04 $81,869 $102,336 $122,803 24 Exempt Communication Specialist 615M $42.60 $53.24 $63.89 $88,608 $110,739 $132,891 89 Exempt Contracts Administrator 585P $50.00 $62.50 $75.00 $104,000 $130,000 $156,000 186 Non -Exempt Coordinator Library Circulation 675M $40.66 $50.82 $60.99 $84,573 $105,706 $126,859 191 Exempt Fire Marshal* 125A $87.72 $109.65 $131.58 $182,458 $228,072 $273,686 11 Exempt Deputy City Attorney 375M $58.02 $72.52 $87.03 $120,682 $150,842 $181,022 71 Exempt Deputy City Clerk 720M $35.08 $43.85 $52.62 $72,966 $91,208 $109,450 55 Exempt Deputy City Manager 115A $76.28 $95.34 $114.41 $158,662 $198,307 $237,973 195 Exempt Deputy Director Technical Services Division 200D $71.96 $89.95 $107.94 $149,677 $187,096 $224,515 20 Exempt Deputy Fire Chief* 110A $91.38 $114.22 $137.07 $190,070 $237,578 $285,106 81 Exempt Director Administrative Services/Chief Financial Officer 50E $92.88 $116.09 $139.31 $193,190 $241,467 $289,765 72 Exempt Director Community Services 45E $88.32 $110.39 $132.47 $183,706 $229,611 $275,538 Item 11: Staff Report Pg. 175 Packet Pg. 420 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule PALO Effective 12/31/2022 (Market and Benefits Offset) ALTO Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 1012 Exempt Director Development Services 145A $77.59 $96.98 $116.38 $161,387 $201,718 $242,070 133 Exempt Director Human Resources/Chief People Officer 55E $88.55 $110.68 $132.82 $184,184 $230,214 $276,266 128 Exempt Director Information Technology/Chief Information Officer 25E $96.71 $120.88 $145.06 $201,157 $251,430 $301,725 131 Exempt Director Libraries 60E $82.69 $103.36 $124.04 $171,995 $214,989 $258,003 2028 Exempt Director of Emergency Medical Services 215D $69.63 $87.03 $104.44 $144,830 $181,022 $217,235 2005 Exempt Director Office of Emergency Services 215D $69.63 $87.03 $104.44 $144,830 $181,022 $217,235 49 Exempt Director Office of Management and Budget 120A $79.80 $99.74 $119.69 $165,984 $207,459 $248,955 134 Exempt Director Planning & Community Environment 40E $93.12 $116.39 $139.67 $193,690 $242,091 $290,514 135 Exempt Director Public Works/City Engineer 30E $94.31 $117.88 $141.46 $196,165 $245,190 $294,237 121 Exempt Director Utilities 10E $111.29 $139.11 $166.94 $231,483 $289,349 $347,235 2002 Exempt Division Head Library Services 260D $60.28 $75.34 $90.41 $125,382 $156,707 $188,053 172 Exempt Division Manager Open Space, Parks & Golf 245D $62.66 $78.32 $93.99 $130,333 $162,906 $195,499 2031 Exempt Division Manager Planning 220D $67.39 $84.23 $101.08 $140,171 $175,198 $210,246 1005 Exempt Executive Assistant to the City Manager 705M $36.60 $45.74 $54.89 $76,128 $95,139 $114,171 139 Exempt Fire Chief* 35E $105.11 $131.38 $157.66 $218,629 $273,270 $327,933 163 Exempt Hearing Officer 480M $51.51 $64.38 $77.26 $107,141 $133,910 $160,701 101 Exempt Human Resources Representative 735P $34.24 $42.79 $51.35 $71,219 $89,003 $106,808 90 Exempt Landscape Architect Park Planner 510M $49.05 $61.31 $73.58 $102,024 $127,525 $153,046 2015 Exempt Legal Fellow 755P $43.14 $53.92 $64.71 $89,731 $112,154 $134,597 171 Exempt Management Analyst 585M $44.50 $55.62 $66.75 $92,560 $115,690 $138,840 79 Exempt Manager Accounting 235D $60.86 $76.07 $91.29 $126,589 $158,226 $189,883 2007 Exempt Manager Airport 210D $69.86 $87.32 $104.79 $145,309 $181,626 $217,963 2023 Exempt Manager Budget 360M $64.58 $80.72 $96.87 $134,326 $167,898 $201,490 38 Exempt Manager Communications 525M $49.35 $61.68 $74.02 $102,648 $128,294 $153,962 154 Exempt Manager Community Services 630M $45.88 $57.34 $68.81 $95,430 $119,267 $143,125 169 Exempt Manager Community Services Sr Program 585M $49.28 $61.60 $73.92 $102,502 $128,128 $153,754 1013 Exempt Manager Development Center 495M $55.69 $69.61 $83.54 $115,835 $144,789 $173,763 63 Exempt Manager Economic Development 220D $64.31 $80.38 $96.46 $133,765 $167,190 $200,637 44 Exempt Manager Employee Benefits 450M $55.02 $68.77 $82.53 $114,442 $143,042 $171,662 45 Exempt Manager Employee Relations & Training 235D $60.86 $76.07 $91.29 $126,589 $158,226 $189,883 93 Exempt Manager Environmental Control Program 419M $59.86 $74.82 $89.79 $124,509 $155,626 $186,763 1116 Exempt Manager Facilities 445M $52.81 $66.01 $79.22 $109,845 $137,301 $164,778 2030 Exempt Manager Finance 223D $63.88 $79.84 $95.81 $132,870 $166,067 $199,285 Item 11: Staff Report Pg. 176 Packet Pg. 421 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule f City of Palo Alto ` Management, Professional and Confidential Salary Schedule PALO Effective 12/31/2022 (Market and Benefits Offset) ALTO Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 127 Exempt Manager Fleet 255D $53.35 $66.68 $80.02 $110,968 $138,694 $166,442 2018 Exempt Manager Human Services 540M $51.74 $64.67 $77.61 $107,619 $134,514 $161,429 32 Exempt Manager Information Technology 230D $62.22 $77.77 $93.33 $129,418 $161,762 $194,126 2006 Exempt Manager Information Technology Security 230D $58.84 $73.55 $88.26 $122,387 $152,984 $183,581 158 Exempt Manager Laboratory Services 495M $50.27 $62.83 $75.40 $104,562 $130,686 $156,832 78 Exempt Manager Library Services 565M $48.66 $60.82 $72.99 $101,213 $126,506 $151,819 92 Exempt Manager Maintenance Operations 469M $49.24 $61.55 $73.86 $102,419 $128,024 $153,629 26 Exempt Manager Transportation Planning 345M $64.68 $80.84 $97.01 $134,534 $168,147 $201,781 51 Exempt Manager Planning 415M $59.10 $73.87 $88.65 $122,928 $153,650 $184,392 103 Exempt Manager Real Property 235D $57.56 $71.94 $86.33 $119,725 $149,635 $179,566 2011 Exempt Manager Revenue Collections 250D $54.09 $67.61 $81.14 $112,507 $140,629 $168,771 160 Exempt Manager Solid Waste 330M $58.22 $72.77 $87.33 $121,098 $151,362 $181,646 57 Exempt Manager Treasury, Debt & Investments 235D $59.35 $74.18 $89.02 $123,448 $154,294 $185,162 86 Exempt Manager Urban Forestry 436M $54.87 $68.58 $82.30 $114,130 $142,646 $171,184 178 Exempt Manager Water Quality Control Plant 205D $71.70 $89.62 $107.55 $149,136 $186,410 $223,704 39 Exempt Manager Watershed Protection 330M $64.51 $80.63 $96.76 $134,181 $167,710 $201,261 1008 Exempt Office of Emergency Services Coordinator 525M $47.86 $59.82 $71.79 $99,549 $124,426 $149,323 2024 Exempt Performance Auditor I 750P $32.40 $40.50 $48.60 $67,392 $84,240 $101,088 100 Exempt Performance Auditor II 585M $44.50 $55.62 $66.75 $92,560 $115,690 $138,840 148 Exempt Police Chief 15E $108.51 $135.63 $162.76 $225,701 $282,110 $338,541 2021 Exempt Chief Assistant City Attorney 101A $95.65 $119.56 $143.48 $198,952 $248,685 $298,438 2016 Exempt Principal Business Analyst 310M $61.32 $76.64 $91.97 $127,546 $159,411 $191,298 2029 Exempt Principal Planner 469M $49.64 $62.04 $74.45 $103,251 $129,043 $154,856 2003 Exempt Principal Management Analyst 360M $61.08 $76.34 $91.61 $127,046 $158,787 $190,549 2009 Exempt Project Manager 570M $50.32 $62.90 $75.48 $104,666 $130,832 $156,998 2012 Exempt Public Safety Communications Manager 495M $50.27 $62.83 $75.40 $104,562 $130,686 $156,832 166 Exempt Public Safety Program Manager 585M $44.50 $55.62 $66.75 $92,560 $115,690 $138,840 117 Exempt Senior Accountant 525M $53.78 $67.22 $80.67 $111,862 $139,818 $167,794 2013 Exempt Senior Business Analyst - M 420M $53.39 $66.73 $80.08 $111,051 $138,798 $166,566 187 Exempt Senior Engineer 300M $68.72 $85.89 $103.07 $142,938 $178,651 $214,386 106 Exempt Senior Executive Assistant 450M $52.04 $65.04 $78.05 $108,243 $135,283 $162,344 157 Exempt Senior Human Resources Administrator 545M $46.84 $58.54 $70.25 $97,427 $121,763 $146,120 14 Exempt Senior Management Analyst 465M $52.00 $64.99 $77.99 $108,160 $135,179 $162,219 Item 11: Staff Report Pg. 177 Packet Pg. 422 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule PALO Effective 12/31/2022 (Market and Benefits Offset) ALTO Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 130 Exempt Senior Performance Auditor 510M $49.05 $61.31 $73.58 $102,024 $127,525 $153,046 53 Exempt Senior Project Manager 300M $68.72 $85.89 $103.07 $142,938 $178,651 $214,386 33 Exempt Senior Technologist 420M $53.39 $66.73 $80.08 $111,051 $138,798 $166,566 155 Exempt Superintendent Animal Services 540M $46.72 $58.39 $70.07 $97,178 $121,451 $145,746 83 Exempt Superintendent Community Services 480M $55.78 $69.72 $83.67 $116,022 $145,018 $174,034 1117 Exempt Superintendent Recreation 480M $55.78 $69.72 $83.67 $116,022 $145,018 $174,034 2022 Exempt Supervising Librarian 675M $40.81 $51.01 $61.22 $84,885 $106,101 $127,338 161 Exempt Supervisor Facilities Management 600M $43.51 $54.38 $65.26 $90,501 $113,110 $135,741 113 Exempt Supervisor Inspection and Surveying 540M $46.72 $58.39 $70.07 $97,178 $121,451 $145,746 146 Exempt Supervisor Warehouse 660M $39.36 $49.20 $59.04 $81,869 $102,336 $122,803 181 Exempt Supervisor Water Quality Control Operations 525M $47.86 $59.82 $71.79 $99,549 $124,426 $149,323 2027 Exempt Utilities Chief Operating Officer 60E $80.20 $100.25 $120.30 $166,816 $208,520 $250,224 Confidential Classifications 905 Non -Exempt Human Resources Technician 830C $28.70 $35.87 $43.05 $59,696 $74,610 $89,544 903 Non -Exempt Legal Secretary -Confidential 820C $29.41 $36.76 $44.12 $61,173 $76,461 $91,770 67 Exempt Secretary to City Attorney 800C $34.86 $43.57 $52.29 $72,509 $90,626 $108,763 1004 Non -Exempt Senior Legal Secretary - Confidential 810C $32.40 $40.50 $48.60 $67,392 $84,240 $101,088 * Effective 02/25/2023 Item 11: Staff Report Pg. 178 Packet Pg. 423 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule ALTO Effective 07/01/2023 (4% Increase) Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 190 Non -Exempt Accountant 690P $42.15 $52.68 $63.22 $87,672 $109,574 $131,498 76 Exempt Administrative Assistant 750P $33.70 $42.12 $50.55 $70,096 $87,610 $105,144 115 Exempt Assistant Chief Building Official 405M $61.18 $76.47 $91.77 $127,254 $159,058 $190,882 132 Exempt Assistant Chief of Police 100A $100.25 $125.31 $150.38 $208,520 $260,645 $312,790 108 Exempt Assistant City Attorney 165A $76.94 $96.17 $115.41 $160,035 $200,034 $240,053 109 Exempt Assistant City Clerk 630M $46.58 $58.22 $69.87 $96,886 $121,098 $145,330 107 Exempt Assistant City Manager 20E $100.00 $124.99 $149.99 $208,000 $259,979 $311,979 73 Exempt Assistant Director Administrative Services 120A $82.99 $103.73 $124.48 $172,619 $215,758 $258,918 126 Exempt Assistant Director Community Services 150A $79.46 $99.32 $119.19 $165,277 $206,586 $247,915 1007 Exempt Assistant Director Human Resources 155A $76.84 $96.04 $115.25 $159,827 $199,763 $239,720 2001 Exempt Assistant Director Library Services 160A $71.75 $89.68 $107.62 $149,240 $186,534 $223,850 10 Exempt Assistant Director Planning & Community Environment 130A $80.81 $101.01 $121.22 $168,085 $210,101 $252,138 143 Exempt Assistant Director Public Works 140A $79.88 $99.84 $119.81 $166,150 $207,667 $249,205 168 Exempt Assistant Fleet Manager 585M $46.28 $57.85 $69.42 $96,262 $120,328 $144,394 102 Exempt Assistant Manager WQCP 240D $66.07 $82.58 $99.10 $137,426 $171,766 $206,128 30 Exempt Assistant to the City Manager 390M $64.79 $80.98 $97.18 $134,763 $168,438 $202,134 118 Exempt Chief Building Official 290M $78.36 $97.95 $117.54 $162,989 $203,736 $244,483 2008 Exempt Chief Communications Officer 135A $76.41 $95.51 $114.62 $158,933 $198,661 $238,410 112 Exempt Chief Planning Official 220D $70.08 $87.60 $105.12 $145,766 $182,208 $218,650 95 Exempt Chief Procurement Officer 235D $59.86 $74.82 $89.79 $124,509 $155,626 $186,763 82 Exempt Chief Transportation Official 140A $75.94 $94.92 $113.91 $157,955 $197,434 $236,933 96 Exempt Claims Investigator 660P $40.94 $51.17 $61.41 $85,155 $106,434 $127,733 24 Exempt Communication Specialist 615M $44.30 $55.37 $66.45 $92,144 $115,170 $138,216 89 Exempt Contracts Administrator 585P $52.00 $65.00 $78.00 $108,160 $135,200 $162,240 186 Non -Exempt Coordinator Library Circulation 675M $42.29 $52.86 $63.44 $87,963 $109,949 $131,955 191 Exempt Fire Marshal 125A $91.24 $114.04 $136.85 $189,779 $237,203 $284,648 11 Exempt Deputy City Attorney 375M $60.35 $75.43 $90.52 $125,528 $156,894 $188,282 71 Exempt Deputy City Clerk 720M $36.49 $45.61 $54.74 $75,899 $94,869 $113,859 55 Exempt Deputy City Manager 115A $79.33 $99.16 $119.00 $165,006 $206,253 $247,520 195 Exempt Deputy Director Technical Services Division 200D $74.84 $93.55 $112.26 $155,667 $194,584 $233,501 20 Exempt Deputy Fire Chief 110A $95.04 $118.79 $142.55 $197,683 $247,083 $296,504 81 Exempt Director Administrative Services/Chief Financial Officer 50E $96.60 $120.74 $144.89 $200,928 $251,139 $301,371 72 Exempt Director Community Services 45E $91.85 $114.81 $137.78 $191,048 $238,805 $286,582 Item 11: Staff Report Pg. 179 Packet Pg. 424 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule ALTO Effective 07/01/2023 (4% Increase) Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 1012 Exempt Director Development Services 145A $80.69 $100.86 $121.04 $167,835 $209,789 $251,763 133 Exempt Director Human Resources/Chief People Officer 55E $92.09 $115.11 $138.14 $191,547 $239,429 $287,331 128 Exempt Director Information Technology/Chief Information Officer 25E $100.58 $125.72 $150.87 $209,206 $261,498 $313,810 131 Exempt Director Libraries 60E $86.00 $107.50 $129.00 $178,880 $223,600 $268,320 2028 Exempt Director of Emergency Medical Services 215D $72.42 $90.52 $108.63 $150,634 $188,282 $225,950 2005 Exempt Director Office of Emergency Services 215D $72.42 $90.52 $108.63 $150,634 $188,282 $225,950 49 Exempt Director Office of Management and Budget 120A $82.99 $103.73 $124.48 $172,619 $215,758 $258,918 134 Exempt Director Planning & Community Environment 40E $96.84 $121.05 $145.26 $201,427 $251,784 $302,141 135 Exempt Director Public Works/City Engineer 30E $98.08 $122.60 $147.12 $204,006 $255,008 $306,010 121 Exempt Director Utilities 10E $115.75 $144.68 $173.62 $240,760 $300,934 $361,130 2002 Exempt Division Head Library Services 260D $62.69 $78.36 $94.04 $130,395 $162,989 $195,603 172 Exempt Division Manager Open Space, Parks & Golf 245D $65.17 $81.46 $97.76 $135,554 $169,437 $203,341 2031 Exempt Division Manager Planning 220D $70.08 $87.60 $105.12 $145,766 $182,208 $218,650 1005 Exempt Executive Assistant to the City Manager 705M $38.06 $47.57 $57.09 $79,165 $98,946 $118,747 139 Exempt Fire Chief 35E $109.32 $136.64 $163.97 $227,386 $284,211 $341,058 163 Exempt Hearing Officer 480M $53.57 $66.96 $80.36 $111,426 $139,277 $167,149 101 Exempt Human Resources Representative 735P $35.61 $44.51 $53.42 $74,069 $92,581 $111,114 90 Exempt Landscape Architect Park Planner 510M $51.02 $63.77 $76.53 $106,122 $132,642 $159,182 2015 Exempt Legal Fellow 755P $44.87 $56.08 $67.30 $93,330 $116,646 $139,984 171 Exempt Management Analyst 585M $46.28 $57.85 $69.42 $96,262 $120,328 $144,394 79 Exempt Manager Accounting 235D $63.30 $79.12 $94.95 $131,664 $164,570 $197,496 2007 Exempt Manager Airport 210D $72.66 $90.82 $108.99 $151,133 $188,906 $226,699 2023 Exempt Manager Budget 360M $67.16 $83.95 $100.74 $139,693 $174,616 $209,539 38 Exempt Manager Communications 525M $51.32 $64.15 $76.98 $106,746 $133,432 $160,118 154 Exempt Manager Community Services 630M $47.72 $59.64 $71.57 $99,258 $124,051 $148,866 169 Exempt Manager Community Services Sr Program 585M $51.26 $64.07 $76.89 $106,621 $133,266 $159,931 1013 Exempt Manager Development Center 495M $57.92 $72.40 $86.88 $120,474 $150,592 $180,710 63 Exempt Manager Economic Development 220D $66.88 $83.60 $100.32 $139,110 $173,888 $208,666 44 Exempt Manager Employee Benefits 450M $57.23 $71.53 $85.84 $119,038 $148,782 $178,547 45 Exempt Manager Employee Relations & Training 235D $63.30 $79.12 $94.95 $131,664 $164,570 $197,496 93 Exempt Manager Environmental Control Program 419M $62.26 $77.82 $93.39 $129,501 $161,866 $194,251 1116 Exempt Manager Facilities 445M $54.93 $68.66 $82.40 $114,254 $142,813 $171,392 2030 Exempt Manager Finance 223D $66.44 $83.04 $99.65 $138,195 $172,723 $207,272 Item 11: Staff Report Pg. 180 Packet Pg. 425 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto ` Management, Professional and Confidential Salary Schedule P PALOEffective 07/01/2023 (4% Increase) Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 127 Exempt Manager Fleet 255D $55.48 $69.35 $83.22 $115,398 $144,248 $173,098 2018 Exempt Manager Human Services 540M $53.81 $67.26 $80.72 $111,925 $139,901 $167,898 32 Exempt Manager Information Technology 230D $64.72 $80.89 $97.07 $134,618 $168,251 $201,906 2006 Exempt Manager Information Technology Security 230D $61.20 $76.50 $91.80 $127,296 $159,120 $190,944 158 Exempt Manager Laboratory Services 495M $52.28 $65.35 $78.42 $108,742 $135,928 $163,114 78 Exempt Manager Library Services 565M $50.61 $63.26 $75.92 $105,269 $131,581 $157,914 92 Exempt Manager Maintenance Operations 469M $51.22 $64.02 $76.83 $106,538 $133,162 $159,806 26 Exempt Manager Transportation Planning 345M $67.27 $84.08 $100.90 $139,922 $174,886 $209,872 51 Exempt Manager Planning 415M $61.47 $76.83 $92.20 $127,858 $159,806 $191,776 103 Exempt Manager Real Property 235D $59.86 $74.82 $89.79 $124,509 $155,626 $186,763 2011 Exempt Manager Revenue Collections 250D $56.26 $70.32 $84.39 $117,021 $146,266 $175,531 160 Exempt Manager Solid Waste 330M $60.56 $75.69 $90.83 $125,965 $157,435 $188,926 57 Exempt Manager Treasury, Debt & Investments 235D $61.72 $77.15 $92.58 $128,378 $160,472 $192,566 86 Exempt Manager Urban Forestry 436M $57.07 $71.33 $85.60 $118,706 $148,366 $178,048 178 Exempt Manager Water Quality Control Plant 205D $74.57 $93.21 $111.86 $155,106 $193,877 $232,669 39 Exempt Manager Watershed Protection 330M $67.09 $83.86 $100.64 $139,547 $174,429 $209,331 1008 Exempt Office of Emergency Services Coordinator 525M $49.78 $62.22 $74.67 $103,542 $129,418 $155,314 2024 Exempt Performance Auditor I 750P $33.70 $42.12 $50.55 $70,096 $87,610 $105,144 100 Exempt Performance Auditor II 585M $46.28 $57.85 $69.42 $96,262 $120,328 $144,394 148 Exempt Police Chief 15E $112.85 $141.06 $169.28 $234,728 $293,405 $352,102 2021 Exempt Chief Assistant City Attorney 101A $99.48 $124.35 $149.22 $206,918 $258,648 $310,378 2016 Exempt Principal Business Analyst 310M $63.77 $79.71 $95.66 $132,642 $165,797 $198,973 2029 Exempt Principal Planner 469M $51.63 $64.53 $77.44 $107,390 $134,222 $161,075 2003 Exempt Principal Management Analyst 360M $63.52 $79.40 $95.28 $132,122 $165,152 $198,182 2009 Exempt Project Manager 570M $52.34 $65.42 $78.51 $108,867 $136,074 $163,301 2012 Exempt Public Safety Communications Manager 495M $52.28 $65.35 $78.42 $108,742 $135,928 $163,114 166 Exempt Public Safety Program Manager 585M $46.28 $57.85 $69.42 $96,262 $120,328 $144,394 117 Exempt Senior Accountant 525M $55.93 $69.91 $83.90 $116,334 $145,413 $174,512 2013 Exempt Senior Business Analyst - M 420M $55.52 $69.40 $83.28 $115,482 $144,352 $173,222 187 Exempt Senior Engineer 300M $71.47 $89.33 $107.20 $148,658 $185,806 $222,976 106 Exempt Senior Executive Assistant 450M $54.12 $67.65 $81.18 $112,570 $140,712 $168,854 157 Exempt Senior Human Resources Administrator 545M $48.72 $60.89 $73.07 $101,338 $126,651 $151,986 14 Exempt Senior Management Analyst 465M $54.08 $67.59 $81.11 $112,486 $140,587 $168,709 Item 11: Staff Report Pg. 181 Packet Pg. 426 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule ALTO Effective 07/01/2023 (4% Increase) Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 130 Exempt Senior Performance Auditor 510M $51.02 $63.77 $76.53 $106,122 $132,642 $159,182 53 Exempt Senior Project Manager 300M $71.47 $89.33 $107.20 $148,658 $185,806 $222,976 33 Exempt Senior Technologist 420M $55.52 $69.40 $83.28 $115,482 $144,352 $173,222 155 Exempt Superintendent Animal Services 540M $48.59 $60.73 $72.88 $101,067 $126,318 $151,590 83 Exempt Superintendent Community Services 480M $58.01 $72.51 $87.02 $120,661 $150,821 $181,002 1117 Exempt Superintendent Recreation 480M $58.01 $72.51 $87.02 $120,661 $150,821 $181,002 2022 Exempt Supervising Librarian 675M $42.45 $53.06 $63.68 $88,296 $110,365 $132,454 161 Exempt Supervisor Facilities Management 600M $45.25 $56.56 $67.88 $94,120 $117,645 $141,190 113 Exempt Supervisor Inspection and Surveying 540M $48.59 $60.73 $72.88 $101,067 $126,318 $151,590 146 Exempt Supervisor Warehouse 660M $40.94 $51.17 $61.41 $85,155 $106,434 $127,733 181 Exempt Supervisor Water Quality Control Operations 525M $49.78 $62.22 $74.67 $103,542 $129,418 $155,314 2027 Exempt Utilities Chief Operating Officer 60E $83.41 $104.26 $125.12 $173,493 $216,861 $260,250 Confidential Classifications 905 Non -Exempt Human Resources Technician 830C $29.85 $37.31 $44.78 $62,088 $77,605 $93,142 903 Non -Exempt Legal Secretary -Confidential 820C $30.60 $38.24 $45.89 $63,648 $79,539 $95,451 67 Exempt Secretary to City Attorney 800C $36.26 $45.32 $54.39 $75,421 $94,266 $113,131 1004 Non -Exempt Senior Legal Secretary - Confidential 810C $33.70 $42.12 $50.55 $70,096 $87,610 $105,144 Item 11: Staff Report Pg. 182 Packet Pg. 427 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule PALO Effective pay period inclusive of 01/01/2024 (Annual $100 Medical Offset) ALTO Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 190 Non -Exempt Accountant 690P $42.61 $53.26 $63.92 $88,629 $110,781 $132,954 76 Exempt Administrative Assistant 750P $34.16 $42.70 $51.24 $71,053 $88,816 $106,579 115 Exempt Assistant Chief Building Official 405M $61.64 $77.05 $92.46 $128,211 $160,264 $192,317 132 Exempt Assistant Chief of Police 100A $100.72 $125.89 $151.07 $209,498 $261,851 $314,226 108 Exempt Assistant City Attorney 165A $77.40 $96.75 $116.10 $160,992 $201,240 $241,488 109 Exempt Assistant City Clerk 630M $47.04 $58.80 $70.56 $97,843 $122,304 $146,765 107 Exempt Assistant City Manager 20E $100.46 $125.57 $150.69 $208,957 $261,186 $313,435 73 Exempt Assistant Director Administrative Services 120A $83.45 $104.31 $125.18 $173,576 $216,965 $260,374 126 Exempt Assistant Director Community Services 150A $79.92 $99.90 $119.88 $166,234 $207,792 $249,350 1007 Exempt Assistant Director Human Resources 155A $77.30 $96.62 $115.95 $160,784 $200,970 $241,176 2001 Exempt Assistant Director Library Services 160A $72.21 $90.26 $108.32 $150,197 $187,741 $225,306 10 Exempt Assistant Director Planning & Community Environment 130A $81.28 $101.59 $121.91 $169,062 $211,307 $253,573 143 Exempt Assistant Director Public Works 140A $80.34 $100.42 $120.51 $167,107 $208,874 $250,661 168 Exempt Assistant Fleet Manager 585M $46.75 $58.43 $70.12 $97,240 $121,534 $145,850 102 Exempt Assistant Manager WQCP 240D $66.53 $83.16 $99.80 $138,382 $172,973 $207,584 30 Exempt Assistant to the City Manager 390M $65.25 $81.56 $97.88 $135,720 $169,645 $203,590 118 Exempt Chief Building Official 290M $78.83 $98.53 $118.24 $163,966 $204,942 $245,939 2008 Exempt Chief Communications Officer 135A $76.88 $96.09 $115.31 $159,910 $199,867 $239,845 112 Exempt Chief Planning Official 220D $70.55 $88.18 $105.82 $146,744 $183,414 $220,106 95 Exempt Chief Procurement Officer 235D $60.32 $75.40 $90.48 $125,466 $156,832 $188,198 82 Exempt Chief Transportation Official 140A $76.40 $95.50 $114.60 $158,912 $198,640 $238,368 96 Exempt Claims Investigator 660P $41.40 $51.75 $62.10 $86,112 $107,640 $129,168 24 Exempt Communication Specialist 615M $44.76 $55.95 $67.14 $93,101 $116,376 $139,651 89 Exempt Contracts Administrator 585P $52.47 $65.58 $78.70 $109,138 $136,406 $163,696 186 Non -Exempt Coordinator Library Circulation 675M $42.76 $53.44 $64.13 $88,941 $111,155 $133,390 191 Exempt Fire Marshal 125A $91.70 $114.62 $137.55 $190,736 $238,410 $286,104 11 Exempt Deputy City Attorney 375M $60.81 $76.01 $91.22 $126,485 $158,101 $189,738 71 Exempt Deputy City Clerk 720M $36.96 $46.19 $55.43 $76,877 $96,075 $115,294 55 Exempt Deputy City Manager 115A $79.80 $99.74 $119.69 $165,984 $207,459 $248,955 195 Exempt Deputy Director Technical Services Division 200D $75.31 $94.13 $112.96 $156,645 $195,790 $234,957 20 Exempt Deputy Fire Chief 110A $95.50 $119.37 $143.25 $198,640 $248,290 $297,960 81 Exempt Director Administrative Services/Chief Financial Officer 50E $97.06 $121.32 $145.59 $201,885 $252,346 $302,827 72 Exempt Director Community Services 45E $92.32 $115.39 $138.47 $192,026 $240,011 $288,018 Item 11: Staff Report Pg. 183 Packet Pg. 428 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule f City of Palo Alto ` Management, Professional and Confidential Salary Schedule PALO Effective pay period inclusive of 01/01/2024 (Annual $100 Medical Offset) ALTO Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 1012 Exempt Director Development Services 145A $81.16 $101.44 $121.73 $168,813 $210,995 $253,198 133 Exempt Director Human Resources/Chief People Officer 55E $92.56 $115.69 $138.83 $192,525 $240,635 $288,766 128 Exempt Director Information Technology/Chief Information Officer 25E $101.04 $126.30 $151.56 $210,163 $262,704 $315,245 131 Exempt Director Libraries 60E $86.47 $108.08 $129.70 $179,858 $224,806 $269,776 2028 Exempt Director of Emergency Medical Services 215D $72.88 $91.10 $109.32 $151,590 $189,488 $227,386 2005 Exempt Director Office of Emergency Services 215D $72.88 $91.10 $109.32 $151,590 $189,488 $227,386 49 Exempt Director Office of Management and Budget 120A $83.45 $104.31 $125.18 $173,576 $216,965 $260,374 134 Exempt Director Planning & Community Environment 40E $97.31 $121.63 $145.96 $202,405 $252,990 $303,597 135 Exempt Director Public Works/City Engineer 30E $98.55 $123.18 $147.82 $204,984 $256,214 $307,466 121 Exempt Director Utilities 10E $116.21 $145.26 $174.32 $241,717 $302,141 $362,586 2002 Exempt Division Head Library Services 260D $63.16 $78.94 $94.73 $131,373 $164,195 $197,038 172 Exempt Division Manager Open Space, Parks & Golf 245D $65.64 $82.04 $98.45 $136,531 $170,643 $204,776 2031 Exempt Division Manager Planning 220D $70.55 $88.18 $105.82 $146,744 $183,414 $220,106 1005 Exempt Executive Assistant to the City Manager 705M $38.52 $48.15 $57.78 $80,122 $100,152 $120,182 139 Exempt Fire Chief 35E $109.78 $137.22 $164.67 $228,342 $285,418 $342,514 163 Exempt Hearing Officer 480M $54.04 $67.54 $81.05 $112,403 $140,483 $168,584 101 Exempt Human Resources Representative 735P $36.08 $45.09 $54.11 $75,046 $93,787 $112,549 90 Exempt Landscape Architect Park Planner 510M $51.48 $64.35 $77.22 $107,078 $133,848 $160,618 2015 Exempt Legal Fellow 755P $45.33 $56.66 $68.00 $94,286 $117,853 $141,440 171 Exempt Management Analyst 585M $46.75 $58.43 $70.12 $97,240 $121,534 $145,850 79 Exempt Manager Accounting 235D $63.76 $79.70 $95.64 $132,621 $165,776 $198,931 2007 Exempt Manager Airport 210D $73.12 $91.40 $109.68 $152,090 $190,112 $228,134 2023 Exempt Manager Budget 360M $67.63 $84.53 $101.44 $140,670 $175,822 $210,995 38 Exempt Manager Communications 525M $51.79 $64.73 $77.68 $107,723 $134,638 $161,574 154 Exempt Manager Community Services 630M $48.18 $60.22 $72.27 $100,214 $125,258 $150,322 169 Exempt Manager Community Services Sr Program 585M $51.72 $64.65 $77.58 $107,578 $134,472 $161,366 1013 Exempt Manager Development Center 495M $58.39 $72.98 $87.58 $121,451 $151,798 $182,166 63 Exempt Manager Economic Development 220D $67.35 $84.18 $101.02 $140,088 $175,094 $210,122 44 Exempt Manager Employee Benefits 450M $57.69 $72.11 $86.54 $119,995 $149,989 $180,003 45 Exempt Manager Employee Relations & Training 235D $63.76 $79.70 $95.64 $132,621 $165,776 $198,931 93 Exempt Manager Environmental Control Program 419M $62.72 $78.40 $94.08 $130,458 $163,072 $195,686 1116 Exempt Manager Facilities 445M $55.40 $69.24 $83.09 $115,232 $144,019 $172,827 2030 Exempt Manager Finance 223D $66.90 $83.62 $100.35 $139,152 $173,930 $208,728 Item 11: Staff Report Pg. 184 Packet Pg. 429 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule f City of Palo Alto ` Management, Professional and Confidential Salary Schedule PALO Effective pay period inclusive of 01/01/2024 (Annual $100 Medical Offset) ALTO Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 127 Exempt Manager Fleet 255D $55.95 $69.93 $83.92 $116,376 $145,454 $174,554 2018 Exempt Manager Human Services 540M $54.28 $67.84 $81.41 $112,902 $141,107 $169,333 32 Exempt Manager Information Technology 230D $65.18 $81.47 $97.77 $135,574 $169,458 $203,362 2006 Exempt Manager Information Technology Security 230D $61.67 $77.08 $92.50 $128,274 $160,326 $192,400 158 Exempt Manager Laboratory Services 495M $52.75 $65.93 $79.12 $109,720 $137,134 $164,570 78 Exempt Manager Library Services 565M $51.08 $63.84 $76.61 $106,246 $132,787 $159,349 92 Exempt Manager Maintenance Operations 469M $51.68 $64.60 $77.52 $107,494 $134,368 $161,242 26 Exempt Manager Transportation Planning 345M $67.73 $84.66 $101.60 $140,878 $176,093 $211,328 51 Exempt Manager Planning 415M $61.93 $77.41 $92.90 $128,814 $161,013 $193,232 103 Exempt Manager Real Property 235D $60.32 $75.40 $90.48 $125,466 $156,832 $188,198 2011 Exempt Manager Revenue Collections 250D $56.72 $70.90 $85.08 $117,978 $147,472 $176,966 160 Exempt Manager Solid Waste 330M $61.02 $76.27 $91.53 $126,922 $158,642 $190,382 57 Exempt Manager Treasury, Debt & Investments 235D $62.19 $77.73 $93.28 $129,355 $161,678 $194,022 86 Exempt Manager Urban Forestry 436M $57.53 $71.91 $86.30 $119,662 $149,573 $179,504 178 Exempt Manager Water Quality Control Plant 205D $75.04 $93.79 $112.55 $156,083 $195,083 $234,104 39 Exempt Manager Watershed Protection 330M $67.56 $84.44 $101.33 $140,525 $175,635 $210,766 1008 Exempt Office of Emergency Services Coordinator 525M $50.24 $62.80 $75.36 $104,499 $130,624 $156,749 2024 Exempt Performance Auditor I 750P $34.16 $42.70 $51.24 $71,053 $88,816 $106,579 100 Exempt Performance Auditor II 585M $46.75 $58.43 $70.12 $97,240 $121,534 $145,850 148 Exempt Police Chief 15E $113.32 $141.64 $169.97 $235,706 $294,611 $353,538 2021 Exempt Chief Assistant City Attorney 101A $99.95 $124.93 $149.92 $207,896 $259,854 $311,834 2016 Exempt Principal Business Analyst 310M $64.24 $80.29 $96.35 $133,619 $167,003 $200,408 2029 Exempt Principal Planner 469M $52.09 $65.11 $78.14 $108,347 $135,429 $162,531 2003 Exempt Principal Management Analyst 360M $63.99 $79.98 $95.98 $133,099 $166,358 $199,638 2009 Exempt Project Manager 570M $52.80 $66.00 $79.20 $109,824 $137,280 $164,736 2012 Exempt Public Safety Communications Manager 495M $52.75 $65.93 $79.12 $109,720 $137,134 $164,570 166 Exempt Public Safety Program Manager 585M $46.75 $58.43 $70.12 $97,240 $121,534 $145,850 117 Exempt Senior Accountant 525M $56.40 $70.49 $84.59 $117,312 $146,619 $175,947 2013 Exempt Senior Business Analyst - M 420M $55.99 $69.98 $83.98 $116,459 $145,558 $174,678 187 Exempt Senior Engineer 300M $71.93 $89.91 $107.90 $149,614 $187,013 $224,432 106 Exempt Senior Executive Assistant 450M $54.59 $68.23 $81.88 $113,547 $141,918 $170,310 157 Exempt Senior Human Resources Administrator 545M $49.18 $61.47 $73.77 $102,294 $127,858 $153,442 14 Exempt Senior Management Analyst 465M $54.54 $68.17 $81.81 $113,443 $141,794 $170,165 Item 11: Staff Report Pg. 185 Packet Pg. 430 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule PALO Effective pay period inclusive of 01/01/2024 (Annual $100 Medical Offset) ALTO Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 130 Exempt Senior Performance Auditor 510M $51.48 $64.35 $77.22 $107,078 $133,848 $160,618 53 Exempt Senior Project Manager 300M $71.93 $89.91 $107.90 $149,614 $187,013 $224,432 33 Exempt Senior Technologist 420M $55.99 $69.98 $83.98 $116,459 $145,558 $174,678 155 Exempt Superintendent Animal Services 540M $49.05 $61.31 $73.58 $102,024 $127,525 $153,046 83 Exempt Superintendent Community Services 480M $58.48 $73.09 $87.71 $121,638 $152,027 $182,437 1117 Exempt Superintendent Recreation 480M $58.48 $73.09 $87.71 $121,638 $152,027 $182,437 2022 Exempt Supervising Librarian 675M $42.92 $53.64 $64.37 $89,274 $111,571 $133,890 161 Exempt Supervisor Facilities Management 600M $45.72 $57.14 $68.57 $95,098 $118,851 $142,626 113 Exempt Supervisor Inspection and Surveying 540M $49.05 $61.31 $73.58 $102,024 $127,525 $153,046 146 Exempt Supervisor Warehouse 660M $41.40 $51.75 $62.10 $86,112 $107,640 $129,168 181 Exempt Supervisor Water Quality Control Operations 525M $50.24 $62.80 $75.36 $104,499 $130,624 $156,749 2027 Exempt Utilities Chief Operating Officer 60E $83.88 $104.84 $125.81 $174,470 $218,067 $261,685 Confidential Classifications 905 Non -Exempt Human Resources Technician 830C $30.32 $37.89 $45.47 $63,066 $78,811 $94,578 903 Non -Exempt Legal Secretary -Confidential 820C $31.06 $38.82 $46.59 $64,605 $80,746 $96,907 67 Exempt Secretary to City Attorney 800C $36.72 $45.90 $55.08 $76,378 $95,472 $114,566 1004 Non -Exempt Senior Legal Secretary - Confidential 810C $34.16 $42.70 $51.24 $71,053 $88,816 $106,579 Item 11: Staff Report Pg. 186 Packet Pg. 431 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule ALTO Effective Pay period inclusive of 07/01/2024 (4% Increase) Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 190 Non -Exempt Accountant 690P $44.32 $55.40 $66.48 $92,186 $115,232 $138,278 76 Exempt Administrative Assistant 750P $35.53 $44.41 $53.30 $73,902 $92,373 $110,864 115 Exempt Assistant Chief Building Official 405M $64.12 $80.14 $96.17 $133,370 $166,691 $200,034 132 Exempt Assistant Chief of Police 100A $104.75 $130.93 $157.12 $217,880 $272,334 $326,810 108 Exempt Assistant City Attorney 165A $80.50 $100.62 $120.75 $167,440 $209,290 $251,160 109 Exempt Assistant City Clerk 630M $48.93 $61.16 $73.40 $101,774 $127,213 $152,672 107 Exempt Assistant City Manager 20E $104.48 $130.60 $156.72 $217,318 $271,648 $325,978 73 Exempt Assistant Director Administrative Services 120A $86.80 $108.49 $130.19 $180,544 $225,659 $270,795 126 Exempt Assistant Director Community Services 150A $83.12 $103.90 $124.68 $172,890 $216,112 $259,334 1007 Exempt Assistant Director Human Resources 155A $80.40 $100.49 $120.59 $167,232 $209,019 $250,827 2001 Exempt Assistant Director Library Services 160A $75.11 $93.88 $112.66 $156,229 $195,270 $234,333 10 Exempt Assistant Director Planning & Community Environment 130A $84.53 $105.66 $126.80 $175,822 $219,773 $263,744 143 Exempt Assistant Director Public Works 140A $83.56 $104.44 $125.33 $173,805 $217,235 $260,686 168 Exempt Assistant Fleet Manager 585M $48.62 $60.77 $72.93 $101,130 $126,402 $151,694 102 Exempt Assistant Manager WQCP 240D $69.20 $86.49 $103.79 $143,936 $179,899 $215,883 30 Exempt Assistant to the City Manager 390M $67.87 $84.83 $101.80 $141,170 $176,446 $211,744 118 Exempt Chief Building Official 290M $81.99 $102.48 $122.98 $170,539 $213,158 $255,798 2008 Exempt Chief Communications Officer 135A $79.96 $99.94 $119.93 $166,317 $207,875 $249,454 112 Exempt Chief Planning Official 220D $73.37 $91.71 $110.06 $152,610 $190,757 $228,925 95 Exempt Chief Procurement Officer 235D $62.74 $78.42 $94.11 $130,499 $163,114 $195,749 82 Exempt Chief Transportation Official 140A $79.46 $99.32 $119.19 $165,277 $206,586 $247,915 96 Exempt Claims Investigator 660P $43.06 $53.82 $64.59 $89,565 $111,946 $134,347 24 Exempt Communication Specialist 615M $46.56 $58.19 $69.83 $96,845 $121,035 $145,246 89 Exempt Contracts Administrator 585P $54.57 $68.21 $81.86 $113,506 $141,877 $170,269 186 Non -Exempt Coordinator Library Circulation 675M $44.47 $55.58 $66.70 $92,498 $115,606 $138,736 191 Exempt Fire Marshal 125A $95.37 $119.21 $143.06 $198,370 $247,957 $297,565 11 Exempt Deputy City Attorney 375M $63.25 $79.06 $94.88 $131,560 $164,445 $197,350 71 Exempt Deputy City Clerk 720M $38.44 $48.04 $57.65 $79,955 $99,923 $119,912 55 Exempt Deputy City Manager 115A $82.99 $103.73 $124.48 $172,619 $215,758 $258,918 195 Exempt Deputy Director Technical Services Division 200D $78.32 $97.90 $117.48 $162,906 $203,632 $244,358 20 Exempt Deputy Fire Chief 110A $99.32 $124.15 $148.98 $206,586 $258,232 $309,878 81 Exempt Director Administrative Services/Chief Financial Officer 50E $100.95 $126.18 $151.42 $209,976 $262,454 $314,954 72 Exempt Director Community Services 45E $96.01 $120.01 $144.02 $199,701 $249,621 $299,562 Item 11: Staff Report Pg. 187 Packet Pg. 432 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule ♦ City of Palo Alto ` Management, Professional and Confidential Salary Schedule ALTO Effective Pay period inclusive of 07/01/2024 (4% Increase) Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 1012 Exempt Director Development Services 145A $84.40 $105.50 $126.60 $175,552 $219,440 $263,328 133 Exempt Director Human Resources/Chief People Officer 55E $96.26 $120.32 $144.39 $200,221 $250,266 $300,331 128 Exempt Director Information Technology/Chief Information Officer 25E $105.09 $131.36 $157.64 $218,587 $273,229 $327,891 131 Exempt Director Libraries 60E $89.93 $112.41 $134.90 $187,054 $233,813 $280,592 2028 Exempt Director of Emergency Medical Services 215D $75.80 $94.75 $113.70 $157,664 $197,080 $236,496 2005 Exempt Director Office of Emergency Services 215D $75.80 $94.75 $113.70 $157,664 $197,080 $236,496 49 Exempt Director Office of Management and Budget 120A $86.80 $108.49 $130.19 $180,544 $225,659 $270,795 134 Exempt Director Planning & Community Environment 40E $101.20 $126.50 $151.80 $210,496 $263,120 $315,744 135 Exempt Director Public Works/City Engineer 30E $102.49 $128.11 $153.74 $213,179 $266,469 $319,779 121 Exempt Director Utilities 10E $120.87 $151.08 $181.30 $251,410 $314,246 $377,104 2002 Exempt Division Head Library Services 260D $65.68 $82.10 $98.52 $136,614 $170,768 $204,922 172 Exempt Division Manager Open Space, Parks & Golf 245D $68.27 $85.33 $102.40 $142,002 $177,486 $212,992 2031 Exempt Division Manager Planning 220D $73.37 $91.71 $110.06 $152,610 $190,757 $228,925 1005 Exempt Executive Assistant to the City Manager 705M $40.07 $50.08 $60.10 $83,346 $104,166 $125,008 139 Exempt Fire Chief 35E $114.17 $142.71 $171.26 $237,474 $296,837 $356,221 163 Exempt Hearing Officer 480M $56.20 $70.25 $84.30 $116,896 $146,120 $175,344 101 Exempt Human Resources Representative 735P $37.52 $46.90 $56.28 $78,042 $97,552 $117,062 90 Exempt Landscape Architect Park Planner 510M $53.55 $66.93 $80.32 $111,384 $139,214 $167,066 2015 Exempt Legal Fellow 755P $47.15 $58.93 $70.72 $98,072 $122,574 $147,098 171 Exempt Management Analyst 585M $48.62 $60.77 $72.93 $101,130 $126,402 $151,694 79 Exempt Manager Accounting 235D $66.32 $82.89 $99.47 $137,946 $172,411 $206,898 2007 Exempt Manager Airport 210D $76.05 $95.06 $114.08 $158,184 $197,725 $237,286 2023 Exempt Manager Budget 360M $70.34 $87.92 $105.51 $146,307 $182,874 $219,461 38 Exempt Manager Communications 525M $53.86 $67.32 $80.79 $112,029 $140,026 $168,043 154 Exempt Manager Community Services 630M $50.11 $62.63 $75.16 $104,229 $130,270 $156,333 169 Exempt Manager Community Services Sr Program 585M $53.80 $67.24 $80.69 $111,904 $139,859 $167,835 1013 Exempt Manager Development Center 495M $60.72 $75.90 $91.08 $126,298 $157,872 $189,446 63 Exempt Manager Economic Development 220D $70.04 $87.55 $105.06 $145,683 $182,104 $218,525 44 Exempt Manager Employee Benefits 450M $60.00 $75.00 $90.00 $124,800 $156,000 $187,200 45 Exempt Manager Employee Relations & Training 235D $66.32 $82.89 $99.47 $137,946 $172,411 $206,898 93 Exempt Manager Environmental Control Program 419M $65.24 $81.54 $97.85 $135,699 $169,603 $203,528 1116 Exempt Manager Facilities 445M $57.61 $72.01 $86.42 $119,829 $149,781 $179,754 2030 Exempt Manager Finance 223D $69.58 $86.97 $104.37 $144,726 $180,898 $217,090 Item 11: Staff Report Pg. 188 Packet Pg. 433 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule ♦ City of Palo Alto ` Management, Professional and Confidential Salary Schedule ALTO Effective Pay period inclusive of 07/01/2024 (4% Increase) Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 127 Exempt Manager Fleet 255D $58.19 $72.73 $87.28 $121,035 $151,278 $181,542 2018 Exempt Manager Human Services 540M $56.45 $70.56 $84.68 $117,416 $146,765 $176,134 32 Exempt Manager Information Technology 230D $67.79 $84.73 $101.68 $141,003 $176,238 $211,494 2006 Exempt Manager Information Technology Security 230D $64.14 $80.17 $96.21 $133,411 $166,754 $200,117 158 Exempt Manager Laboratory Services 495M $54.86 $68.57 $82.29 $114,109 $142,626 $171,163 78 Exempt Manager Library Services 565M $53.12 $66.40 $79.68 $110,490 $138,112 $165,734 92 Exempt Manager Maintenance Operations 469M $53.76 $67.19 $80.63 $111,821 $139,755 $167,710 26 Exempt Manager Transportation Planning 345M $70.44 $88.05 $105.66 $146,515 $183,144 $219,773 51 Exempt Manager Planning 415M $64.41 $80.51 $96.62 $133,973 $167,461 $200,970 103 Exempt Manager Real Property 235D $62.74 $78.42 $94.11 $130,499 $163,114 $195,749 2011 Exempt Manager Revenue Collections 250D $59.00 $73.74 $88.49 $122,720 $153,379 $184,059 160 Exempt Manager Solid Waste 330M $63.47 $79.33 $95.20 $132,018 $165,006 $198,016 57 Exempt Manager Treasury, Debt & Investments 235D $64.68 $80.84 $97.01 $134,534 $168,147 $201,781 86 Exempt Manager Urban Forestry 436M $59.84 $74.79 $89.75 $124,467 $155,563 $186,680 178 Exempt Manager Water Quality Control Plant 205D $78.04 $97.55 $117.06 $162,323 $202,904 $243,485 39 Exempt Manager Watershed Protection 330M $70.26 $87.82 $105.39 $146,141 $182,666 $219,211 1008 Exempt Office of Emergency Services Coordinator 525M $52.26 $65.32 $78.39 $108,701 $135,866 $163,051 2024 Exempt Performance Auditor I 750P $35.53 $44.41 $53.30 $73,902 $92,373 $110,864 100 Exempt Performance Auditor II 585M $48.62 $60.77 $72.93 $101,130 $126,402 $151,694 148 Exempt Police Chief 15E $117.85 $147.31 $176.78 $245,128 $306,405 $367,702 2021 Exempt Chief Assistant City Attorney 101A $103.95 $129.93 $155.92 $216,216 $270,254 $324,314 2016 Exempt Principal Business Analyst 310M $66.81 $83.51 $100.22 $138,965 $173,701 $208,458 2029 Exempt Principal Planner 469M $54.18 $67.72 $81.27 $112,694 $140,858 $169,042 2003 Exempt Principal Management Analyst 360M $66.55 $83.18 $99.82 $138,424 $173,014 $207,626 2009 Exempt Project Manager 570M $54.92 $68.64 $82.37 $114,234 $142,771 $171,330 2012 Exempt Public Safety Communications Manager 495M $54.86 $68.57 $82.29 $114,109 $142,626 $171,163 166 Exempt Public Safety Program Manager 585M $48.62 $60.77 $72.93 $101,130 $126,402 $151,694 117 Exempt Senior Accountant 525M $58.65 $73.31 $87.98 $121,992 $152,485 $182,998 2013 Exempt Senior Business Analyst - M 420M $58.23 $72.78 $87.34 $121,118 $151,382 $181,667 187 Exempt Senior Engineer 300M $74.81 $93.51 $112.22 $155,605 $194,501 $233,418 106 Exempt Senior Executive Assistant 450M $56.77 $70.96 $85.16 $118,082 $147,597 $177,133 157 Exempt Senior Human Resources Administrator 545M $51.15 $63.93 $76.72 $106,392 $132,974 $159,578 14 Exempt Senior Management Analyst 465M $56.72 $70.90 $85.08 $117,978 $147,472 $176,966 Item 11: Staff Report Pg. 189 Packet Pg. 434 of 853 Item 11 Attachment F Revised Management and Conf Salary Schedule City of Palo Alto Management, Professional and Confidential Salary Schedule ALTO Effective Pay period inclusive of 07/01/2024 (4% Increase) Hourly Rate Annual Salary Job Code FLSA Status Classifications Grade Codes Min Mid Max Min Mid Max 130 Exempt Senior Performance Auditor 510M $53.55 $66.93 $80.32 $111,384 $139,214 $167,066 53 Exempt Senior Project Manager 300M $74.81 $93.51 $112.22 $155,605 $194,501 $233,418 33 Exempt Senior Technologist 420M $58.23 $72.78 $87.34 $121,118 $151,382 $181,667 155 Exempt Superintendent Animal Services 540M $51.02 $63.77 $76.53 $106,122 $132,642 $159,182 83 Exempt Superintendent Community Services 480M $60.82 $76.02 $91.23 $126,506 $158,122 $189,758 1117 Exempt Superintendent Recreation 480M $60.82 $76.02 $91.23 $126,506 $158,122 $189,758 2022 Exempt Supervising Librarian 675M $44.64 $55.79 $66.95 $92,851 $116,043 $139,256 161 Exempt Supervisor Facilities Management 600M $47.55 $59.43 $71.32 $98,904 $123,614 $148,346 113 Exempt Supervisor Inspection and Surveying 540M $51.02 $63.77 $76.53 $106,122 $132,642 $159,182 146 Exempt Supervisor Warehouse 660M $43.06 $53.82 $64.59 $89,565 $111,946 $134,347 181 Exempt Supervisor Water Quality Control Operations 525M $52.26 $65.32 $78.39 $108,701 $135,866 $163,051 2027 Exempt Utilities Chief Operating Officer 60E $87.24 $109.04 $130.85 $181,459 $226,803 $272,168 Confidential Classifications 905 Non -Exempt Human Resources Technician 830C $31.53 $39.41 $47.30 $65,582 $81,973 $98,384 903 Non -Exempt Legal Secretary -Confidential 820C $32.31 $40.38 $48.46 $67,205 $83,990 $100,797 67 Exempt Secretary to City Attorney 800C $38.20 $47.74 $57.29 $79,456 $99,299 $119,163 1004 Non -Exempt Senior Legal Secretary - Confidential 810C $35.53 $44.41 $53.30 $73,902 $92,373 $110,864 Item 11: Staff Report Pg. 190 Packet Pg. 435 of 853 Item 12 Item 12 Staff Report CITY OF PALO ALTO City Council Staff Report From: City Manager Report Type: CONSENT CALENDAR Lead Department: Public Works Meeting Date: April 10, 2023 Report #:2302-1026 TITLE Approval of a Funding Agreement with the Santa Clara Valley Water District for Reimbursement Costs Incurred in Support of the Purified Water Project, and a Budget Amendment in the Wastewater Treatment Fund Advanced Water Purification Facility capital project (WQ-19003) RECOMMENDATION Staff recommends that Council: 1. Approve and authorize the City Manager or their designee to execute an agreement between the Santa Clara Valley Water District and the City for reimbursement of City costs incurred in support of Valley Water's Purified Water Project; and 2. Amend the Fiscal Year 2023 Budget Appropriation for the Wastewater Treatment Fund by (requires a 2/3 vote): a. Increasing the revenue estimate from other agencies by $500,000 in the Advanced Water Purification Facility capital project (WQ-19003); and b. Increasing the ending fund balance by $500,000. EXECUTIVE SUMMARY The Regional Water Quality Control Plant (RWQCP) treats wastewater from the City of Palo Alto (Palo Alto), City of Mountain View (Mountain View), City of Los Altos, East Palo Alto Sanitary District, Stanford University and Los Altos Hills. A small fraction of the effluent from the RWQCP is further treated and then used for irrigation and toilet flushing. In November 2019, Council approved the Agreement between the City of Palo Alto, City of Mountain View and Santa Clara Valley Water District to Advance Resilient Water Reuse Programs in Santa Clara County' (Partnership Agreement). The Partnership Agreement includes an option for the Santa Clara Valley Water District (Valley Water) to receive approximately half 1 City Council, November 18,2019; Agenda Item #17; SR #10627, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- c m rs/yea r -a rc h ive/2019/i d -10627-m i n i-pa c ket-11182019. pdf?t=60382.02 Item 12: Staff Report Pg. 1 Packet Pg. 436 of 853 Item 12 Item 12 Staff Report of the treated wastewater produced by the RWQCP for use in the county south of Mountain View. Palo Alto is assisting Valley Water staff with the design criteria for the potential Purified Water Project. The proposed funding agreement ("Agreement By and Between the Santa Clara Valley Water District and the City of Palo Alto relating to Valley Water's Payment for City's Support Services to Valley Water's Purified Water Project", Attachment A) would allow the City to be reimbursed for staff time. Staff will return to Council at a future meeting to discuss the cost of the local salt removal facility, a lease agreement, and an operations and maintenance agreement with the Regional Purification Facility managed by Valley Water. BACKGROUND Water is a scarce resource in California. Availability is affected by droughts and climate change, and may be subject to changes to the state water system. The RWQCP is a local source of drought -proof, sustainable water, only a small fraction of which is currently being used for irrigation and toilet flushing. Investments in pipeline expansions and additional treatment facilities are needed to increase the amount of water reused from the facility. In 2019, Palo Alto and Mountain View entered into an agreement with Valley Water (Partnership Agreement) which grants Valley Water an option to take approximately half of the effluent from the RWQCP. Valley Water intends to purify the effluent at the old Los Altos Treatment Plant location and use it to recharge the groundwater basin south of Mountain View. Palo Alto and Valley Water are assessing construction feasibility for a Purified Water Project in Palo Alto at the former Los Altos Treatment Plant (LATP) site at the end of San Antonio Road. RWQCP effluent would receive additional treatment at the proposed Purified Water Facility for groundwater recharge south of Mountain View. The Purified Water Project is part of Valley Water's response strategy to the multi -year drought and is consistent with Board direction to expand the County's recycled water supply. In September 2020, Valley Water's Board approved a Design -Build -Finance -Operate -Maintain procurement process under a Public/Private Partnership (P3) to expand potable water reuse and delivery to the Los Gatos Recharge System (Purified Water Project). The Board directed Valley Water staff to launch a P3 procurement process once all the necessary elements for the project were secured. Valley Water plans to implement the Board's potable reuse directive through a North County production facility to begin operation in 2028. In September 2022, staff and Valley Water provided a Council study session regarding the partnership with Valley Water to build a Regional Purification Facility at the old Los Altos Treatment Plant (Purified Water Project). Then, in October 2022, Council accepted the updated Item 12: Staff Report Pg. 2 Packet Pg. 437 of 853 Item 12 Item 12 Staff Report S/CAP Goals and Key Actions2. The S/CAP Goals and Key Actions include a goal to "Develop a water supply portfolio which is resilient to droughts, changes in climate, and water demand and regulations, that supports our urban canopy" and a key action to "Develop and implement projects that result from a "One Water" Portfolio for Palo Alto, including but not limited to: stormwater, recycled water, on -site reuse, conservation, groundwater." The partnership with Valley Water supports this objective by providing $16 million of funding towards Palo Alto's Local Salt Removal Facility. Additionally, the Council's 2023 Objective of "Climate Change and the Natural Environment" includes a Priority Objective to "Approve agreements with Valley Water for the purified water facility at LATP Area B". Valley Water requires support services from various City departments, including Public Works — Environmental Services Division, Engineering, Real Estate, Utilities, and City Attorney to accomplish the various tasks in support of the Purified Water Project. Palo Alto staff currently assist Valley Water with this effort and will continue to do so to ensure successful implementation of the Purified Water Project. Assistance will include developing needed agreements, such as a ground lease for the former LATP site; resolving technical and operational issues such as tie-ins at the RWQCP for source water, pump station location, pipeline alignments, and power; and resolving legal issues, including regulatory permitting requirements. The foregoing will require the dedication of considerable amount of time from Palo Alto staff and consultants. ANALYSIS Valley Water and the City must resolve several key issues before a Purified Water Project can be constructed in Palo Alto, including but not limited to: A facilities and land lease on former Los Altos Treatment Plant (LATP) lands. Identification of diversion point of source water (tertiary -treated wastewater) to be conveyed to the new Purified Water Project facility. Siting of pump stations, pipeline, and appurtenances on RWQCP property. Siting of pipeline for source water and RO concentrate within the City's jurisdiction. Identification of return point of RO Concentrate to the RWQCP. Management and disposal of reverse osmosis (RO) concentrate including an Operations and Maintenance agreement and an RO concentrate agreement. Other requisite legal agreements (i.e., power, signage) associated with purified water production on City -owned land. Potential connection of the Local Salt Removal Facility with the Project. CEQA documentation preparation and review 2 City Council, September 27, 2022; Agenda Item #10; SR#14606 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=81997 Item 12: Staff Report Pg. 3 Packet Pg. 438 of 853 Item 12 Item 12 Staff Report Parameters and expectations for communications and responsiveness of P3 entity to City and the public during construction and ongoing operations. The attached Funding Agreement (Attachment A) will enable Valley Water to provide reimbursement for City of Palo Alto's staff and consultant time on the Purified Water Project for: 1) Meeting Attendance 2) Regulatory Coordination and Resolution of RO Concentrate Management and Disposal 3) Land Lease to Site Purification Facilities 4) Development of Agreements: O&M, lease, and RO Concentrate disposal 5) Technical Support and Coordination The term of the Funding Agreement commences on its Effective Date and expires two years after the Effective Date. The term of the Funding Agreement will be automatically extended for additional annual periods up to four additional years unless Palo Alto or Valley Water provide a notice of termination. As part of the development of this Funding Agreement, Palo Alto staff identified a list of expected positions and hourly rates (mainly from Public Works Department and Utilities) that will support the Purified Water Project. The hourly rates were calculated using the maximum hourly rate per the current Salary Schedule and a percentage for benefits based on the labor group. These rates will be updated as new Salary Schedules are adopted by City Council. In addition to City staff, Palo Alto requires consultant services to support specific technical issues related to the Purified Water Project. In December 2022, Council approved a Professional Services Contract3 with Woodard & Curran which includes a task to assist with the coordination of technical issues related to the Purified Water Project. Woodard & Curran services covered under this Contract related to the Purified Water Project, will be also reimbursed by Valley Water. City staff anticipates returning to Council for approvals and status updates on the project deliverables and milestones listed above in due course. Separately, Valley Water will submit a planning application with the City's Planning and Development Services Department for any land use approvals, planning entitlements, site and design reviews and other environmental review under the California Environmental Quality Act/National Environmental Policy Act. City's staff time related to these items work is not 3,4 City Council, December 19, 2022; Agenda Item #15, SR#14685 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82021 Item 12: Staff Report Pg. 4 Packet Pg. 439 of 853 Item 12 Item 12 Staff Report covered by this Funding Agreement. Valley Water has set up a deposit account with the Planning and Development Services Department. FISCAL/RESOURCE IMPACT Work covered in the Scope of Services (Exhibit A) of the Funding Agreement and performed by City staff will first be paid for by the City through regular payroll. Work performed by Woodard & Curran will first be paid by the City through the existing contract. An increase of $500,000 in revenue from Valley Water is recommended in the Advanced Water Purification Facility capital project (WQ-19003) to offset costs in this project via the attached Funding Agreement. Quarterly invoices will be submitted to Valley Water for reimbursement. STAKEHOLDER ENGAGEMENT Palo Alto hosted a community meeting on October 23, 2019 to inform the community and answer questions about the components of the Partnership Agreement. Approximately 20 members of the public attended. Overall, the attendees were supportive of the Partnership Agreement. Since 2019, public outreach and engagement has been led by Valley Water with assistance from the City. Valley Water has presented the project to the Conservation Council (an active group of non -governmental organizations focused on environmental causes within Palo Alto) and other key stakeholders. Public outreach will continue to be an important component of the Purified Water Project as it progresses. ENVIRONMENTAL REVIEW The proposed funding agreement is not a project subject to CEQA review under section 15378(b)(4) because the funding agreement is government funding mechanisms or fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. Valley Water is the lead agency for the Purified Water Project and will be preparing the Environmental Impact Report (State Clearinghouse #2021030519). ATTACHMENTS Attachment A: Valley Water Funding Agreement for Purified Water Project APPROVED BY: Brad Eggleston, Director Public Works/City Engineer Item 12: Staff Report Pg. 5 Packet Pg. 440 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified AGREEMENT BY AND BETWEEN THE Water Project SANTA CLARA VALLEY WATER DISTRICT AND THE CITY OF PALO ALTO RELATING TO VALLEY WATER'S PAYMENT FOR CITY'S SUPPORT SERVICES TO VALLEY WATER'S PURIFIED WATER PROJECT This Master Agreement (Agreement) is made and entered this day of 2023 (Effective Date), by and between the City of Palo Alto (City or Palo Alto), a California municipal corporation, and the Santa Clara Valley Water District (Valley Water), an independent special district of the State of California. The City and Valley Water may be referred to individually as a Party, or collectively as Parties, to this Agreement. RECITALS A. The City is the owner and operator for the Palo Alto Regional Water Quality Control Plant (RWQCP), which treats wastewater for the communities of Los Altos, Los Altos Hills, Mountain View, Palo Alto, Stanford University, and the East Palo Alto Sanitary District. B. In August 2017, Valley Water and Palo Alto executed a Memorandum of Understanding for the purpose of developing plans and studies to expand the production and use of recycled and purified water within the County. C. In December 2019, Valley Water, Palo Alto, and the City of Mountain View executed a Partnership Agreement to Advance Resilient Water Reuse Programs in Santa Clara County to achieve the most cost effective, environmentally beneficial utilization of treated wastewater in the County. D. Valley Water desires to develop a process and facilities to purify treated wastewater for potable reuse, including (1) using purified water to replenish groundwater basins, an outcome commonly referred to as Indirect Potable Reuse, and/or (2) delivering the purified water with additional treatment directly to Valley Water's raw water or treated water sources and subsequent delivery to potable water consumers, an outcome commonly referred to as Direct Potable Reuse. E. In September 2020, Valley Water's Board of Directors (Board) approved a design - build -finance -operate -maintain procurement process under a public/private partnership to expand potable water reuse and delivery to the Los Gatos Recharge System (Purified Water Project). F. The Parties desire to cooperate with one another to construct the Purified Water Project, including pipelines, pump station, and related appurtenances, on City -owned property, using treated effluent from the Palo Alto RWQCP as source water for the advanced water purification facilities and the Palo Alto RWQCP outfall to discharge the reverse osmosis concentrate produced by the purification process G. Valley Water requires support services from various City departments, including Public Works — Environmental Services Division, Engineering, Real Estate, Utilities, and City Attorney to accomplish the various tasks in support of the Purified Water Project. Now, therefore, in consideration of the mutual promises set forth below, the Parties agree as follows: 11Page Item 12: Staff Report Pg. 6 Packet Pg. 441 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified Water Project AGREEMENT Purpose The purpose of this Agreement is to establish the basis and procedure for reimbursement by Valley Water for the costs and expenses incurred by City in the performance of support services in connection with the Purified Water Project, including services performed during the period from July 1, 2022 through the effective date of this Agreement. 2. Scope of Agreement A. The Parties have agreed that the City will provide support services generally described in Scope of Services, attached hereto as Exhibit A and incorporated into the Agreement by this reference (Scope of Services); the Parties furthermore agree that City shall provide such services to the extent necessary in its professional judgment and discretion to complete the tasks described in the Scope of Services, and to satisfy any regulatory, technical or similarly applicable requirements. B. This Agreement does not apply to services performed by the City's Planning and Development Services Department for any land use approvals or entitlements required by the City of Palo Alto and environmental review under the California Environmental Quality Act/National Environmental Policy Act. C. Nothing in this Agreement commits either Party to the implementation of any project, including without limitation, the City's provision of land or permission to discharge into the RWQCP outfall. D. Nothing in this Agreement modifies the terms of any existing Agreement between the City and Valley Water. 3. Agreement Term; Termination A. Term. The term of this Agreement commences on its Effective Date and expires two years after the Effective Date. The term of this Agreement shall be automatically extended for an additional period of one (1) year, not to exceed four (4) additional years, unless either party provides written notice of termination at least 30 days prior to the immediately preceding one-year renewal period. B. Termination. Any Party may terminate this Agreement by providing thirty (30) days written notice to the other Party. The City shall send Valley Water a final invoice within sixty (60) days of the effective date of termination of this Agreement. 4. Reimbursement A. Services Performed by City Prior to Effective Date of this Agreement. Within thirty (30) days of the effective date of this Agreement, Valley Water agrees to reimburse City for services performed in connection with the Purified Water Project for the period from July 1, 2022 through January 31, 2023, as detailed in Exhibit D. 2IPage Item 12: Staff Report Pg. 7 Packet Pg. 442 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified B. Services Performed by City After January 31, 2023. The Cit Water Project ey Water with an initial written invoice for work performed from February 1, 2023 through March 31, 2023. Thereafter, commencing on or around July 1, 2023, the City, on a quarterly basis, shall provide Valley Water a written invoice for the work performed during the immediately previous three months. The invoice shall set forth the relevant period, the number of hours worked and the applicable hourly rates, a description of the reimbursable expenses incurred and the amount of such expenses, and documents supporting the reimbursable expenses. C. Within 45 days of receipt of an invoice, Valley Water shall remit payment to City, subject to review and approval of Valley Water. Such approval shall not be unreasonably withheld. Responsibilities of the Parties A. Valley Wateragreesto: Ensure sufficient staff resources and consultant services are devoted to development and pursuit of the Scope of Services. 2. Provide all necessary studies, reports, plans, specifications, maps, and other documents to City in a timely manner, and allow the City at least 2 weeks for detailed review and comments, unless mutually agreed otherwise by the Parties. 3. Schedule meetings with 2 weeks advance notice and cognizant of City availabilities unless mutually agreed to otherwise by the Parties. 4. In collaboration with the City, review and respond to subsequent requests for additional information to complete the Scope of Services. 5. Work collaboratively with City staff and consultants retained by City to ensure timely discussion and review of the Purified Water Project tasks. B. City agrees to: Ensure sufficient staff resources and consultant services are devoted to City's responsibilities with respect to the Scope of Services, subject to the appropriation of funds by City's Council. Review and provide comments on the Scope of Services and any amendments thereto within a timeframe mutually agreed to by the Parties. Work collaboratively with Valley Water and its consultant, contractors, and agents (including the private entity) to ensure timely discussion and review of Purified Water Project tasks associated with design and construction. Once per quarter, submit invoices documenting costs incurred by the City and any consultants retained by City for review and approval by Valley Water. Records Retention and Audit 3IPage Item 12: Staff Report Pg. 8 Packet Pg. 443 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding JAgreement for Purified A. The City agrees to make available for examination by Valley Water Project limitations established by state law, its authorized agents, officers, or employees, any and all ledgers, books of accounts, invoices, vouchers, cancelled checks, and other records or documents evidencing or relating to the expenditures and disbursements invoiced to Valley Water or amounts deducted from the Funding Account. City shall also furnish to Valley Water, its authorized agents, officers or employees such other evidence or information as Valley Water may request with regard to any such expenditure or disbursement charged by City. B. The City shall maintain full and adequate records to document the actual costs it incurs which are subject to reimbursement of the City's costs pursuant to this Agreement. City shall provide such assistance as may be reasonably requested in the course of such inspection. Notices Any and all notices required to be given to a Party hereunder shall be deemed to have been delivered upon deposit in the United States mail, postage prepaid, addressed to either of the Parties at the following address or such other address, or via e-mail with a written confirmation of receipt at the address(es) below, as is provided by either Party in writing: City: City of Palo Alto Public Works Department Attention: Karin North, Assistant Director of Public Works 2501 Embarcadero Way Palo Alto, CA 94303 Phone: (650) 329-2104 Email address: Karin.North@cityofpaloalto.org Valley Water: Santa Clara Valley Water District Water Utility Enterprise Attention: Kirsten Struve, Assistant Officer 5750 Almaden Expressway San Jose, CA 95118 Phone: (408) 630-3138 Email address: kstruve@valleywater.org 8. Severability If a court of competent jurisdiction holds any provision of this Agreement to be illegal, unenforceable, or invalid in whole or in part for any reason, the validity and enforceability of the remaining provisions, or portions of them, will not be affected, unless an essential purpose of this Agreement would be defeated by the loss of the illegal, unenforceable, or invalid provision. 4IPage Item 12: Staff Report Pg. 9 Packet Pg. 444 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified 9. Mutual Indemnification Water Project In lieu of and notwithstanding the pro rata risk allocation, which might otherwise be imposed between the Parties pursuant to 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, Valley Water and City agree that, pursuant to Government Code Section 895.4, each of the Parties hereto shall fully indemnify and hold each of the other Party, including its officers, board members, employees, and agents, harmless from any claim, expense or cost, damage or liability 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 Party under this Agreement. No Party, nor any officer, board member, or agent thereof shall be responsible for any damage or liability occurring by reason of the negligent acts or omissions or willful misconduct of the other Party hereto, its officers, board members, 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. 10. Governing Law and Compliance with Laws The Parties agree that California law governs this Agreement. In the performance of this Agreement each Party will comply with all applicable laws, ordinances, codes and regulations of the federal, state, and applicable local government. 11. Disputes The Parties agree that they will work together in good faith to achieve the intent of this Agreement. In the event that a dispute arises as to the proper interpretation of the respective obligations and responsibilities of the Parties as described herein, or as to any other aspect of this Agreement, Valley Waterand the City agree that they each will assign the appropriate individuals to meet and make good faith efforts to negotiate in order to arrive at a resolution of the dispute. If any legal action or other proceeding is commenced to enforce or interpret any provision of, or otherwise relating to, this Agreement, each Party shall bear the entirety of its owns costs and expenses including but not limited to attorneys' fees. 12. Venue In the event that suit is brought by any Party to this Agreement, the Parties agree that venue will be exclusively vested in the state courts of the County of Santa Clara, or if federal jurisdiction is appropriate, exclusively in the United States District Court, Northern District of California, San Jose, California. 13. Assignability Parties will not assign this Agreement or any portion thereof to a third party without the prior written consent of the other Party. 14. Ownership of Materials All reports, documents, technical data, findings, or other materials (collectively, the Work Product") developed by City as part of this Agreement shall be the property of the City. Valley Water shall have right to the Work Product for Valley Water business, including, without limitation, further development of its water supply infrastructure. 5IPage Item 12: Staff Report Pg. 10 Packet Pg. 445 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified This section shall not apply to any Work Product or documents or co Water Project covered by attorney -client privilege. 15. Entire Agreement This Agreement constitutes the entire agreement between the City and Valley Water with respect to the subject matter hereof and supersedes all prior offers and negotiations, oral and written. This Agreement may not be amended or modified in any respect except by an instrument in writing signed by authorized representatives of the Parties. 16. Counterparts and Electronic Signatures This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, will be deemed to be an original, and all of which, taken together, will be deemed to be one and the same instrument. Unless otherwise prohibited by law or policy of a Party, the Parties agree that an electronic copy of a signed contract, or an electronically signed contract, has the same force and legal effect as a contract executed with an original ink signature. The term "electronic copy of a signed contract" refers to a writing as set forth in Evidence Code Section 1550. The term "electronically signed contract" means a contract that is executed by applying an electronic signature using technology approved by the City. 17. Nonwaiver A Party's waiver of any term, condition, or covenant, or breach of any term, condition or covenant will not be construed as a waiver of any other term, condition or covenant. 18. Third Parties 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. 19. Debt Limitation The City and Valley Water are both subject to laws or policies which limit their ability to incur debt in future years. Nothing in this Agreement shall constitute an obligation of future legislative bodies of the City or Valley Water to appropriate funds for purposes of this Agreement. 20. No Partnership or Agency Nothing in this Agreement is intended to constitute a partnership between the Parties, or authorize either party to act as agent for the other, or authorize a party to act in the name or on behalf of or otherwise to bind the other in any way. 21. Exhibits The following listed Exhibits are incorporated herein by this reference as though set forth in full: Exhibit A - Scope of Services Exhibit B - Schedule of Performance Exhibit C —Compensation Exhibit D — Initial Statement 6IPage Item 12: Staff Report Pg. 11 Packet Pg. 446 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified IN WITNESS WHEREOF, the Cityand Valley Waterhave executedthisAgreeme Water Project ate as defined in the introductory paragraph of this Agreement. APPROVED AS TO FORM FOR CITY MOLLY STUMP City Attorney Date APPROVED AS TO FORM FOR VALLEY WATER: byFD—Sig—d A FULCHER Sr. Assistant District Counsel Date 2/22/2023 7IPage CITY OF PALO ALTO By ED SHIKADA City Manager Date SANTA CLARA VALLEY WATER DISTRICT DocuSignned by By1 R1LZLLENDER, ESQ Chief Executive Officer Date 2/28/2023 Item 12: Staff Report Pg. 12 Packet Pg. 447 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 EXHIBIT A SCOPE OF SERVICES A. Background: The Purified Water Project Item 12 Attachment A. Valley Water Funding Agreement for Purified Water Project The Purified Water Project is part of Valley Water's strategy to respond to the multi -year drought and is consistent with Board direction to expand the County's recycled water supply. Valley Water's 2040 Water Supply Master Plan (WSMP) recommends developing at least 24,000 AFY of potable water reuse (above the current target of 33,000 AFY of non - potable reuse). Valley Water has developed a Countywide Water Reuse Master Plan (CoRe Plan) that has evaluated potable reuse expansion throughout Santa Clara County, including identifying options for achieving the WSMP's water reuse target. In September 2020, the Board approved a Design -Build -Finance -Operate -Maintain procurement process under a Public/Private Partnership (P3) to expand potable water reuse and delivery to the Los Gatos Recharge System (Purified Water Project). The Board directed Valley Water staff to launch a P3 procurement process once all necessary elements for an advanced water purification project were secured. Valley Water will implement the Board's potable reuse directive through a North County production facility to begin operation in 2028. The Purified Water Project will purify water for potable reuse to supplement groundwater recharge from existing sources such as imported and local water supplies. Implementation of the Purified Water Project will also mitigate the risk of land subsidence, which could significantly impact the infrastructure and economy of Santa Clara County. Valley Water and the City must resolve several key issues before a Purified Water Project can be constructed in Palo Alto, including but not limited to: 1. A facilities and land lease on former Los Altos Treatment Plant (LATP) lands. 2. Identification of diversion point of source water (tertiary -treated wastewater). 3. Siting of pump stations, pipeline, and appurtenances on RWQCP property. 4. Management and disposal of reverse osmosis (RO) concentrate including an Operations and Maintenance agreement and a RO concentrate agreement. 5. CEQA document preparation and review. 6. Siting of pipeline for source water and RO concentrate within the City's jurisdiction. 7. Potential connection of the Local Salt Removal Facility with the Project. 8. Identification of return point of RO Concentrate to the RWQCP. 9. Other requisite legal agreements (i.e., power, signage) associated with purified water production on City -owned land. 10. Parameters and expectations for communications and responsiveness of P3 entity to City and the public during construction and ongoing operations. B. General Provisions The Parties acknowledge the complexity of the project and the need for ongoing coordination of efforts; the Parties further agree to work in good faith to resolve the issues 8IPage Item 12: Staff Report Pg. 13 Packet Pg. 448 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified enumerated above and complete the tasks described below. Water Project Valley Water agrees to provide adequate funding to reimburse the City for approved costs incurred in connection with the implementation of the project. City agrees to use Valley Water funds only for direct project costs. C. Description of Tasks Task 1 - Attendance of Meetings City will attend meetings with Valley Water, federal and state regulatory staff, and the private entity to identify, discuss, and resolve issues, to establish priorities, and to review progress. This includes development of a schedule for the execution of the needed agreements for Valley Water's planning purposes. These meetings will be used to further refine the principal terms to be included in various agreements that will establish commitments for the above -listed key issues and legal aspects of a water purification facility. Task 2 — Regulatory Coordination and Resolution of RO Concentrate Management and Disposal City, Valley Water, and applicable consultants will develop strategies for regulatory compliance with pertinent regulatory agencies, including the Regional Water Quality Control Board (RWQCB) on various permitting items including application of existing permit conditions and agency issues regarding RO concentrate management, NPDES permitting, and IPR facility permitting. City's work under this task may include, but is not limited to: a) fulfillment of data requests and site access coordination, b) review of studies prepared by Valley Water or its consultants pertaining to RO concentrate management including, but not limited to, assessing the feasibility of using the existing RWQCP outfall for RO concentrate discharge within the constraints of continued compliance with the City's National Pollutant Discharge Elimination System (NPDES) limitations, and c) participation in the evaluation and discussions of regulatory options for addressing RO concentrate management. This task may require City, at City's sole discretion, to provide peer review, responding to regulatory agencies, consultant support services, and attendance at meetings, as appropriate, to discuss study outcomes. Task 3 - Land Lease for Purification Facilities City and Valley Water will develop an executable lease agreement option for buildable land at the site of the former Los Altos Treatment Plant (LATP) to accommodate the Project and associated facilities. The lease agreement will include an option for additional facilities for educational outreach and training activities associated with purified water. In addition to development of the lease, City work under this task may include, but is not limited to: support and coordination regarding remediation of hazardous materials at the LATP site, regulatory permitting support, coordination of site entry, permission to sample, and support of materials registration. Task 4 — Development of Agreements 9IPage Item 12: Staff Report Pg. 14 Packet Pg. 449 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified City will review legal memoranda developed by Valley Water and/or Water Project support of Project development and implementation. These activities will provide the legal foundation for agreements supporting purified water facility construction and production, including but not limited to the following: 1. A facilities and land lease on RWQCP or City lands, 2. Specifications for diversion point of source water (tertiary treated wastewater), 3. Management and disposal of reverse osmosis (RO) concentrate, 4. Return point to RWQCP for RO Concentrate; and 5. Revised legal agreements (i.e., O&M, power, signage) associated with purified water production on City's lands. 6. Development and review of the present Funding Agreement 7. Support related to Palo Alto City Council and Valley Water Board approval of these Agreements Task 5 — Technical Support and Coordination City shall provide technical support and coordinate with Valley Water and the private entity to support the Project development and implementation. City, with necessary consultant services, will review engineering, environmental, regulatory, and technical memoranda and reports developed by Valley Water and/or its consultants in support of P3 Purified Water Project development. This task includes general project coordination during the design - build and post -construction phases and work activities and coordination associated with but not limited to: 1. Tie-in Connections at RWQCP for RO concentrate and tertiary effluent pipelines 2. Abandonment of existing monitoring well at the former LATP site 3. Former LATP site boundaries and survey 4. Project Homekey 5. RWQCP water quality sampling, as needed 6. Existing utility identification and connections 7. Current and historical water quality information 8. Effluent water samples for additional testing 9. As -Built drawings of the RWQCP, if available. 10IPage Item 12: Staff Report Pg. 15 Packet Pg. 450 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified Water Project EXHIBIT B SCHEDULE OF PERFORMANCE The Parties will mutually agree to the schedule to perform tasks under this Agreement. Parties agree to perform tasks in a reasonable amount of time. 111 Page Item 12: Staff Report Pg. 16 Packet Pg. 451 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 EXHIBIT C COMPENSATION Item 12 Attachment A. Valley Water Funding Agreement for Purified Water Project Not to Exceed Amount: $500,000. Valley Water funding for this Agreement will not exceed $500,000, unless increased through a written amendment to this Agreement signed by both parties. Hourly Rates: Valley Water will compensate City at the hourly rates in Exhibit C.1 of this Agreement. Notwithstanding anything to the contrary, these hourly rates are valid at the time of execution but may be subject to increase following each new fiscal year. Reimbursable Expenses: Valley Water will reimburse for expenses subject to the following: The following expenses are reimbursable to the extent City documents to Valley Water's satisfaction that they were incurred in performing the work required by Exhibit A: o the cost of City's Consultant services supporting the Purified Water Program. o the cost of mailing, shipping and/or delivery of documents or products to Valley Water. o the cost of photographing, reproducing and/or copying. o telephone and fax charges. o the rental of any specialized equipment to the extent Valley Water has preapproved, in writing, the cost of such rental. 12IPage Item 12: Staff Report Pg. 17 Packet Pg. 452 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 EXHIBIT C.1 SCHEDULE OF CHARGES Item 12 Attachment A. Valley Water Funding Agreement for Purified Water Project The following City staff positions are anticipated to be necessary to provide support services under this Agreement. Additional or alternative positions may be necessary throughout the Agreement. The rates will be subject to change based on City's salary schedules approved by City Council. City Department Title Hourly Rate (Funding Agreement) Public Works Administrative Associate I $63 Public Works Administrative Associate II $68 Public Works Administrative Associate III $73 City Attorney Assistant City Attorney $192 Public Works Assistant Director Public Works $199 Utilities Assistant Director - UTL $210 Utilities Assistant Director (WGW) $215 Public Works Assistant Manager WQCP $165 Public Works Associate Engineer $108 Utilities Associate Resource Planner $105 City Attorney Deputy City Attorney $151 Public Works Director of Public Works $245 Public Works Engineer $122 Utilities Engineering Manager $188 Public Works Management Analyst $116 Public Works Manager Environmental Control $155 Administrative Services Manager Real Property $149 Public Works Manager WQCP $186 Utilities Principal Engineer $164 Public Works Project Engineer $131 Utilities Project Engineer $131 Public Works Project Manager $131 Public Works Sr. Engineer $178 Utilities Sr. Engineer $178 Administrative Services Sr. Management Analyst $135 Utilities Sr. Resource Planner $168 Utilities Supervising Project Engineer $147 Utilities Sr. Resource Planner $168 13IPage Item 12: Staff Report Pg. 18 Packet Pg. 453 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified Water Project EXHIBIT C.2 SCHEDULE OF CHARGES The following consultant support positions are anticipated to be necessary to provide support services under this Agreement and are subject to change per consultant agreements between the City and Woodard & Curran. 2023 Rate Schedule Woodard $ Curran Pr;.ILcx Assistant 51.8 Billing Manager / Dtsigner 1 / Graphic Artist 1 Graphics Manager / Marketing 3154 Assistant / Maakate g Manager / Senior Accountant / Senior Paaject Assestant 5oftwafe Engineer I 5115 Designer 2 1182 Designer I/ Senior Software Developer 1187 Engineer 1 / Geologist 1 / Planner 1 / Scientist 1 1 Senior Designer f Technica[ 1192 Specialist I Software Engineer 2 1198 Software Engineer 3 3213 Engineer 21 Geologist 21 Planner 2 f Scientist 2 / Technical Specialist 2 1219 Engineer 31 Geologist 31 Planner 3 f Scientist 3 / Technical Specalist 3 1251 Project Engineer 1 / Project Geologist 1 f Project Plawr 1 / Project Scientist 1 / Project Specialist 1 / Project Technical Specialist 1 3261 Protect Engineer 2 f Project Geologist 2 f Project Planner 21 Project Scientist 2 / SP -T7 Project Specialst 2 / Project Technical Specialist 2 Project Manager 1 / Terhnical Manager 1 3 299 Project Manager 2 / Teehtreal Manager 2 5315 Sernar Project Manager 1 Senior Technical Manager 1335 f+lational Practice Leader 1 Senior Technical Practice Leader 1352 Travel S052S/m lie Other Direct Costs At Cost Plus 5% Subconsuultants/Subcontractors At Cost Plus 595 Milesge rate will change as the federal allowable rate is mo�fied. 14 I P a g e Item 12: Staff Report Pg. 19 Packet Pg. 454 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified Water Project EXHIBIT D INITIAL STATEMENT JULY 1, 2022 TO JANUARY 31, 2023 15IPage Item 12: Staff Report Pg. 20 Packet Pg. 455 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 4. CITY OF PALO ALTO FROM: TO: PROJECT DATE: SUBJECT MEMORANDUM Karin North, Assistant Director of Public Works Diego Martinez Garcia, Associate Engineer Kirsten Struve, Assistant Officer Water Supply Division Regional Water Purification Facility January 31, 2023 Progress Report #1 Item 12 Attachment A. Valley Water Funding Agreement for Purified Water Project The project report for this invoice is provided for the period July 1, 2022 through January 31, 2023. ACTIVIES THIS PERIOD BY TASK Task 1. Attendance of Meetings • City staff attended meetings with Valley Water related to the development of Agreements, ROC Management, Regulatory Strategies, Tie-ins and special studies. Task 2. Regulatory Coordination and Resolution of RO Concentrate Management and Disposal • Review and editing Toxicity Pilot Study Plan and Effluent Hauling Memos • Coordination related to Toxicity Pilot Study • Preparation for meetings with Regional Board • Review and editing of technical memo's: Reasonable Potential Analysis, Selenium TMDL and Hydraulic Modeling Task 3. Land Lease for Purification Facilities • No activities performed this period Task 4. Development of Agreements • Development and review of the Funding Agreement • Development and review of reimbursement statements forms • Development of strategy to fund Planning Account and Public Works staff time • Onboard Consultant to support City on Agreement's development and review 16IPage Item 12: Staff Report Pg. 21 Packet Pg. 456 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Task 5. Technical Support and Coordination Agreement for Purified Water Project • Final effluent data request (5 years of minute flow data) • Recycled Water data request (5 years of hourly flow data) • Internal discussions about tie-in connections at the RWQCP • RWQCP effluent sampling coordination • Responded to RWQCP requests for information (as-builts, process information). • Initial support to setup a Planning Account 17IPage Item 12: Staff Report Pg. 22 Packet Pg. 457 of 853 DocuSign Envelope ID: 6FFE6495-C3A7-4C5F-844A-D66B39897583 Item 12 Attachment A. Valley Water Funding Agreement for Purified Water Project 0 CITY OF PALO ALTO City Support Services for the Period July 1, 2022 to January 31, 2023 Job Classification Employee Department Hours Total Cost Assistant Director Public Works Karin North Public Works 33.50 $ 6,119.52 Senior Engineer Samantha Engelage Public Works 37.50 $ 5,907.69 Manager RWQCP James Allen Public Works 3.00 $ 500.40 Associate Engineer Diego Martinez Garcia Public Works 99.50 $ 10,779.53 Senior Engineer Tom Kapushinski Public Works 6.00 $ 945.23 Assistant Director Utilities Karla Dailey Utilities 0.00 $ Senior Resource Planner Lisa Bilir Utilities 0.00 $ Manager Real State Sunny Tong Administrative 0.00 $ Services Assistant City Attorney Caio Arellano City Attorney 13.75 $ 2,569.10 GRAND TOTAL 193.25 $26,821.48 18IPage Item 12: Staff Report Pg. 23 Packet Pg. 458 of 853 Item 13 Item 13 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: Administrative Services ALTO Meeting Date: April 17, 2023 Report #:2303-1108 TITLE Approval of Tenant Work Letter for Lease of 300 Homer Avenue Roth Building between the City of Palo Alto and the Palo Alto Museum; CEQA Status --Not a Project RECOMMENDATION Staff recommends that the City Council approve and authorize the City Manager or their designee to execute the Tenant Work Letter, Exhibit D to the lease agreement by and between the City of Palo Alto and Palo Alto History Museum to rehabilitate the Roth Building to "Warm Shell" condition. EXECUTIVE SUMMARY The Tenant Work Letter is the third and final necessary document for construction to begin the Roth Building rehabilitation. Staff and the Museum have finalized the Tenant Work Letter to define the parties' respective funding contributions and roles and responsibilities during construction. Both parties acknowledge that construction costs will continue to change and therefore acknowledge that the total project cost will increase, however, the federal earmark of $3 million is expected to support the rehabilitation and restoration of this facility and assist in ensuring the project is funded. The Museum most recently estimated construction to commence in May 2023 and expects to open its doors to the public at the end of 2024 or early 2025. BACKGROUND At the December 12, 2022 meeting (Item 6 — CMR 15017)1, the Council approved the lease and license agreement with the Palo Alto Museum for the Roth Building at 300 Homer Avenue. Those two documents have been executed and the Palo Alto Museum has assumed responsibility for the property. The parties mutually agreed to the extension of the lease term requiring the completion of the Tenant Work Letter within 60 days of completion of the lease agreement. All documents remain in full effect. 1 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-council-agendas- mi nutes/2022/20221212/20221212pccsm-amended-1 i nked.pdf Item 13: Staff Report Pg. 1 Packet Pg. 459 of 853 Item 13 Item 13 Staff Report ANALYSIS The Tenant Work Letter (Attachment A) is the third and final document and is now before Council for consideration. The Tenant Work Letter for the Roth Building Warm Shell rehabilitation, referenced as Exhibit D to the Lease Agreement, sets forth the terms and conditions for planned Phase 1 "warm shell" rehabilitation of the building and capital improvements to the site, including project funding. Below is a summary of selected terms included and recommended for approval in this item. The agreement, containing the full terms and conditions, can be found in the attachment. This document was delayed as the Museum and staff worked with the Federal government in the requirements for the $3 million federal earmark secured by Congresswoman Eshoo. This grant is a critical funding source to ensure this project can proceed and parties have worked to meet the requirements and adjusted terms and conditions to provide sufficient time for these funds to be made available. Summary of Selected Terms Included in Tenant Work Letter: • Communications: o Museum will keep the City updated on progress and significant developments by informal communication in addition to scheduled meetings and reports o Museum will provide a weekly written report via e-mail summarizing progress made in preceding week • Funding: o City's contribution of funding from sources such as restricted impact fees and grant funding is in reliance on the Museum's commitment to comply with the applicable conditions associated with those funding sources o City will contribute $10.02 million — 20% to be deposited after the museum has provided evidence of required funds/pledges for project construction followed by periodic disbursements for progress payments by Museum to general contractor. o After funds from the City contribution have been exhausted, the museum anticipates using pledge funding and the Federal HUD funds to pay for remaining construction costs ■ Museum is solely responsible for complying with HUD grant conditions and consequences of any failure to comply and the City will make all reasonable efforts to support the museum in this work. • Prior to Construction: o Museum to provide written proof that it has entered into construction contract with general contractor that meets requirements in TWL o Museum to obtain all necessary permits and authorizations (the City will reimburse the museum of permit costs of $100,000) o Funding schedule to be updated with final Guaranteed Maximum Price contract amounts Item 13: Staff Report Pg. 2 Packet Pg. 460 of 853 Item 13 Item 13 Staff Report o Project schedule to be updated based on updated construction contract details • During Construction: o Museum is solely responsible for construction administration services during construction and closeout o Vance Brown will serve as the general contractor; contract will be a guaranteed maximum price contract and include all subcontracts and a 10% construction contingency o All work will be done in accordance with design documents and construction contract and in compliance with all applicable laws (including City ordinances, rules, and regulations) o A preconstruction conference will take place before any work begins on the project and weekly meetings will continue through construction FISCAL/RESOURCE IMPACT The City and the Museum spent significant resources to reach all three agreements. Staff dedicated significant staffing resources and outside legal support to the negotiation process. A FY 2023 Mid -Year budget amendment funded the legal contractual services needed to complete these documents. Under the City's supervision, the Museum is responsible for rehabilitating the Roth Building at a total estimated cost of $11.9 million, which is budgeted in the Roth Building Rehabilitation capital project (PF-23001). The Tenant Work Letter reflects revised funding allocations which recognize and allocate additional grant funding from the County of Santa Clara and most significantly, an additional $3 million received through a federal earmark with the assistance of Congresswoman Anna Eshoo. These federal funds are to be used for the restoration and rehabilitation of the Museum and will be critical to enabling the completion of this Phase 1 "warm shell" of the project. STAKEHOLDER ENGAGEMENT Staff met with representatives of the Museum including their counsel to discuss and negotiate the Tenant Work Letter terms. ENVIRONMENTAL REVIEW Council action on this item is not a project as defined by the California Environmental Quality Act (CEQA) in that approval of the Tenant Work Letter is a government fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. (CEQA Guidelines section 15378(b)(4)). The rehabilitation and restoration work to the Roth Building is categorically exempt from the CEQA review in that the work to be performed is limited to maintenance, repair, stabilization, rehabilitation, restoration, preservation, conservation or reconstruction of historical resources Item 13: Staff Report Pg. 3 Packet Pg. 461 of 853 Item 13 Item 13 Staff Report in a manner consistent with the Secretary of the Interior's Standards for the Treatment of Historic Properties with Guidelines for Preserving, Rehabilitating, Restoring, and Reconstructing Historic Buildings (1995), Weeks and Grimmer. (CEQA Guidelines Section 15331) ATTACHMENTS Attachment A: Tenant Work Letter, 300 Homer Ave "ROTH Facility" APPROVED BY: Kiely Nose, Assistant City Manager Item 13: Staff Report Pg. 4 Packet Pg. 462 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" TENANT WORK LETTER FOR ROTH BUILDING WARM SHELL REHABILITATION EXHIBIT D To LEASE AGREEMENT BY AND BETWEEN CITY OF PALO ALTO AS LANDLORD AND PALO ALTO HISTORY MUSEUM AS TENANT Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 5 Packet Pg. 463 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" TABLE OF CONTENTS Recitals...................................................................................................................................3 Terms and Conditions 1. Definitions and Purpose..................................................................................................4 2. Party Representatives and Relations..............................................................................7 3. Term................................................................................................................................8 4. Project Funding...............................................................................................................8 5. Conditions for Commencement of Project Construction...............................................11 6. Project Construction......................................................................................................12 7. Maintenance and Repair...............................................................................................17 8. Utility Service................................................................................................................17 9. Insurance......................................................................................................................17 10. Damage to Project........................................................................................................19 11. Project Records.............................................................................................................19 12. Disclaimers....................................................................................................................20 13. Default...........................................................................................................................20 14. Notice............................................................................................................................21 15. Miscellaneous Provisions..............................................................................................21 Attachment A Project Funding Attachment B Project Schedule Attachment C Insurance Requirements (Architect) Attachment D Insurance Requirements (General Contractor) 2 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 6 Packet Pg. 464 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" TENANT WORK LETTER FOR ROTH BUILDING WARM SHELL RENOVATIONS EXHIBIT D TO LEASE AGREEMENT BETWEEN CITY OF PALO ALTO AND PALO ALTO HISTORY MUSEUM This Tenant Work Letter ("Tenant Work Letter") is made this day of April, 2023 ("Effective Date"), and supplements the Lease Agreement dated December 12, 2022 ("Lease") between the City of Palo Alto ("City") and the Palo Alto History Museum ("Museum") (individually, a "Party" and, collectively, the "Parties"), in reference to the following facts and circumstances: RECITALS A. Pursuant to the terms of the Lease, Museum is leasing the Premises. B. The purpose of this Tenant Work Letter is to set forth the terms and conditions for planned Phase 1 "warm shell" rehabilitation of the Building (the "Project"), including the terms and conditions for funding Project costs. C. The Museum has retained the architectural firm Garavaglia Architecture, Inc. ("Garavaglia"), to develop the design documents, dated October 10, 2008, for construction of the Project ("Design Documents"), which were submitted for City approval and issuance of a building permit for construction of the Project. D. The City issued Building Permit # 16000-03285 on February 26, 2019 for construction of the Project pursuant to the Design Documents ("Permit"). The Permit was extended to June 25, 2023. E. The Museum has retained Vance Brown, Inc., as the general contractor ("General Contractor") pursuant to a construction contract dated August 29, 2022, as amended, to construct the Project pursuant to the Design Documents and as authorized by the Permit (as amended, "Construction Contract"). F. Prior to execution of this Tenant Work Letter, the Museum has estimated the cost to construct the Project based on the Construction Contract's "Guaranteed Maximum Price" ("GMP") of $11,513,075. However, the Museum anticipates that the GMP will increase prior to commencement of construction on the Project, and this Tenant Work Letter will be updated prior to Project commencement to reflect the final GMP for the Construction Contract. G. The City has agreed to contribute funds derived from various funding sources, including restricted impact fees and certain grant funding, toward the Museum's cost to 3 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 7 Packet Pg. 465 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" construct the Project, as further specified herein, in reliance on the Museum's commitment to comply with the applicable conditions associated with those funding sources, as set forth in the Lease. H. The City has agreed to provide the City Contribution to apply to payment for the Construction Cost in reliance on the Museum's representations that the Museum will have sufficient additional funds for the Museum Contribution to complete the Project, based on (i) pledged donations for the Project ("Museum Donations"), and (ii) use of federal Community Project Funding ("CPF") grant funds pursuant to written notice from the Department of Housing and Urban Development ("HUD") confirming that the HUD CPF Form HUD -7015.15, "Request for Release of Funds and Certification" has been received by the HUD Community Planning and Development Western Region Officer. I. Use of funds from the HUD Grant for the Museum Contribution is subject to compliance with applicable grant conditions, including those set forth in HUD's FY 2022 Community Funding Grant Guide ("CPF Grant Guide"), which, among other things, provides that the provisions of 2 CFR Part 200 apply to all CPF awards, including the procurement requirements set forth in 2 CFR §200.317-327. IN CONSIDERATION OF the foregoing and the following covenants, terms and conditions, the Parties agree as follows: TERMS AND CONDITIONS 1. DEFINITIONS AND PURPOSE. 1.1 Recitals Incorporated. The foregoing Recitals are expressly incorporated into this Tenant Work Letter. 1.2 Definitions. Capitalized terms used in this Tenant Work Letter have the same meaning as provided in the Lease for those terms unless otherwise specified herein. The following terms used in this Tenant Work Letter, including the Recitals, have the meanings set forth in this Section 1.2: "Architect" means the architectural firm retained by the Museum to provide architectural design services for the Project. "City" means the City of Palo Alto, a California chartered municipal corporation, acting by and through its City Council. "City Agents" means individuals or entities acting within their capacity as duly authorized agents of the City for the Project, including, but not limited to, members of the Construction Liaison Team. "City Contribution" is the amount the City has agreed to contribute toward the Construction Cost as further detailed in Section 4.2 and Attachment A (Project Funding). 4 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 8 Packet Pg. 466 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" "Commencement Deadline" means the date by which construction of the Project must commence as stated in Section 4.3, including any duly authorized amendments thereto, if any. "Conditions Deadline" means the date by which the conditions precedent for commencement of construction set forth in Section 5 must be met, as further specified in Section 5.1. "Construction Contract" means the contract between Museum and the General Contractor for construction of the Project as stated in Recital E. "Construction Cost" means the amount the Museum must pay to the General Contractor to construct the Project based on the GMP in the fully executed Construction Contract, at the time that Attachment A is revised with updated construction costs, if applicable, pursuant to Section 5.4, including the costs for all subcontracts, and including, unless otherwise indicated by the context, authorized change orders, if any, and the Contingency Funds included in the Construction Contract. "Construction Liaison Team" has the meaning provided in Section 2.1. "Contingency Funds" means the amount set forth in line 44 of Exhibit B (Schedule of Values) to the Construction Contract, based on 10 % of the total Construction Pricing, which may be used, if needed, to cover increases in the cost to construct the Project as further specified in Section 4.4. "County" means the County of Santa Clara. "County Grant Agreements" has the meaning provided in the Lease "CPF Grant Guide" has the meaning provided in Recital I. "Design Documents" means the design documents described in Recital C, including, unless otherwise indicated by the context, any modifications pursuant to duly authorized change orders. "Effective Date" has the meaning set forth in the introductory paragraph to this Tenant Work Letter. "General Contractor" means the general contractor referenced in Recital E, or any replacement contractor, if any, approved by the Parties pursuant to Section 6.3 to construct the Project. "GMP" has the meaning provided in Recital F, the amount of which is subject to update prior to commencement of construction pursuant to Section 5.4. "HUD Funds" has the meaning provided in Attachment A (Project Funding). "HUD Grant" means the $3,000,000 CPF grant (Consolidated Appropriations Act, 2022) approved as Grant number B-22-CP-CA-0071. 5 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 9 Packet Pg. 467 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" "Laws" means all applicable local, state, and federal laws, regulations, rules, codes, ordinances, permits, orders, and the like enacted or imposed by or under the auspices of any governmental entity with jurisdiction over the Project, including labor, health and safety requirements. "Museum" means the Palo Alto History Museum (aka, the "Palo Alto Museum"), a nonprofit corporation. "Museum's Agents" means individuals or entities acting within their capacity as duly authorized agents of the Museum for the Project, which includes the employees and contractors of Museum. "Museum Contribution" is the amount the Museum has agreed to contribute to pay for the Project as further specified in Section 4.3 and Attachment A (Project Funding). "Museum Donations" has the meaning provided in Recital H and as further specified in Attachment A (Project Funding). "PAMC" means the Palo Alto Municipal Code. "Permit" has the meaning provided in Recital D above, including any City - authorized amendments or extensions thereto, if any. "Project" has the meaning provided in Recital B above, and as further specified in the Design Documents and as authorized by the Permit. "Project Account" means the account jointly maintained by the City and the Museum into which the City Contribution will be deposited in specified increments for the Museum to pay for progress payments for the Construction Contract until the City Contribution is exhausted. "Project Representative" means the individual(s) designated by City to serve as the primary point of contact for communications with the City regarding Project construction and as further specified in Section 2.1. "Project Schedule" means the planned time for construction of the Project as set forth in Attachment B (Project Schedule), which is subject to update prior to commencement of construction pursuant to Section 5.2. "Recital" means the recitals set forth at the beginning of this Tenant Work Letter. "Section" means a section or subsection of this Tenant Work Letter, unless otherwise indicated. "Site" means the area or areas being used for construction of the Project, including any staging area(s). 6 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 10 Packet Pg. 468 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" "Tenant Work Letter" means this Tenant Work Letter regarding construction of the Project. "Term" has the meaning provided in Section 3. 1.3 Purpose of Tenant Work Letter. The purpose of this Tenant Work Letter is to provide for the General Contractor's construction of the Project, including terms and conditions for funding, change orders, Project completion, and acceptance. 2. PARTY REPRESENTATIVES AND RELATIONS. 2.1 City's Representatives. A. Construction Liaison Team. The City's representatives for administration of this Tenant Work Letter are the Director of Administrative Services or his or her designee(s), the Director of Public Works or his or her designee(s), the City Manager's Office representative(s), and the Project Representative (collectively, the "Construction Liaison Team"). The Construction Liaison Team will be the City's representative for all purposes of administering and implementing this Tenant Work Letter, including approval of change orders on behalf of the City, subject to the limits of authority granted by the City Council. The Construction Liaison Team will be responsible for efficient coordination of internal City review and approval procedures, and for direct communications with the Museum's representative(s) identified in Section 2.2, below. B. Project Representative. The Project Representative will be the Construction Liaison Team's primary point of contact for routine communications concerning the Project. The Project Representative will not have independent authority to accept, reject, direct, or stop work on the Project; to modify the approved design; or to approve change order requests on behalf of the City. The Project Representative may attend the pre -construction conference and weekly progress meetings, and will be present on the Site during construction. 2.2 Museum's Representative. The Museum's authorized representative for administration and implementation of this Tenant Work Letter, including coordination and direct communications with the Construction Liaison Team, is Richard C. Green, Board President, or such other person designated by the Museum from time to time. 2.3 Communications. A. Duty to Update. Beginning one week after the Effective Date, the Museum will keep the Construction Liaison Team updated on progress and significant developments concerning Project construction by informal communication in addition to the scheduled meetings and reports required in this Tenant Work Letter. B. Pre -Construction Meetings. In addition to the weekly construction meetings in Section 6.7, prior to commencement of construction of the Project, the Parties will schedule regular meetings at mutually convenient times, to keep the Construction Liaison Team informed and updated on the progress of funding the 7 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 11 Packet Pg. 469 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" Museum Contribution, meeting other conditions for commencement of construction pursuant to Section 5, and any other pre -construction issues. C. Weekly Reports. The Museum will submit a weekly written report, distributed by email to all members of the Construction Liaison Team, summarizing the progress made during the preceding week, including funding, schedule and cost updates, and identifying any significant issues or concerns relating to the Project. 3. TERM. The Term of this Tenant Work Letter will begin upon the Effective Date and will remain in effect until a notice of completion has been recorded following City acceptance of the Project, as further specified in Section 6.13, unless the Tenant Work Letter is terminated sooner pursuant to Sections 5.1 or 13. 4. PROJECT FUNDING. 4.1 Project Costs. The anticipated costs for all work and services to be performed to construct the Project, including, but not limited to, the Construction Cost, is set forth in Attachment A (Project Funding), subject to updating pursuant to Section 5.4. 4.2 City Contribution. The City will contribute funds toward the Construction Cost as further specified in Attachment A (Project Funding), including both direct funding and reimbursements, and including funds from the County Grant Agreements (collectively, the "City Contribution"). The City Contribution includes reimbursement of permit and processing fees from the City's general fund, as authorized by the City Council on November 15, 2021. However, Museum is solely responsible for payment of any utility fees that are due and payable to any of the City's enterprise funds or any other fund separate from the City's general fund. The City Contribution may not be used for any purpose other than the Construction Cost in accordance with the terms of this Tenant Work Letter. A. Limitations. Except as set forth in Section 4.4 and Section 6.8 below, the City Contribution may not be used for additional costs due to changes or additions to the scope of work set forth in the Construction Contract and Design Documents unless and only to the extent that the City agrees in writing in advance to contribute to the added costs resulting from any such added or changed work. The City has no obligation to provide any funds for the Project in addition to the City Contribution unless and only to the extent agreed pursuant to Section 4.4(B) below in a writing memorialized pursuant to Section 15.1. B. Payment of City Contribution. Within 30 days after the Museum has provided evidence, to the Liaison Team's reasonable satisfaction, that the Museum has sufficient liquid and reliably pledged funds pursuant to Section 4.3, the City will deposit 20% of the total City Contribution into the Project Account. Thereafter, once Project construction has commenced, within 30 days after receiving a copy of the most recent Museum -approved monthly progress payment application from the General Contractor, the City will deposit the amount approved for the progress payment into the Project Account for the Museum to draw on to pay the General Contractor until the City Contribution is exhausted, at which point the Museum will be solely responsible for paying the General Contractor for its work on the Project. 8 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 12 Packet Pg. 470 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" C. County Grant Funding. The portion of the City Contribution derived from the County Grant Agreements will be specifically and solely allocated for the particular uses specified in each of the respective County Grant Agreements. The Museum will ensure that all eligible costs that are funded through the County Grant Agreements are separately invoiced and documented, to ensure compliance with the requirements of the individual County Grant Agreements. 4.3 Museum Contribution. The "Museum Contribution" will consist of the amounts set forth in Section 1 of Attachment A, which are intended to be sufficient to complete construction of the Project after the City Contribution has been exhausted. The Museum Contribution will include the cost of those utility and permit costs and fees for the Project that are not expressly waived or reimbursed by the City. The Museum will use reasonable efforts to obtain contributions from the community in the amount of the Museum Donations identified in Section 1 of Attachment A in order to commence construction of the Project (as evidenced by commencement of labor for the Project at the Premises) no later than 270 days following the Effective Date ("Commencement Deadline"). A. Evidence of Sufficient Funds for the Museum Donations. Within 90 days following the Effective Date, the Museum will provide evidence satisfactory to the City that (i) the Museum holds sufficient liquid funds in the amount of at least ninety percent (90%) of the Museum Donations and (ii) that funds in the amount of the remaining ten percent (10%) of the Museum Donations have been reliably pledged to pay for construction of the Project pursuant to the terms of the Construction Contract. Within six months following the Effective Date, Museum will provide evidence satisfactory to the City that any such pledged, but unfunded portions of the Museum Donations have been funded to the Museum and will be available to timely pay the General Contractor for construction of the Project. B. HUD Grant Funds and Compliance. The Parties acknowledge that the Museum Donations alone will be insufficient to pay all costs to complete the Project after the City Contribution has been exhausted. The Museum represents that it is authorized to use the HUD Funds to pay for completion of the Project pursuant to the terms of the Construction Contract, and for Project -related costs, including required environmental review. Within 270 days following the Effective Date, the Museum will provide evidence satisfactory to the City that sufficient HUD Funds will be available on a timely basis to complete construction of the Project after funds from the City Contribution have been exhausted. The Museum will use commercially reasonable efforts to satisfy all applicable conditions and requirements of the HUD Grant, including the requirements set forth in the CPF Grant Guide, so as to enable the HUD Funds to be available to pay for construction of the Project as soon as reasonably possible, and, the City will use commercially reasonable efforts to cooperate with the Museum to satisfy those requirements. The Museum is solely responsible for complying with the HUD Grant conditions and for the consequences of any failure to so comply, including additional costs due to delay from failure to timely secure adequate funding or for penalties or repayment obligations for failure to comply with the HUD Grant funding conditions, including the applicable requirements of the CPF Grant Guide and the federal regulations referenced therein. The Museum represents that the Construction Contract is exempt from the competitive procurement requirements included in those federal regulations because the Construction Contract 9 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 13 Packet Pg. 471 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" pre -dates award of the HUD Grant. The Museum will indemnify, hold harmless, and defend City against any claim, damages, or liability incurred due to any actual or alleged failure by Museum to comply with the applicable HUD Grant funding conditions. The Museum's obligations in this paragraph will survive expiration or termination of this Tenant Work Letter. 4.4 Contingency Funds. A. General. The Contingency Funds are solely intended for unforeseeable increases to the Construction Contract cost that arise after construction commences, including costs increases that arise during construction due to changes in the work authorized pursuant to Section 6.8. The Museum will provide an accounting of any use of Contingency Funds to the City when such funds are used. B. Insufficient Funds. If the Contingency Funds will be inadequate to complete the Project following exhaustion of the City Contribution, the Museum will complete the Project using the remaining funds from the HUD Grant. If, following exhaustion of the City Contribution, it becomes evident that the combined Contingency Funds and funds from the HUD Grant will be insufficient to pay for unforeseen costs that arise before the Project is completed, at the request of either Party, the Parties will meet and confer in an endeavor to mutually agree on a plan to address the shortfall and complete the Project in a manner that is consistent with the objectives of this Agreement, which may include change of Project scope, value engineering, or other cost saving measures. 4.5 Project Account. Within 30 days after the Effective Date, the Parties will establish the Project Account at a mutually acceptable financial institution with an office within the City of Palo Alto. If a minimum deposit is required to establish the account, the City will provide the necessary amount from the City Contribution. The City will deposit the City Contribution into the Project Account as further specified in Section 4.2, above, which the Museum may then draw from to pay for the Construction Contract, provided that the Project is timely commenced as specified in Section 5, including any mutually agreed extensions to the Commencement Deadline. Funds in the Project Account may only be used for costs authorized by this Tenant Work Letter. Any unauthorized use by Museum of City Contribution funds constitutes a default subject to the terms of Section 13, below. A. General. The Museum will administer and coordinate the receipt and disbursement of such funds for all costs and expenses related to the Project, consistent with the terms of this Tenant Work Letter, including the most current version of Attachment A (Project Funding). Deposits into and withdrawals from the Project Account will be made by the Parties in accordance with this Tenant Work Letter. The cost of the Project Account will be shared equally by the Parties. Any earnings from the investment of funds in the Project Account, if any, will remain or be deposited in the Project Account and be applied toward construction of the Project. B. Investment Limitations. Except to the extent otherwise approved in writing by the Parties, funds in the Project Account may only be invested in (1) immediately available funds (cash and cash equivalents), (2) fully insured FDIC certificates of deposits with daily trading liquidity, or (3) treasury bonds in tranches 10 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 14 Packet Pg. 472 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" with the objective to hold to maturity and have sufficient liquidity to pay construction obligations when due. C. Disbursements. The Museum will promptly provide the Construction Liaison Team with a copy of each Museum -approved payment application from the General Contractor, but disbursements from the Project Account for the Museum's payments to the General Contractor, will not be subject to prior approval by the City. D. Closure. The Parties will take action to close the Project Account once the City Contribution has been exhausted and all proceeds from the City Contribution paid out from the Project Account. 5. CONDITIONS FOR COMMENCEMENT OF PROJECT CONSTRUCTION. The Parties recognize that while time is of the essence for commencing work on the Project, it would be undesirable to commence Project construction before conditions have been met to ensure successful and timely completion of the Project, including firm contracts, required permits and authorizations, and adequate funding to ensure the Project can be timely completed by the Museum after the City Contribution is exhausted. The terms and conditions set forth in this Section 5 are intended to supplement the general requirements set forth in Section 12 of the Lease. 5.1 Conditions Precedent to Construction Commencement. Project construction may not commence until all of the conditions precedent to construction set forth in this Section 5 have been satisfied. The Museum will ensure that all of the conditions in this Section have been met to the City's reasonable satisfaction within 150 days following the Effective Date ("Conditions Deadline"). The Museum will notify the Construction Liaison Team in writing when the Museum believes that all of the conditions set forth in this Section 5 have been met. Within 30 days following receipt of this notice, the Construction Liaison Team will either (i) notify the Museum in writing that the City is satisfied that all of the Section 5 conditions have been met such that construction may commence; or (ii) notify the Museum in writing identifying any Section 5 conditions that have not been met to the City's reasonable satisfaction, such that construction may not yet commence. A. Conditions Deadline. If the Museum is unable to meet the conditions set forth in this Section 5 by the Conditions Deadline, the Museum's Representative will meet with the Construction Liaison Team to develop a plan for timely commencement of the Project consistent with the terms and objectives set forth in Section 3 of the Lease, which may include value engineering, scope reduction, phasing, or other cost saving measures so that the Project or an amended version of the Project can be timely completed with available funds. B. Commencement Deadline. If construction of the Project has not commenced by the Commencement Deadline (within 270 days following the Effective Date), this Tenant Work Letter will terminate unless the Parties mutually agree to extend the Commencement Deadline. 5.2 Construction Contract and Project Schedule. As a condition precedent to commencement of construction, the Museum will provide written proof to the Construction Liaison Team that it has affirmed or entered into a completed and up-to-date Construction 11 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 15 Packet Pg. 473 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" Contract with the General Contractor that meets the requirements specified in this Tenant Work Letter, including, but not limited to, Sections 6.3, 6.4, 6.7, 6.10, and 9. The written proof required for satisfying this condition includes delivery of fully executed copies of the final Construction Contract and subcontract agreements. If needed, the Parties will revise and update the Project Schedule set forth in Attachment B (Project Schedule) to ensure that it reflects the most current as -planned schedule available prior to commencement of construction. The revised Project Schedule will be dated, memorialized pursuant to Section 15.1, and will supersede the original Attachment B. 5.3 Permits and Authorizations. As a condition precedent to commencement of construction, the Museum will provide written proof to the Construction Liaison Team that in addition to the Permit, all necessary permits and approvals for the commencement of construction from any and all agencies having jurisdiction over the Project, including the City, have been authorized and will remain in effect during construction, including, as applicable, street opening permits, encroachment permits, utility encroachment permits, and health permits. 5.4 Project Funding Update. As a condition precedent to commencement of construction, Attachment A (Project Funding) will be amended to reflect the final GMP for the Construction Contract and to adjust the amount of the Museum Contribution commensurate with any adjustment to the GMP. The revised Attachment A will be dated, memorialized pursuant to Section 15.1, and will supersede the original Attachment A. The Museum has an ongoing obligation during the Term to promptly notify the Construction Liaison Team in writing of any increases in the Construction Cost from the amount stated in Attachment A. 6. PROJECT CONSTRUCTION. 6.1 Project Administration. The Museum will be solely responsible for construction administration services as needed during Project construction and closeout, including administration of the Construction Contract, review and response to requests for information, change order proposals, shop drawings, addressing any claims, if any, and preparation of record documents. 6.2 Architect. The City hereby approves of Garavaglia as the Architect for the Project. If, for any reason, the Museum wishes to substitute a different firm to serve as Architect for the Project, the substitution will be subject to the City's prior written approval of the proposed firm, which approval shall not be unreasonably withheld. A. Design Services. The Museum will continue to engage and pay for the services of its Architect to handle any architectural services needed during construction of the Project, at the Museum's sole expense. B. Insurance. Museum will require the Architect to provide and maintain insurance coverage, including professional liability insurance, that meets the City's standard requirements for design professional insurance as further specified in Section 9, below. 6.3 General Contractor and Construction Contract. The City hereby approves of Vance Brown, Inc. to serve as the General Contractor. If the Museum wishes to substitute 12 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 16 Packet Pg. 474 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" a different contractor to serve as General Contractor for the Project, the substitution will be subject to the City's prior written approval of the proposed contractor, which approval shall not be unreasonably withheld. A. Construction Contract. The Construction Contract between the Museum and its General Contractor will provide for a GMP, including the cost for all subcontracts and the 10% Construction Contingency Funds. The Construction Contract must also include provisions to ensure the following: 1. No Default. The Construction Contract will provide that the General Contractor will not take any action or fail to take any action which would cause the Museum to be in default under this Tenant Work Letter or the Lease, including, but not limited to, compliance with requirements pertaining to Site security, and compliance with Laws. 2. Compliance. The Construction Contract will require the General Contractor to construct the Project as specified in the approved Design Documents, which must be attached or incorporated therein, and in accordance with all applicable permits and authorizations. The Construction Contract will also require the General Contractor to construct the Project in compliance with applicable Laws, including prevailing wage and Labor Code requirements. 3. Bond and Insurance Requirements. The Construction Contract will include all applicable requirements for a payment and a performance bond, each for 100% of the Construction Cost, using bond forms provided or approved by the City and in compliance with Laws, including Civil Code section 9550 and PAMC section 2.30.500. The Construction Contract will also require the City's standard insurance requirements applicable to the General Contractor as further specified in Section 9, below. 4. As -Built Drawings. The Construction Contract will require the General Contractor to prepare and maintain as -built drawings showing any changes from or details not shown in the Design Documents, suitable for preparation of record drawings. 5. Representation as to Form. The Museum represents that the Construction Contract complies with applicable Laws and the terms of this Tenant Work Letter, and, as applicable, any funding conditions associated with the HUD Grant, and the Museum agrees to indemnify, defend, and hold City harmless against any alleged or actual noncompliance with those requirements, including, but not limited to, noncompliance with prevailing wage laws. The Museum's obligations in this paragraph will survive expiration or termination of this Tenant Work Letter. 6.4 Compliance. The Museum will require its General Contractor to accomplish all associated work required to complete the Project in accordance with the Design Documents and Construction Contract, and to comply with all conditions that are imposed on the Project during the City's approval process. The Museum will require its Architect and General Contractor to ensure that the Project is constructed and completed in accordance with all 13 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 17 Packet Pg. 475 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" applicable Laws, including City ordinances, rules, and regulations, governing construction noise, traffic controls, and dust control, as may be set forth in the PAMC and the City's Department of Public Works' Standard Drawings and Specifications for construction projects and other related construction rules and regulations. The City Contribution will not be increased to cover any added costs resulting from change order work required for code compliance requirements that apply generally in the City, unless and only to the extent the City Council has authorized an increase to the amount of City Contribution for that purpose. The Museum will require the General Contractor to arrange for the placement of portable restrooms at the Project Site to the extent required for work to be performed on the Project. 6.5 Access. The Project Representative and City Agents, including City inspectors, will have reasonable access during normal business hours to the Site during construction of the Project in order to perform their respective duties following 24 hours prior notice to the Museum, except in the event of an emergency or for meetings scheduled pursuant to Sections 2.3.B or 6.7. Any such access shall be subject to the Museum's and the General Contractor's written reasonable security and safety protocols, which will be provided to the Construction Liaison Team within 30 days following the Effective Date. Nothing in this Tenant Work Letter will be construed to limit the City's right to enforce contractual or legal requirements intended to protect workers, the environment, or public or worker health, safety and welfare. 6.6 Project Schedule. The Parties' planned schedule for construction of the Project is set forth in the Project Schedule, attached as Attachment B (Project Schedule) hereto, subject to updating pursuant to Section 5.2. Each Party will exercise its reasonable efforts to perform its respective obligations in a manner to ensure timely completion of the Project consistent with the Project Schedule to the extent it is possible to do so. The Museum has an ongoing obligation during the Term to promptly notify the Construction Liaison Team of any changes or impacts to the Project Schedule that may delay substantial completion (as set forth in Section 6.11) by two or more weeks. 6.7 Construction Meetings. A. Pre -Construction Conference. The Parties will schedule a pre - construction conference to take place before any work begins on the Project. The pre - construction conference will be attended by the Project Representative; members of the Construction Liaison Team; other City Agents with responsibilities relating to construction of the Project; the Museum's representative; the General Contractor's representatives, including the General Contractor's designated project representative and superintendent(s); the Architect; the designated inspector(s); and any other individuals whom the Parties mutually agree should be in attendance. The Project Representative and the Museum's representative, in consultation with the General Contractor, will mutually develop an agenda for the pre -construction conference, which must include communication protocols to ensure efficient and effective communications throughout the construction process; safety requirements; environmental considerations; scheduling; submittals; change order procedures; traffic management; noise management; security; parking; and authorized staging area(s). B. Weekly Meetings. In addition, the Parties will schedule weekly meetings for the duration of the Project, which will be attended by the General Contractor and each Party's designated representative(s). The weekly meetings will 14 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 18 Packet Pg. 476 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" focus on Project progress, including updates on construction, schedule, costs, change orders, and other construction -related issues, such as changes in design, changed conditions, inspection, testing, and similar matters. The General Contractor will be responsible for preparing and distributing agendas and minutes for the pre - construction conference (based on the agenda developed pursuant to Section 6.7.A) and the weekly meeting to all meeting participants with copies to the Construction Liaison Team. 6.8 Change Orders. The Museum may authorize change orders to the Construction Contract without City approval, except under any of the following circumstances, each of which requires prior written approval by the Construction Liaison Team: A. Violation of Lease Requirements for Funding Conditions. The proposed change would likely have a material adverse effect on the ability of the Museum to satisfy the required services and uses specified in Section 3 the Lease. B. Material Scope Change. The proposed change would materially alter the approved Project scope, including, but not limited to, size, footprint, appearance, or impact on normal operations and use of Heritage Park. C. Building Impacts. The proposed change would significantly reduce the quality, functionality, or life -expectancy of the improvements or constituent components or the current or future value of the Building. D. Maintenance Impacts. The proposed change would materially increase the City's costs to operate, repair, or maintain the Public Parkside Restroom, or future cost to operate, repair, or maintain the Building. E. Conflict. The proposed change would conflict with or be inconsistent with the provisions or objectives of this Tenant Work Letter, including, but not limited to, the indemnity and insurance requirements set forth herein. F. Governmental Approval. The proposed change would require new or amended governmental approval, including amendments to any required permit(s). G. Insufficient Funds. The cost of the proposed change would likely result in insufficient funds to complete the Project as approved, including exhaustion of the City Contribution, the Contingency Funds, and the HUD Grant funds. 6.9 Contractor's Licenses. The General Contractor, its subcontractors, and any other Museum's Agents who will perform construction work for the Project will obtain and maintain all current licenses required by the State of California before performing any work on the Project. 6.10 Prevailing Wages. Each worker performing Work under this Contract that is covered under Labor Code sections 1720 or 1720.9, including cleanup at the Project site, must be paid at a rate not less than the prevailing wage as defined in sections 1771 and 1774 of the Labor Code. Pursuant to Labor Code section 1773, the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to perform the work for the Project may be obtained 15 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 19 Packet Pg. 477 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" at the Purchasing Office of the City of Palo Alto. The Contractor must post a copy of the applicable prevailing rates at the Project site. Before entering into the Construction Contract to perform work on the Project and at all times while performing work on the Project, the General Contractor and its subcontractors must be registered with the California Department of Industrial Relations ("DIR") to perform public work under Labor Code section 1725.5. All contractors and subcontractors for the Project must comply with the provisions of Labor Code sections 1775, 1776, 1777.5, 1810, and 1813. The General Contractor must also comply with the provisions of Labor Code sections 1771.4, 1776 and 1812 and all implementing regulations, which are fully incorporated by this reference, including requirements for electronic submission of payroll records. The Construction Contract will be subject to compliance monitoring and enforcement by the DIR, pursuant to Labor Code section 1771.4. 6.11 Substantial Completion. For purposes of this Tenant Work Letter, the Project will be deemed substantially completed when all of the following have occurred, as confirmed by the Construction Liaison Team: A. Written Notice. The General Contractor has delivered a written statement to the Construction Liaison Team stating that the Project is substantially completed in accordance with the Design Documents and Construction Contract. B. Approvals and Inspections. The Museum has obtained all necessary City final inspections of and approvals for the Project. C. Punch List. All work has been completed in conformance with the Construction Contract with the exception of minor punch list items. D. Site Restoration. All equipment, materials, and garbage have been removed from the Project Site and any staging area(s). E. City Access. The City has been provided with the necessary access, including keys or codes, for those portions of the Building to be used for City purposes, including the Public Parkside Restrooms, the City Archives Room, and Community Rooms. 6.12 Record Drawings. Upon completion of the Project, the Architect will prepare the record drawings and provide the City's Director of Public Works with one PDF of a red- lined set of the Design Documents reflecting the actual construction of the Project based on the Contractor's as -built drawings. Submission of such complete and accurate record drawings is a condition precedent to City acceptance of the Project. 6.13 Completion and Acceptance. Once the Project has been completed in accordance with the Design Documents and the terms of this Tenant Work Letter, the City will accept the Project as complete in accordance with standard City procedure, and will notify the Museum of acceptance of the Project, subject to the following conditions: A. Punch List Completion. All punch list items have been completed and the Project site completely restored by the removal of all equipment, fencing, job trailers, and the like. 16 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 20 Packet Pg. 478 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" B. Record Drawings. The City must receive the record drawings pursuant to Section 6.12. 7. CONSTRUCTION SITE MAINTENANCE. At all times during construction of the Project, the Museum is solely responsible for maintaining the Project Site, including any staging area(s), in a commercially reasonable, clean and safe manner in compliance with all permits, the Lease, and applicable Laws. The Museum or the Museum Agents will provide approved containers for trash generated during construction of the Project and arrange for regular disposal of such trash. 8. UTILITY SERVICE. The City's obligation under Section 18 of the Lease to pay for all utilities for the Public Parkside Restrooms will be suspended once construction of the Project commences and will be reinstated upon City's acceptance of the Project. During that time, Museum will be solely responsible for all utility services to the Building, including the Public Parkside Restrooms. 9. INSURANCE. 9.1 Coverage Requirements. In addition to the insurance requirements set forth in the Lease, the Museum must require its Architect to obtain and maintain during the Term the insurance coverage described in Attachment C (Insurance Requirements (Architect)). The Museum must require the General Contractor to obtain prior to beginning and to maintain throughout construction of the Project, up to the date of Project acceptance, the insurance coverage described in Attachment D (Insurance Requirements (General Contractor)). 9.2 General Requirements. The insurance must remain in full force and effect during the Term, commencing on the Effective Date, except as otherwise specified for the General Contractor in Section 9.1, above. Each builder's risk insurance policy must be endorsed to name the City of Palo Alto as a loss payee. With the exception of workers' compensation, employer's liability, and professional liability insurance, each insurance policy required by the Tenant Work Letter must contain the following clauses or endorsements: A. "Coverage will not be suspended, voided, canceled by either party, reduced in coverage or in limits except after 30 days' prior written notice by certified mail, return receipt requested, has been given to the City." B. "All rights of subrogation are hereby waived against the City of Palo Alto and its elected and appointed officials, officers or employees, when acting within the scope of their employment or appointment." C. "The City of Palo Alto, its elected and appointed officials, officers, employees, agents and volunteers are to be covered as insureds as respects: liability arising out of activities performed by or on behalf of the insured; products and completed operations of the insured; premises owned, occupied or used by the insured; or automobiles owned, subleased, hired or borrowed by the insured. Except for the waiver of subrogation contained in Section B, the coverage will contain no special limitations on the scope of protection afforded to the City, its elected and appointed officials, officers, employees, agents or volunteers." 17 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 21 Packet Pg. 479 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" D. "For any claims related to the Tenant Work Letter, the insured's insurance coverage will be primary insurance as respects the City of Palo Alto, its elected and appointed officials, officers, employees, agents and volunteers. Any insurance or self-insurance maintained by the City, its elected and appointed officials, officers, employees, agents or volunteers will be in excess of the insured's insurance and will not contribute with it." E. "Any failure to comply with reporting or other provisions of the policies, including breaches of warranties, will not affect coverage provided to the City of Palo Alto, its elected and appointed officials, officers, employees, agents or volunteers." F. "The insured's insurance will apply separately to each insured against whom a claim is made or suit is brought, except with respect to the limits of the insurer's liability." 9.3 Sufficiency. All insurance required of the Museum, the General Contractor, or the Architect will be provided by insurance carriers with a current A.M. Best's rating of not less than A -VII. The certificates of insurance required for the Architect must be submitted electronically, on or before the Effective Date. The certificates of insurance required for the General Contractor must be submitted electronically to the Project Representative for review by the City's risk manager, no later than 21 calendar days before commencement of construction. If the Museum does not provide evidence of required coverage at least 30 days prior to the expiration of any existing insurance coverage, the City may purchase such insurance coverage for not more than a six-month period, on behalf of and at the sole cost and expense of the Museum. The City retains the right to review the coverage, form, and amount of the insurance coverage required by this Tenant Work Letter and require the Museum to alter the coverage, or coverage requirements for the Architect or General Contractor as appropriate. The City's requirements to alter the coverage, if any, will be reasonable and will be designed to assure protection from and against the kind and extent of risk which exists at the time a change in insurance is required. A failure by the Museum to provide acceptable insurance policies or certificates to the City, incorporating any such changes, within 30 days of receipt of such notice will constitute a default under this Tenant Work Letter. Such default will constitute a material breach and will be grounds for termination of this Tenant Work Letter by the City. The procurement of such required insurance will not be construed to limit the Museum's liability hereunder or to fulfill the indemnification requirements in the Lease. Notwithstanding the policy or policies of insurance, the Museum will be responsible for the full and total amount of any uninsured damage, injury, or loss occurring during the Term that is caused, directly or indirectly, by the willful or negligent acts and/or omissions of the Museum or the Museum's Agents. 9.4 Subrogation. On behalf of itself and its insurers, all rights of subrogation are hereby waived by the City against the Museum and its managers, members, employees, and the Museum's Agents when any of them is acting on behalf of the Museum in the performance of this Tenant Work Letter. 10. Damage to Project. 10.1 General. In the event any part of the Project is damaged by fire, other peril, or any other cause, before the Project has been accepted by the City, the Museum will promptly direct its General Contractor to take appropriate measures to secure the Building and Project 18 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 22 Packet Pg. 480 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" Site to avoid further damage or unsafe conditions; and prepare and submit a claim to its insurer(s) for funds to repair and rebuild all insured loss pursuant to the applicable insurance coverage required under Section 9. Both Parties will cooperate to expedite recovery of insurance proceeds to cover the insured loss. 10.2 Project Construction. The Museum will make reasonable efforts to complete the Project on schedule, if reasonably possible depending on the scope and nature of the damage. The Museum will promptly apply the insurance proceeds to pay for repair, replacement, or restoration of damaged components of the Project. Construction of the Project will be suspended, in whole or in part, to the extent necessary to ensure worker and public safety or to limit the cost to repair and complete the Project. 10.3 Insufficient Funds. The Museum will notify City in writing if the Museum determines that it is unable to secure sufficient insurance proceeds to pay for the full cost of repair. The Parties will arrange to meet and confer within ten days following such notice to develop a mutually acceptable approach to addressing the uninsured loss, which may include securing additional funds, phased completion, reduction in scope and/or other reasonable efforts to complete the Project in furtherance of the purpose set forth in Section 1.3, above. If the Parties are unable to develop a mutually acceptable solution for completing the Project despite the uninsured loss, either Party, within 180 days of the date of the notice of uninsured loss, may terminate the Tenant Work Letter by giving 60 days written notice to the other Party; provided, however, that the Museum may not exercise the right to terminate if the City agrees to provide the additional funds needed by the Museum to pay for the uninsured loss. If the Tenant Work Letter is terminated because of insufficient funds to complete the Project following damage to or destruction of the Project while it is under construction, once all outstanding payments have been made, including any payments due to the General Contractor, any remaining amount of the City Contribution remaining in the Project Account, if any, will be returned to the City. 11. PROJECT RECORDS. The Museum will maintain, or cause to be maintained by its General Contractor and subcontractors, if any, books and records relating to the Project for three years following City's acceptance of the Project. The City may inspect, audit, and copy the Museum's books and records pertaining to its obligations imposed by this Tenant Work Letter upon 30 days' prior written notice from the City at any reasonable time during the Term and for three years following City acceptance of the Project or earlier termination of the Tenant Work Letter, whichever occurs first. The Museum will retain such books and records at accessible locations during that three-year period. This provision will survive the expiration or termination of this Tenant Work Letter. 12. DISCLAIMER. Nothing in this Tenant Work Letter will be construed to establish a partnership, joint venture, group, pool, syndicate or agency between the Parties. No provision contained herein will be construed as authorizing or empowering either Party to assume or create any obligation or responsibility whatsoever, express or implied, on behalf, or in the name of, the other Party in any manner, or to make any representation, warranty or commitment on behalf of the other Party. In no event will the City be liable for any loss caused by the Museum in the 19 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 23 Packet Pg. 481 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" course of its performance hereunder, except as expressly provided herein; or any alleged or actual debts, obligations or liabilities of the Museum, whether due or to become due. 13. DEFAULT. 13.1 Remedies for Museum Default. In addition to any remedies available under the Lease or Laws, if the Museum defaults in the performance of any covenant, term or condition contained in this Tenant Work Letter and such default is not corrected within 30 days of receipt of a written notice of default from the City (or such longer period as may be reasonably required to cure such default so long as the Museum commences to cure such default within such 30 -day period and thereafter diligently pursues such cure), the City retains the right, but not the obligation, to elect any of the following rights and remedies. The following rights and remedies are cumulative and the exercise of one right or remedy will not impair the right of the City to exercise any or all other remedies. A. Termination. In the case of a material default, such as wrongful suspension, termination, or abandonment of the Project; uncorrected or repeated violation of Laws; or refusal or failure to construct the Project as required by the Design Documents or this Tenant Work Letter, City may terminate this Tenant Work Letter and all rights of the Museum and its consultants and contractors, if any, as further specified in Section 13.4. Upon termination, City will have no further obligation to deposit any outstanding portion, if any, of the City Contribution into the Project Account. B. City Contribution. Unless otherwise specified in the City's notice of default, (i) the Museum's right to withdraw funds from the Project Account is suspended until or unless that right is reinstated by the City upon timely cure of the default, (ii) the City's obligation to deposit portions of the City Contribution into the Project Account will likewise be suspended pending timely cure of the default and (iii) the City will have the right to withdraw all unexpended portions of the City Contribution from the Project Account, and City will have no further obligation to deposit any outstanding portion, if any, of the City Contribution into the Project Account. C. Cure at Museum's Expense. The City may cure any default of the Museum by any act, including payment of money, and the cost and expense thereof, plus all reasonable administrative costs, will become immediately due and payable by the Museum to the City. D. Legal Action. The City may initiate an action or suit in law or equity to enjoin any acts which may be unlawful or in violation of the City's rights hereunder. E. Other. The City may pursue any other right or remedy available under Laws, the Lease, or this Tenant Work Letter. 13.2 Opportunity to Cure. Notwithstanding the foregoing, in the event of default which cannot reasonably be cured within 30 days, the Museum will have such additional period of time as is reasonably necessary to cure the default, provided the default can be cured. 13.3 Remedies for City Default. 20 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 24 Packet Pg. 482 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" A. Cost to Complete. If City wrongfully stops or suspends work on the Project, other than as authorized herein or pursuant to exercise of the City's police powers, City will be responsible for additional costs, if any, reasonably incurred by Museum to complete the Project as a direct result of such wrongful stoppage or suspension. As used in this paragraph, "wrongful" and "wrongfully" refer to actions that constitute a material breach of this Tenant Work Letter, but exclude City's reasonable exercise of its police powers. B. Remedies. Except as otherwise provided in the Lease or this Tenant Work Letter, in the event of any material default by City that is not cured within 30 days of written notice of default from the Museum, or such additional period of time as is reasonably necessary to cure the default, the Museum may pursue any rights or remedies provided by law or equity to enforce the Tenant Work Letter. 13.4 Termination. If this Tenant Work Letter is terminated by the City for uncured default by the Museum because of the Museum's refusal or failure to complete the Project in accordance with the terms of this Tenant Work Letter or pursuant to Section 5.1, in addition to any other available remedies, the City will be immediately entitled, but not obligated, to use any remaining funds in the Project Account to complete the Project, including a modified or reduced version of the Project. 13.5 Restoration. In case any suit, action or proceeding to enforce any right or exercise any remedy is brought or taken and then discontinued or abandoned, the Parties will be restored to their former positions, rights and remedies as if no such suit, action or proceedings had been brought or taken. 14. NOTICES. In addition to the notice requirements set forth in the Lease, or as otherwise specified herein, a copy of any notice required or given pursuant to the terms of this Tenant Work Letter must be concurrently transmitted to the City's Director of Public Works in the manner specified in the Lease. 15. MISCELLANEOUS PROVISIONS. 15.1 Entire Tenant Work Letter; Amendment. This Tenant Work Letter represents the entire agreement between the Parties with respect to construction of the Project and supersedes all prior negotiations, representations and contracts, whether written or oral, except for the applicable terms and conditions of the Lease. This Tenant Work Letter and the attachments hereto may only be amended as specified in the Lease. 15.2 Attachments. All Attachments referred to in this Tenant Work Letter are by such references incorporated herein and made a part hereof, including the following: Attachment A Project Funding Attachment B Project Schedule Attachment C Insurance Requirements (Architect) Attachment D Insurance Requirements (General Contractor) 21 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 25 Packet Pg. 483 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" 15.3 Modification for Lack of Funds. The City Contribution is subject to the fiscal provisions of the Charter of the City of Palo Alto and the PAMC, and the Tenant Work Letter will be modified to exclude or reduce the City Contribution under the following circumstances: at the end of any fiscal year, if funds for the City Contribution are not appropriated for the following fiscal year; or at any time within a fiscal year if funds are only appropriated for a portion of the fiscal year and funds for the City Contribution are no longer available, provided that the City will not be excused from using funds previously appropriated for the City Contribution. This provision will take precedence in the event of a conflict with any other covenant, term or condition of this Tenant Work Letter. 15.4 Severability. If a court of competent jurisdiction finds or rules that any provision of this Tenant Work Letter, the Attachments, or any amendment thereto, is void or unenforceable, the unaffected provisions of this Tenant Work Letter, the Attachments, or any amendment thereto, will remain in full force and effect. 15.5 Consent. When either Party is required to give its consent to the other Party, the Party whose consent is required will not unreasonably withhold or delay that consent, unless it is specifically stated that it is within the Party's sole discretion to give or withhold its consent. [Signature page follows.] 22 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 26 Packet Pg. 484 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" IN WITNESS WHEREOF, the Parties by their duly authorized representatives have executed this Tenant Work Letter. CITY OF PALO ALTO City Manager APPROVED AS TO FORM: City Attorney APPROVED: Director of Administrative Services Director of Public Works PALO ALTO HISTORY MUSEUM, a California nonprofit public benefit corporation Board President Treasurer 23 Tenant Work Letter Roth Building Warm Shell Rehabilitation Item 13: Staff Report Pg. 27 Packet Pg. 485 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" ATTACHMENT A PROJECT FUNDING This Attachment A details the Parties' respective funding commitments for construction of the Project, based on the estimated Construction Cost set forth in Recital F, which is subject to amendment prior to commencement of Project construction. Pursuant to Section 5.4, this Attachment A will be amended based on the final GMP, as a condition precedent to commencement of Project construction. 1. Museum Contribution. The Museum is contributing $1,828,825.00 to pay for certain hard and soft costs for the construction of the Project as further specified in Section 4.3, which is comprised of the following: A. The Museum will contribute $335,750.00 to pay for all construction phase soft costs, including, without limitation, all permit and utility fees that are not expressly waived or reimbursed by the City and the premiums for the Builder's Risk insurance for the Project. B. The Museum will contribute $1,493,075.00, based on the difference between the City Contribution and the estimated amount of the GMP as of the Effective Date. The Museum Contribution shall be funded by pledged and received donations in the amount of $850,000.00 (the "Museum Donations") and, to the extent available and subject to Section 4.3 of the Tenant Work Letter, funds from the HUD Grant in the amount of $978,825.00 (the "HUD Funds"). Notwithstanding the foregoing, the amounts set forth herein are subject to amendment pursuant to Section 5.4 to reflect the final GMP and commensurate adjustments to the final amount of the Museum Contribution as a condition precedent to commencement of Project construction. 2. City Contribution. The City Contribution is comprised of the following contributions and reimbursements for construction of the Project, for a total City Contribution of $10,020,000, provided the Museum meets its funding obligations and timely complies with the conditions for Project commencement set forth in this Tenant Work Letter: A. The City will contribute $4,900,000.00 from transferable development rights and City general funds. B. The City will contribute $2,000,000.00 from Stanford University Medical Center development agreement funds. C. The City will contribute $653,000.00 from funds received pursuant to the County Grant Agreements, which is to be allocated solely for the improvements specified in the County Grant Agreements, and conditioned upon the Museum's compliance with the terms and conditions of the County Grant Agreements, as may be further specified in the Lease. Tenant Work Letter Roth Building Warm Shell Renovations Item 13: Staff Report Pg. 28 Packet Pg. 486 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" D. The City will contribute $1,650,000.00 from Community Center Impact Fees, toward construction cost for the community room facilities in the Building, provided those facilities are available for public community center use as further specified in the Lease. E. The City will contribute $350,000.00 from Park Impact Fees toward construction costs for the restroom facilities on the northeast side of the Building, provided those facilities are available as the public restrooms serving Heritage Park as further specified in the Lease. F. The City will contribute $300,000.00 from Library Impact Fees toward construction costs for the City Archive Room, provided the City Archive Room is available and accessible for City archives as further specified in the Lease. G. The City will reimburse the Museum in the amount of $100,000.00 for permit fees previously assessed for the Project. H. The City will contribute $67,000.00 to offset the cost for the General Contractor's procurement of a payment bond and a performance bond. Tenant Work Letter Roth Building Warm Shell Renovations Item 13: Staff Report Pg. 29 Packet Pg. 487 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" ATTACHMENT B PROJECT SCHEDULE Pursuant to Section 6.6 of the Tenant Work Letter, the attached schedule, dated < >, constitutes the planned schedule for construction of the Project. Tenant Work Letter Roth Building Warm Shell Renovations Item 13: Staff Report Pg. 30 Packet Pg. 488 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" ATTACHMENT C INSURANCE REQUIREMENTS (ARCHITECT) Tenant Work Letter Roth Building Warm Shell Renovations Item 13: Staff Report Pg. 31 Packet Pg. 489 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" A. Rev. 2017 CITY O PALO ALTO ATTACHMENT "C" INSURANCE REQUIREMENTS (ARCHITECT) CONTRACTORS, AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST'S KEY RATING OF A-:Vll, OR HIGHER, AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. MINIMUM LIMITS REQUIRED TYPE OF COVERAGE REQUIREMENT EACH OCCURRENCE GGREGATE ES WORKER'S COMPENSATION STATUTORY ES EMPLOYER'S LIABILITY BODILY INJURY PROPERTY $1,000,000 $2,000,000 GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM DAMAGE $1,000,000 $2,000,000 PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY & PROPERTY $1,000,000 $2,000,000 DAMAGE COMBINED. BODILY INJURY $1,000,000 $2,000,000 EACH PERSON $1,000,000 $2,000,000 EACH OCCURRENCE $1,000,000 $2,000,000 UTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON -OWNED PROPERTY DAMAGE $1,000,000 $2,000,000 BODILY INJURY AND PROPERTY $1,000,000 $2,000,000 DAMAGE, COMBINED PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE LL DAMAGES $2,000,000 E CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST ND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS' COMPENSATION, EMPLOYER'S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO "ADDITIONAL INSUREDS" PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. Item 13: Staff Report Pg. 32 Packet Pg. 490 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" CITY OF PALO ALTO ATTACHMENT "C" INSURANCE REQUIREMENTS (ARCHITECT) B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONTRACTOR SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON- PAYMENT OF PREMIUM, THE CONTRACTOR SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. Rev. 2017 Item 13: Staff Report Pg. 33 Packet Pg. 491 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" ATTACHMENT D INSURANCE REQUIREMENTS (GENERAL CONTRACTOR) Tenant Work Letter Roth Building Warm Shell Renovations Item 13: Staff Report Pg. 34 Packet Pg. 492 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" CITY OF PALO ALTO ATTACHMENT "D" INSURANCE REQUIREMENTS (GENERAL CONTRACTOR) CONTRACTORS, AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST'S KEY RATING OF A -:VII, OR HIGHER, AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. MINIMUM LIMITS R TYPE OF COVERAGE REQUIREMENT EACH E OCCURRENCE AGGREGATE YES WORKER'S STATUTORY COMPENSATION BODILY INJURY $5,000,000 $10,000,000 YES GENERAL LIABILITY, INCLUDING PERSONAL PROPERTY DAMAGE $5,000,000 $10,000,000 INJURY, BROAD FORM PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE $5,000,000 $10,000,000 BLANKET COMBINED. CONTRACTUAL, AND BODILY INJURY $2,000,000 $2,000,000 EACH PERSON $2,000,000 $2,000,000 EACH OCCURRENCE $2,000,000 $2,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, PROPERTY DAMAGE $2,000,000 $2,000,000 HIRED, NON -OWNED BODILY INJURY AND PROPERTY $2,000,000 $2,000,000 DAMAGE, COMBINED YES POLLUTION LIABILITY ALL DAMAGES $2,000,000 YES BUILDERS RISK- Full Insurable Value YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS OR SUBCONTRACTORS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS' COMPENSATION, EMPLOYER'S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO "ADDITIONAL INSUREDS" A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY Rev.2022 Item 13: Staff Report Pg. 35 Packet Pg. 493 of 853 Item 13 Attachment A -Tenant Work Letter, 300 Homer Ave "ROTH Facility" CITY OF PALO ALTO ATTACHMENT "D" INSURANCE REQUIREMENTS (GENERAL CONTRACTOR) THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONTRACTOR SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON- PAYMENT OF PREMIUM, THE CONTRACTOR SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. Rev. 2022 Item 13: Staff Report Pg. 36 Packet Pg. 494 of 853 Item 14 Item 14 Staff Report CITY OF PALO ALTO City Council Staff Report From: City Manager Report Type: ACTION ITEMS Lead Department: Utilities Meeting Date: April 17, 2023 Staff Report: 2303-1219 TITLE PUBLIC HEARING: Adoption of a Resolution Approving the Fiscal Year 2024 Gas Utility Financial Plan, Including Proposed Reserve and General Fund Transfers and Amending the Gas Utility Reserve Management Practices, and Increasing Gas Rates by Amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master -Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural Gas Service); CEQA status: exempt/not a project under Public Resources Code section 21080(b)(8) RECOMMENDATION The Finance Committee and the Utilities Advisory Commission (UAC) recommend the City Council adopt a resolution (Attachment A): a. Approving the fiscal year (FY) 2024 Gas Utility Financial Plan (Attachment B); b. Amending the Gas Utility Reserve Management Practices (Attachment C); c. Transferring up to 18% of gas utility gross revenues received during fiscal year 2021 to the general fund in FY 2023; d. Transferring up to 15.5% of gas utility gross revenues received during fiscal year 2022 to the general fund in FY 2024; e. Transferring up to $3.82 million from the CIP Reserve to the Operations Reserve in FY 2023; and f. Increasing gas rates by amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master -Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural Gas Service) (Attachment D). The UAC and Finance Committee both recommend transferring 15.5% of gas utility gross revenues received during fiscal year (FY) 2022 to the General Fund in FY 2024, which is below the voter approved level of 18.0% (item (d) above). The UAC had one dissenting vote for reasons unrelated to the transfer and the Finance Committee had one dissenting vote specifically related to the transfer level. Item 14: Staff Report Pg. 1 Packet Pg. 495 of 853 Item 14 Item 14 Staff Report EXECUTIVE SUMMARY The Utilities Advisory Commission (UAC) and Finance Committee have reviewed the attached proposed Gas Utility Financial Plan and proposed rate changes recommended by staff for FY 2024. The UAC and Finance Committee recommend approval of the staff recommendation, which includes the transfers described in the Recommendation section above. The rate changes included in Attachment D are expected to result in an 8% increase in the customer bill (due to a 21% increase to the distribution component of the rates). The actual bill change customers would experience would vary due to various pass -through rate components related to gas supply costs, which vary as frequently as monthly. Approval of this item would result in implementation of the finalized rates for FY 2024, beginning July 1, 2023. Staff is requesting that Council determine the amount of the General Fund transfer for the gas utility. This is another component of the City's gas rates. City voters first authorized the transfer in 1950, and in November 2022 voters approved Measure L, affirming the continuation of this practice by adding section 2.28.185 to the Municipal Code. Each year the City Council may transfer from the gas utility to the general fund an amount up to 18% of the gross revenues of the gas utility, though Council may choose to transfer a lesser amount. Two alternatives and their associated rate increases are shown in the section below titled "Alternative Gas Increase Plans." All rate and cost discussions in this staff report and the Financial Plan are based on Alternative 2, which involves transferring up to 18% of gas utility gross revenues in FY 2023 and 15.5% in FY 2024, as recommended by the UAC and Finance Committee. BACKGROUND The FY 2024 Gas Utility Financial Plan includes projections of the utility's costs and revenues for FY 2023 through FY 2028. Gas utility costs are made up of: • gas supply costs (60 percent of costs in FY 2023), which represent the cost of buying gas and transporting it to Palo Alto and associated environmental charges, and • distribution -related costs (40 percent of costs in FY 2023), which represent the cost of operating Palo Alto's gas distribution system, administration, customer service, and other day to day operations. Gas supply revenues to cover gas supply costs are collected through four rate components (commodity, transmission, cap and trade, and Carbon Neutral Gas) that pass gas supply costs through directly to customers, and which change as frequently as monthly. Gas distribution revenues to cover gas distribution costs which are collected through a distribution rate that is typically adjusted annually. Distribution rates last increased on July 1, 2022, which resulted in a roughly 3 percent increase in the total system average gas rate (the supply rates plus the distribution rates). Gas market prices rose to unprecedented levels in FY 2023, leading to far higher gas supply costs for Palo Alto in FY 2023 than are projected for FY 2024 through FY 2028. As shown in Figure 1 below, customer gas bills spiked in the winter of 2022/2023 and are expected to decrease Item 14: Staff Report Pg. 2 Packet Pg. 496 of 853 Item 14 Item 14 Staff Report significantly by June 2023, when this rate change would take effect, and are not currently forecasted (based on current forward market prices) to reach similar levels next winter, though these forecasts are uncertain. Figure 1: Monthly Median Residential Gas Bill $300 FY 2024 Rate Changes $250 $200 $150 $100 $50 . ..I $0 Winter Summer Winter Summer Summer Winter Jan -22 Jul -22 Jan -23 Jun -23 Jul -23 Jan -24 Actual Projected ANALYSIS Staff is proposing to increase the distribution component of the gas rates in FY 2024 to ensure the utility is recovering its costs of operations. Revenues were already below costs after keeping rate increases low through the pandemic, but construction inflation and other factors have driven costs up. In addition, the gas market price spikes in FY 2023, which were not fully passed through to customers, decreased reserves well below Council -approved minimums. The distribution rate increase is projected to increase overall customer bills approximately 8%, though changes to gas supply costs mean that the actual impact to customer bills may be higher or lower. This 8% increase in customer bills results from increasing the distribution component of the rates 21% to fully recover distribution costs and avoid decreasing reserves further. Even with this distribution rate increase, based on current market forecasts staff expects average annual customer gas bills to decline 13% in FY 2024 compared to FY 2023 because gas supply costs were extremely high in FY 2023, particularly in the winter. FY 2024 annual gas supply costs are forecasted to be about 36% lower than FY 2023. Gas market prices are uncertain, however, and these forecasts can change. The distribution rate increase is driven by two things: 1) the need to replenish reserves, which were depleted by significant losses due to FY 2023 commodity costs that were not be fully passed through to customers under the City's commodity rate cap of $4 per therm, and Item 14: Staff Report Pg. 3 Packet Pg. 497 of 853 Item 14 Item 14 Staff Report 2) continuing increases in capital and operating costs. Distribution rates did not keep up with these increased costs as the City pursued a Council policy to minimize rate increases during the economic downturn associated with the COVID-19 pandemic. Additional detail on the staff proposal is available in the March 21, 2023 Finance Committee staff report (2302-0946). Alternative Gas Increase Plans The gas utility's transfer to the City's General Fund is a component of the City's gas rates. City voters first authorized the transfer in 1950, and in November 2022 voters approved Measure L, affirming the continuation of this practice by amending the Municipal Code. Specifically, section 2.28.185, "Natural Gas Utility Transfer" states: Each fiscal year the City Council may transfer from the natural gas utility to the general fund an amount equal to 18% of the gross revenues of the gas utility received during the fiscal year two fiscal years before the fiscal year of the transfer. At its discretion, the City Council may decide to transfer a lesser amount. The projected cost of the transfer shall be included in the City's retail natural gas rates as part of the cost of providing gas service. The attached Financial Plan proposes an 18% transfer, $7,191,000 for FY 2023, which aligns with the voter -approved changes codified in PAMC 2.28.185. Measure L authorized Council to make the transfer annually and granted Council the ability to approve a lower amount. Although Council will formally direct the FY 2024 transfer amount next year, Staff provided preliminary projections for FYs 2024 - 2026 for the UAC and Finance Committee's consideration and feedback: Alternative 1 proposes transferring 18% of gross revenue as voters approved in Measure L, and Alternative 2 proposes a transfer between 15.5% and 11.1% annually through FY 2026. Staff prepared Alternative 2's lower transfer percentages in response to recent increases in gas distribution rates and supply costs; this alternative is projected to create FY 2024 - 2026 transfers similar to the annual 2% to 3% growth rate in the transfer prior to Measure L. To illustrate, Alternative 2 links the FY 2024- 2026 transfers to the Consumer Price Index (CPI). CPI is projected to be 3% long term, though staff projects 5% CPI increases in FY 2024 and FY 2025. Table 1 shows a 6% per year projection as the maximum proposed increase under Alternative 2; actual increases for the years shown would be capped at 6% or CPI, whichever is less. Table 1 shows the amount of the transfer both in dollars and as a percentage of utility revenue for each fiscal year, as well as the projected rate of annual growth in the transfer. Table 2 below shows the distribution rate increases (as a percentage of the total bill, excluding supply cost changes) associated with each alternative. Item 14: Staff Report Pg. 4 Packet Pg. 498 of 853 Item 14 Item 14 Staff Report Table 1: Proposed / Projected General Fund Transfers as % of Gross Gas Revenues Two FYs Prior' Proposed Projected FY 2023 FY 2024 FY 2025 FY 2026 Gas Utility Gross Revenue Two Fiscal Years Prior ($000) Alternative 1 39,950 49,721 72,570 66,927 Alternative 2 66,269 Percent of gas utility gross revenue to transfer Alternative 1 18.0% 18.0% 18.0% 18.0% Alternative 2 15.5% 11.1% 12.9% Transfer amount ($000) Alternative 1 7,191 8,934 13,063 12,047 Alternative 2 7,707 8,080 8,565 Change in Transfer from Prior Fiscal Year (%) Alternative 1 -1% 24% 46% -8% Alternative 2 6% 6% 6% Table 2: Summary of Distribution Rate Changes for Transfer Proposal and Alternatives FY 2023 FY 2024 FY 2025 FY 2026 Alternative 1 4% 0 9% 10% 8% Alternative 2 8% 7% 5% FISCAL/RESOURCE IMPACT The resource impact of the recommendations summarized in this report is the continued financial solvency of the gas utility and, as the City is a ratepayer, an increase to General Fund expenses (due to the rate increases) and revenues (due to the General Fund transfer). Normal year sales revenues for the Gas Utility in FY 2024 are projected to increase by roughly 8 percent or $5.7 million as a result of the proposed rate increases, not including fluctuations in commodity revenue/cost. General Fund utility bill costs are expected to increase by $0.06 million as a result of these rate changes. The change in General Fund revenues from FY 2023 to FY 2024 would depend on the General Fund transfer alternative chosen by Council, as shown above in Table 1. Under Alternative 2, which was recommended by the UAC and Finance Committee, General Fund revenues would increase from $7.191 million in FY 2023 to $7.707 million in FY 2024, an increase of about $516,000. 1 Measure L authorizes a transfer based on 18% (or a lesser percentage if approved by Council) of the revenue for two fiscal years prior, so the FY 2024 transfer is based on FY 2022 revenue. Item 14: Staff Report Pg. 5 Packet Pg. 499 of 853 Item 14 Item 14 Staff Report POLICY IMPLICATIONS The proposed gas rate adjustments are consistent with Council -adopted Reserve Management Practices that are part of the Financial Plan and were developed using a cost -of -service study and methodology consistent with the California constitution and industry -accepted cost of service principles. As noted in the Reserves Management Practices (Attachment B), if reserves fall below the minimum guidelines, Council approval is required for a rate plan that requires more than one year to return reserves to within guideline levels. STAKEHOLDER ENGAGEMENT These recommendations were reviewed by the UAC and Finance Committee in public meetings. Public communications of issues related to winter gas supply price spikes were done via social media, City newsletters, and other channels. The public will be notified of the final rate changes adopted by Council through various channels, including social media, the website, utility bill inserts, and City newsletters. Published in the Palo Alto Daily on April 7th and 14th, 2023. ENVIRONMENTAL REVIEW Adoption of the Financial Plans and budgeted transfers referenced in this report does not meet the California Environmental Quality Act's definition of a project, pursuant to Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(4) and (5), because it is a governmental fiscal and administrative activity which will not cause a direct or indirect physical change in the environment. Adoption of the proposed gas rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. ATTACHMENTS Attachment A: Gas Resolution FY24 Attachment B: Reserves Management Practices Redlined Attachment C: Gas FY 2024 Financial Plan Attachment D: Rate Schedule for FY2024 APPROVED BY: Dean Batchelor, Director Utilities Staff: Jonathan Abendschein, Assistant Director of Utilities Item 14: Staff Report Pg. 6 Packet Pg. 500 of 853 Item 14 I Attachment A - Gas Resolution FY24 t A * NOT YET APPROVED Resolution No. Resolution of the Council of the City of Palo Alto Approving the Fiscal Year 2024 Gas Utility Financial Plan, Including Proposed Reserve and General Fund Transfers and Amendment to the Gas Utility Reserve Management Practices, and Increasing Gas Rates by Amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master - Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G- 10 (Compressed Natural Gas Service) I:I Ir_1 1 A. Each year the City of Palo Alto ("City") regularly assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations, including reserves. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and charges. C. On April 17, 2023, the City Council heard and approved the proposed rate increase at a noticed public hearing. The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. The Council hereby adopts the FY 2024 Gas Utility Financial Plan. SECTION 2. The Council hereby approves the amendment to the Gas Utility Reserves Management Practices as shown in Attachment B. SECTION 3. The Council hereby approves the transfer of up to 18% of gas utility gross revenues received during fiscal year 2021 to the general fund in FY 2023. SECTION 4. The Council hereby approves the transfer of up to 15.5% of gas utility gross revenues received during fiscal year 2022 to the general fund in FY 2024. SECTION 5. The Council hereby approves the transfer of up to $3.82 Million from the CIP Reserve to the Operations Reserve, as described in the FY 2024 Gas Utility Financial Plan approved via this resolution. 6056713C Item 14: Staff Report Pg. 7 Packet Pg. 501 of 853 Item 14 I Attachment A - Gas Resolution FY24 t A * NOT YET APPROVED * SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-1 (Residential Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-1, as amended, shall become effective July 1, 2023. SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-2 (Residential Master -Metered and Commercial Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-2, as amended, shall become effective July 1, 2023. SECTION 8. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-3 (Large Commercial Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-3, as amended, shall become effective July 1, 2023. SECTION 9. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-10 (Compressed Natural Gas Service Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-10, as amended, shall become effective July 1, 2023. SECTION 10. The City Council finds as follows: a. Revenues derived from the gas rates approved by this resolution do not exceed the funds required to provide gas service. b. Revenues derived from the gas rates approved by this resolution shall not be used for any purpose other than providing gas service, and the purposes set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 11. The Council finds that the fees and charges adopted by this resolution are charges imposed for a specific government service or product provided directly to the payor that are not provided to those not charged, and do not exceed the reasonable costs to the City of providing the service or product. // Item 14: Staff Report Pg. 8 Packet Pg. 502 of 853 Item 14 I Attachment A - Gas Resolution FY24 t A * NOT YET APPROVED * '- SECTION 12. The Council finds that approving the Financial Plan does not meet the California Environmental Quality Act's (CEQA) definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment, and therefore, no environmental assessment is required. The Council finds that changing gas rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney Mayor APPROVED: City Manager Director of Utilities Director of Administrative Services 6056713C Item 14: Staff Report Pg. 9 Packet Pg. 503 of 853 Item 14 Attachment B - Reserve Management Practices Redline APPENDIX C: GAS UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices shall be used when developing the Gas Utility Financial Plan: Section 1. Definitions a) "Financial Planning Period" — The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b) "Fund Balance" — As used in these Reserves Management Practices, Fund Balance refers to the Utility's Unrestricted Net Assets. c) "Net Assets" - The Government Accounting Standards Board defines a Utility's Net Assets as the difference between its assets and liabilities. d) "Unrestricted Net Assets" - The portion of the Utility's Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Supply Fund Reserves The Gas Utility's Supply Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 4 (Reserve for Commitments) b) For operating and capital budgets re -appropriated from previous years, as described in Section 5 (Reserve for Re -appropriations) Section 3. Distribution Fund Reserves a) For existing contracts, as described in Section 4 (Reserve for Commitments) b) For operating and capital budgets re -appropriated from previous years, as described in Section 5 (Reserve for Re -appropriations) c) For cash flow management and contingencies related to the Gas Utility's Capital Improvement Program (CIP), as described in Section 6 (CIP Reserve) d) For rate stabilization, as described in Section 7 (Rate Stabilization Reserve) e) For operating contingencies, as described in Section 8 (Operations Reserve) f) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 9 (Unassigned Reserves) Section 4. Reserve for Commitments At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserve for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Wastewater Collection Utility at that time. Item 14: Staff Report Pg. 10 Packet Pg. 504 of 853 Item 14 Attachment B - Reserve Management Practices Redline Section 5. Reserve for Reappropriations At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserve for Reappropriations will be set to an amount equal to the amount of all remaining capital and non -capital budgets, if any, that will be re -appropriated to the following fiscal year for each fund in accordance with Palo Alto Municipal Code Section 2.28.090. Section 6. CIP Reserve The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for capital contingencies. Staff will manage the CIP Reserve according to the following practices: The following guideline levels are set forth for the CIP Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of CIP expense budgeted for that year. Minimum Level 12 months of budgeted CIP expense Maximum Level 24 months of budgeted CIP expense a) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the Reserve for Commitments when funds are added to or removed from the Reserve for Commitments as a result of a change in contractual commitments related to CIP projects. Any other additions to or withdrawals from the CIP reserve require Council action. b) Minimum Level: i) Funds held in the Reserve for Commitments may be counted as part of the CIP Reserve for the purpose of determining compliance with the CIP Reserve minimum guideline level. ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered by the end of the following fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the next fiscal year. For example, if the CIP Reserve is below its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve, or that does so in a shorter period of time. c) Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds may be added to this reserve. If there are funds in this reserve in excess of the maximum level staff must propose to transfer these funds to another reserve or return them to ratepayers in the next Financial Plan. Staff may also seek Council approval to hold funds in this reserve in excess of the maximum level, if they are held fora specific future purpose related to the CIP. Section 7. Rate Stabilization Reserve Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate Item 14: Staff Report Pg. 11 Packet Pg. 505 of 853 Item 14 Attachment B - Reserve Management Practices Redline Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Gas Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 8. Operations Reserve The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion of the Gas Utility's Fund Balance not included in the reserves described in Section 4 -Section 7 above will be included in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 8 d) below. Staff will manage the Operations Reserve according to the following practices: a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. 60 days of O&M and commodity expense Minimum Level 90 days of O&M and commodity expense Target Level 120 days of O&M and commodity expense Maximum Level b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve. c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any Financial Plan created for the Gas Utility shall be designed to return the Operations Reserve to its target level by the end of the forecast period. d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this reserve. Any further increase in the Gas Utility's Fund Balance shall be automatically included in the Unassigned Reserve described in Section 9, below. Section 9. Unassigned Reserve If the Operations Reserve reaches its maximum level, any further additions to the Gas Utility's Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Gas Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For Item 14: Staff Report Pg. 12 Packet Pg. 506 of 853 Item 14 Attachment B - Reserve Management Practices Redline example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY 2020, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. Section 10. Intra-Utility Transfers Between Supply and Distribution Funds The Gas Utility records costs in two separate funds: the Gas Supply Fund and the Gas Distribution Fund. At the end of each fiscal year staff is authorized to transfer an amount equal to the difference between Gas Supply Fund costs and Gas Supply Fund Revenues, from the Gas Distribution Fund Operations Reserve to the Gas Supply Fund, or vice versa. Such transfers shall be included in the ordinance closing the budget for the fiscal year. Section 11. Cap and Trade Program Reserve This reserve tracks revenues from the sale of carbon allowances freely allocated by the California Air Resources Board to the gas utility, under the State's Cap and Trade Program. Funds in this Reserve are managed in accordance with the City's Policy on the Use of Freely Allocated Allowances under the State's Cap and Trade Program (the Policy), adopted by Council Resolution 9487 in January 2015. At the end of each fiscal year staff is authorized to transfer all revenues from the sale of allocated carbon allowances to this reserve. Item 14: Staff Report Pg. 13 Packet Pg. 507 of 853 Item 14 Attachment B - Reserve Management Practices Redline Item 14: Staff Report Pg. 14 Packet Pg. 508 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan FY 2024 GAS UTILITY FINANCIAL PLAN FY 2024 TO FY 2028 Item 14: Staff Report Pg. 15 Packet Pg. 509 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan GAS UTILITY FINANCIAL PLAN FY 2024 TO FY 2028 Section 1: Definitions and Abbreviations.................................................................................4 Section 2: Executive Summary and Recommendations............................................................5 Section 2A: Overview of Financial Position..................................................................................5 Section 2B: Summary of Proposed Actions..................................................................................8 Section 3: Detail of FY 2023 Rate and Reserve Proposals.........................................................9 Section3A: Rate Design...............................................................................................................9 Section 3B: Current and Proposed Rates...................................................................................10 Section 3C: Bill impact of Proposed Rate Changes....................................................................12 Section 3D: Proposed Reserve Transfers...................................................................................13 Section 4: Utility Overview....................................................................................................14 Section 4A: Gas Utility History...................................................................................................14 Section 4B: Customer Base........................................................................................................16 Section 4C: Distribution System.................................................................................................16 Section 4D: Cost Structure and Revenue Sources......................................................................17 Section 4E: Reserves Structure..................................................................................................18 Section 4F: Competitiveness......................................................................................................18 Section4G: Gas Supply Rates....................................................................................................19 Section 5: Utility Financial Projections...................................................................................21 Section 5A: Load Forecast.........................................................................................................21 Section 5A: FY 2018 to FY 2022 Cost and Revenue Trends........................................................23 Section 5B: FY 2022 Results.......................................................................................................25 Section 5C: FY 2023 Projections.................................................................................................25 Section 5D: FY 2024 -FY 2028 Projections..................................................................................26 Section 5E: Risk Assessment and Reserves Adequacy...............................................................28 March 2023 2 I Page Item 14: Staff Report Pg. 16 Packet Pg. 510 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial PlanJA 11 Section 5F: Long -Term Outlook.................................................................................................29 Section 5G: Alternative Gas Increase Plans...............................................................................31 Section 6: Details and Assumptions.......................................................................................34 Section 6A: Gas Purchase Costs.................................................................................................34 Section6B: Operations..............................................................................................................37 Section 6C: Capital Improvement Program(CIP).......................................................................38 Section6D: Debt Service............................................................................................................40 Section 6E: Equity Transfer........................................................................................................42 Section6F: Revenues.................................................................................................................42 Section 6G: Communications Plan.............................................................................................42 Appendices............................................................................................................................44 Appendix A: Gas Financial Forecast Detail................................................................................45 Appendix B: Gas Utility Capital Improvement Program (CIP) Detail.........................................46 Appendix C: Gas Utility Reserves Management Practices.........................................................47 Appendix D: Description of Gas Utility Cost Categories.............................................................51 Appendix E: Gas Utility Communications Samples....................................................................52 March 2023 31 Item 14: Staff Report Pg. 17 Packet Pg. 511 of 853 Item 14 Attachment C - Gas G. " AN FY2024 Financial Plan ' ABS: Acrylonitirile butydene styrene, a plastic gas main material AMI: Advanced Metering Infrastructure CARB: California Air Resources Board CIP: Capital Improvement Program CNG: Compressed Natural Gas CPAU: City of Palo Alto Utilities Department CPUC: California Public Utilities Commission Cross -bore: A cross -bore exists when one utility line has been drilled or "bored" through a portion of another line. Gas cross -bores can occur in sewer lines as a result of "horizontal boring" construction practices. Distribution: transportation of gas to customers. GMR Program: Gas Main Replacement Program Local Transportation: transportation of gas to Palo Alto across PG&E's distribution system from PG&E City Gate. Malin: a delivery hub referred to in gas purchase contracts and located in Malin, Oregon, where the northern end of PG&E's Redwood Transmission Pipeline is located. MMBtu: Millions of British thermal units, a unit of gas measurement equal to ten therms. Commonly used for high volume gas measurement. Wholesale purchases of gas from suppliers are typically measured in MMBtu. O&M: Operations and Maintenance PE or HDPE: Polyethylene, a gas main material (more specifically, High -Density Polyethylene) PG&E: Pacific Gas and Electric PG&E Citygate, or Citygate: a delivery hub referred to in gas purchase contracts. Any gas delivered to PG&E's distribution system (such as gas delivered at the southern end of PG&E's Redwood Transmission Pipeline) is said to have been delivered at PG&E Citygate. PVC: Polyvinyl chloride, a plastic gas main material Summer: April 1 to October 31 Therms: The standard unit of measurement for natural gas sales to customers, equal to 100,000 British thermal units. Therms measure the heating value of the gas, rather than its volume. Transmission: transportation of gas between major gas delivery hubs via a gas transmission pipeline, such as PG&E's Redwood pipeline. UAC: Utilities Advisory Commission, an appointed body that advises the City Council on CPAU issues. Winter: November 1 to March 31 March 2023 4IPage Item 14: Staff Report Pg. 18 Packet Pg. 512 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN This document presents a Financial Plan for the City's Gas Utility for the next five years. This Financial Plan provides revenues to cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term and includes measures to mitigate and manage those risks. SECTION 2A: OVERVIEW OF FINANCIAL POSITION Gas commodity costs were extremely high in FY 2023 due to unprecedented supply and demand conditions throughout the western United States. These commodity costs are not projected to recur in FY 2024, and staff plans to propose hedging alternatives to Council that could mitigate futures increases. Staff is proposing to increase the distribution component of the gas rates in FY 2024 to ensure the utility is recovering its costs of operations. Revenues were already below costs after keeping rate increases low through the pandemic, but construction inflation and other factors have driven costs up. The distribution rate increase is projected to increase overall customer bills approximately 8% if supply costs remain the same in FY 2024 as they were in FY 2023, though staff does not expect this. This 8% increase in customer bills results from increasing the distribution component of the rates 21% to fully recover distribution costs and avoid decreasing reserves further. Even with this distribution rate increase, staff expects average annual customer gas bills to decline 13% in FY 2024 compared to FY 2023 because gas supply costs were extremely high in FY 2023, particularly in the winter. FY 2024 annual gas supply costs are forecasted to be about 36% lower than FY 2023. Gas market prices are uncertain, however, and these forecasts can change. From FY 2024 through FY 2028 gas supply costs are projected to increase by only 1% per year (though this forecast is uncertain)' and distribution operational costs are projected to increase by about 4% per year, leading to average overall costs for the gas utility to increase about 3% per year. Total gas bills (including both commodity and distribution components) are forecasted to rise at a slightly higher average rate, 4% per year. However, because distribution rates are currently below costs, distribution rates will have to increase faster than distribution costs to ensure full cost recovery. The commodity component of the rates is forecasted to increase no more than 1% per year on average, but the distribution component is expected to increase 6% per year on average, for a net 4% per year on average over the forecast period. Gas commodity costs are extremely uncertain, and changes in commodity costs are passed directly to customers through a month -varying rate adjuster (capped at $4/therm). This Financial Plan projects that increasing gas utility distribution operational costs will cause distribution rates (all costs excluding commodity, transportation, or environmental rate components, which includes operational costs, capital costs, overhead, transfers, and other similar costs) to increase 1 This results from a projected gradual decline in the main component of gas supply costs, the cost of gas purchased in the market (the "commodity" charge), combined with significant increases in smaller components of commodity costs: gas transportation and environmental charges. The net result is a gradual increase in costs. However, forecasting commodity costs if very uncertain. For more detail gas supply rate design and the sources for these forecasts, see Section 4G: Gas Supply Pass -Through Rates and Section 6A: Gas Purchase Costs March 2023 5 I Page Item 14: Staff Report Pg. 19 Packet Pg. 513 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN customer bills by 6% per year on average over the forecast period, with higher rate increases in FY 2024 and FY 2025. The significantly higher rate changes are due to the fact that distribution revenues are currently approximately 20% below distribution costs, leading to a need for distribution rate increases to exceed distribution cost increases. Distribution rates are not high enough to recover costs because the utility minimized rate increases in FY 2021 and FY 2022 to minimize the impact of gas rate increases on a community struggling to manage the economic impact of the pandemic. As shown in Table 1, below, total gas utility costs are projected to be 20% higher in FY 2024 than they were in FY 2022. This is primarily due to higher long-term commodity prices, which are projected to be 25% higher than FY 2022 and are forecasted to remain approximately at those levels through the forecast period (though these forecasts are uncertain). Staff projects operations costs to increase by about 2.6% on average annually through the forecast period primarily due to salary and benefit increases both in the gas utility and for administrative functions provided by the City's General Fund staff. Capital Improvement Program (CIP) costs vary from year to year and staff projects the two-year average CIP costs to increase by about 10% on average over the forecast horizon. While CPAU has historically planned a new gas main replacement project every year, higher than expected bid proposals have required resizing and redesign of some projects. Since FY 2020, staff has been budgeting for a new, larger main replacement project every other year, and this revised main replacement schedule has allowed CPAU to reasonably meet its main replacement needs while addressing challenges in the construction market and optimizing staffing resources. However, replacement costs continue to rise and holding the gas main replacement program budget steady results in a reduction of the rate of main replacement over time. This Financial Plan addresses these challenges in a way that will allow CPAU to meet its main replacement needs by increasing main replacement budget beginning in FY 2025 and including a 3% annual construction inflationary increase thereafter. Table 1 shows the Gas Utility expenses over the period of this Financial Plan. Staff is also controlling costs by applying for grant funding for the upcoming main replacement project and is currently awaiting a response on a Natural Gas Distribution Infrastructure Safety and Modernization grant opportunity. Table 1: Gas Utility Expenses for FY 2022 to FY 2028 (Thousand $'s) Expenses ($000) FY 2022 (act.) FY 2023 (est.) FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Commodity Costs 24,103 48,057 29,948 28,556 29,625 30,289 31,178 Operations 23,225 26,590 26,101 27,393 28,276 28,363 29,134 Capital Projects 4,674 8,217 7,036 10,347 7,500 10,150 7,818 TOTAL 52,002 82,863 63,085 66,296 65,401 68,802 68,130 In order to move towards full cost recovery while minimizing rate impacts, the Financial Plan includes the rate trajectory shown in Table 2. March 2023 61 " Item 14: Staff Report Pg. 20 Packet Pg. 514 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan Table 2: Projected Gas Rate Trajectory for FY 2024 to FY 2028 Projection FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Current (FY 2024) Financial Plan 8% 7% 5% 5% 5% FY 2023 Financial Plan 4% 4% 4% 3% N/A FY 2022 Financial Plan 5% 5% 0% N/A N/A The unprecedented and extreme gas prices in FY 2023 impacted the gas utility's reserves significantly, and very high double-digit rate increases would be required to return reserves to within guidelines. Staff is proposing to allow the Gas Operations Reserve to be below the risk assessment levels for two fiscal years and below the minimum guideline for three. If costs exceeded available reserves during this time, the gas utility could explore borrowing from another City fund or other short-term financing. See Section 5E: Risk Assessment and Reserves Adequacy for more information. The gas utility's transfer to the City's General Fund is another component of the City's gas rates. City voters first authorized the transfer in 1950, and in November 2022 voters approved Measure L, affirming the continuation of this practice by amending the Municipal Code. The measure states that each year the City Council may transfer from the gas utility to the general fund an amount up to 18% of the gross revenues of the gas utility'2 though Council may choose to transfer a lesser amount. This Financial Plan proposes an 18% transfer, $7,191,000 for FY 2023, which aligns with the voter -approved changes codified in PAMC 2.28.185. Although Council will formally direct the FY 2024 transfer amount next year, Staff has provided preliminary projections for FYs 2024-2026: Alternative 1 proposes transferring 18% of gross revenue as voters approved in Measure L, and Alternative 2 proposes a transfer between 15.5% and 11.1% annually through Additional details are shown in Section 5G: Alternative Gas Increase Plans. Table 3 shows the projected reserve transfers over the forecast period. As noted above, staff is proposing to allow the Gas Operations Reserve to be below the risk assessment levels for two fiscal years and below the minimum guideline for three. The Gas Utility Reserves Management Practices (Attachment B, Section 8) require returning Operations reserves to within minimum guidelines (60 days of O&M and commodity expense) within one year unless an alternative plan is approved by Council. 2 18% of the gross revenues of the gas utility received "during the fiscal year two fiscal years before the fiscal year of the transfer." (Section 2.28.185, Palo Alto Municipal Code). March 2023 7 1 °age Item 14: Staff Report Pg. 21 Packet Pg. 515 of 853 Item 14 Attachment C - Gas GAS UTA AN FY2024 Financial Plan Table 3: Operations, Rate Stabilization and CIP Reserve Starting and Ending Balances, Revenues, Transfers To/(From) Reserves, Capital Program (CIP) Contribution To/(From) Reserves, and Reserve Guideline Levels for FY 2023 to FY 2028 ($000) FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Starting Reserve Balances 1 Operations Reserve* 11,300 3,666 4,169 3,983 8,536 13,101 2 CIP Reserve 3,820 - - - - - 3 Cap and Trade Reserve 6,732 8,834 11,908 15,395 19,294 23,623 4 Debt Service Reserve 434 434 434 434 - - Revenues 5 Total Revenues 70,468 63,223 65,479 68,993 72,516 76,622 6 Cap and Trade 2,102 3,074 3,487 3,898 4,329 4,776 Transfers 7 Operations Reserve* 1,718 (3,074) (3,487) (3,464) (4,329) (4,776) 8 CIP Reserve (3,820) - - - - - 9 Cap and Trade Reserve 2,102 3,074 3,487 3,898 4,329 4,776 10 Debt Service Reserve (434) Expenses 11 Total Non-CIP Expenses (71,704) (55,684) (55,318) (57,374) (57,800) (59,122) 12 Planned Distribution CIP (10,217) (7,036) (10,347) (7,500) (10,150) (11,818) Ending Reserve Balances 1+5+6+7+11+12 Operations Reserve* 3,666 4,169 3,983 8,536 13,101 18,784 2+8 CIP Reserve - - - - - - 3+9 Cap and Trade 8,834 11,908 15,395 19,294 23,623 28,398 4+10 Debt Service Reserve 434 434 434 - - - Operations Reserve Guidelines 13 Minimum 13,394 10,044 10,055 10,450 10,575 11,504 14 Maximum 26,788 20,089 20,111 20,900 21,151 23,008 CIP Reserve Guidelines 15 Minimum 10,217 7,036 10,347 7,500 10,150 11,818 16 Maximum 17,253 17,383 17,847 17,650 21,968 26,261 *Operations Reserve represents the Gas Supply Fund Rate Stabilization Reserve and the Gas Distribution Fund Operations Reserve combined. ii *q l[s1►WI: 1UJ►pit►pile\Ks12 J t.1 i'll1 Y T I [s1 I Staff proposes the following actions for the Gas Utility in FY 2023: 1. Transfer up to 18% of gas utility gross revenues received during fiscal year 2021 to the general fund; and 2. Transfer up to $3.82 million from the CIP Reserve to the Operations Reserve; and 3. Amend the Gas Utility Reserve Management Practices reflected in Appendix C: Gas Utility Reserves Management Practices, section 11. Staff proposes the following actions for the Gas Utility in FY 2024: 1. Transfer up to % of gas utility gross revenues received during fiscal year 2022 to the general fund; and March 2023 81 Item 14: Staff Report Pg. 22 Packet Pg. 516 of 853 Item 14 Attachment C - Gas GAS UTFJ,_AN 2. Increase distribution rates by 21.4% (for an estimated 8% increase to total rates) for FY 2024, primarily reflecting increases to capital expenditures and increased operations costs. See Section 38: Current and Proposed Rates for more details. Staff requests that Council determine the FY 2024 General Fund transfer and has provided two alternatives for determining the amount of the transfer, which are shown in Section 5G: Alternative Gas Increase Plans. At their March 1, 2023 and March 21, 2023 meetings, respectively, the UAC and Finance Committee recommended transferring 15.5% of gas utility revenues received during FY 2022 to the General Fund in FY 2024, and all rate and cost discussions in this Financial Plan reflect that recommendation. SECTION 3A: RATE DESIGN The Gas Utility's rates are evaluated and implemented in compliance with cost of service requirements set forth in the California Constitution and applicable statutory law. The Gas Utility's proposed rates are based on the methodology from the March 2019 Natural Gas Cost of Service and Rates Study. The City's natural gas rates are based on the 2019 Natural Gas Cost of Service and Rates Study, updated with current and proposed operating costs. During the COVID-19 pandemic, usage amongst customer classes dropped to reflect people working and staying at home rather than going to the workplace. Similarly, businesses operated at minimum staffing conditions or fully remote. Costs related to salaries and benefits, administrative functions provided by the City's General Fund staff, and supply costs are increasing. In order to move towards full cost recovery while minimizing rate impacts, staff recommends a distribution rate increase to all customer classes of 21.4%, which staff estimates will result in an approximate 8% system average rate increase. If, after recovery from the pandemic, usage and/or spending projections change, staff may suggest a re -balancing of rates at that time. Distribution rates typically comprise approximately 70% of the overall rate, which consists of both gas supply and distribution components (though in FY 2023 it accounted for about 40% due to unprecedented supply cost increases). Supply -related costs include the cost of the natural gas itself (the "commodity" rate), gas transmission, and gas environmental charges, and these are a fluctuating component of the Gas Utility's expenses. Commodity rates, which typically make up approximately 30% of overall retail gas rates, vary significantly due to changes in market conditions. Staff monitors market prices monthly and automatically incorporates market prices into monthly supply rate adjustments, which are passed directly to customers as a line item on their utility bills. The overall rate changes (commodity plus distribution) referenced in this report are based on current gas market forecasts that indicate that the commodity portion of the overall rate is unlikely to continue at the unprecedented level observed in FY 2023. Current gas market forward prices indicate that average annual commodity costs are likely to decline 36% in FY 2024 from FY 2023. This is consistent with current gas market forecasts from various sources, including March 2023 9 I Page Item 14: Staff Report Pg. 23 Packet Pg. 517 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan forward gas contracts on exchanges and forecasts from suppliers, but staff cautions that these forecasts can change rapidly due to changing weather, economic factors, or gas supply constraints. Staff recommends increasing the distribution component of the rates by 21.4%, which equates to an 8% increase to total rates, if commodity rates remained unchanged from FY 2023 (which, as noted above, staff does not project to be the case). Table 6 below shows both the proposed increase in distribution rates (about 21%) and the net impact on rates including commodity costs (about 8% overall, as distribution is about 40% of total rate revenue in FY 2023). From FY 2023 to FY 2024, the distribution portion of customer gas bills will increase 8%, and the commodity portion of the bill is projected to decline 22%. The result is that customers should see a 13% overall decrease in their bills in FY 2024 over the prior year, if, as forecasted above, commodity rates drop 36% from FY 2023 to FY 2024. Table 4: Cost of Service (COSA) Distribution Revenue Requirement by Customer Class Cost of Service Analysis FY 2024 Proposed Distribution Rate Increase Forecasted Commodity Rate Change Net Change for Combined Commodity and Distribution Rate G1 — Residential 21% -36% ° -13% G2 - Small Commercial G3 - Large Commercial Total Rate impacts of these changes are outlined in Section 3B: Current and Proposed Rates. SECTION 3B: CURRENT AND PROPOSED RATES Gas rates have two drivers: 1) Supply costs — these are costs related to the purchase of gas supply, transmission costs to bring the gas to Palo Alto's meters, and environmental costs, such as the purchase of cap and trade allowances for gas burned and carbon neutral offsets; and 2) Distribution costs. Supply costs are charged to customers via four pass -through rate components related to supplying gas to customers: 1) gas commodity, which represents the cost of buying gas in the markets, 2) gas transportation, which represents the cost of transporting purchased gas to Palo Alto, 3) Cap and Trade compliance, which represents the cost of mandated participation in the State's cap and trade program, and 4) carbon offset charge, which represents the cost of buying offsets for the City's Carbon Neutral Gas Portfolio. On July 1, 2012 CPAU restructured its rates so that the commodity component of the rates varied monthly to match changes in gas market prices.3 In January 2015, the Council adopted a new rate component to collect the costs of purchasing allowances for the purpose of compliance with the 3 Staff Report 2812, 5/17/2012: http://archive.cityofpaloaIto.org/civica/filebank/blobdload.asp?BlobID=31395 March 2023 101 Pag' Item 14: Staff Report Pg. 24 Packet Pg. 518 of 853 Item 14 Attachment C - Gas GAS UTA AN FY2024 Financial Plan State's cap -and -trade program.4 This component changes depending on the cost of allowances and gas demand. Another component of the City's supply costs is the Transportation Charge, which is the cost that PG&E charges CPAU for transporting gas to Palo Alto via PG&E's pipelines. This charge applies to Palo Alto and other cities and agencies who procure natural gas for resale. In October 2016, the Council adopted a resolution changing the Local Transportation rate (which had been collapsed into the Distribution rate in 2015 to streamline bill presentation), to be reflected on the bill as a pass -through of PG&E's Gas Transportation Rate to Wholesale/Resale Customers (G-WSL) charge to Palo Alto.5 PG&E's G-WSL rate is currently $0.15/therm as shown in the "Transportation Charge" column of the linked schedule of monthly rates and has a cap of $0.25/therm, which went into effect on July 1, 2022. The transportation charge continues to increase as PG&E collects costs related to improving storage facilities, decommissioning older facilities, increased costs resulting from wildfire mitigation, accounting for and greenhouse gas mitigation costs. Based on PG&E's estimates, prices are going to continue to escalate between 6% and 22% between 2023 and 2026. Current and historic per therm rates for the Transportation Charges are posted on the City Utilities website.6 In December 2016, Council approved a carbon neutral gas plan, with a goal of achieving a carbon neutral gas portfolio by FY 2018.7 Costs associated with the carbon neutral gas plan are passed directly to customers as well, although the maximum rate impact is $0.10 per therm. All gas supply, transmission, and environmental costs are passed through to customers as monthly prices change. Three years' worth of history of these supply rate components can be found on Palo Alto's website.8 CPAU has four rate schedules: one for separately metered residential customers (G-1), one for small commercial and master -metered multi -family residential customers (G-2), one for customers using over 250,000 therms per year (G-3), and a specific schedule for the City's Compressed Natural Gas (CNG) station (G-10). To recover distribution costs, all customers pay a monthly service charge, which funds meter reading, billing, and other customer service costs, as well as a portion of Operations and Maintenance (O&M) costs. All customers are also assessed a distribution charge based on each therm of gas used. Separately metered residential customers are charged on a tiered basis, differentiated by season. During the winter months, the first 2 therms per day (60 therms for a 30 day billing period) are charged a base price per therm, and all additional units charged a higher price per therm. During the summer months, the first tier level is 0.667 therms per day, or 20 therms for a 30 day billing period. Commercial customers pay a uniform price for each therm used. Table 5 shows the current monthly service charges for all rate schedules. Table 6 shows the consumption charges related to distribution. As mentioned earlier, commodity charges change 4 Staff Report 5397, 1/26/2015: https://www.cityofpaloalto.org/civicax/filebank/documents/45537 5 Staff Report 7260 10/17/2016 http://www.cityofpaloalto.org/civicax/filebank/documents/54165 6 Monthly Gas Commodity & Volumetric Rates http://www.cityofpaloalto.org/civicax/filebank/documents/30399 Staff Report 7533 12/05/2016 http://www.cityofpaloalto.org/civicax/filebank/documents/54882 8 Monthly Gas Commodity & Volumetric Rates http://www.cityofpaloalto.org/civicax/filebank/documents/30399 March 2023 111 Page Item 14: Staff Report Pg. 25 Packet Pg. 519 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan monthly, and transportation charges are tied to the PG&E G-WSL rate schedule. Some recent commodity price history is discussed in Section 6A: Gas Purchase Costs. Table 5: Current and Proposed Monthly Service Charges Rate Schedule Current (as of 1/1/23) Proposed for FY 2024 Change ($) Change (%) G-1 (Residential) $ 11.54 $ 14.01 $ 2.47 21.4% G-2 (Small Commercial) 106.90 129.78 22.88 21.4% G-3 (Large Commercial) 489.12 593.79 104.67 21.4% G-10 (CNG) 72.30 87.77 15.47 21.4% Table 6: Current and Proposed Gas Distribution Charges Current (as of 1/1/23) Proposed for FY 2024 Change ($) Change (%) G-1 (Residential) Tier 1 Rates $ 0.5607 $ 0.6807 $ 0.1200 21.4% Tier 2 Rates 1.4338 1.7406 0.3068 21.4% G-2 (Residential Master -Metered and Small Commercial) Uniform Rate 0.7365 0.8941 0.1576 21.4% G-3 (Large Commercial) Uniform Rate 0.7292 0.8852 0.1560 21.4% G-10 (CNG) Uniform Rate 0.0120 0.0145 0.0025 20.8%* *Adjusted downward due to rounding SECTION 3C: BILL IMPACT OF PROPOSED RATE CHANGES Table 7 shows the impact of the proposed July 1, 2023 rate changes on the median residential bill for representative average winter and summer bills, with average winter bills forecasted to be significantly lower and summer bills higher. The average annual gas bill for the median residential customer is projected to be 13% lower in FY 2024 than FY 2023. However, since customer gas usage varies and the price of commodities changes monthly, the actual change may vary. Table 7 shows a representative winter period (November thru March) and summer period (April through October) bill comparison. March 2023 12 1 Page Item 14: Staff Report Pg. 26 Packet Pg. 520 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan Table 7: Impact of Proposed Gas Rate Changes on Residential Bills Usage (Therms/month) Bill under Current Rates Bill under Proposed Rates Change $/mo. % Winter Commodity Prices based on: Average Actual Commodity Cost Nov. 2022 —Jan. 2023 Average Forecast Commodity Cost Nov. 2023 —Jan. 2024 30 $ 98.98 $ 66.53 $(32.45) -33% 54 (median) 168.93 108.54 (60.39) -36% 80 262.18 175.25 (86.92) -33% 150 527.32 371.99 (155.34) -29% Summer (Based on May 2022 Commodity Prices) 10 $ 27.41 $ 31.08 $ 3.67 13% 18 (median) 40.11 44.74 4.63 12% 30 67.89 75.83 7.94 12% 45 104.80 117.34 12.54 12% Table 8 shows the impact of the proposed July 1, 2023 rate changes on various representative commercial customer bills. The overall increases for the G-2 and G-3 classes are projected to be about -13% on an annual basis, assuming gas commodity prices decline as described in Section 6A: Gas Purchase Costs. Table 8: Impact of Proposed Gas Rate Changes on Commercial Bills9 Usage (Therms/month) Bill under Current Rates Bill under Proposed Rates Change 500 $ 1,282 $ 1,146 -11% 5,000 11,855 10,295 -13% 10,000 23,604 20,460 -13% 50,000 117,609 101,802 -13% SECTION 3D: PROPOSED RESERVE TRANSFERS This Financial Plan includes a proposed transfer of up to $3.82 million from the CIP Reserve to the Operations Reserve in FY 2023, bringing the CIP Reserve to zero. These funds will be used to cover some of the costs for planned CIP. The CIP Reserve has a minimum level of 12 months of budgeted CIP expense (more details are in Section 6 of Appendix C: Gas Utility Reserves Management Practices). In FY 2024, the minimum level is $7.04 million. According to the Reserves Management Practices, if at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the City Council to replenish the reserve. Due to the extreme 9 Commodity prices for bills under current rates are based on the average actual commodity prices from July 2022 through February 2023 and projections for March 2023 to June 2023. Commodity prices for bills under the proposed rates are based on staff's forecast for July 2023 through June 2024. March 2023 13 1 Rage Item 14: Staff Report Pg. 27 Packet Pg. 521 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan impact of the supply cost spikes during the winter of FY 2023 on the Gas Utility's reserves, balances needed to replenish the CIP Reserve are not projected to become available until FY 2028. In FY 2028, this Financial Plan projects that the Operations Reserve will reach target levels, and staff plans to transfer amounts above the target level at year end FY 2028 or sooner to the CIP Reserve and continue to replenish the reserve with available funds until the CIP Reserve is within the target range. Also in FY 2023, staff forecasts $2.102 million in revenue from sales of allowances related to California's cap -and -trade program. These funds are committed for specific programs that reduce greenhouse gas and are tracked separately in the Cap and Trade Reserve. Staff requests Council authorization to transfer up to the $2.102 million from the Rate Stabilization Reserve to the Cap and Trade Reserve. Staff also recommends amending the Gas Utility Reserves Management Practices (see Appendix C: Gas Utility Reserves Management Practices) to authorize staff to perform this transfer each year into the future without a separate resolution. In FY 2026, the final debt service payment is expected on the 2011 Utility Revenue Refunding Bonds, Series A. At that time, the $0.434 million in the debt service reserve will be returned to the Operations Reserve. The impact of these proposed transfers on reserves levels can be seen in Table 3 above and in Appendix A: Gas Utility Financial Forecast Detail. This section provides an overview of the utility and its operations. It is intended as general background information and to help readers better understand the forecasts in Section 5: Utility Financial Projections and Section 6: Details and Assumptions. *i[•].r�_AeleFiuii ui&a:1iit•IcJ1.1 On September 22, 1917, the City of Palo Alto issued a bond to purchase the property of Palo Alto Gas Company and continue it as a municipal enterprise. At the time, the system was comprised of 21 miles of mains, 1,900 meters, and was valued at $65,500. PG&E supplied the gas, which was synthesized from coal at its Potrero gasification facility. Almost immediately the City faced challenges. Losses were at nearly 25% according to PG&E's master meter, and PG&E had filed with the Railroad Commission (the forerunner to today's CPUC) to increase rates by nearly 72.5%. Despite these initial hurdles, Palo Alto's system grew tremendously, and by 1924 revenues had exceeded those of the electric utility. Sales were such that the annual reports of the time noted gas usage "appears to be greater than that of any other city in the state, showing that gas is a very popular form of fuel in Palo Alto." Just prior to the acquisition of the neighboring town of Mayfield's gas system (centered around today's California Avenue) in 1929, the miles of main in service and customer connections had doubled. Notable changes to the gas supply itself came in 1930, when PG&E ceased supplying purely manufactured (or coal) gas from its Potrero Hill facility in San Francisco and instead switched to natural gas. In 1935, a supplementary butane injection system (later retired) was purchased from March 2023 141; age Item 14: Staff Report Pg. 28 Packet Pg. 522 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN Standard Oil to mitigate large wintertime peaks. Gas sales were at 248,658 million cubic feet (MCF) with 4,849 active services. Early gas mains in Palo Alto were made of steel, but in the 1950s, like many other utilities, CPAU switched to ABS plastic. CPAU switched to PVC plastic in the early 1970s, but around 100 miles of ABS mains had already been installed. A 1990 evaluation of the system found a steadily increasing rate of gas leaks associated with those mains, something that other gas utilities had also been experiencing. To reduce leaks, CPAU accelerated its main replacement program from 7,000 feet (1.3 miles) of replacements per year to 20,000 feet (3.8 miles) per year. This would enable the utility to replace all of its ABS and its most vulnerable steel and PVC mains with polyethylene (PE) mains over the course of the following 36 years.1° The Gas Utility has replaced all but .11 miles of ABS gas mains, which consists of mainly short sections of pipelines in various locations throughout the City. These sections will be replaced as the distribution mains around them are replaced. The majority of ABS, Taenite, and K40 gas services were replaced in 2020. The only ABS, Tenite and K40 gas services remaining are on moratorium streets; these services will be replaced as the street moratorium expires. The Gas Utility completed the replacement of approximately 22,000 linear feet of PVC gas main and over 250 natural gas services in FY22 under the Gas Main Replacement Project 23. This is an example of how local control of its Gas Utility has provided Palo Alto residents with substantial benefits. During the 1990s and 2000s, while CPAU was increasing its main replacement rate to ensure a robust gas distribution system, PG&E was underspending on safety -related infrastructure, according to a past audit." In the 1990s, while grappling with the issues surrounding its distribution system, CPAU was also participating in major changes to the structure of the gas industry in California. Until 1988 CPAU had a formal policy of setting its rates equal to PG&E's rates and successfully did so with the exception of one year in the mid -1970s. At times this led to inadequate revenue (1974 to 1981) as PG&E, the City's only gas supplier, regularly filed requests with the CPUC to increase the wholesale gas supply rates charged to the Gas Utility. In the 1990s, as the CPUC began deregulating the natural gas industry in California, the Gas Utility began purchasing gas from suppliers other than PG&E. In 1997 the CPUC adopted the "Gas Accord,"12 which enabled the Gas Utility (along with other local transportation -only customers) to obtain transmission rights on PG&E's Redwood transmission pipeline running from Malin, Oregon into California. In 2000/2001 the California energy crisis occurred, causing major disruptions to the Gas Utility's supply costs. Wholesale gas prices rose over 500% between January 2000 and January 2001. The Council approved drawing down reserves to provide ratepayer relief and, for two years following the crisis, CPAU rates were above PG&E's as reserves were replenished. In April 2001 the Council approved a hedging practice of buying fixed price gas one to three years into the future. After reaching a low point in October 2001, prices continued to rise, and the CPAU hedging strategy frequently resulted in a wholesale supply cost advantage compared to PG&E until prices began to decline steeply in mid -2008. At that point the Gas Utility's wholesale supply costs became to Staff Report CMR:183:90. Infrastructure Review and Update, March 1, 1990 1 Focused Financial Audit of The Pacific Gas & Electric Company's Gas Distribution Operations, Overland Consulting, made available through a CPUC Administrative Law Judge's ruling on Al2-11-009/113-03-007 on 5/31/2013 12 CPUC decision 97-08-055. Since then, the Gas Accord has been amended four times, with the most recent being Gas Accord V, application A.09-09-013 March 2023 15 1 Page Item 14: Staff Report Pg. 29 Packet Pg. 523 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN higher than market gas prices due to fixed price contracts entered into prior to 2008. As a result the Gas Utility's wholesale supply costs were higher than PG&E's for several years. In 2012 Council approved a plan to formally cease the hedging strategy and purchase all gas on the short- term ("spot") markets. As of July 1, 2012, the commodity portion of the gas rates changes every month based on the spot market gas price. In January 2015, the Council adopted a new rate component to collect the costs of purchasing allowances for the purpose of compliance with the State's cap -and -trade program.13 As of November 1, 2016, the Council adopted a resolution changing the Local Transportation rate (which had been collapsed into the Distribution rate in 2015 to streamline bill presentation), to be a pass -through of PG&E's Gas Transportation Rate to Wholesale/Resale Customers (G-WSL) charge to Palo Alto.14 In December 2016, Council approved a carbon neutral gas plan, with a goal of achieving a carbon neutral gas portfolio by FY 2018.11 The City's gas utility has been carbon neutral since FY 2018 through the purchase of offsets. SECTION 4B: CUSTOMER BASE CPAU's Gas Utility provides natural gas service to the residents, businesses, and other gas customers in Palo Alto. Close to 23,800 customers are connected to the natural gas system, approximately 21,500 (90%) of which are residential and 2,300 (10%) of which are non- residential. In a normal year, residential customers consume about 10 to 11 million therms of gas per year, roughly 40% of the gas sold, while non-residential customers consume 60% (about 15 to 18 million therms). Residential customers use gas primarily for space heating (46% of gas consumed) and water heating (42%), with the remainder consumed for other purposes such as cooking, clothes drying, and heating pools and spas.16 Non-residential customers use gas for space and water heating (73% of gas consumed), cooking (20%), and industrial processes (6%).17 The Gas Utility receives gas at the four receiving stations within Palo Alto where CPAU's distribution system connects with Pacific Gas and Electric's (PG&E's) system. These receiving stations are jointly operated by CPAU and PG&E. CPAU purchases gas from various natural gas marketers, with PG&E providing only local transportation service (transportation from the PG&E City Gate gas delivery hub to Palo Alto). CPAU also has transmission rights on PG&E's transmission pipeline from Malin, Oregon to PG&E City Gate, allowing it to purchase lower priced gas at that location. CPAU does not produce or store any natural gas, and purchases gas in the monthly and daily spot markets. The cost of the purchased gas is passed through directly to customers through a rate adjuster that varies monthly with market (Bidweek) prices. In a similar fashion, the costs for local transportation is tied to PG&E's G-WSL rate schedule, and it varies when and if PG&E changes its rate schedule. The cost of purchased gas and PG&E local transportation service usually account for roughly one third of the utility's expenditures. 13 Staff Report 5397, 1/26/2015: https://www.cityofpaloalto.org/civicax/filebank/documents/45537 14 Staff Report 7260 10/17/2016 http://www.cityofpaloalto.org/civicax/filebank/documents/54165 15 Staff Report 7533 12/05/2016 http://www.cityofpaloalto.org/civicax/filebank/documents/54882 16 http://energyalmanac.ca.gov/naturalgas/overview.html 17 Source: Statewide Commercial End Use Study, California Energy Commission report, 2006. Statistics shown are for end users in PG&E Climate Zone 4 (the Peninsula) where Palo Alto is located. March 2023 16 1 Page Item 14: Staff Report Pg. 30 Packet Pg. 524 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan SECTION 4C: DISTRIBUTION SYSTEM To deliver gas from the receiving stations to its customers, the utility owns 210 miles of gas mains (which transport the gas to various parts of the city) and close to 23,800 gas services (which connect the gas mains to the customers' gas lines). These mains and services, along with their associated valves, regulators, and meters, represent the vast majority of the infrastructure used to deliver gas in Palo Alto. CPAU has an ongoing CIP to repair and replace its infrastructure over time, the expense of which normally accounts for around 15 to 20% on average of the utility's expenditures. Costs for main replacements have been going up in recent years. In addition to the CIP, the Gas Utility performs a variety of maintenance activities related to the system, such as monitoring the system for leaks, testing and replacing meters, monitoring the condition of steel pipe, and building and replacing gas services for buildings being built or redeveloped throughout the city. The utility also shares the costs of other system -wide operational activities (such as customer service, billing, meter reading, supply planning, energy efficiency, equipment maintenance, and street restoration) with the City's other utilities. These maintenance and operations expenses, as well as associated administration, debt service, rent, and other costs, make up roughly half of the utility's expenses. In addition to these ongoing activities, CPAU has conducted a program to find and replace cross - bores over the last several years. Currently, an average of $0.7 million is estimated per year for the cross -bore program through FY 2028. SECTION 4D: COST STRUCTURE AND REVENUE SOURCES As shown in Figure 1, the Gas Utility receives about 92% of its revenue from sales of gas and the remainder from capacity and connection fees, interest on reserves, and other sources. Appendix A: Gas Utility Financial Forecast Detail shows more detail on the utility's cost and revenue structures. March 2023 Figure 1: Revenue Structure (FY 2022) ■ Sales of Gas ■ Other Revenue 17 1 ram Item 14: Staff Report Pg. 31 Packet Pg. 525 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan As shown in Figure 2, in FY 2022, gas purchase costs accounted for about 46% of the Gas Utility's costs. This percentage can vary widely from year to year, as this cost is based upon market purchases, and includes costs related to cap and trade. Operational costs in FY 2022 represented 45% of expenses and capital investment was responsible for the remaining 9%. CIP is on average about 15 to 20% of expenses, but as main replacement projects are only occurring every other year, the percentage swings more. SECTION 4E: RESERVES STRUCTURE Figure 2: Cost Structure (FY 2022) ■ Operations ■ Gas Purchases Capital CPAU maintains six reserves for its Gas Utility to manage various types of contingencies and track program spending. The summary below describes each of these briefly. See Appendix C: Gas Utility Reserves Management Practices for more detailed definitions and guidelines for reserve management: • Reserve for Commitments: A reserve equal to the utility's outstanding contract liabilities for the current fiscal year. Most City funds, including the General Fund, have a Commitments Reserve. • Reserve for Re -appropriations: A reserve for funds dedicated to projects re -appropriated by the City Council, nearly all of which are capital projects. Most City funds, including the General Fund, have a Re -appropriations Reserve. • Capital Improvement Program (CIP) Reserve: The CIP reserve can be used to accumulate funds for future expenditure on CIP projects. This CIP can also act as a contingency reserve for the CIP. This type of reserve is used in other utility funds (Electric, Water, and Wastewater Collection) as well. • Rate Stabilization Reserve: This reserve is intended to be empty unless one or more large rate increases are anticipated in the forecast period. In that case, funds can be accumulated to spread the impact of those future rate increases across multiple years. This type of reserve is used in other utility funds (Electric, Water, and Wastewater Collection) as well. • Operations Reserve: This is the primary contingency reserve for the Gas Utility and is used to manage yearly variances from budget for operational gas costs. This type of reserve is used in other utility funds (Electric, Water, and Wastewater Collection) as well. • Unassigned Reserve: This reserve is for any funds not assigned to the other reserves and is normally empty. • Cap and Trade Reserve: This reserve tracks unspent or unallocated revenues from the sale of carbon allowances freely allocated by the California Air Resources Board to the gas utility, under the State's Cap and Trade Program. March 2023 181 Item 14: Staff Report Pg. 32 Packet Pg. 526 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan SECTION 4F: COMPETITIVENESS Table 9 presents residential bills for Palo Alto and PG&E for Calendar Years 2021 and 2022 compared to winter months in 2022-2023 during the recent supply price spikes at median usage levels. The annual gas bill for the median residential customer for CY 2022 was $821, about 11% lower than the annual bill for a PG&E customer with the same consumption. PG&E's distribution rates for gas have increased to collect for needed system improvements for pipeline safety and maintenance. The bill calculations for PG&E customers are based on PG&E Climate Zone X, an area which includes the surrounding communities. Table 9: Residential Natural Gas Bill Comparison ($/month or year) Year/Month Median Usage (therms)18 Palo Alto PG&E Zone X % Difference CY 2021 402 $ 631.28 $ 701.60 (14%) CY 2022 402 821.33 868.62 (11%) November 2022 32 62.64 76.93 (19%) December 2022 69 175.06 171.96 2% January 2023 76 393.57 217.25 81% Historically, Palo Alto's residential gas bills have been competitive relative to PG&E. During January 2023, bills increased significantly relative to PG&E. Staff is looking into reasons why gas prices spiked this winter and why PG&E's gas rates did not rise as rapidly as Palo Alto's gas rates during the recent market price spikes. Governor Newsom has requested that the Federal Electric Regulatory Commission start an investigation of winter gas prices. The Mayor sent a letter to the Governor on February 7, 2023 expressing the City's support for pursuing these investigations. Similar investigations are underway by the California Public Utilities Commission (CPUC) in collaboration with the California Energy Commission and California Independent System Operator (CAISO). Staff is also in the process of doing a more extensive competitiveness review of commercial customer bills and will provide updates in the future. SECTION 4G: GAS SUPPLY PASS -THROUGH RATES The City has four pass -through rates related to supplying gas to customers: 1) gas commodity, which represents the cost of buying gas in the markets, 2) gas transportation, which represents the cost of transporting purchased gas to Palo Alto, 3) Cap and Trade compliance, which represents the cost of mandated participation in the State's cap and trade program, and 4) carbon offset charge, which represents the cost of buying offsets for the City's Carbon Neutral Gas Portfolio. Gas commodity rates are forecasted to decline slightly over the forecast period, but increases in other rate components are forecasted to lead to a net gradual increase in total gas supply costs over the forecast period. 18 Median usage data based on CY 2022 March 2023 19 1 P Item 14: Staff Report Pg. 33 Packet Pg. 527 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN For the gas commodity charge, starting in July 2012, CPAU replaced a "laddering" hedging strategy for purchasing gas supplies with a strategy to buy gas on the short-term, or "spot" markets and pass the commodity cost to customers on a monthly basis. Prior to December 2018, commodity prices had generally fluctuated in a fairly narrow band, averaging around $0.32/therm. Over the last few years, a variety of factors combined that led to more variability in prices: Regional temperatures were cooler than normal, but in addition, gas supplies stored in underground facilities have been lower than normal, as well as constrained due to problems with the Aliso Canyon facility in southern California. There have been periodic pipeline constraints at both the northern and southern California borders. While there was not an actual constriction on supply, the confluence of all these factors drove up the bidweek prices for all California delivery points. There has continued to be a bit more volatility in the market, and while the gas market price trend appears slightly downward over time, commodity prices are not projected to decrease to FY 2022 levels. Figure 3 shows the City's actual commodity rates through December 2022, and projected rates through FY 2025. Note that while gas commodity costs might be forecasted to decline slightly, increases in other gas supply components (transportation, environmental charges) are expected to offset that, leading to a gradual increase in overall gas supply costs. Natural gas prices through the forecast period are projected to remain higher than the very low levels seen in in FY 2022 and earlier due to a number of factors. These factors include inflation, the war in Ukraine, and growth in LNG exports due to global demand. Prices are also forecasted to be higher in the region due to more reliance on natural gas for power generation due to low or unpredictable hydro conditions, continued likelihood of extreme or unexpected weather events, lower gas storage levels, constraints on the transportation of gas, and overall increased market volatility resulting in pricing premiums. Figure 3: Palo Alto Gas Commodity Rates, Actual and Projected, FY 2012 - FY 2025 4.5 4.0 3.5 3.0 ra 2.5 o 2.0 E 0 1.5 O 1.0 0.0 -Actual ---Projected During winter 2022/2023, gas commodity prices at the monthly and daily Citygate indexes were abnormally high. In mid -December, Citygate daily index prices settled higher than $5/therm, the March 2023 20IPage Item 14: Staff Report Pg. 34 Packet Pg. 528 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN highest natural gas spot prices since December 2000. Several trends occurring simultaneously contributed to prices rising to these levels including widespread below -normal temperatures, high natural gas consumption, reduced natural gas flows, transmission pipeline constraints, and low natural gas storage levels in the Pacific region. These extreme market conditions impacted most utilities throughout the Pacific and Rocky Mountain regions of the United States. Staff anticipated that the Citygate commodity price for January 2023 would exceed the Commodity rate cap of $2/therm, based on the monthly forward price data that suggested it would settle around $3.5/therm. The City Council approved staff's recommendation to double the commodity rate cap to $4/therm (see Reso #10090) effective January 1, 2023. The settled commodity price at Citygate index for January 2023 was around $5/therm - even higher than the updated rate cap. Due to the rate cap, CPAU was not able to recover the full costs of January 2023 supply purchases from customers, but the impact to the gas reserves was far less than if the commodity rate cap had stayed at $2/therm. Figure 4 below shows the actual and projected Palo Alto gas commodity rates and the settled Citygate price on January 2023. The projected commodity rates in February 2023 and beyond are expected to be lower than January 2023, but are not expected to decline to FY 2022 levels. Figure 4: Palo Alto Gas Commodity Rates, Commodity Rate Caps, and Citygate Actual Prices 6 $4jtherm Cap 4 ...................... t 3 $2/therm Cap 1 ` w a —Citygate Price Palo Alto Rate = = -Projected Rate SECTION 5A: LOAD FORECAST Gas usage in Palo Alto is volatile, varying with both economic and weather conditions. As shown in Figure 5, in the early 1970s, gas purchases reached over 45 million therms per year. Usage dropped dramatically in the 1976/1977 drought when customers saved significant amounts of (hot) water by upgrading to efficient showerheads. During the 1980s and 90s average gas usage was around 36 million therms per year. Usage dropped again in the early 2000s. In FY 2001, gas prices escalated during the California energy crisis and Palo Alto's rates increased by nearly 200%. March 2023 211 Page Item 14: Staff Report Pg. 35 Packet Pg. 529 of 853 Item 14 Attachment C - Gas GAS UTA AN FY2024 Financial Plan From 2003 to 2011, usage decreased by 2.3% mainly as a result of continued customer investments in energy efficiency. In 2014 and 2015, unusually warm winters, as well as ongoing drought, caused gas usage to tumble to historic lows. In 2017 and 2018, as the drought eased, gas usage increased again, but appeared to have stabilized. The COVID pandemic resulted in gas usage decreasing again, mainly in the commercial sectors as a result of many businesses operating staff remotely. Gas usage decreased by about 12% in 2020 and 2021, compared with 2019. Figure 5: Historical Gas Supply Purchases 50 45 L I- 40 O -35 w 20 O N t0 00 0 N lD 00 0 N t0 00 O N lD 00 O N tD 00 0 N N r` r` r` n 0 00 0 00 00 T 01 T M ON 0 0 0 0 0 - .-1 -1 N N 01 Ol Ol 471 471 61 o 01 o 01 Q1 61 O O O O O O O O O 0 0 0 c1 N .-1 N N N a-1 N •-I N N N N ci .-i N N N N N N N N N N N N The ongoing pandemic recovery, as well as usage declines similar to what has been seen in the electric utility, leads to questions of how long the trend of reduced consumption in gas will last. As seen with prior economic and drought -related gas usage declines in the past, it is likely that consumption will not come back to pre-conservation/pandemic levels but will likely become a long -run usage decline. Further changes, such as the voluntary replacement of gas appliances with electric appliances, building electrification of new construction as mandated by the 2019 Reach Code, and customer behavior are also expected to lower long run usage, and this forecast will be revised accordingly as more customers adopt these measures.19 In addition, separate strategic planning and financial analysis will be performed separate from this Financial Plan to address a financial and infrastructure strategy for the gas utility during a transition to an electrified community. Any insights from separate analyses will be integrated into future Financial plans. Based on billing data through the end of 2022, gas usage has shown modest recovery with the return of winter heating. It is too early in the winter heating season to tell what the trend will continue to be. However, long term declining gas consumption will put upward pressure on rates, as a generally increasing cost to operate and distribute gas will be spread across fewer units of sale. 19 The City's Sustainability and Climate Action Plan (S/CAP) is currently being updated. As building electrification goals in the S/CAP are updated, they will be modeled in this load forecast or alternative load forecasts. March 2023 22 I Page Item 14: Staff Report Pg. 36 Packet Pg. 530 of 853 GAS Item 14 Attachment C - Gas FY2024 Financial Plan Figure 6: Gas Supply Purchases Forecast 40 ^, 38 36 w -c 34 32 -3o 28 26 24 22 20 O N W 00 O N V lO 00 O N V to 00 O N Q Q O Q Q N , rl -1 , N N N N N M M O O O O O O O O O O N N O O O O O N N N N N N N N N N N N N N N N N SECTION 5A: FY 2018 TO FY 2022 COST AND REVENUE TRENDS Figure 7 and Appendix A: Gas Utility Financial Forecast Detail show how costs have changed during the last five years as well as how staff project costs to change over the next five years. While the gas utility strives to maintain a steady rate of funding for main replacement over time, this funding pattern was disrupted from FY 2015 to FY 2020. In FY 2015, no funding for gas main replacement was budgeted due to the fact that staff was completing a prior major gas main replacement project, the largest in utility history, which completed replacement of most of the ABS gas mains in Palo Alto. The next main replacement to be budgeted involved replacements of gas mains on University Avenue, a project that evolved into the Upgrade Downtown project involving a coordinated replacement of several different types of infrastructure to avoid multiple disruptions to the business district. This multi -year planning effort did not allow for design of other new projects, and the hiatus in starting a new main replacement project allowed the Gas Utility to temporarily keep rates lower. In FY 2021 the gas utility returned to routine funding for main replacement for the gas utility, though gas main replacement investment is likely to become more complex as the City plans for a transition to an electrified community. Revenues have fluctuated but generally matched expenses in the years between FY 2018 and FY 2022. The absence of new budget for main replacement projects for several years, as well as the availability of relatively large reserves, reduced the need for rate increases until FY 2019. The last adjustment to gas distribution rates was a 3% increase to the total system average gas rate (supply rates plus distribution rates) in July 2022. The commodity cost and revenue increases in FY 2022 were the result of higher market commodity prices. Figure 4 in Section 4G shows the gas commodity prices and Figure 3 Palo Alto's gas commodity rates. Gas supply costs are passed through to customers, and change month to month with a cap of $4/therm. Figure 7 shows the actual overall system average rate change from FY 2018 through FY 2023 (shown in grey) and the projected overall system average rate change for FY 2024 through FY March 2023 23 I Page Item 14: Staff Report Pg. 37 Packet Pg. 531 of 853 Item 14 Attachment C - Gas GAS UTA AN FY2024 Financial Plan 2028 (shown in red) both excluding supply -related rate changes. The rate increases only include the needed increase for the distribution rate as a percentage of the base gas utility sales revenue. Figure 7: Gas Utility Expenses, Revenues, Rate Changes Excluding Supply -Related Changes Actual Costs through FY 2022 and Projections through FY 2028 5100 $90 $80 c $70 D $60 * $5D $40 $30 $20 $10 $0 Rate Changes (excluding supply -related rate changes) 0% 4% 5% 2% 3% 3% 8% 7% 5% 5% 5% — Revenue ❑Capital Investment ❑Gas Supply ❑ Operations ■Transfers ■ Debt Service Figure 8 shows the actual overall system average rate change from FY 2018 through FY 2023 (shown in grey) and the projected overall system average rate increase for FY 2024 through FY 2028 (shown in red) including the supply -related rate changes. The rate changes include the overall change in the rate as a percentage of the base sales revenue for the gas utility. Because staff expects the spike in gas market commodity prices in FY 2023 not to continue, the projected FY 2024 costs are much lower in FY 2024. This is effectively an overall decrease in the system average rate despite rising costs for operating and capital costs for the distribution system. Figure 8: Gas Utility Expenses, Revenues, Rate Changes Including Supply -Related Changes Actual Costs through FY 2022 and Projections through FY 2028 Rate changes (with supply -related rate changes) $90 0% 2% 33% 44% -13% 3% 5% 4% 4% $80 $70 $50 N o $50 $40 $30 $10 $0 HT$20 y N 1 N N N N N N N a o 0 0 0 N N N N N 0 0 N N 0 0 o a N N N N Actuals Projections March 2023 — Revenue ❑ Capital Investment ❑ Gas Supply * Debt Service ❑ Operations ■Transfers 24 I P a g e Item 14: Staff Report Pg. 38 Packet Pg. 532 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan SECTION 5B: FY 2022 RESULTS Sales revenues were higher than projected in the FY 2023 Financial Plan by about $3.6 million, due to higher revenue from higher gas commodity rates, but other sources of funds were lower by $0.7 million. On the expense side, purchase costs came in about $4.4 million higher than projected due to increased market commodity costs. Operational expenses were about $0.9 million higher than projected, with increases in Salary and Benefits and Allocated Charges. Total FY 2022 expenses were $52.7 million compared to $47.3 million projected in the FY 2023 Financial Plan. Table 10 summarizes the variances from forecast. Table 10: FY 2022 Actual Results vs. FY 2023 Financial Plan Forecast ($000) Net Cost/(Benefit) Type of Change Sales Increase due to Commodity Price Increases (3,624) Revenue Increase Lower Interest Income and Non -Sales Revenues 721 Revenue Decrease Higher Gas Purchase Costs 4,396 Cost Increase Higher O&M and Customer Services Costs 941 Cost Increase Net Cost / (Benefit) of Variances 2,435 SECTION 5C: FY 2023 PROJECTIONS Current projections indicate that sales revenues will be higher than last year's forecast by about $23.4 million, due to higher projected commodity costs. Other revenues and transfers are projected to be nearly $1 million lower. Operations costs estimated to be lower by about $0.6 million due to lower transfers. Gas purchase costs greatly increased due to higher than expected market commodity prices. Not all gas commodity costs were passed through to customers, leading to a $5 million variance for FY 2023 that significantly impacted the Operations Reserve. Table 11 summarizes the projected variances from the FY 2023 Financial Plan. Table 11: FY 2023 Projected Results vs. FY 2023 Financial Plan Forecast ($000) Net Cost/ (Benefit) Type of Change Sales Increase due to Commodity Price Increases (23,411) Revenue Increase Lower Interest Income and Non -Sales Revenues 963 Revenue Decrease Higher Gas Purchase Costs 28,045 Cost Increase Lower O&M and Customer Services Costs (565) Cost Decrease Net Cost / (Benefit) of Variances 5,031 SECTION 5D: FY 2024 -FY 2028 PROJECTIONS Figure 7 above shows overall costs for the Gas Utility increasing by over 50% from FY 2022 to FY 2023 due to the supply cost increases discussed above. Costs are projected to decline in FY 2024 and increase by 3% annually on average throughout the rest of the forecast period. Gas commodity costs are the most variable component and represent the largest estimated jump in costs from FY 2022 to FY 2023. Staff projects commodity costs to approximately double from FY 2022 to FY 2023 and then decline in FY 2024, though not to FY 2022 levels. For the remainder of the five-year forecast period from FY 2024 through FY 2028, total gas supply costs are March 2023 251; age Item 14: Staff Report Pg. 39 Packet Pg. 533 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN projected to increase gradually, with gas commodity costs projected to decline gradually, offset by significant increases in transportation and environmental costs. Commodity price forecasts that far into the future are highly uncertain. Market prices could increase or decrease. Cap and Trade allowance costs are increasing by 15.7% annually from FY 2024 to FY 2028.20 Staff projects transmission costs to increase steadily at 4-6% annually from FY 2024 to FY 2028.21 Carbon offset products are also increasing at 7% per year on average.22 Staff anticipates annual capital expenditures will fluctuate during the forecast period due to planning for larger main replacement construction projects every other year instead of smaller projects annually. This main replacement schedule allows CPAU to meet its main replacement needs while addressing challenges in the current construction market and optimizing current staffing resources. Averaging the cost of CIP over these two-year cycles, costs are expected to increase by around 10.9% on average annually from FY 2024 through FY 2028. General inflationary increases for operating expenses are around 2 to 3% per year. Salaries and benefits expenses are projected to rise at 2 to 8% per year, per similar assumptions used in the City's Long -Range Financial Forecast. As shown in Figure 9, this Financial Plan projects to utilize all funds from the CIP Reserve in FY 2023 in order to partially fund the CIP budget. Because of the sharp rise in commodity costs, there will be no available funds to replenish the CIP Reserve until around FY 2028. By FY 2026, staff expects gas fund costs to align more closely with revenues and this will allow the Operations Reserve to begin to replenish. In FY 2027 and FY 2028 the Operations Reserve reaches levels within the guideline range. Once those reserve balances are available, staff will consider transfers to replenish the CIP Reserve. Per the Reserves Management Practices (Appendix C), Section 6, any rate plan that does not return CIP reserves to minimum levels within one year requires Council approval. Figure 10 shows the year end FY 2022 CIP Reserve levels and shows the reduction to zero by the end of FY 2023. At the end of FY 2022 there were also balances in the CIP Reappropriations and Commitments Reserves, which is common because capital projects often cover multiple years. Figure 10 also shows an assumption that the level of funding in the CIP Reappropriations and Commitments Reserves will be the same during the forecast period as at year end FY 2022. However, even with the CIP Reserve together with the CIP Reappropriations and Commitments Reserves, staff does not expect that the reserve balances will reach the minimum level of 12 months of budgeted CIP expense. 20 Based on allowance broker quotes. 21 The transportation rates for calendar years 2022-2026 reflect the rates in the September 30, 2021 prepared testimony (A.21-09-018) regarding PG&E's 2023 Gas Transmission & Storage (GT&S) Cost Allocation and Rate Design (CARD), afterward a 3% escalation rate is applied. 22 Based on carbon offset provider quotes. March 2023 26 1 Page Item 14: Staff Report Pg. 40 Packet Pg. 534 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan Figure 9: Gas Utility Reserves Actual Reserve Levels for FY 2022 and Projections through FY 2028 $30 C 0 Z $25 2 CIP Reserve $20 Operations Reserve $15 Rate Stabilization $10 ■ Reserve for Reappropriations $5 $0 N m a ro N N N N N N N O O O O O O O N N N N N N N LL LL LL LL � LL � Figure 10: Gas CIP Actual Reserve Levels for FY 2022 and Projections through FY 2028 $18 O $16 $14 CIP Reserve $12 $10 — CIP Reap propriations/ Commitments $8 � Reserve Minimum $6 $4 —Reserve Maximum $2 $0 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 March 2023 27 I P a g e Item 14: Staff Report Pg. 41 Packet Pg. 535 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN Staff is evaluating when to implement a fixed funding amount that will be provided from the Operations Reserve to the CIP Reserve to fund capital improvements. This approach will provide stability to the Operations Reserve by providing for a steady funding stream for CIP work and by reflecting fluctuations due to CIP such as project delays or accelerations in the CIP Reserve; ultimately, this should result in more stable customer rates. The use of the CIP Reserve in this way will isolate fluctuations due to CIP delays or accelerations and allow those to be viewed together in the CIP Reserve. Conversely, other trends or factors affecting the Operations Reserve will be easier to identify and communicate. Without this change, both CIP costs and revenues flow solely through the Operations Reserve. Because of the substantial impacts to gas reserves due to recent increases in supply costs, CIP fixed funding will not be implemented at this time, and possibly not within the 5 -year planning horizon. Staff will continue to evaluate as ending reserve balances become available. SECTION 5E: RISK ASSESSMENT AND RESERVES ADEQUACY As noted earlier, unprecedented and extreme gas prices in FY 2023 and unexpected expenses in FY 2022 significantly impacted the gas utility's reserves, and double-digit rate increases would be required to return reserves to within guidelines. Staff is proposing to allow the Gas Operations Reserve to be below the risk assessment levels for two fiscal years and below the minimum guideline for three. This Financial Plan projects the Gas Utility's primary contingency reserve, the Operations Reserve, to be below guideline levels at the end of FY 2023 through FY 2026 and then return to within the guideline range by the end of FY 2027 and increase to approximately target levels by the end of the forecast period. Per the Reserves Management Practices (Appendix C) any rate plan that involves returning the Operations Reserve to within guideline levels in more than one year requires Council approval. Figure 11 shows the Operations Reserve alongside the guideline levels. Figure 11: Operations Reserve Adequacy $30 $25 $20 c $15 $10 $5 $0 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 March 2023 —Reserve (Year -End) —Reserve Maximum -- Reserve Target —Reserve Minimum — Risk Assessment 28 I P a g e Item 14: Staff Report Pg. 42 Packet Pg. 536 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN Forecasted Operations Reserve levels also drop below the short-term risk assessment for the Utility at the end of FY 2023 through FY 2025, return to above the short-term risk assessment level by the end of FY 2026, and remain above this level for the remainder of the forecast period. Table 12 summarizes the risk assessment calculation for the Gas Utility through FY 2028. The risk assessment includes the revenue shortfall that could accrue due to: 1. Lower than forecasted distribution sales revenue; and 2. An increase of 10% of planned system improvement CIP expenditures for the budget year. Table 12: Gas Risk Assessment ($000) FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total non -commodity revenue $26,328 $32,014 $35,518 $37,972 $40,519 $43,327 Max. revenue variance, previous ten years 16% 16% 16% 16% 16% 16% Risk of revenue loss $4,222 $5,134 $5,696 $6,089 $6,498 $6,948 CIP Budget $9,050 $5,825 $9,100 $6,400 $9,050 $10,685 CIP Contingency @10% $905 $583 $910 $640 905 $1,069 Total Risk Assessment value $5,127 $5,716 $6,606 $6,729 $7,403 $8,016 SECTION 5F: LONG-TERM OUTLOOK It is difficult to predict commodity costs in the long-term (5 to 35 years) as a variety of trends can impact them positively or negatively. For example, advancements in gas extraction technology like fracking may lead to increased supplies of gas, but also face increased scrutiny for their environmental effects. Additionally, factors such as pipeline capacity for transporting natural gas, storage levels impacted by weather and changes in demand, and injection or withdrawal activity also play a role in determining commodity costs. On the demand side, a continued shift from coal to natural gas for electricity generation, an expansion of liquified natural gas export capabilities, or an increase in manufacturing in the U.S. might drive up natural gas prices, but other factors, such as generally more mild winters or an increased drive towards electrification, might drive gas demand lower. It is also difficult to predict the magnitude of the additional cost impacts associated with the State's cap -and -trade program over the long term. In the face of this uncertainty, CPAU is able to protect the financial position of the Gas Utility by continuing its current strategy of passing these costs directly to its customers via month -varying rate adjustment mechanisms, though the City plans to evaluate a potential winter hedging program. The City pursues a policy of purchasing offsets to make gas usage in Palo Alto carbon neutral. The cost is not to exceed $0.10/therm. Future CIP investment needs for the Gas Utility may be lower than in the past, although costs per foot for main replacement have increased substantially. The Gas Utility has replaced nearly all of its ABS gas mains and its most problematic steel and PVC mains as well. The PE pipe being used now is expected to have at least a fifty-year lifetime, and there is growing evidence that it may last much longer than that. This would result in lower CIP investment over the long term. CPAU is continuing to study and develop its future main replacements priorities and strategy. Long-term state or local climate goals will also have a major impact on the Gas Utility. The Global Warming Solutions Act, Assembly Bill 32, set a goal of reducing greenhouse gas (GHG) emissions March 2023 29 1 Page Item 14: Staff Report Pg. 43 Packet Pg. 537 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN to 1990 levels by 2020. In its December 2007 Climate Protection Plan, the City set a goal of lowering emissions to 15% below 2005 levels by 2020. As a community Palo Alto achieved these goals in 2012 even with continued use of natural gas for heating, cooking, and industrial processes. However, to achieve the recently adopted Sustainability and Climate Action Plan (S/CAP) goal of an 80% reduction in carbon emissions by 2030, or the State's adopted goal of an 80% reduction in emissions by 2050, extensive electrification of gas -using appliances is necessary. Extensive electrification could result in stranded investment and higher rates as the costs of the distribution system are recovered over a lower sales base. It is instructional that, in the recent discussion draft of its scoping plan update, CARB says, to meet those goals, natural gas use would have to be "mostly phased out."23 Staff has begun to evaluate how to manage potential impacts of these trends. Staff expects gas utility costs associated with electrification including safely decommissioning gas pipes. This Financial Plan includes $4 million in FY 2028 for these costs, although detailed cost estimates are not yet available. These costs are expected to grow as staff studies them in more detail, and alternative funding sources may be required. The S/CAP Goals and Key Actions and Work Plan will include strategic planning for the gas utility for managing the transition to an electrified community, and this is also a strategic planning priority for the Utilities Department. SECTION 5G: ALTERNATIVE GAS INCREASE PLANS The gas utility's transfer to the City's General Fund is a component of the City's gas rates. City voters first authorized the transfer in 1950, and in November 2022 voters approved Measure L, affirming the continuation of this practice by amending the Municipal Code. Specifically, section 2.28.185, "Natural Gas Utility Transfer" states: Each fiscal year the City Council may transfer from the natural gas utility to the general fund an amount equal to 18% of the gross revenues of the gas utility received during the fiscal year two fiscal years before the fiscal year of the transfer. At its discretion, the City Council may decide to transfer a lesser amount. The projected cost of the transfer shall be included in the City's retail natural gas rates as part of the cost of providing gas service. The attached Financial Plan proposes an 18% transfer, $7,191,000 for FY 2023, which aligns with the voter -approved changes codified in PAMC 2.28.185. Measure L authorized Council to make the transfer annually, and granted Council the ability to approve a lower amount. Although Council will formally direct the FY 2024 transfer amount next year, Staff has provided preliminary projections for FYs 2024 - 2026: Alternative 1 proposes transferring 18% of gross revenue as voters approved in Measure L, and Alternative 2 proposes a transfer between 15.5% and 11.1% annually through FY 2026. Staff prepared Alternative 2's lower transfer percentages in response to recent increases in gas distribution rates and supply costs; this alternative is projected to create FY 2024 - 2026 transfers similar to the annual 2% to 3% growth rate in the transfer prior to Measure L. To illustrate, Alternative 2 links the FY 2024 - 2026 transfers to the Consumer Price Index (CPI). CPIError! 23 Climate Change Scoping Plan, First Update, Discussion Draft for Public Review and Comment, California Air Resources Board, October 2013, pg. 88. March 2023 301 age Item 14: Staff Report Pg. 44 Packet Pg. 538 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan Reference source not found. is projected to be 3% long term, though staff projects 5% CPI increases in FY 2024 and FY 2025. Table 15 shows a 6% per year projection as the maximum proposed increase under Alternative 2; actual increases for the years shown would be capped at 6% or CPI, whichever is less. Error! Reference source not found. 16Error! Reference source not found. shows the amount of the transfer both in dollars and as a percentage of utility revenue for each fiscal year, as well as the projected rate of annual growth in the transfer. Error! Reference source not found. below shows the distribution rate increases (as a percentage of the total bill, excluding supply cost changes) associated with each alternative. Table 13: Proposed / Projected Transfers as % of Gross Revenues Two FY Prior24 Proposed Projected FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Gas Utility Gross Revenue Two Fiscal Years Prior ($000) Alternative 1 39,950 49,721 I 72,570 66,927 71,878 78,305 Alternative 2 66,269 69,453 75,133 Percent of gas utility gross revenue to transfer Alternative 1 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% Alternative 2 15.5% 11.1% 12.9% 13.1% 12.8% Transfer amount ($000) Alternative 1 7,191 8,934 13,063 12,047 12,938 14,095 Alternative 2 7,707 8,080 8,565 9,078 9,623 Change in Transfer (%) Alternative 1 0 1% 24% 46% -8% 7% 9% Alternative 2 6% 6% 6% 6% 6% Table 14: Summary of Rate Changes for Alternatives (Excludes Supply Rate Changes) FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Alternative 1 9% 10% 8% 5% 5% 0 4% Alternative 2 8% 7% 5% 5% 5% 24 Measure L authorizes a transfer based on 18% (or a lesser percentage if approved by Council) of the revenue for two fiscal years prior, so the FY 2024 transfer is based on FY 2022 revenue. March 2023 311; age Item 14: Staff Report Pg. 45 Packet Pg. 539 of 853 Item 14 Attachment C - Gas GAS UTA AN FY2024 Financial Plan Figure 12: Gas Utility Expenses, Revenues, and Rate Changes Excluding Supply -Related Rate Changes (Alternative 1) Actual Costs through FY 2022 and Projections through FY 2028 c 0 2 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Rate changes (excluding supply -related rate changes) 0% 4% 5% 2% 3% 3% 9% 10% 8% 5% 5% i -fl 1,4, C3)O N 104 Cfl N. 00 N N N N N N N N N O O O O O O O O O N N N N N N N N N Actuals SECTION 6A: GAS PURCHASE COSTS Projections — Revenue ❑ Capital Investment ❑ Gas Supply ❑ Operations ■ Transfers ■ Debt Service The Gas Utility purchases much of its gas for delivery at Malin, Oregon which is almost always less expensive than delivery at PG&E Citygate, even including the costs of transmission from Malin to Citygate. The Gas Utility purchases gas on a month -ahead and day -ahead basis in the spot market. The years from FY 2009 through FY 2022 have seen gas prices in a relatively narrow but low band. Starting in late 2021, and becoming more acute starting in the summer of 2022, lower levels of natural gas in storage, along with colder than normal weather and transmission pipeline constraints on both the northern and southern borders of California has created short- term price spikes and increased volatility, as shown in Figure 13. These market conditions exacerbated and caused unprecedented price spikes during December 2022 and January 2023 when Citygate prices reached as high as $49.52 on the monthly index and up to $57.07 on the daily index. Details of this event was described in Section 4G: Gas Supply Rates. This event has greatly increased the commodity costs in FY 2023, estimated at about $22 million or 327% above budgeted, through January 2023. The commodity costs are a pass -through to customers, and the gas utility was able to recover most of the costs. To mitigate impacts of March 2023 32 1 Page Item 14: Staff Report Pg. 46 Packet Pg. 540 of 853 Item 14 Attachment C - Gas GAS UTA AN FY2024 Financial Plan future short-term spikes for customers, the gas utility plans to investigate the possibility of a winter hedging program, with the goals to mitigate risks for the gas utility and bring price stability to ratepayers. Figure 13: Gas Commodity Monthly Market Prices at Malin and PG&E Citygate 60 50 E E 40 v • a 30 O 20 E 0 L) 10 0 U '1 U) U) ul 'D w w w N N N N co 00 00 00 m m m m O O O O ri r -I ,- rl N N N N rn r -I r -I r l r -I r -I .-4 r4 '4 r -I r -I r l r -I .-4 r4 - r -I r1 r -I r l N N N N N N N N N N N N N +' C r C +' C ' C +' C ' C + Q 7 V Q 7 V Q 7 V Q 7 V Q 7 V Q 7 V Q 7 V Q 7 V o o o ¢ o, ft, o a o a o a o, Citygate Actual --- Malin Actual Even as supply conditions improve, relieving the high prices seen in the winter of 2022/2023, natural gas prices through the forecast period are projected to remain higher than the very low levels seen in previous years due to a number of factors described in Section 4G: Gas Supply Rates. On September 15, 2014, Council adopted a resolution (Reso. #9451) authorizing the City's participation in a natural gas purchase from Municipal Gas Acquisition and Supply Corporation (MuniGas) for the City's entire retail gas load for a period of at least 10 years. The MuniGas transaction includes a mechanism for municipal utilities to utilize their tax-exempt status to achieve a discount on the market price of gas. As of November 1, 2018, gas began flowing under this program, reducing the City's gas commodity cost by about $1 million per year and saving gas customers approximately $0.03 per therm on the commodity portion of their bills. Gas commodity costs are forecasted to stay fairly steady over the next several years, but forecasts of commodity costs are very uncertain. Figure 14 shows the projected gas prices used to generate this forecast. Projections for transmission costs associated with transporting gas over PG&E's Redwood transmission pipeline (from Malin, Oregon to the PG&E Citygate) are based on rates adopted in the most recent update to the Gas Accord. March 2023 33 Page Item 14: Staff Report Pg. 47 Packet Pg. 541 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan Figure 14: Annual Average Wholesale Gas Market Price Projections 12 E E 10 v u 8 a 0 6 E E 84 2 0 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 -Citygate -Malin PG&E's Local transportation rates have increased over the past few years and are projected to slowly increase annually in future years. Figure 15 shows the average annual PG&E gas transportation rates without the Cap -and -Trade exemption rates for actuals up to Q2 of FY 2023 and projected up to FY 2033. Figure 15: PG&E Gas Local Transportation Rates, Actual and Projected 0.40 E 0.35 0.30 0.25 0 L 0.20 0 0. 0.15 0.10 l7 u' 0.05 l7 a 0.00 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Actual ......Projected For Cap and Trade compliance costs, the gas utility has been regulated under California's greenhouse house (GHG) regulations since January 2015 with a GHG emissions cap that declines over time. The gas utility receives carbon allowances equal to the emissions allowed under the cap and is required to auction off a portion (60% in 2022, increasing by 5% annually) of the allowances through the state Cap and Trade Program. To meet its annual GHG compliance obligation, the gas utility must purchase allowances based on actual gas load. Proceeds of allowance sales must be used within 10 years of their receipt, and Palo Alto is developing programs and plans to utilize them. March 2023 34IPage Item 14: Staff Report Pg. 48 Packet Pg. 542 of 853 Item 14 Attachment C - Gas GAS U7 FY2024 Financial Plan AN The auction price to either purchase or sell allowances also increases annually by 5% plus inflation. Given the rate of increased allowance purchases and the increasing market prices, these costs are anticipated to increase from $1.5 million in FY 2022 to $6.8 million in FY 2030, about an 18% increase per year on average. The City also has a Carbon Neutral Natural Gas plan (Staff Report 744125) whereby carbon offsets are purchased in an amount equal to the emissions generated by the communities' natural gas use. These high -quality carbon offsets support projects that reduce the amount of GHGs in the atmosphere, such as forest maintenance or capturing methane from dairy farms. Purchasing carbon offsets is a good first step towards reducing carbon in the atmosphere, but the longer - term goal is to reduce the community's use of natural gas by maximizing efficiency and switching to high -efficiency electric appliances where possible. The costs for these offsets are projected to increase from $2.2 million in FY 2022 to $2.9 million in FY 2030. SECTION 6B: OPERATIONS Operations costs include the Customer Service, Demand Side Management, Operations and Maintenance (including Engineering), Resource Management, and Administration categories in Figure 16, below. Debt service, rent, and transfers are also included in Operations costs (excluding the General Fund equity transfer). Appendix D: Description of Gas Utility Cost Categories includes detailed descriptions of the activities associated with these cost categories. Operations costs are generally projected to increase by 2 to 3% per year on average. Salary and benefits, inflation, and other assumptions match those used in the City's long-range financial forecast. Operations costs include funding for the cross -bore program. In the 1970s CPAU, like many other utilities, adopted horizontal drilling as an alternative to trenching when installing new gas services. This created the possibility of cross -bores, which can happen when a gas service is bored through a sewer lateral. Though cross -bores are very rare, they can create a dangerous situation when a contractor attempts to clear a blocked sewer line, because if the cross -bored gas service is damaged during the line, clearing it can result in a gas leak. CPAU has been inspecting new gas services since 2001, and in 2011 began video inspections of the sewer laterals at the location of horizontally -drilled gas services installed before 2001. This inspection program has cost roughly $1 million per year since FY 2012 and decreased in FY 2023 with the completion of Phase III of the cross -bore inspection project. While a majority of sewer laterals have been inspected, staff has come across several services which are not able to be scoped, either due to infiltration by roots or broken/collapsed pipe segments. Staff has included $0.6 million to $0.8 million per year in additional funding between FY 2024 and FY 2028 to complete the inspections within the next 5 years. During FY 2021, administration costs, that include charges for administrative functions provided by the City's General Fund staff, were lower than usual because of the impacts of the pandemic 25 https://www.cityofpaIoaIto.org/civicax/filebank/documents/54588 March 2023 35 1 Item 14: Staff Report Pg. 49 Packet Pg. 543 of 853 Item 14 Attachment C - Gas GAS UTA AN FY2024 Financial Plan increasing vacancies as well as with cost reduction measures implemented across the City departments. Figure 16: Actual and Projected Operational Costs $25 $20 ■ Debt service and transfers ■ Resource Management 1__ I $15 C 0 ■ Operations & Maintenance $10 ■ Demand Side Management $5 �_ _� _fi Customer Service i1■ Administration (excluding debt service and $0 transfers) as an O .+ N m a rn so r as N N N N N N N N N O O O O O O O O O O O N N N N N N N N N N N Actual Projected SECTION 6C: CAPITAL IMPROVEMENT PROGRAM (CIP) The Gas Utility's CIP consists of the following programs and budgets: • The Gas Main Replacement Program, under which the Gas Utility replaces aging gas mains and mains ranked to have the greatest risk scores within the system. • Customer Connections, which cover the cost when the Gas Utility installs new services or upgrades existing services at a customer's request in response to development or redevelopment. The Gas Utility charges a fee to these customers to cover the cost of these projects. • Ongoing Projects, which cover the cost of routine meter, regulator, and service replacement, minor projects to improve reliability or increase capacity, and other general improvements. • Tools and Equipment, which cover the cost of capitalized equipment, such as directional boring, gas pipeline maintenance and emergency equipment. • One-time Projects, which represent occasional large projects that do not fall into any other category. Table 15 shows the current status of these project categories and future projected spending. March 2023 36 I P a g e Item 14: Staff Report Pg. 50 Packet Pg. 544 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan Table Gas Main Replacement 15: Budgeted Gas CIP Spending ($000) .• r i r 12,237 4,725 8,000 5,300 7,950 4,000 Gas Tools and Equipment 59 100 100 100 100 100 Ongoing Projects 1,541 1,000 1,000 1,000 1,000 1,000 Customer Connections 1,042 1,211 1,247 1,100 1,100 1,100 Electrification Transition - - - - 4,000 TOTAL 14,880 7,036 10,347 7,500 10,150 10,200 *Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year Gas Main Replacements The Gas Main Replacement (GMR) Program is the largest budgeted category in the gas fund and is used to replace ageing natural gas infrastructure throughout the City. This program improves safety and reliability of the natural gas system by replacing pipe material and components, prior to failure, with reliable polyethylene pipe and fittings. The GMR Program completed a major milestone in 2013 with the replacement of gas mains made from Acrylonitrile-Butadiene-Styrene (ABS) plastic with Polyethylene (PE) pipe. The City's 2015 Distribution Integrity Management Plan (DIMP) identified ABS pipe and components as suitable for replacement due to the pipe's brittleness and difficulty of repair. There are 0.1 miles of remaining ABS in the system, which is scattered throughout the City in very small sections. After the replacement of ABS pipe, CPAU's 2015 Risk Assessment identified PVC pipe material as the next pipe material to be reviewed for replacement. In general, CPAU replaces about 4 miles (1.9% of the system) of pipe on each GMR project, accounting for approximately 75% of PVC and 25% of steel. The pipelines are replaced with PE pipe. With the ongoing discussions and direction from City Council related to electrification of homes and neighborhoods throughout the City and transitioning away from natural gas, it will be necessary at some point to scale back the rate of replacement of the existing gas system. Staff is working to develop an efficient phasing plan for electrification and the scaling back of the gas infrastructure. However, staff believes it is necessary to continue the current efforts to replace older and higher -risk materials within the gas system to maintain safety and system integrity. This investment is recommended until a more defined plan on electrification and the transition away from natural gas is completed. That transition plan may involve aggressive electrification in areas with PVC pipe to avoid future investments in PVC pipe replacement. The priority for the gas utility fund is continued safe operation to manage the overall risk and continue the reliable and safety delivery of natural gas throughout the City. In the short term that requires investing in replacement of highest risk PVC pipe, prioritizing areas of the gas system that will be needed the longest during the transition to an electrified community, and gradually that will be integrated with a strategy to aggressively electrify neighborhoods and abandon PVC pipe rather than replace it. Several factors are contributing to an increase in construction costs in the Bay Area, such as a greater focus on infrastructure improvement by many municipal agencies and the higher demand for utility contractors within these fields. The current budget for the GMR program has held March 2023 371 Item 14: Staff Report Pg. 51 Packet Pg. 545 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN steady over the last few years, which results in a reduction of replacement due to the steady increase in the replacement cost. CPAU recently posted the Gas Main Replacement 24A Project for competitive bidding and resulted in one contractor submitting a bid for almost two times the engineering estimate, even after it was bid a second time. Future GMR projects will require a budget increase to maintain a similar rate of PVC and steel main replacement. Currently, CPAU plans to replace as many aging mains as possible within its current budget. However, if this trend of higher construction cost continues, the Gas Utility may require larger CIP budgets and as a result, an increase in rates to maintain an adequate rate of replacement to relieve the risks of PVC and steel pipe in the system. This Financial Plan addresses these challenges in a way that will allow CPAU to meet its main replacement needs. This plan includes approximately $12 million to $13 million starting in FY25 and includes a 3% annual construction cost inflationary increase. This will assist in keeping up with the increasing cost of replacement of PVC mains and steel mains as needed. Additionally, the GMR project schedule for gas will be staggered with water and wastewater (water and wastewater construction every even year and gas construction every odd year), which will ease scheduling difficulties for inspection coverage due to shared inspection staff across water, wastewater, gas, and large development services projects. Construction of the GMR 24A commenced during January 2023 and is anticipated to be completed in March 2023 (FY 2023). However, work will also continue on GMR 24B in FY 2024 and into FY 2025. The GMR 24B project is awaiting a response to an application submitted for a Natural Gas Distribution Infrastructure Safety and Modernization grant opportunity. CPAU intends to apply each year for the grant funding opportunity, which would assist with the replacement of PVC and steel distribution mains in the gas system. If CPAU determines that grant funding is not likely to be awarded, CPAU will evaluate the merit of continuing to apply for the grant. Tools and Equipment, Ongoing Projects, and Customer Connections Staff estimates ongoing projects, tools and equipment, and customer connections to cost approximately $2.2 million through the end of the forecast period. In practice, these projects can fluctuate dramatically depending on prices of material, system conditions and the pace of development and redevelopment in the city. It is worth noting that fee revenue pays for the Customer Connections program, so when costs go up fees will be adjusted as well. Aside from customer connections and transfers from other funds, the CIP plan for FY 2023 to FY 2028 is funded by utility rates. Appendix B: Gas Utility Capital Improvement Program (CIP) Detail shows the details of the plan. SECTION 6D: DEBT SERVICE The Gas Utility currently makes debt service payments on one bond issuance, the 2011 Series A Utility Revenue Refunding Bonds. This bond issuance was to refinance the $18 million principal remaining on the Utility Revenue Bonds, 2002 Series A issued for the Gas and Water Utilities to finance various improvements to the distribution systems. $9.4 million of this issuance was March 2023 381 age Item 14: Staff Report Pg. 52 Packet Pg. 546 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN secured by the net revenues of the Gas Utility. Table 16 shows debt service for this bond for the financial forecast period. Debt service on this bond will continue through 2026. Table 16: Gas Utility Debt Service FY 2024 FY 2025 FY 2026 2011 Utility Revenue 802 799 802 Refunding Bonds, Series A The 2011 bonds include two covenants stating that 1) the Gas Utility will maintain a debt coverage ratio of 125% of debt service, and 2) that the City will maintain "Available Reserves"26 equal to five times the annual debt service. This Financial Plan complies with these covenants throughout the forecast period, as shown in Table 19 and Table 20. Table 17: Debt Service Coverage Ratio ($000) FY 2024 FY 2025 FY 2026 Revenues 66,297 68,966 72,891 Expenses (Excluding CIP and Debt Service) (54,882) (54,519) (56,572) Net Revenues 11,415 14,447 16,319 Debt Service 802 799 802 Coverage Ratio 1423% 1807% 2036% Table 18: Debt Service Minimum Reserves ($000) FY 2023 FY 2024 FY 2025 FY 2026 Gas and Water Utilities a 28,383 20,108 23,904 18,266 Debt Service b 1463 1459 1454 1457 Reserves Ratio c 35x 25x 30x 23x a) CIP, Rate Stabilization, Operations, and Unassigned Reserves b) Gas and Water Utility's share of the debt service on the 2011 bonds. c) Calculated using combined Gas and Water Utility reserves. The actual reserves ratio for the 2011 bonds is calculated based on the combined Electric, Gas, and Water Utility reserves and total debt service and is higher than shown here. The Gas Utility's reserves and net revenue are also pledged as security for the bond issuances listed in Table 19, even though the Gas Utility is not responsible for the debt service payments. The Gas Utility's reserves or net revenues would only be called upon if the responsible utilities are unable to make their debt service payments. Staff does not currently foresee this occurring. 26 Available Reserves as defined in the 2011 bonds include the reserves for the Water, Electric, and Gas Utilities March 2023 39 I Pap - Item 14: Staff Report Pg. 53 Packet Pg. 547 of 853 Item 14 Attachment C - Gas GAS UTA AN FY2024 Financial Plan Table 19: Other Issuances Secured by Gas Utility's Revenues or Reserves Annual Debt Secured by Gas Utility's Bond Issuance Responsible Utilities Service ($000) Net Revenues Reserves 1999 Utility Revenue Wastewater Collection Bonds, Series A Wastewater Treatment $1,207 No Yes Storm Drain 2009 Water Revenue Bonds (Build America Water $1,977* No Yes Bonds) *Net of Federal interest subsidy SECTION 6E: EQUITY TRANSFER The equity transfer is discussed in Section 5G: Alternative Gas Increase Plans SECTION 6F: REVENUES The Gas Fund receives most of its revenues from sales of gas, but about 8% comes from other sources including interest income, service connection and capacity fees, and sales of allowances related to California's cap -and -trade program. The Cap and Trade compliance charge is another revenue item related to the cap -and -trade program that is collected in customers' bills. While the State provides CPAU with a certain number of free allowances each year, the Gas Utility is required to sell a portion of those in accordance with the regulations. In order to have enough allowances to cover customers' natural gas emissions, CPAU must buy allowances at market, and subsequently passes through the cost of those allowances to customers. The regulations do not allow the revenue derived from the sale of the free allowances to offset allowance purchases, thus the pass -through rate component. These funds are transferred to the Cap and Trade Reserve (see Section 3D: Proposed Reserve Transfers for more details). This Financial Plan bases sales revenue projections on the load forecast in Section 5A: Load Forecast. Except where stated otherwise, these load forecasts are based on normal weather. Weather can vary substantially, however, and this can affect revenues substantially. Also, changes in customer behavior, as well as changes to more efficient gas appliances, or switching to electric appliances, will modify these forecasts. Staff continually evaluates forecasts to see when new trends emerge. SECTION 6G: COMMUNICATIONS PLAN The FY 2024 gas utility communications strategy covers these primary areas: natural gas market supply costs, supply and demand, operations, infrastructure, safety, efficiency, carbon neutrality, and cost containment measures. The City of Palo Alto Utilities (CPAU) communication methods include the website, utility bill inserts, messaging on bills and envelopes, email newsletters, print and digital ads in local publications, and participation in community outreach events. Since moving to market pricing for commodity rates several years ago, monthly gas rates can fluctuate for CPAU customers based on a variety of factors affecting the market. Staff post the March 2023 401 Item 14: Staff Report Pg. 54 Packet Pg. 548 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN monthly rates online at www.cityofpaIoaIto.org/RatesOverview and provide additional updates as necessary via other communication channels. During the FY 2023 winter, utilities across the region saw extremely high gas market prices projected for January and February; much higher than last year's winter prices, and the highest since the 2001 energy crisis. Staff have engaged in a robust and proactive outreach campaign to try to inform customers in advance about the extremely high gas rates to help avoid surprisingly high bills, emphasizing the importance of saving energy to keep utility costs low. Consistent with the Utilities Strategic Plan, CPAU is instituting cost containment as an ongoing priority that is part of our annual cycle. To keep customers apprised of its rates the status and accomplishments of capital improvement projects, the City maintains a network of project web pages. Print and digital ads, social media and email blasts drive traffic to the website. CPAU promotes gas use efficiency incentives year-round, but most heavily during winter months to impact heating activities. Programs such as the Home Efficiency Genie and commercial energy efficiency programs help residents and businesses better understand energy usage, activities and/or upgrades they can implement to improve efficiency and keep utility costs low. The MyCPAU online account management portal provides customers with direct access and more information about utility account and consumption data. CPAU communicates about safety for all utility services year-round including the need to call USA (811) before digging to check for underground utility lines. Staff also emphasize the importance of contacting CPAU to check for potential sewer and gas line cross -bores prior to clearing a sewer line. Every year, CPAU publishes an updated gas safety awareness brochure and mails it to all customers in Palo Alto as well as other stakeholders. CPAU will continue to promote messaging about safety, rates, and more, through a variety of marketing and media channels. Staff talk with business customers at special facilities meetings, attend neighborhood safety and emergency preparedness fairs and offer presentations to school and community groups. While print materials and webpages still feature prominently, CPAU is increasing use of other outreach channels such as email newsletters, direct mail, newspaper inserts, social media and online videos. The Gas Safety Public Awareness Plan contains saved copies of all outreach materials and activity logs. March 2023 411 Item 14: Staff Report Pg. 55 Packet Pg. 549 of 853 Item 14 Attachment C - Gas (JH`' FY2024 Financial Plan Appendix A: Gas Financial Forecast Detail Appendix B: Gas Utility Capital Improvement Program (CIP) Detail Appendix C: Gas Utility Reserves Management Practices Appendix D: Description of Gas Utility Cost Categories Appendix E: Gas Utility Communications Samples March 2023 42 I Page Item 14: Staff Report Pg. 56 Packet Pg. 550 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN APPENDIX A: GAS FINANCIAL FORECAST DETAIL City of Palo Alto Gas Utility $ o00 $ o00 $ o00 $ 000 $ o00 $-000 $'000 $-000 $'000 $-000($000) Fiscal Year 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 1 RATE CHANGE (%4 0% 4% 5% 2% 3% 3% 8% 7% 7% 5% 5% 2 TOTAL SYSTEM AVERAGE RATE ($/Therm) $ 1.203 $1.340 $ 1.289 $ 1.417 $1.802 $2.524 $2.175 $ 2.281 $ 2.479 $ 2.613 $ 2.756 3 SUPPLY COMPONENTS($/Therm) $ 0.597 $0.412 $ 0.513 $ 0.896 $1.678 $1.129 $1.070 $ 1.125 $ 1.161 $ 1.207 $ 1.260 4 SALES IN THOUSAND THERMS 28,314 29,110 26,610 25,451 25,426 26,501 26,670 26,310 26,058 25,805 25,658 5 CHANGE IN RETAIL SALES REVENUE 910 1,492 1,817 953 1,191 1,492 5,669 4,330 4,486 3,205 3,448 6 7 Utilities Retail Sales 34,056 39,017 34,294 36,071 45,816 66,881 58,013 60,010 64,595 67,430 70,702 8 Service Connection&CapacityFees 1,078 997 902 840 475 1,167 1,211 1,247 1,100 1,100 1,133 9 Other Revenues & Transfers In 1,740 2,023 2,159 '.. 2,559 2,915 3,910 6,684 7,739 8,851 10,050 11,367 10 Interest plus Gain or Loss on Investment 568 597 578 479 427 612 361 456 588 955 1,398 11 Total Sources of Funds 37,442 42,634 37,933 39,950 49,634 72,570 66,269 69,453 75,133 79,535 84,599 12 13 Purchases of Utilities: 14 Supply Commodity & Cap and Trade 9,698 12,470 8,376 9,891 20,591 43,796 23,489 21,757 22,494 22,925 23,636 15 Supply Transportation 3,223 3,487 2,727 2,859 3,513 4,261 6,459 6,799 7,131 7,364 7,542 16 Total Purchases 12,921 15,958 11,102 12,750 24,103 48,057 29,948 28,556 29,625 30,289 31,178 17 18 Administration (CIP - Operating) 3,574 3,353 3,711 3,248 4,403 4,512 4,759 4,982 5,121 5,261 5,410 19 Customer Service 1,529 1,563 1,872 1,904 2,035 2,110 2,267 2,343 2,388 2,424 2,475 20 Demand Side Management 829 536 550 417 306 316 338 350 358 365 374 21 Engineering (Operating) 351 400 666 571 659 480 516 533 544 552 564 22 Operations and Maintenance 4,673 4,957 5,334 6,600 7,422 7,296 7,815 8,250 8,395 8,533 8,486 23 Resource Management 357 401 463 551 668 694 748 771 785 795 811 23 Supply and Distribution Operations 11,313 11,211 12,596 13,291 15,493 15,408 16,442 17,229 17,592 17,931 18,121 24 Debt Service Payments 203 179 155 135 108 804 802 799 802 - - 25 Rent 602 621 645'.. 471 481 494 507 521 532 543 555 26 Transfers to General Fund 6,699 6,601 6,942 ''.. 6,847 7,240 7,191 7,622 8,080 8,565 9,078 9,623 27 Other Transfers Out 808 704 521 512 277 693 727 764 787 810 835 28 Capital Improvement Programs 7,804 5,567 3,342 9,283 4,674 10,217 7,036 10,347 7,500 10,150 7,818 29 Total Uses of Funds 40,349 40,840 35,304 ''.. 43,288 52,002 82,863 63,085 66,296 65,401 68,802 68,130 30 31 Into/ Out oReserves 2,907) 1,793 2,629 3,339 2,368 10,293 3,184 3,156 9,732 10,733 16,469 32 33 Reappropriations+Commitments 8,674 11,251 3,662 9,086 5,541 5,541 5,541 5,541 5,541 5,541 5,541 34 Plant Replacement 0 0 0 0 0 0 0 0 0 0 0 Debt Service Reserve 795 795 804 434 434 434 434 434 0 0 0 35 CIP Reserve 3,820 3,820 3,820 3,820 3,820 0 0 0 0 0 0 36 Rate Stabilization 7,090 2,533 8,419 2,766 0 0 0 0 0 0 0 37 Operations Reserve 8,638 9,966 13,450 11,981 11,300 2,724 2,834 2,504 8,771 15,175 22,869 Cap and Trade Reserve 0 4,542 6,731 8,834 11,908 15,395 19,293 23,623 28,398 38 Unassigned 0 0 0 0 0 0 0 0 0 0 0 39 Total Reserves 29,017 28,365 30,155 32,630 27,827 17,534 20,718 23,874 33,605 44,339 56,808 40 41 Short Term Risk Assessment Value 4,051 4,138 3,940 4,625 4,291 5,127 5,716 6,690 7,096 7,833 8,118 42 43 Operations Reserve Guidelines 44 Min(60DaysCommodity+O&M) 5,727 6,173 5,254 6,051 7,780 13,549 10,104 10,159 10,537 10,715 11,700 45 Target(90DaysCommodity+O&M) 8,590 9,260 7,881 9,076 11,670 20,324 15,157 15,239 15,805 16,073 17,549 46 Max(120DaysCommodity+O&M) 11,454 12,346 10,508 12,102 15,560 27,098 20,209 20,318 21,074 21,431 23,399 47 March 2023 43 I Page Item 14: Staff Report Pg. 57 Packet Pg. 551 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan )LPLAN APPENDIX B: GAS UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL GAS MAIN REPLACEMENT PROGRAM GS -13001 Gas Main Replacement - Project 23 GS -14003 Gas Main Replacement - Project 24 GS -15000 Gas Main Replacement - Project 25 GS-XXXXX Gas Main Replacement - Project 26 GS-XXXXX Gas Main Replacement - Project 27 GS -18000 Gas ABS/Tenite Replacement Project 2,282,610 2,282,304 - 1,955,001 9,955,001 8,000,000 - - - - - - - - - 4,725,000 - - - - - 8,000,000 - - - - - - 5,300,000 - - - - - - - - 7,950,000 - - 4,000,000 - - Subtotal, Gas Main Replacement Prog. 4,237,611 12,237,305 8,000,000 4,725,000 8,000,000 5,300,000 7,950,000 4,000,000 TOOLS AND EQUIPMENT GS -13002 Gas Tools and Equipment 9,096 59,096 50,000 100,000 100,000 100,000 100,000 100,000 Subtotal, Tools and Equipment 9,096 59,096 50,000 100,000 100,000 100,000 100,000 100,000 ONGOING PROJECTS GS -11002 Gas Distribution System Improvements GS -80019 Gas Meters and Regulators 410,796 910,796 500,000 129,987 629,987 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 Subtotal, Ongoing Projects 540,783 1,540,783 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 CUSTOMER CONNECTIONS (FEE FUNDED) GS -80017 Gas System, Customer Connections 124,408 1,042,486 1,166,894 1,210,900 1,247,200 1,100,000 1,100,000 1,100,000 Subtotal, Customer Connections 124,408 1,042,486 1,166,894 1,210,900 1,247,200 1,100,0001 1,100,000 1,100,000 ELECTRIFICATION TRANSITION GS-XXXXX Electrification Transition 4,000,000 Subtotal, Electrification Transition 4,000,000 GRAND TOTAL 4,911,898 14,879,670 10,216,894 7,035,900 10,347,200 7,500,000 10,150,000 10,200,000 Funding Sources Connection/Capacity Fees Other Utility Funds (Asset Mgmt, GIS Systems) Utility Rates 1,166,894 9,050,000 1,210,900 5,825,000 1,247,200 9,100,000 1,100,000 6,400,000 1,100,000 9,050,000 1,100,000 9,100,000 CIP-RELATED RESERVES DETAIL 6/30/2022 Actual 4,150,829 Reappropriations & Commitments March 2023 441Page Item 14: Staff Report Pg. 58 Packet Pg. 552 of 853 Item 14 Attachment C - Gas T FY2024 Financial Plan APPENDIX C: GAS UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices shall be used when developing the Gas Utility Financial Plan: Section 1. Definitions a) "Financial Planning Period" — The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b) "Fund Balance" — As used in these Reserves Management Practices, Fund Balance refers to the Utility's Unrestricted Net Assets. c) "Net Assets" - The Government Accounting Standards Board defines a Utility's Net Assets as the difference between its assets and liabilities. d) "Unrestricted Net Assets" - The portion of the Utility's Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Supply Fund Reserves The Gas Utility's Supply Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 4 (Reserve for Commitments) b) For operating and capital budgets re -appropriated from previous years, as described in Section 5 (Reserve for Re -appropriations) Section 3. Distribution Fund Reserves a) For existing contracts, as described in Section 4 (Reserve for Commitments) b) For operating and capital budgets re -appropriated from previous years, as described in Section 5 (Reserve for Re -appropriations) c) For cash flow management and contingencies related to the Gas Utility's Capital Improvement Program (CIP), as described in Section 6 (CIP Reserve) d) For rate stabilization, as described in Section 7 (Rate Stabilization Reserve) e) For operating contingencies, as described in Section 8 (Operations Reserve) f) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 9 (Unassigned Reserves) Section 4. Reserve for Commitments At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserve for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Wastewater Collection Utility at that time. Section 5. Reserve for Reappropriations At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserve for Reappropriations will be set to an amount equal to the amount of all remaining capital and March 2023 45 I Page Item 14: Staff Report Pg. 59 Packet Pg. 553 of 853 Item 14 Attachment C - Gas GAS UTA AN FY2024 Financial Plan non -capital budgets, if any, that will be re -appropriated to the following fiscal year for each fund in accordance with Palo Alto Municipal Code Section 2.28.090. Section 6. CIP Reserve The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for capital contingencies. Staff will manage the CIP Reserve according to the following practices: The following guideline levels are set forth for the CIP Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of CIP expense budgeted for that year. Minimum Level 12 months of budgeted CIP expense Maximum Level 24 months of budgeted CIP expense a) b) c) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the Reserve for Commitments when funds are added to or removed from the Reserve for Commitments as a result of a change in contractual commitments related to CIP projects. Any other additions to or withdrawals from the CIP reserve require Council action. Minimum Level: i) Funds held in the Reserve for Commitments may be counted as part of the CIP Reserve for the purpose of determining compliance with the CIP Reserve minimum guideline level. ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered by the end of the following fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the next fiscal year. For example, if the CIP Reserve is below its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve, or that does so in a shorter period of time. Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds may be added to this reserve. If there are funds in this reserve in excess of the maximum level staff must propose to transfer these funds to another reserve or return them to ratepayers in the next Financial Plan. Staff may also seek Council approval to hold funds in this reserve in excess of the maximum level, if they are held fora specific future purpose related to the CIP. Section 7. Rate Stabilization Reserve Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Gas Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 8. Operations Reserve March 2023 46IPapP Item 14: Staff Report Pg. 60 Packet Pg. 554 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion of the Gas Utility's Fund Balance not included in the reserves described in Section 4 -Section 7 above will be included in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 8 d) below. Staff will manage the Operations Reserve according to the following practices: a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of O&M and commodity expense Target Level 90 days of O&M and commodity expense Maximum Level 120 days of O&M and commodity expense b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve. c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any Financial Plan created for the Gas Utility shall be designed to return the Operations Reserve to its target level by the end of the forecast period. d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this reserve. Any further increase in the Gas Utility's Fund Balance shall be automatically included in the Unassigned Reserve described in Section 9, below. Section 9. Unassigned Reserve If the Operations Reserve reaches its maximum level, any further additions to the Gas Utility's Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Gas Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY 2020, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. Section 10. Intra-Utility Transfers Between Supply and Distribution Funds March 2023 471Page Item 14: Staff Report Pg. 61 Packet Pg. 555 of 853 Item 14 Attachment C - Gas GAS UT FY2024 Financial Plan AN The Gas Utility records costs in two separate funds: the Gas Supply Fund and the Gas Distribution Fund. At the end of each fiscal year staff is authorized to transfer an amount equal to the difference between Gas Supply Fund costs and Gas Supply Fund Revenues, from the Gas Distribution Fund Operations Reserve to the Gas Supply Fund, or vice versa. Such transfers shall be included in the ordinance closing the budget for the fiscal year. Section 11. Cap and Trade Program Reserve This reserve tracks revenues from the sale of carbon allowances freely allocated by the California Air Resources Board to the gas utility, under the State's Cap and Trade Program. Funds in this Reserve are managed in accordance with the City's Policy on the Use of Freely Allocated Allowances under the State's Cap and Trade Program (the Policy), adopted by Council Resolution 9487 in January 2015. At the end of each fiscal year staff is authorized to transfer all revenues from the sale of allocated carbon allowances to this reserve. March 2023 48 I P a g e Item 14: Staff Report Pg. 62 Packet Pg. 556 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan APPENDIX D: DESCRIPTION OF GAS UTILITY COST CATEGORIES This appendix describes the activities associated with the various cost categories referred to in this Financial Plan. Customer Service: This category includes the Gas Utility's share of the call center, meter reading, collections, and billing support functions. Billing support encompasses staff time associated with bill investigations and quality control on certain aspects of the billing process. It does not include maintenance of the billing system itself, which is included in Administration. This category also includes CPAU's key account representatives, who work with large commercial customers who have more complex requirements for their gas services. Resource Management: This category includes gas procurement, contract management, rate setting, and tracking of legislation and regulation related to the gas industry. Operations and Maintenance: This category includes the costs of a variety of distribution system maintenance activities, including: • surveying the gas system (50% of the system each year) and repairing any leaks found; • investigating reports of damaged mains or services and perform emergency repairs; • building and replacing gas services for new or redeveloped buildings; and • testing and replacing meters to ensure accurate sales metering. This category also includes a variety of functions the utility shares with other City utilities, including: • the Field Services team (which does field research of various customer service issues); • the Cathodic Protection team (which monitors and maintains the systems that prevent corrosion in metal pipes and reservoirs); and • the General Services team (which manages and maintains equipment, paves and restores streets after gas, water, or sewer main replacements, and provides welding services, including certified gas line welding services) Administration: Accounting, purchasing, legal, and other administrative functions provided by the City's General Fund staff, as well as shared communications services and Utilities Department administrative overhead and billing system maintenance costs. Demand Side Management: Includes the cost of administering gas efficiency programs and the direct cost of rebates paid. Engineering (Operating): The Gas Utility's engineers focus primarily on the CIP, but a small portion of their time is spent assisting with distribution system maintenance. March 2023 491 Item 14: Staff Report Pg. 63 Packet Pg. 557 of 853 APPENDIX E: GAS UTILITY COMMUNICATIONS SAMPLES sa.hkya aw berm /eery opara•sd Mo Ftaaaw M !rare SAM R 'a•. taw a 11.01 toy aAp.apae arnPltws aa111a1 can tya0ar Taps. rangier ad ewla 0100.9 _. - . .,c oy14 L- :a. l,..n. n..nba asssooaltl .1n yo.0 aopow to 0001 554 oteag. Lee bsys Try .u0100 UMM a you Ay hre arm pews do, Hes. adn. accts? sbu 0aa dwo the fro or tuner o.aagr at ca"oro.eana as o.ip.rras Follow 1s an Twaar a te.lm.. ca..v Patlalel.. b uipdaat aarel. as wen a..abelg is l.a.as a dy m fatale SWWA. MINIMIZE PROPERTY Ahae" hairsca`honhandg ole.'nyourcar DAMAGE FROM and a uaMrd a w phone because ATat gas Perak am Wade" prow ale" nil oat dt.ng INTERRUPTED POWER PROTECT YOURSELF AND YOUR FAMILY saaare arw power oreag . ca, be Oar... Fellow are g.drrw to beep V.-- 11"• away from a fowled Poeer ante am oo" • VIA" aldd nearby pfM, Ws —. yo.. uL al a wars err yw...00l • Stay Foie Vote C a. poew iw tells acroa a Men you re n n a.. odws any and era For rw0N pan orerel a you ' , -.• goat ar a Ma paw 0.ig.r •• ail, abash as logeue. a Pam a. . lo.drq she wadi 001 00 g otew x leer girt • ■roes IraI. do no Oar any 11f a rs•saaroaa a. add Do no loos for . gw err yateae Leave Soars. are Cal 90 fa/opal ■ tawrarfy n ot" a Faro Ara usesust a IM 32S•n1! • Do rat canned a. .m54gs•ry a teaaalaM wraagaaeralI I to was .eels Ydea tat ltaed aLY�t yes mire Ornagaprepany N ONONV r M Mat 01 •/aV wonbere waaag a lap, paaar Mat • p.ap Va.a a.4ltd Mar deed flap tweed dkas ale mra p Yelp saw 1w lea earrwo ba/1. I. oar age paYctan b ra.i�ea aesaldC awyaaa • bail Sal pasai•a on areas roar frail a parer reap akea passer Is us*at t • Laaaaarl�da a Owes areas pacer • Ready to save energy and water and make your busineu more efficient? !. ,. C !yotpa.oano rep bCflnessmrrt vad.nof COOPERATE WITH hue rein rynd.raor.<nyoroaoanoo.: UTILITY CREWS acaltdfrOI lstfatl 10 IN 4c:#: 1 tnNM1uMn more! perm . rnaric. poets ..c r..ec access power ise and does oon p,.• f orpoa" W' rose coopera•o", ' "`" '"' ""' CL E A Re s u l t w c.uwa Item 14: Staff Report Pg. 64 Packet Pg. 558 of 853 Item 14 Attachment C - Gas FY2024 Financial Plan imple and Substantive Jays to Lower Your Energy Bill. Are you looking for wen to make you. business —� none energy and wale, efrcient? Reduong your busness's energy and water consumption is not only a great way to protect the planet but also helps you save money and gain customer loyalty. With the new •waklaad ma, adt t�A) IRayam. business customer cat get free hands on asYttance and generous rebates to install energy and water elrrc.ent eq.apmerd Now a Rry bwehasas bloat fr. the esawhws tltaseW Ytfiwl llaipwy arcs. alwwgal, ftnw to aid SOars cat a "y ma airy bander d Anmata 6rrgy Ado—, ndude.g • Fro careusalor. and a, sde rI•awiatb b adatafy alwgr aid waver atbanry opsora raasla to you, business and IRCOV • Generous ,abases to onset prayed polls • Lower onwgy and was. bills • imposed le.wr aid comdo.t for loladng ocd*wla r "tear lane. wMadn • Reduced carbon toolorert Her. s how you quality • you rote !o x a non res.aeriu.:.. - on •re,irel !day eeeeo frail day d Palo Alto Dares ►e_ must par co- ^ , - +.r. • eio lc adla gad fray eenoll • You. !only 6 small.. !tear S000 so _r c •cc! • you holy a o r e^ay n adore!,, v,. c—, Item 14 Attachment D - Gas Rate Schedules FY24 RESIDENTIAL GAS SERVICE UTILITY RATE SCHEDULE G- 1 A. B. C. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from City of Palo Alto Utilities: 1. Separately -metered single-family residential Customers; 2. Separately -metered multi -family residential Customers in multi -family residential facilities. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. UNBUNDLED RATES: Per Service Monthly Service Charge:.................................................................................................. $14.01 154 Tier 1 Rates: Per Therm Supply Charges: 1. Commodity (Monthly Market Based) ..............................................$0.10-$4.00 $0.10-$4.00 2. Cap and Trade Compliance Charge ............................................ $0.00-$0.25 3. Transportation Charge................................................................. $0.00-$0.25 4. Carbon Offset Charge.................................................................. $0.00-$0.10 Distribution Charge:.......................................................................................... $0.68075-607 Tier 2 Rates: (All usage over 100% of Tier 1) Supply Charges: 1. Commodity (Monthly Market Based) 2. Cap and Trade Compliance Charge ... 3. Transportation Charge ........................ 4. Carbon Offset Charge ......................... Distribution Charge: ............................................................. CITY OF PALO ALTO UTILITIES Issued by the City Council ........................................ $0.10-$4.00 ................................... $0.00-$0.25 ................................... $0.00-$0.25 ................................... $0.00-$0.10 .......................................... $1.740643 CITY OF Supersedes Sheet No G-1-1 dated -1-202 : r PALO ALTO UTILITIES Item 14: Staff Report Pg. 65 Sheet No G-1-1 Effective 71-1-2023 Packet Pg. 559 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 RESIDENTIAL GAS SERVICE UTILITY RATE SCHEDULE G- 1 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer's Meter. The Cap and Trade Compliance Charge reflects the City's cost of regulatory compliance with the state's Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City's Gas Utility's compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Transportation Charge is based on the current PG&E Gas Transportation Rate to Wholesale/Resale Customers (G-WSL) CY—WSL rate for Palo Alto accounting for delivery losses to the Customer's Meter. The Carbon Offset Charge reflects the City's cost to purchase offsets for greenhouse gases produced in the burning of natural gas. The Carbon Offset Charge will change in response to changing market conditions, changing sales volumes and the quantity of offsets purchased within the Council -approved per therm cap. The Commodity, Cap and Trade Compliance, Transportation, and Carbon Offset aid - Transportation Charges will fall within the minimum/maximum ranges set forth in Section C. -Current and historic per therm rates for the Commodity, Cap and Trade Complian Carbon Offset and Transportation se Charges are posted on the City Utilities website.I 2. Seasonal Rate Changes: The Summer period is effective April 1 to October 31 and the Winter period is effective from November 1 to March 31. When the billing period includes use in both the Summer and the Winter periods, the usage will be prorated based on the number of days in each CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-1-2 Sheet No G-1-2 dated -1-202 : r PALO ALT O UTILITIES Effective 71-1-2023 Item 14: Staff Report Pg. 66 Packet Pg. 560 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 RESIDENTIAL GAS SERVICE UTILITY RATE SCHEDULE G- 1 1 Monthly gas and commodity and volumetric rates are available here, or by visiting https://www.cityofpaloalto. org/files/assets/public/utilities/rates-schedules-for-utilities/monthly-gas-commodity-rates.pdf CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-1-3 : r PALO ALT O dated -1-202 UTILITIES Item 14: Staff Report Pg. 67 Sheet No G-1-3 Effective 71-1-2023 Packet Pg. 561 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 RESIDENTIAL GAS SERVICE UTILITY RATE SCHEDULE G- 1 seasonal period, and the charges based on the applicable rates for each period. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Calculation of Usage Tiers Tier 1 natural gas usage shall be calculated and billed based upon a level of 0.667 therms per day during the Summer period and 2.0 therms per day during the Winter period, rounded to the nearest whole therm, based on meter reading days of service. As an example, for a 30 day bill, the Tier 1 level would be 20 therms during the Summer period and 60 therms during the Winter period months. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. [End} CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-1-4 : r PALO ALT O dated -1-202 UTILITIES Item 14: Staff Report Pg. 68 Sheet No G-1-4 Effective 71-1-2023 Packet Pg. 562 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 RESIDENTIAL MASTER -METERED AND COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-2 A. B. C. D. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities: 1. Commercial Customers who use less than 250,000 therms per year at one site; 2. Master -metered residential Customers in multi -family residential facilities. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. UNBUNDLED RATES: Per Service Monthly Service Charge:............................................................................................. $129.7806.90 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) ......................................... $0.10-$4.00 2. Cap and Trade Compliance Charges ........................................... $0.00-$0.25 3. Transportation Charge................................................................. $0.00-$0.25 4. Carbon Offset Charge.................................................................. $0.00-$0.10 Distribution Charge:...................................................................................................... $0.89417365 SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer's Meter. The Cap and Trade Compliance Charge reflects the City's cost of regulatory compliance with the state's Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City's Gas Utility's compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-2-1 () Effective 71--1-2023 dated -1-202 PALO ALTO Sheet No G-2-1 Item 14: Staff Report Pg. 69 Packet Pg. 563 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 RESIDENTIAL MASTER -METERED AND COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-2 The Transportation Charge is based on the current PG&E Gas Transportation Rate to Wholesale/Resale Customers G-WSL G WS>J rate for Palo Alto accounting for delivery losses to the Customer's Meter. The Carbon Offset Charge reflects the City's cost to purchase offsets for greenhouse gases produced in the burning of natural gas. The Carbon Offset Charge will change in response to changing market conditions, changing sales volumes and the quantity of offsets purchased within the Council -approved per therm cap. The Commodity, Cap and Trade Compliance, Transportation, and Carbon Offset an4- TransportationCharges will fall within the minimum/maximum ranges set forth in Section C. -Current and historic per therm rates for these Commodity. Cap and Trade Compliance, Carbon Offset and Transportation Charges are posted on the City Utilities website.1 [End} CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-2-2 () Effective 71--1-2023 dated -1-202 PALO ALTO Sheet No G-2-2 Item 14: Staff Report Pg. 70 Packet Pg. 564 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 RESIDENTIAL MASTER -METERED AND COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-2 1 Monthly gas and commodity and volumetric rates are available here, or by visiting https://www.cityofpaloalto. org/files/assets/public/utilities/rates-schedules-for-utilities/monthly-gas-commodity-rates.pdf CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-2-3 () Effective 71--1-2023 dated -1-202 PALO ALTO Sheet No G-2-3 Item 14: Staff Report Pg. 71 Packet Pg. 565 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 LARGE COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-3 A. B. C. La APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities: 1. Commercial Customers who use at least 250,000 therms per year at one site; 2. Customers at City -owned generation facilities. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. UNBUNDLED RATES: Monthly Service Charge: Supply Charges: Per Service $593.79489.12 Per Therm 1. Commodity (Monthly Market Based) .................................................... $0.10-$4.00 2. Cap and Trade Compliance Charges .................................................... $0.00-$0.25 3. Transportation Charge.......................................................................... $0.00-$0.25 4. Carbon Offset Charge........................................................................... $0.00-$0.10 Distribution Charge:......................................................................................................$0.885279-2 SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer's Meter. The Cap and Trade Compliance Charge reflects the City's cost of regulatory compliance CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-3- 1 () PA LO ALTO Effective 71--1-2023 dated -1-202 o G-3-1 Item 14: Staff Report Pg. 72 Packet Pg. 566 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 LARGE COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-3 with the state's Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City's Gas Utility's compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Transportation Char e is based on the current PG&E Gas Transportation Rate to Wholesale/Resale Customers G-WSL G WSL rate for Palo Alto accounting for delivery losses to the Customer's Meter. The Carbon Offset Charge reflects the City's cost to purchase offsets for greenhouse gases produced in the burning of natural gas. The Carbon Offset Charge will change in response to changing market conditions, changing sales volumes and the quantity of offsets purchased within the Council -approved per therm cap. The Commodity, Cap and Trade Compliance, Transportation, and Carbon Offset ai4- Transportation Charges will fall within the minimum/maximum ranges set forth in Section C. _Current and historic per therm rates for these Commodity, Cap and Compliance, Carbon Offset and Transportation Charges are posted on the City Utilities website.1 2. Request for Service A qualifying Customer may request service under this schedule for more than one account or meter if the accounts are located on one site. A site consists of one or more contiguous parcels of land with no intervening public right -of- ways (e.g. streets). 3. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable City of Palo Alto full -service rate schedule. [End} CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-3-2 (') PA LO ALTO Effective 71-- 1-2023 dated -1-202 o G-3-2 Item 14: Staff Report Pg. 73 Packet Pg. 567 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 LARGE COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-3 1 Monthly gas and commodity and volumetric rates are available here, or by visiting https://www.cityofpaloalto. org/files/assets/public/utilities/rates-schedules-for-utilities/monthly-gas-commodity-rates.pdf CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-3-3 () PA LO ALTO Effective 71-- 1-2023 dated -1-202 o G-3-3 Item 14: Staff Report Pg. 74 Packet Pg. 568 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 COMPRESSED NATURAL GAS SERVICE UTILITY RATE SCHEDULE G-10 A. APPLICABILITY: This schedule applies to the sale of natural gas to the City -owned compressed natural gas (CNG) fueling station at the Municipal Service Center in Palo Alto. B. TERRITORY: Applies to the City's CNG fueling station located at the Municipal Service Center in City of Palo Alto. C. UNBUNDLED RATES: Per Service Monthly Service Charge:............................................................................................... $ 87.7772? 30 Per Therm Supply Charges: Commodity (Monthly Market Based)................................................................ $0.10-$4.00 Cap and Trade Compliance Charges.................................................................. $0.00-$0.25 Transportation Charge....................................................................................... $0.00-$0.25 Carbon Offset Charge........................................................................................ $0.00-$0.10 Distribution Charge......................................................................................................... $0.0145120 D. SPECIAL CONDITIONS 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer's Meter. The Cap and Trade Compliance Charge reflects the City's cost of regulatory compliance with the state's Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City's Gas Utility's compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No G-10-1 Effective 71-1-2023 dated 1 202 PALO ALTO Sheet No G-10-1 Item 14: Staff Report Pg. 75 Packet Pg. 569 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 COMPRESSED NATURAL GAS SERVICE UTILITY RATE SCHEDULE G-10 The Transportation Charge is based on the current PG&E Gas Transportation Rate to Wholesale/Resale Customers (G-WSL) G WSL-rate for Palo Alto accounting for delivery losses to the Customer's Meter. The Carbon Offset Charge reflects the City's cost to purchase offsets for greenhouse gases produced in the burning of natural gas. The Carbon Offset Charge will change in response to changing market conditions, changing sales volumes and the quantity of offsets purchased within the Council - approved per therm cap. The Commodity, Cap and Trade Compliance, Transportation, and Carbon Offset arid - Transportation Charges will fall within the minimum/maximum range set forth in Section C. - Current and historic per therm rates for these Commodity, Cap and Trade Compliance, Offset and Transportation Charges are posted on the City Utilities website.l {End) CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-10-2 CITY OF Effective 71--1-2023 dated -1-202 PALO ALTO ShN G-10-2 Item 14: Staff Report Pg. 76 Packet Pg. 570 of 853 Item 14 Attachment D - Gas Rate Schedules FY24 COMPRESSED NATURAL GAS SERVICE UTILITY RATE SCHEDULE G-10 1 Monthly gas and commodity and volumetric rates are available here, or by visiting https://www.cityofpaloalto. org/files/assets/public/utilities/rates-schedules-for-utilities/monthly-gas-commodity-rates.pdf CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-10-3 CITY OF Effective 71--1-2023 dated -1-202 PALO ALTO ShN G-10-3 Item 14: Staff Report Pg. 77 Packet Pg. 571 of 853 Item 15 Item 15 Staff Report CITY OF PALO ALTO City Council Staff Report From: City Manager Report Type: PUBLIC HEARING Lead Department: Utilities Meeting Date: April 17, 2023 Staff Report:2303-1235 TITLE PUBLIC HEARING: Adoption of a Resolution Approving the Fiscal Year 2024 Electric Utility Financial Plan and Proposed Reserve Transfers, Deactivating Utility Rate Schedule E-HRA, and Amending Utility Rate Schedules E-1, E-2, E -2-G, E- 4, E -4-G, E-4 TOU, E-7, E -7-G, E-7 TOU, E-NSE, and E -EEC; CEQA Status: Not a project under Public Resources Code 15378(b)(5) and exempt under Public Resources Code 15273(a) RECOMMENDATION The Finance Committee and Staff recommend the City Council adopt a Resolution (Attachment A): 1. Approving the FY 2024 Electric Financial Plan (Attachment B); and 2. Approving the following transfers at the end of FY 2023: a. Up to $12 million from the Supply Operations Reserve to the Distribution Operations Reserve; and b. Up to $4.5 million from the Supply Operations Reserve to the Cap and Trade Program Reserve; and 3. Approving the following transfers in FY 2024: a. Up to $10 million from the Supply Operations Reserve to the Electric Special Projects (ESP) reserve; and b. Up to $8 million from the Supply Operations Reserve to the Hydroelectric Stabilization Reserve; and c. Up to $3 million from the Supply Operations Reserve to the Cap and Trade Program Reserve; and 4. Approving the following rate actions for FY 2024 (Attachment C): a. Deactivation of the hydroelectric rate adjuster from customer bills effective July 1, 2023; b. An increase to retail electric rates E-1 (Residential Electric Service), E-2 (Small Non - Residential Electric Service), E-4 (Medium Non -Residential Electric Service), E-4 TOU (Medium Non -Residential Time of Use Electric Service), E-7 (Large Non -Residential Electric Service), and E-7 TOU (Large Non -Residential Time of Use Electric Service) of Item 15: Staff Report Pg. 1 Packet Pg. 572 of 853 Item 15 Item 15 Staff Report 21% effective July 1, 2023; c. An increase to the Export Electricity Compensation (E -EEC -1) rate to reflect 2022 avoided cost, effective July 1, 2023; d. An increase to the Net Surplus Electricity Compensation (E-NSE-1) rate to reflect current projections of FY 2023 avoided cost, effective July 1, 2023; and e. An update to the Residential Master -Metered and Small Non -Residential Green Power Electric Service (E -2-G), the Medium Non -Residential Green Power Electric Service (E- 4 -G), and the Large Non -Residential Green Power Electric Service (E -7-G) rate schedules to reflect modified distribution and commodity components, effective July 1, 2023 EXECUTIVE SUMMARY On March 21, 2023 the Finance Committee reviewed the recommended Council actions above and unanimously recommended them for Council approval. The attached FY 2024 Electric Utility Financial Plan (Attachment B) and proposed rate changes (Attachment C) reflect the Finance Committee (and staff) recommendation. The actions above and rate changes included in Attachment C result in the deactivation of the hydroelectric rate adjuster and a 21% increase to the base electric rates, the net effect of which is a 5% decrease to the customer bill. Approval of this item would result in implementation of the finalized rates for FY 2024, beginning July 1, 2023. BACKGROUND Every year staff presents the Finance Committee with Financial Plans for its Electric, Gas, Water, and Wastewater Collection Utilities and recommends any rate adjustments required to maintain their financial health. These Financial Plans include a comprehensive overview of the utility's operations, both retrospective and prospective, and are intended to be a reference for UAC and Council members as they review the budget and staff's rate recommendations. Each Financial Plan also contains a set of Reserves Management Practices describing the reserves for each utility and the management practices for those reserves ANALYSIS Staff and the Finance Committee propose a set of electric utility rate changes that will decrease bills by 5%. The proposal involves deactivating the hydroelectric rate adjuster while increasing base electric rates 21%, for a net decrease in utility bills of 5%. This is in contrast to the original staff proposal recommended for approval by the UAC in March of this year, which involved a 50% reduction in the hydroelectric rate adjuster and a 14% increase in the base electric rates. The new proposal is made possible by the pending receipt of a $24 million refund from the Bureau of Reclamation of overcharges associated with the Central Valley Project, where the City gets most of its hydroelectric power, due to a successful result in litigation the City participated in against the Federal Bureau of Reclamation over overcharges associated with the Central Valley Project. Item 15: Staff Report Pg. 2 Packet Pg. 573 of 853 Item 15 Item 15 Staff Report Additional detail on the staff proposal is available in the study session staff report on tonight's Council agenda (Staff Report 2304-1247, April 17, 2023) and in the March 21, 2023 Finance Committee staff report (Staff Report 2303-1109).1 FISCAL/RESOURCE IMPACT The resource impact of the recommendations summarized in this report is the continued financial solvency of the electric utility and, as the City is a ratepayer, an increase to General Fund expenses (due to the rate increases) and revenues (due to the General Fund transfer). The estimated FY 2024 revenue impact of the recommendations in this report would be a $12 million increase or 6% compared to FY 2023 levels in the Electric Fund (excluding expected monies to be received from the CVPIA payment). General Fund utility bill costs are expected to increase by $0.14 million as a result of these rate changes. POLICY IMPLICATIONS The proposed electric rate adjustments are consistent with Council -adopted Reserve Management Practices that are part of the Financial Plan and were developed using a cost -of - service study and methodology consistent with the California constitution and industry -accepted cost of service principles. As noted in the Reserves Management Practices (Appendix C of Attachment B), if reserves fall below the minimum guidelines, Council approval is required for a rate plan that requires more than one year to return reserves to within guideline levels. COMMITTEE AND COMMISSION REVIEW Utilities staff presented a different proposal to the UAC on March 1, 2023 which is summarized in the staff report presented to the UAC that evening.2 Staff presented to the Finance Committee on March 21, 2023 a recommendation that Council approve the FY 2024 Electric Utility Financial Plan as follows, as detailed in staff report 2303-1141: At the March 21 Finance Committee meeting, Staff recommended the following transfers at the end of FY 2023: 1. Up to $12 million from the Supply Operations Reserve to the Distribution Operations Reserve; and 2. Up to $4.5 million from the Supply Operations Reserve to the Cap and Trade Program Reserve; and 1Council Staff Report 2303-1109 https://cityofpaloaIto.primegov.com/meeting/document/1854.pdf?name=Item%204%20Staff%20Report 2 Utilities Advisory Commission Staff Report https://www.citvofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes- 2023/03-m a r -2023/03 -01 -2023 -item -4. pdf 3 Finance Committee Staff Report 2303-1141 https://cityofpaloaIto.primegov.com/Portal/Meeting?meetingTemplateld=11228 Item 15: Staff Report Pg. 3 Packet Pg. 574 of 853 Item 15 Item 15 Staff Report In addition, Staff recommended the following transfers in FY 2024: 3. Up to $10 million to the Electric Special Projects (ESP) reserve from the Supply Operations Reserve; and 4. Up to $8 million to the Hydroelectric Stabilization Reserve from the Supply Operations Reserve; and 5. Up to $3 million from the Supply Operations Reserve to the Cap and Trade Program Reserve; and Staff also recommended the following rate actions for FY 2024: 6. Deactivation of the hydroelectric rate adjuster from customer bills effective July 1, 2023; and 7. An increase to retail Electric Utility Rates E-1 (Residential Electric Service), E-2 (Small Non - Residential Electric Service), E-4 (Medium Non -Residential Electric Service), E-4 TOU (Medium Non -Residential Time of Use Electric Service), E-7 (Large Non -Residential Electric Service), and E-7 TOU (Large Non -Residential Time of Use Electric Service) of 21% effective July 1, 2023; and 8. An increase to the Export Electricity Compensation (E -EEC -1) rate to reflect 2022 avoided cost, effective July 1, 2023; and 9. An increase to the Net Surplus Electricity Compensation (E-NSE-1) rate to reflect current projections of FY 2023 avoided cost, effective July 1, 2023; and 10. An update to the Residential Master -Metered and Small Non -Residential Green Power Electric Service (E -2-G), the Medium Non -Residential Green Power Electric Service (E -4- G), and the Large Non -Residential Green Power Electric Service (E -7-G) rate schedules to reflect modified distribution and commodity components, effective July 1, 2023 The Finance Committee unanimously recommended approval of this proposal on March 21, 2023. STAKEHOLDER ENGAGEMENT These recommendations were reviewed by the UAC and Finance Committee in public meetings. The public will be notified of the final rate changes adopted by Council through various channels, including social media, the website, utility bill inserts, and City newsletters. Published in the Palo Alto Daily on Friday, April 7th and 14th, 2023. ENVIRONMENTAL REVIEW The Council's approval of the Electric Financial Plan does not meet the California Environmental Quality Act's (CEQA) definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment, and therefore, no environmental assessment is required. The Council finds that changing electric rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to CEQA, pursuant to California Public Resources Code Sec. 21080(b)(8) and CEQA Guidelines section 15273(a). After reviewing the staff report and all attachments presented to Council, Item 15: Staff Report Pg. 4 Packet Pg. 575 of 853 Item 15 Item 15 Staff Report the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. ATTACHMENTS Attachment A: Electric Resolution FY24 Attachment B: Electric FY 2024 Financial Plan Attachment C: Rate Schedule Combined APPROVED BY: Dean Batchelor, Director Utilities Staff: Micah Babbitt Item 15: Staff Report Pg. 5 Packet Pg. 576 of 853 Item 15 Attachment A - Resolution FY 2024 t A Electric Rates *Yet to be Passed* Resolution No. Resolution of the Council of the City of Palo Alto Approving the Fiscal Year 2024 Electric Utility Financial Plan and Reserve Transfers, Deactivating Utility Rate Schedule E-HRA (Electric Hydro Rate Adjuster), and Amending Utility Rate Schedules E-1 (Residential Electric Service), E-2 (Residential Master -Metered and Small Non -Residential Electric Service), E -2-G (Residential Master- Metered and Small Non -Residential Green Power Electric Service), E-4 (Medium Non -Residential Electric Service), E -4-G (Medium Non -Residential Green Power Electric Service), E-4 TOU (Medium Non -Residential Time of Use Electric Service), E-7 (Large Non -Residential Electric Service), E -7-G (Large Non- Residential Green Power Electric Service), E-7 TOU (Large Non -Residential Time of Use Electric Service), E-NSE (Net Surplus Electricity Compensation Rate), and E -EEC (Export Electricity Compensation) RECITALS A. Each year the City of Palo Alto ("City") regularly assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made part of the Financial Plans. C Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and charges. D. On April 17, 2023, the City Council heard and approved the proposed rate increase at a noticed public hearing. The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. The Council hereby approves the FY 2024 Electric Utility Financial Plan 6056737CUtility Electric Rate Schedules FY24 Electric Financial Plan Item 15: Staff Report Pg. 6 Packet Pg. 577 of 853 Item 15 Attachment A - Resolution FY 2024 t A Electric Rates SECTION 2. The Council hereby approves the following transfers to be made by the end of FY 2023, as described in the FY 2024 Electric Utility Financial Plan: A transfer of up to $12 million from the Supply Operations Reserve to the Distribution Operations Reserve; and b. A transfer of up to $4.5 million from the Supply Operations Reserve to the Cap and Trade Program Reserve; and SECTION 3. The Council hereby approves the following transfers to be made by the end of FY 2024, as described in the FY 2024 Electric Utility Financial Plan: a. A transfer of up to $10 million from the Supply Operations Reserve to the Electric Special Projects (ESP) reserve; and b. A transfer of up to $8 million from the Supply Operations Reserve to the Hydroelectric Stabilization Reserve; and c. A transfer of up to $3 million from the Supply Operations Reserve to the Cap and Trade Program Reserve; and SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-HRA (Electric Hydro Rate Adjuster) is hereby deactivated, effective July 1, 2023. SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-1 (Residential Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-1, as amended, shall become effective July 1, 2023. SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-2 (Residential Master -Metered and Small Non -Residential Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-2, as amended, shall become effective July 1, 2023. SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E -2-G (Residential Master -Metered and Small Non -Residential Green Power Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E -2-G, as amended, shall become effective July 1, 2023. SECTION 8. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-4 (Medium Non -Residential Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-4, as amended, shall become effective July 1, 2023. SECTION 9. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E -4-G (Medium Non -Residential Green Power Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E -4-G, as amended, shall 6056737CUtility Electric Rate Schedules FY24 Electric Financial Plan Item 15: Staff Report Pg. 7 Packet Pg. 578 of 853 Item 15 Attachment A - Resolution FY 2024 t A Electric Rates become effective July 1, 2023. SECTION 10. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-4 TOU (Medium Non -Residential Time of Use Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-4 TOU, as amended, shall become effective July 1, 2023. SECTION 11. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-7 (Large Non -Residential Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-7, as amended, shall become effective July 1, 2023. SECTION 12. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E -7-G (Large Non -Residential Green Power Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E -7-G, as amended, shall become effective July 1, 2023. SECTION 13. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-7 TOU (Large Non -Residential Time of Use Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-7 TOU, as amended, shall become effective July 1, 2023. SECTION 14. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-NSE (Net Surplus Electricity Compensation Rate) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-NSE-1, as amended, shall become effective July 1, 2023. SECTION 15. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E -EEC -1 (Export Electricity Compensation) is hereby amended to read as attached and incorporated. Utility Rate Schedule E -EEC -1, as amended, shall become effective July 1, 2023. SECTION 16. The Council makes the following findings: a. The revenue derived from the adoption of this resolution shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. b. The fees and charges adopted by this resolution are charges imposed for a specific government service or product provided directly to the payor that are not provided to those not charged, and do not exceed the reasonable costs to the City of providing the service or product. // // 6056737CUtility Electric Rate Schedules FY24 Electric Financial Plan Item 15: Staff Report Pg. 8 Packet Pg. 579 of 853 Item 15 Attachment A - Resolution FY 2024 t A Electric Rates SECTION 17. The Council finds that approving the Financial Plan and Reserve transfers does not meet the California Environmental Quality Act's (CEQA) definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment, and therefore, no environmental assessment is required. The Council finds that changing electric rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and CEQA Guidelines Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney 6056737CUtility Electric Rate Schedules FY24 Electric Financial Plan Mayor APPROVED: City Manager Director of Utilities Director of Administrative Services Item 15: Staff Report Pg. 9 Packet Pg. 580 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan FY 2024 ELECTRIC UTILITY FINANCIAL PLAN FY 2024 TO FY 2028 Item 15: Staff Report Pg. 10 Packet Pg. 581 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan FY 2024 ELECTRIC UTILITY FINANCIAL PLAN FY 2024 TO FY 2028 Section 1: Definitions and Abbreviations.................................................................................4 Section 2: Executive Summary and Recommendations............................................................5 Section 2A: Overview of Financial Position..................................................................................5 Section 2B: Summary of Proposed Actions..................................................................................9 Section 3: Detail of FY 2023 Rate and Reserves Proposals......................................................10 Section3A: Rate Design.............................................................................................................10 Section 3B: Current and Proposed Rates...................................................................................11 Section 3C: Bill Impact of Proposed Rate Changes....................................................................13 Section 3D: Proposed Reserve Transfers...................................................................................14 Section 4: Utility Overview....................................................................................................16 Section 4A: Electric Utility History.............................................................................................16 Section 4B: Customer Base........................................................................................................19 Section 4C: Distribution System.................................................................................................19 Section 4D: Cost Structure and Revenue Sources......................................................................20 Section 4E: Reserves Structure..................................................................................................21 Section4F: Competitiveness......................................................................................................22 Section 5: Utility Financial Projections...................................................................................23 Section 5A: Load Forecast.........................................................................................................23 Section 5B: FY 2018 to FY 2022 Cost and Revenue Trends........................................................25 Section 5C: FY 2022 Results.......................................................................................................27 Section 5D: FY 2023 Projections................................................................................................28 Section 5E: FY 2024 - FY 2028 Projections................................................................................28 Section 5F: Risk Assessment and Reserves Adequacy................................................................30 21 Page Item 15: Staff Report Pg. 11 Packet Pg. 582 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Section 5G: Long -Term Outlook.................................................................................................36 Section 5H: Alternative Rate Projections...................................................................................38 Section 6: Details and Assumptions.......................................................................................39 Section 6A: Electricity Purchases...............................................................................................39 Section6B: Operations..............................................................................................................41 Section 6C: Capital Improvement Program(CIP).......................................................................42 Section6D: Debt Service............................................................................................................43 Section6E: Equity Transfer........................................................................................................44 Section 6F: Wholesale Revenues and Other Revenues..............................................................44 Section 6G: Sales Revenues.......................................................................................................45 Section 7: Communications Plan............................................................................................46 Appendices............................................................................................................................48 Appendix A: Electric Utility Financial Forecast Detail................................................................49 Appendix B: Electric Utility Reserves Management Practices...................................................53 Appendix C: Description of Electric utility Operational Activities..............................................58 Appendix D: Samples of Recent Electric Utility Outreach Communications..............................59 31 Page Item 15: Staff Report Pg. 12 Packet Pg. 583 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan CAISO California Independent System Operator CARB California Air Resources Board CIP Capital Improvement Program CPAU City of Palo Alto Utilities Department CPUC California Public Utilities Commission CVP Central Valley Project GWh a gigawatt-hour, equal to 1,000 MWh or 1,000,000 kWh. Commonly used for discussing total monthly or annual electric load for the entire city, or the monthly or annual output of an electric generator. kWh a kilowatt-hour, the standard unit of measurement for electricity sales to customers. kW a kilowatt, a unit of measurement used in reference a customer's peak demand (the highest 15 minute average consumption level in a month), which is used for billing large and mid -size commercial customers. kV a kilovolt, one thousand volts, a unit of measurement of the voltage at which a section of the distribution system operates. The transmission system operates at 115-500 kV, and this is lowered to 60 kV in the sub -transmission section of the Electric Utility's distribution section, then 12 kV or 4 kV in the rest of the distribution system, and finally 120, 240, or 480 volts at the electric outlet. MWh a megawatt -hour, equal to 1,000 kWh. Commonly used for measuring wholesale electricity purchases. MW a megawatt, equal to 1,000 kW. Commonly used when discussing maximum electricity demand for all customers in aggregate. PG&E Pacific Gas and Electric REC Renewable Energy Certificate RPS Renewable Portfolio Standard Sub -transmission System: The section of the Electric Utility's distribution system that operates at 60 kV and which interfaces with PG&E's transmission system. Transmission System: Sections of the electric grid that operate at high voltages, generally 115 kV or more. The voltage at the intersection of the Electric Utility's distribution system and PG&E's transmission system is 115 kV. The Electric Utility does not own or operate any transmission lines. UCC Utility Control Center SCADA Supervisory Control and Data Acquisition system, the system of sensors, communications, and monitoring stations that enables system operators to monitor and operate the system remotely. WAPA, or Western: Western Area Power Administration, the agency that markets power from CVP hydroelectric generators and other hydropower owned by the Bureau of Reclamation. a Item 15: Staff Report Pg. 13 Packet Pg. 584 of 853 This document presents a Financial Plan for the City of Palo Alto (City) Electric Utility for the next five-year forecast, FY 2024 - 2028. This Financial Plan describes how revenues will cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term and includes measures to mitigate and manage those risks. SECTION 2A: OVERVIEW OF FINANCIAL POSITION From July 2019 through April 2022 the City did not increase rates, to mitigate the economic impact of the COVID-19 pandemic on residents and businesses. In that time supply and distribution expenses increased $50 million (30%). The expense increases combined with pandemic -related electricity sales revenue declines created a $43 million shortfall in FY 2022. Some of this was related to the impacts of extreme drought and rising electricity market prices, and in response, the City activated the hydroelectric rate adjuster (E-HRA) in April 2022. In 2023 the City began increasing base rates to begin recovering costs, starting with a 5% rate increase on July 1, 2022. The intent was to use loans from the Electric Special Projects Reserve and what Operations Reserves remained to phase in rate increases gradually. But in late 2022 electricity market prices increased at unprecedented levels, leading to the need to increase the hydroelectric rate adjuster on January 1, 2023 to match the cost of replacing hydroelectric power with market power. Costs are projected to exceed revenues again in FY 2023, leading to further depletion of reserves. This forecast assumes some decrease in power prices after this year, but prices are expected to continue to remain elevated over FY 2022 and earlier levels based on forward market price curves developed by OTC Global Holdings, an independent commodity broker. Some recovery of hydroelectric generation is forecasted in FY 2024 based on the Western Area Power Administration's current forecast, but not to normal levels given the dry ground and low reservoir levels, which are expected to absorb a significant share of precipitation even if it is above average. Normal levels of hydroelectric generation are not forecasted until FY 2026, assuming normal rainfall in the winter of 2022/2023 and 2023/2024. The forecast assumes it takes multiple years to recover because reservoirs can take multiple seasons to fill and return to normal operations based on historical experience. To reduce hydroelectric -related volatility in the future, staff is now making its rate projections assuming that long-term "normal" production from the City's hydroelectric resources is about 80% of historical average levels. 5IPage Item 15: Staff Report Pg. 14 Packet Pg. 585 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Since presenting the rate proposal and financial plan to the UAC on iarcn i, LUL, new information has arisen that materially improves the electric utility's financial position. Staff expects to receive a $24 million payment in the coming weeks from successful litigation against the Bureau of Reclamation for overcharges related to power purchased from the Central Valley Project. The litigation was filed in 2014 by the Northern California Power Agency (NCPA) and its members (NCPA, City of Redding and City of Roseville v. United States; Case No. 14-817C)1. Based on the information, staff revised the rate proposal provided to the UAC and proposes a net average rate reduction of 5%. The net rate reduction results from the combination of deactivating the hydroelectric rate adjuster (HRA) and increasing the base rates by 21%. The previous plan presented to UAC reduced the HRA by 50% and increased the base rates by 14%, resulting in a negligible average rate change. However, the $24M damages repayment can be used to replenish reserves with some funds available for rate stabilization, providing adequate reserves to manage hydroelectric risk and enabling future rate increases to be phased over a slightly longer period. Significantly for this year's rate proposal, the replenished reserves enable the HRA to be removed entirely. Over the forecast period other costs are increasing as well. Cost increases include: • Significant increases in transmission costs • Significant increases in capital investment to replace aging infrastructure • Increased operations costs • Debt service costs for grid modernization improvements and investments in fiber infrastructure to support AMI. Long-term costs are expected to continue to increase, so the 5% drop in customer bills forecast for July 1, 2023 is projected to be offset with a 5% increase in FY 2025 and another increase of 5% in FY 2026 as shown in table 3, even if hydroelectric and power market conditions improve. There are some significant uncertainties in this forecast. Load is assumed to stay fairly flat in this forecast, with long-term declines in electric load offset by some load growth due to electrification and potential new data centers. If load growth exceeds expectations, it could improve this forecast and reduce the size of future rate increases. On the other hand, if costs for electrification -related grid modernization and electrification programs exceed forecasts, which is quite possible given the high uncertainties involved in current cost projections, it could offset the benefits of increased load. The Electric Utility's costs are projected to decline by about 2% per year from FY2023 levels, before then increasing again in FY2026, for an average of 1% increase from FY 2024 - 2028, as shown in Table 1. As noted above most of the costs are related to electric supply purchases, which continue to increase mainly due to rising transmission costs over the span of the financial plan, but also higher commodity costs in the near term due to low hydro conditions and higher 1 NCPA is a Joint Powers Authority with sixteen public electric utility members, including the City of Palo Alto. 61 Page Item 15: Staff Report Pg. 15 Packet Pg. 586 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan market prices. Overall supply costs are projected to increase at an estimat a u io per ye r on average from FY2023 levels, which are estimated to be the highest on record. Operations and maintenance costs are about 30% of total costs and are projected to increase by about 1.5% per year on average due to both inflation as well as salary and benefits increases. Capital improvement costs are projected to fall slightly in the short term as the Smart Grid technology project and rebuilding of the Foothill distribution system spending declines from its peaks in FY2022 and FY2023, then stabilize just over $20 million a year thereafter. Ongoing projects will include rebuilds of existing underground districts as well as substation improvements and voltage conversion projects. As shown in Table 1, debt service payments for grid modernization and fiber begin in FY2025 and increase to $9.6m in FY2028. These new bonds and investments are expected to commence in FY2024 as shown in Table 1.1 below. Table 1: Electric Utility Expenses for FY 2022 to FY 2028 Expenses ($000) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 (act) (est) Power Supply Purchases 112,525 117,900 118,019 115,638 118,069 118,851 121,028 Operations 61,948 69,337 68,329 65,303 66,547 67,638 64,877 Capital Projects 34,525 28,991 25,508 24,610 22,644 22,716 22,730 Debt Service from Grid Modernization and Fiber 2,032 3,632 6,432 9,632 Projects TOTAL 208,998 216,228 211,856 207,583 210,892 215,637 218,268 Table 2.1: Electric Utility Investments FY 2024 to FY 2028 Expenses ($000) FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Grid Modernization 25,000 25,000 50,000 50,000 50,000 Projects Electric Utility Fiber 13,000 0 0 0 0 Backbone TOTAL 38,000 25,000 50,000 50,000 50,000 Table 2 below shows the proposed rate projections alongside the current rates with the hydroelectric rate adjuster. While base rates increase by 21%, the removal of the hydroelectric rate adjuster means that the total effective rate for FY2024 is 5% lower than the current total effective rate. 71 Item 15: Staff Report Pg. 16 Packet Pg. 587 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Table 3: Projected Electric Rates, FY 2024 to FY 2028 Current Proposed Projected Mid -Year Projection FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 System Average Base Rates $0.171 $0.208 $0.217 $0.227 $0.237 $0.249 ($/kWh) Proposed % Base Rate Increase 21% 5% 5% 5% 5% Hydroelectric Rate Adjuster $0.048 Inactive Inactive Inactive Inactive Inactive ($/kWh) Proposed % HRA Decrease -100% 0% 0% 0% 0% Total System Average Rate ($/kWh) $0.219 $0.208 $0.217 $0.227 $0.237 $0.249 (with Hydroelectric Rate Adjuster) % Change in Total System Average Rate - 5 /0 o 5% 5% 5% 5% The rate changes above are made possible bythe $24 million refund from the successful litigation against the Bureau of Reclamation for overcharges related to power purchases from the Central Valley Project. Staff is proposing to use $10 million of the funds to repay a loan from the Electric Special Projects Reserve. • In FY 2018 Council approved (Staff Report 81862), a $10 million transfer from the Electric Special Projects (ESP) Reserve to the Operations Reserve to mitigate higher supply costs due to the drought, the costs of new renewable energy projects coming online and increasing transmission charges. $5 million was repaid in FY 2020 • In FY 2022 Council approved (Staff Report 13361, June 13, 2022), a $5 million transfer from the ESP Reserve to the Operations Reserve to avoid rate increases exceeding 5%. Staff proposes using $8 million of the $24 million refund payment from the Central Valley Project litigation to fund the balance of the Hydroelectric Stabilization Reserve, bringing the balance above the minimum requirement and eliminating the need for the hydroelectric rate adjuster. Table 4 shows the projected reserve transfers over the forecast period. 2 https://www.cityofpaIoaIto.org/files/assets/public/agendas-minutes-reports/reports/city- manager-reports-cmrs/year-archive/2017/8186.pdf 81 Page Item 15: Staff Report Pg. 17 Packet Pg. 588 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Table 4: Reserves Starting and Ending Balances, Revenues, Expenses, rom) Reserves, Operations and Capital (CIP) Reserve Guideline Levels for FY 2023 to FY 2028 ($000) FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Starting Reserve Balances 1 Supply Operations 27,197 14,378 14,003 19,933 27,680 33,136 2 Distribution Operation 2,945 5,077 7,208 10,124 10,673 12,304 3 CIP 880 880 880 880 5,880 10,880 4 Electric Special Projects 24,649 17,649 24,649 24,649 26,649 28,649 5 Hydro Stabilization 400 400 8,400 8,400 8,400 8,400 6 Low Carbon Fuel Standard 7,236 6,214 5,142 4,574 4,121 3,668 7 Cap and Trade Program 1,189 5,612 8,577 11,307 11,307 11,307 Revenues 8 Supply 134,629 141,976 132,031 136,751 134,384 135,204 9 Distribution 60,314 79,398 86,837 94,660 100,856 107,187 Transfers a -From Supply Operations to Distribution (12,000) b -From Supply Operations to Cap and Trade Program (4,423) (2,965) (2,730) c -Into Supply Operations from ESP - a+b+c = 10 Supply Operations Total (16,423) (12,965) (2,730) (2,000) (2,000) (2,000) 11 Distribution Operations 12,000 - - (5,000) (5,000) (5,000) 12 CIP - - - 5,000 5,000 5,000 13 Electric Special Projects - 10,000 - 2,000 2,000 2,000 14 Hydro Stabilization - 8,000 - - - - 15 Low Carbon Fuel Standard - - - - - - 16 Cap and Trade Program 4,423 2,965 2,730 - - - Capital Program Contribution 17 Distribution Operations 18 CIP Reserve Expenses 19 Supply Funded Expenses (131,025) (129,386) (123,371) (127,004) (126,927) (131,698) 20 Distribution Non-CIP Expenses (48,191) (54,759) (58,311) (63,467) (67,510) (78,601) 21 Planned CIP (21,991) (22,508) (25,610) (25,644) (26,716) (25,730) 22 ESP Funded (7,000) (3,000) - - - (10,000) 23 Hydro Funded - - - - - - 24 LCFS Funded (1,022) (1,072) (568) (453) (453) - Ending Reserve Balance 1+8+10+19 Supply Operations 14,378 14,003 19,933 27,680 33,136 34,643 2+9+11+17+20+21 Distribution Operation 5,077 7,208 10,124 10,673 12,304 10,160 3+12+18 CIP 880 880 880 5,880 10,880 15,880 4+13+22 Electric Special Projects 17,649 24,649 24,649 26,649 28,649 20,649 5+14+23 Hydro Stabilization 400 8,400 8,400 8,400 8,400 8,400 6+15+24 Low Carbon Fuel Standard 6,214 5,142 4,574 4,121 3,668 3,668 7+16 Cap and Trade Program 5,612 8,577 11,307 11,307 11,307 11,307 Operations Reserve Guidelines (Supply) 25 Minimum 21,749 21,765 20,739 21,164 21,326 21,706 26 Maximum 43,499 43,530 41,478 42,328 42,652 43,412 Operations Reserve Guidelines (Distribution 27 Minimum 9,057 8,913 9,458 9,975 10,658 10,788 28 Maximum 15,785 15,419 16,437 17,396 18,687 18,867 CIP Reserve Guidelines 29 Minimum 4,938 5,174 5,685 4,215 4,392 5,873 30 Maximum 24,688 25,869 28,425 31,223 34,288 34,288 91 'age Item 15: Staff Report Pg. 18 Packet Pg. 589 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan SECTION 2B: SUMMARY OF PROPOSED ACTIONS Staff recommends the City Council adopt a Resolution: 1. Approving the Fiscal Year (FY) 2024 Electric Financial Plan; 2. Approving the following transfers at the end of FY 2023: a. Up to $12 million from the Supply Operations Reserve to the Distribution Operations Reserve; and b. Up to $4.5 million from the Supply Operations Reserve to the Cap and Trade Program Reserve; and 3. Approving the following transfers in FY 2024: a. Up to $10 million from the Supply Operations Reserve to the Electric Special Projects (ESP) reserve; and b. Up to $8 million from the Supply Operations Reserve to the Hydroelectric Stabilization Reserve; and c. Up to $3 million from the Supply Operations Reserve to the Cap and Trade Program Reserve; and 4. Approving the following rate actions for FY 2024: a. Deactivation of the hydroelectric rate adjuster from customer bills effective July 1, 2023; b. An increase to retail electric rates E-1 (Residential Electric Service), E-2 (Small Non - Residential Electric Service), E-4 (Medium Non -Residential Electric Service), E-4 TOU (Medium Non -Residential Time of Use Electric Service), E-7 (Large Non - Residential Electric Service), and E-7 TOU (Large Non -Residential Time of Use Electric Service) of 21% effective July 1, 2023; c. An increase to the Export Electricity Compensation (E -EEC -1) rate to reflect 2022 avoided cost, effective July 1, 2023; d. An increase to the Net Surplus Electricity Compensation (E-NSE-1) rate to reflect current projections of FY 2023 avoided cost, effective July 1, 2023; and e. An update to the Residential Master -Metered and Small Non -Residential Green Power Electric Service (E -2-G), the Medium Non -Residential Green Power Electric Service (E -4-G), and the Large Non -Residential Green Power Electric Service (E -7- G) rate schedules to reflect modified distribution and commodity components, effective July 1, 2023. SECTION 3A: RATE DESIGN The Electric Utility's rates are evaluated and implemented in compliance with cost of service requirements set forth in the California Constitution and applicable statutory law. This Financial Plan is based on staff's assessment of the financial position of the Electric Utility and updated using the methodology from the "City of Palo Alto Electric Cost of Service and Rate Study"3 3 Staff Report 6857 http://www.citVofpaloalto.org/civicax/filebank/documents/52274 10 I Page Item 15: Staff Report Pg. 19 Packet Pg. 590 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan drafted by EES Consulting, Inc. in 2015/16. The COSA is also based on desig pted by Council on September 15, 2015 (Staff Report 6061). SECTION 3B: CURRENT AND PROPOSED RATES The City adopted the current rates effective July 1, 2022, when CPAU increased electric rates by 5%. Staff held back further rate increases during the COVID-19 pandemic and instead drew down reserves. While using reserves mitigated larger increases during the pandemic, costs have continued to rise and higher rates are needed to recover costs. In order to move towards full cost recovery, staff recommends a rate increase to all customer classes of 21%. Staff is also engaging the services of consultants to review and revise the Electric Utility's Cost of Service study and rates. This study will examine how costs are allocated among the residential and commercial classes and realign them if needed, and will develop cost -based rates for several emerging groups, such as: all -electric customers, DC -fast charging facilities, and micro -grid customers. The current rates and proposed FY 2024 rates are reflected in Table 4 below: 11 1 ag' Item 15: Staff Report Pg. 20 Packet Pg. 591 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Table 5: Current and Proposed Electric Rates Current Rates Proposed Rates (7/1/2023) Change $ Electric Hydro Rate Adjuster E-HRA ($/kWh) 0.04800 0.00000 -0.04800 I -100% E-1 (Residential) Tier 1 Energy ($/kWh) 0.14445 0.17522 0.03077 21% Tier 2 Energy ($/kWh) 0.20335 0.24666 0.04331 21% Minimum Bill ($/day) 0.34470 0.41812 0.07342 21% E-2 & E -2-G (Small Non -Residential) Summer Energy ($/kWh) 0.21896 0.26560 0.04664 21% Winter Energy ($/kWh) 0.15355 0.18626 0.03271 21% Minimum Bill ($/day) 0.87770 1.06465 0.18695 21% E-4 & E -4-G (Medium Non -Residential) Summer Energy ($/kWh) 0.13490 0.16363 0.02873 21% Winter Energy ($/kWh) 0.10443 0.12667 0.02224 21% Summer Demand ($/kW) 30.36000 36.82668 6.46668 21% Winter Demand ($/kW) 19.92000 24.16296 4.24296 21% Minimum Bill ($/day) 18.13790 22.00127 3.86337 21% E-7 & E -7-G (Large Non -Residential) Summer Energy ($/kWh) 0.12004 0.14561 0.02557 21% Winter Energy ($/kWh) 0.08125 0.09856 0.01731 21% Summer Demand ($/kW) 32.22000 39.08286 6.86286 21% Winter Demand ($/kW) 17.90000 21.71270 3.81270 21% Minimum Bill ($/day) 51.56960 62.55392 10.98432 21% Net Energy Metering Compensation Rates The City operates two Net Energy Metering (NEM) programs. Solar customers served by the City of Palo Alto's (CPAU) original NEM program, also called NEM 1, are compensated at retail rates for electricity they export to the grid, and solar customers served by the NEM successor program, or NEM 2 (effective after the City reached its NEM 1 cap at the end of 2017), are compensated at the Export Electricity Compensation (EEC -1) rate for exported electricity. Customers on the NEM 1 program who have chosen to have the value of any annual net generation they produced over the past 12 months credited back to their account do so under the Net Metering Net Surplus Electricity Compensation (E-NSE) rate. The Net Surplus Electricity 12IPage Item 15: Staff Report Pg. 21 Packet Pg. 592 of 853 Compensation rate represents the value of the City's avoided cost Item 15 Attachment B - FY24 Electric Utility Financial Plan or vaiue or customer - generated electricity in Palo Alto, including compensation for the energy, avoided capacity charges, avoided transmission and ancillary service charges, avoided transmission and distribution (T&D) losses, and renewable energy credits (RECs), or environmental attributes. Staff proposes increasing the E-NSE-1 rate to $0.1535/kWh based on updated avoided cost calculations for 2022 reflecting the greatly increased electricity market prices expected to continue into the future. Under the City's NEM successor program, participating solar customers in Palo Alto are billed at the current retail rate for electricity drawn from the grid, and receive a credit for electricity they export to the grid at the Export Electricity Compensation (EEC -1) rate. This compensation rate also reflects the avoided cost or value of customer -generated electricity in Palo Alto, calculated on a forward -looking basis for the upcoming fiscal year. As shown in the table below, the current avoided cost for solar generation in Palo Alto is 10.45 cents/kWh, which is significantly lower than the avoided cost on the proposed NEM compensation rate (16.85 cents/kWh). This increase in the overall avoided cost is driven by greatly increased electricity market prices. Table 5: NEM Buyback Rates — Current vs. Proposed Rate Current $/kWh Proposed $/kWh Export Electricity (E -EEC) $0.1045 $0.1685 Net Surplus Electricity (E-NSE) $0.1026 $0.1535 Palo Alto Green (PAG) Program The Palo Alto Green (PAG) program provides CPAU's commercial customers an opportunity to voluntarily pay a premium to receive renewable electricity credits to match their energy usage. Under this program, CPAU staff purchase and retire Green -e certified renewable energy certificates (RECs) in the wholesale market on behalf of PAG customers. This enables participating commercial customers to claim credit for the REC purchases in order to satisfy their corporate sustainability goals and meet federal "green certification" requirements. The PAG charge is a pass -through charge; the revenue collected through the PAG rate premium is intended to fully recover the costs of administering the program. The PAG program has very low overhead costs (e.g., the cost of hiring an auditor to carry out an annual Green -e verification process for the program), so the vast majority of the program cost is the purchase cost of the RECs. In the past year the wholesale cost of Green -e certified RECs in the Western US market has remained relatively flat at around $6.5/REC. As such, the PAG rate premium should remain at $7.5 per 1,000 kWh block (.75 cents/kWh), enough to cover the cost of the RECs and overhead. The PAG rate premium is reflected on the Residential Master -Metered and Small Non -Residential Green Power Electric Service (E -2-G), the Medium Non -Residential Green Power Electric Service (E -4-G), and the Large Non -Residential Green Power Electric Service (E -7-G) rate schedules. 13IPage Item 15: Staff Report Pg. 22 Packet Pg. 593 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan SECTION 3C: BILL IMPACT OF PROPOSED RATE CHANGES Table 6 shows the impact of the proposed July 1, 2023 rate changes on the residential and non- residential bills for various consumption levels. For more on comparisons of rates with surrounding agencies, see Section 4F: Competitiveness below. 141 Item 15: Staff Report Pg. 23 Packet Pg. 594 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Table 6: Impact of Proposed Electric Rate Changes on Customer Bills Bill under Change Peak Bill Under Rate Usage Demand Current Rates Proposed Schedule (kWh/mo) (kW-mo) Rates 7/1/23 ($/mo) $/mo ($/mo) 300 N/A $58 $53 ($5) -9% (Summer Median) N/A $72 $66 ($6) -8% 365 E-1 (Winter (Residential) Median) N/A $94 $88 ($6) -7% 453 650 N/A $144 $137 ($7) -5% 1200 N/A $282 $272 ($10) -3% E-2 (Small Non- 1,000 N/A $234 $226 ($8) -4% Residential) 160,000 274 $33,715 $31,580 ($2,135) -6% E-4 (Medium Non - Residential) 500,000 856 $105,352 $98,680 ($6,672) -6% E-7 (Large Non- 2,000,000 3,424 $383,095 $348,247 ($34,849) -9% Residential SECTION 3D: PROPOSED RESERVE TRANSFERS In FY 2018, Council approved a $10 million loan from the ESP Reserve. Prior financial plans assumed full repayment by FY 2025, but with the $24 million refund payment from the successful litigatoin against the Bureau of Reclamation, staff is proposing to repay the loan early. Staff proposes using $8 million of the $24 million payment to increase the balance of the hydro stabilization reserve from the current level of $400,000 above the minimum guideline level, but still below the target level of $19 million. Given the drought over the prior 3 years and FY 2023 hydroelectric projections currently remaining fairly low, there is an estimated supply cost increase of $8-$10 million in FY 2023 compared to FY 2022. Because of this, Council approved an increase to the hydroelectric rate adjuster effective January 1, 2023 to bring in additional revenue to cover increased supply costs. Staff proposes to eliminate the HRA mechanism in FY 2024 given the $8 million that can be transferred into the hydro stabilization reserve. 15IPage Item 15: Staff Report Pg. 24 Packet Pg. 595 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan The remaining $6 million would be added to the Supply and Distribution Op rations icesery and used to phase in the rate increases needed to stabilize those reserves slightly more gradually over the forecast period. There are repayments of $2 million per year from FY 2026 through FY 2030 to the ESP Reserve for loans to the electric, gas, and fiber utilities for AMI investments. The City maintains a Cap and Trade Program Reserve within the Electric fund to hold revenues from the sale of carbon allowances freely allocated by the California Air Resources Board to the City's electric utility. Cap and Trade Program revenues are provided to the electric utility to support a wide variety of carbon reducing activities, including local decarbonization. Until the establishment of the REC Exchange program, adopted by Council in August 2020 (Staff Report #11556),4 all of this revenue was spent on purchasing renewable energy. In accordance with Council's August 2020 direction, the City has began exchanging certain types of renewable energy to take advantage of market conditions to reduce supply costs, fund electric utility programs and capital investment, and raise funds for local decarbonization. For FY 2021 and FY 2022 Council directed that 1/3 of the revenue be used for local decarbonization and 2/3 for rate reduction. On December 12, 2022 Council approved continuation of the program with 100% of revenue going to local decarbonization. In accordance with Council policy, staff will fund the Cap and Trade Program Reserve with unspent revenues from the sale of carbon allowances freely allocated to the electric utility in an amount equal to 100% of the FY 2022 Renewable Energy Credit (REC) Exchange program revenues, currently estimated to be between $2.7 million and $4.5 million going forward, for future local decarbonization projects. Figure 8 (for Supply Fund Reserves) and Figure 9 (for Distribution Fund Reserves) in Section 5E: FY 2022 - FY 2026 Projections show the impact of these transfers on reserves levels. Table 7 shows the projected balance of each of the Electric Utility reserves for the period covered by this Financial Plan. See also: Appendix A: Electric Utility Financial Forecast Detail 4 https://www.cityofpaloalto.org/civicax/filebank/documents/78046 5 https://cityofpaloaIto.primegov.com/Portal/Meeting?meetingTemplateld=8713 Agenda Item 3, Utilities Advisory Commission Recommend the City Council Affirm the Continuation of the REC Exchange Program, Staff Report #14375 16 I P a g e Item 15: Staff Report Pg. 25 Packet Pg. 596 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Table 7: End of Fiscal Year Electric Utility Reserve Balances for FY 2022 to F LUL� Ending Reserve Balance ($000) FY 2022 (Act) FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Re -appropriations 120 120 120 120 120 120 120 Commitments 6,679 6,679 6,679 6,679 6,679 6,679 6,679 Low Carbon Fuel Standard (LCFS) 7,236 6,214 5,142 4,574 4,121 3,668 3,668 Cap and Trade 1,189 5,612 8,577 11,307 11,307 11,307 11,307 Underground Loan 727 727 727 727 727 727 727 Public Benefits 3,891 4,608 5,380 6,175 6,910 7,585 8,200 Special Projects 24,649 17,649 24,649 24,649 26,649 28,649 30,649 Hydro Stabilization 400 400 8,400 8,400 8,400 8,400 8,400 Capital 880 880 880 880 5,880 10,880 15,880 Rate Stabilization - - - - - - - Distribution and Supply Operations 30,142 19,455 21,211 30,057 38,354 45,440 44,802 Unassigned 845 - - - - - - TOTAL 76,757 62,344 81,765 93,569 109,147 123,455 130,432 This section provides an overview of the utility and its operations. It is intended as general background information to help readers better understand the forecasts in Section 5: Utility Financial Projections and Section 6: Details and Assumptions. SECTION 4A: ELECTRIC UTILITY HISTORY On January 16, 1900, Palo Alto began operating its own electric system. One of the earliest sources of Palo Alto's electricity was a steam engine, which was later replaced by a diesel engine in 1914 due to rising fuel oil costs. As the population and the demand for electricity continued to grow, CPAU connected to PG&E's system in the early 1920s. Power from PG&E proved more economical than the diesel engines, and by the late 1920s CPAU was using its own diesel engines only during peak demand periods. At that time CPAU owned 45 miles of distribution lines and the City used 9.7 GWh annually, less than 1% of today's annual consumption. The diesel engines remained in operation until 1948, when they were retired. From 1950 to 1970 electric consumption in Palo Alto grew dramatically, just as it did throughout the rest of the country. In 1970 total annual sales were 602 GWh, twenty times the sales in 1950 (30 GWh). Some of that growth was related to a development boom in Palo Alto, which doubled the number of customers. Some was related to the proliferation of electric appliances, as evidenced by the fact that residential customers were using three times more electricity in 1970 than they had been in 1950. But the most notable factor was the growth of industry in Palo Alto during that time. By 1970, commercial customers were using 20 times more electricity per 17 I P a g e Item 15: Staff Report Pg. 26 Packet Pg. 597 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan customer than they had been in 1950. These decades also saw several o ner notaoie events, including: • 1964: CPAU entered into a favorably priced 40 -year contract with the Federal Bureau of Reclamation to purchase power from the Central Valley Project (CVP), a contract which later was managed by the Western Area Power Administration (WAPA) an office of the Department of Energy created in the 1970s to market power from various hydroelectric projects operated by the Federal Government, including the CVP. • 1965: The City began a long-term program to underground its overhead utility lines (Ordinance 2231). • 1968: Palo Alto joined several other small municipal utilities to form the Northern California Power Agency (NCPA), a joint action agency intended to make the group less vulnerable to actions by private utilities and to enable investment in energy supply projects. Palo Alto's first new power plant investment in over 50 years came in the mid -80s. Palo Alto joined other NCPA members to invest in the construction and operation of the Calaveras Hydroelectric Project on the Stanislaus River in the Sierra -Nevada Mountains. The project commenced operation in 1990. The 1980s also saw an increased focus on infrastructure maintenance. In 1987 the UCC was built to house the terminals for a new SCADA system, which enabled utility staff to monitor the distribution system in real time, improving response time to outages. CPAU also commenced a preventative maintenance and planned replacement program for its underground system in the early 1990s. In the early 1990s the CPUC issued a ruling to deregulate the electric industry in California, and in 1996 the State legislature passed Assembly Bill 1890, which, among other things, created the California Independent System Operator (CAISO) to operate the transmission system and the Power Exchange to facilitate wholesale energy transactions. This restructuring was anticipated to bring lower costs to consumers, and while CPAU was not required to participate in the industry restructuring, in 1997 the Council approved a Direct Access Program for the Electric Utility6 that enabled CPAU to sell electricity outside its service territory and allowed customers within CPAU's service territory to choose other providers. The utility unbundled its electric rates, creating separate supply and distribution components, which would enable customers to receive only distribution service while purchasing the electricity itself from another provider. The energy crisis in 2000 to 2001 led to the suspension of direct access by the CPUC in September 2001 as wholesale energy prices skyrocketed. The Electric Utility was less impacted than other utilities by the 2000 to 2001 energy crisis thanks to the Calaveras project and its contract with WAPA for CVP hydropower. In 2001 CPAU began planning for the impacts associated with the new terms of its contract with WAPA, set to take effect in 2005. The previous contract had provided 90% of Palo Alto's power supply at favorable rates, and PG&E, as a party to the contract, had provided supplemental power 6 Implementation of Direct Access for Electric Utility Customers, CMR:460:97, December 1, 1997 18 I P a g e Item 15: Staff Report Pg. 27 Packet Pg. 598 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan to balance the monthly and annual variability of CVP generation. The new co tract wouia pr vide only a third of Palo Alto's requirement, and the monthly and annual variability in CVP generation would be passed directly to Palo Alto. As a result, electric supply costs would increase and CPAU needed to more actively manage its supply portfolio. CPAU began purchasing power from marketers and also investigated building a power plant in Palo Alto or partnering in the development of a gas -fired power plant elsewhere. Climate change was also becoming more of a concern to the community, and gradually CPAU shifted its focus to the procurement of renewable energy. In 2002 the Council adopted a goal of achieving 20% of its energy supply from renewables by 2015. Subsequently the City signed its first contract for renewable power, a contract for energy from a wind generator commencing deliveries in 2005. In 2011 the renewable energy goal was increased to at least 33% by 2015, and in 2013 the City adopted a plan to make its electric supply 100% carbon neutral, which it achieves through the combination of its carbon - free hydroelectric supplies, purchases of long-term renewable energy supplies, and short-term RECs to meet the balance of its needs. 19I'-' Item 15: Staff Report Pg. 28 Packet Pg. 599 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan SECTION 4B: CUSTOMER BASE The City of Palo Alto's Electric Utility provides electric service to the Figure 1: Customer Consumption By Class (FY 2022) residents, businesses, and other electric customers in Palo Alto. There 18% are roughly 29,700 customers connected to the electric system, Residential 25,600 (86%) of which are residential 6% and 4,100 (14%) of which are non- OSmallComm. residential. Residential customers ❑ Med. Comm. consumed 154 gigawatt-hours (GWh) 7 Large Comm. in FY 2022, approximately 20% of the electricity sold, while non-residential 32% customers consumed 80% or 659 GWh. Residential customers use electricity primarily for lighting, refrigeration, electronics, and air conditioning.' Non-residential customers use the majority of their electricity for cooling, ventilation, lighting, office equipment (offices), cooking (restaurants), and refrigeration (grocery stores).8 As shown in Figure 1, large customer loads represent the biggest proportion of sales for the Electric Utility. The proportion of sales to large vs. small customers is greater than for the City's other utilities. For example, the largest customers (the 70 customers on the E-7 rate schedule) account for around 44% of CPAU's sales. The next largest customer group (the 890 non- residential customers on the E-4 rate schedule) represents another 30% of sales. In total, that means that about 3% of customers account for nearly three quarters of the electric load. SECTION 4C: DISTRIBUTION SYSTEM The Electric Utility receives electricity at a single connection point with PG&E's transmission system. From there the electricity is delivered to customers through nearly 472 miles of distribution lines, of which 211 miles (45%) are overhead lines and 261 miles (55%) are underground. The Electric Utility also maintains nine substations, roughly 2,000 overhead line transformers, around 1,100 underground and substation transformers, and the associated electric services (which connect the distribution lines to the customers' homes and businesses). These lines, substations, transformers, and services, along with their associated poles, meters, and other associated electric equipment, represent the vast majority of the infrastructure used to deliver electricity in Palo Alto. Source: Residential Appliance Saturation Survey, California Energy Commission, 2010 8 Source: Statewide Commercial End Use Study, California Energy Commission report, 2006. 20 I P a g e Item 15: Staff Report Pg. 29 Packet Pg. 600 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan SECTION 4D: COST STRUCTURE AND REVENUE SOURCES As shown in Figure 2, electric commodity purchases accounted for roughly 54% of the Electric Utility's Figure 2: Cost Structure (FY 2022) costs in FY 2022. Operational costs 16% represented roughly 30%, and L Commodity capital investment was responsible Supply for the remaining 16%. CPAU's non- ___ _____ _-_ C Operations hydro long-term commodity supply = = _ is heavily dependent on long-term ______ Capital contracts which have little variability _____- in price. On average, costs for these 30% long-term contracts are not predicted to increase as quickly as operations and CIP costs, and will steadily become a smaller proportion of the Electric Utility's costs. Staff projects commodity supply costs to be approximately 55% of total costs in FY 2028. While average year purchase Figure 3: costs for the electric utility are predictable due to its 200% long-term contracts, variability in hydroelectric 150% generation can result in increased or decreased costs. 100% This is by far the largest 50% source of variability the utility faces. Figure 3 shows 0% the difference in the annual load resource balance under high, projected, and low hydroelectric generation scenarios for FY 2022. Additional costs associated with a very low generation scenario can range from $8-20 million per year, depending on market prices. For the current hydroelectric risk assessment see Section 5F: Risk Assessment and Reserves Adequacy. Hydroelectric Variability as a % of Load (FY 2022) FL' Surplus Hydro (sales; Market Power/RECs liiiiiiiiiiii■ Hydro Renewables Low Hydro Average High g Hydro Load Figure 4: Revenue Structure (FY 2022) O Sales of Electricity O Other Revenue X79% As shown in Figure 4 the Electric Utility receives 79% of its revenue from sales of electricity and the remainder from connection fees, interest on reserves, cost recovery transfers from other funds for shared services provided by the electric utility, accounting entries that reflect things such as CPAU's participation in a pre -funding 21 I Page Item 15: Staff Report Pg. 30 Packet Pg. 601 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan program associated with its contract with WAPA, revenues from sales of surpius nyaroei ctric energy during wet years, as well as LCFS and Cap and Trade revenues. AppendixA: Electric Utility Financial Forecast Detail shows more detail on the utility's cost and revenue structures. As discussed in Section 4B: Customer Base, nearly three quarters of the utility's electricity sales are to the 960 largest customers, which provide a similar share of the utility's revenue stream. About 25% of the utility's revenue comes from peak demand charges on large non-residential customers. Due to moderate weather and the prevalence of natural gas heating, however, loads (and therefore revenues) are very stable for this utility, without the large seasonal air conditioning or winter heating loads seen at some other utilities. SECTION 4E: RESERVES STRUCTURE CPAU maintains several reserves for its Electric Utility to manage various types of contingencies and for ease of reporting. It also maintains two funds, the Supply Fund and the Distribution Fund, to manage costs associated with electricity supply and electricity distribution, respectively. The City established this separation of supply and distribution costs as the City prepared to allow its customers a choice of electricity providers (referred to as "Direct Access") in the late 1990s and early 2000s. Though the 2000/2001 energy crisis halted these plans, CPAU continues to maintain separate funds to facilitate separation of supply and distribution costs in the rates. This could be important if California ever decides to broadly reintroduce Direct Access, and is useful for rate design as the nature of utility service evolves in response to higher penetrations of distributed generation. Thus, individual reserves may reside within a particular fund (for instance, Electric Special Projects is under Electric Supply) or be included within both funds (there are both Supply and Distribution Reserves for Commitments). The summary below describes the various reserves, but see Appendix B: Electric Utility Reserves Management Practices for more detailed definitions and guidelines for reserve management: • Reserves for Commitments: Reserves equal to the utility's outstanding contract liabilities for the current fiscal year. Most City funds, including the General Fund, have a Commitments Reserve. • Reserves for Reappropriations: Reserves for funds dedicated to projects re -appropriated by the City Council, nearly all of which are capital projects. Most City funds, including the General Fund, have a Re -appropriations Reserve. This is currently an important reserve for all utility funds, but changes in budgeting practices will change that in future years, as described in Section 3C (Reserves Management Practices). • Electric Special Projects (ESP) Reserve: This reserve was formerly called the Calaveras Reserve, which was accumulated during deregulation of California's electric system to fund the stranded costs associated primarily with the Calaveras hydroelectric resource and the California -Oregon Transmission Project. When that reserve was no longer needed for that purpose, the reserve was renamed and the purpose was changed to fund projects with significant impact that provide demonstrable value to electric ratepayers. 221 aoe Item 15: Staff Report Pg. 31 Packet Pg. 602 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan • Hydroelectric Stabilization Reserve: This contingency reserve is used br managing additional costs due to below average hydroelectric generation, or to hold surpluses resulting from above average hydroelectric generation. • Underground Loan Reserve: This reserve is an accounting tool used to offset receivables associated with loans made through the underground loan program. It is adjusted according to principal payments made on those loans. • Cap and Trade Program Reserve: This reserve tracks unspent or unallocated revenues from the sale of carbon allowances freely allocated by the California Air Resources Board to the electric utility, under the State's Cap and Trade Program. Funds in this Reserve are managed in accordance with the City's Policy on the Use of Freely Allocated Allowances under the State's Cap and Trade Program. • Low Carbon Fuel Standard (LCFS) Reserve: This reserve tracks revenues earned via the sale of Low Carbon Fuel Credits allocated by the California Air Resources Board to the City, in accordance with California's Low Carbon Fuel Standard program. • Public Benefits Reserve: CPAU's electric rates include a separate charge called the "Public Benefits Charge" which generates revenue to be used for energy efficiency, demand -side renewable energy, research and development, and low-income energy efficiency services. Any funds not expended in the current year are added to the Public Benefits Reserve for use in future years. • Capital Improvement Program (CIP) Reserve: The CIP reserve can be used to accumulate funds for future expenditure on CIP projects, as well as to manage cash flow for ongoing capital projects. This reserve can also act as a contingency reserve for unforeseen capital expenses. This type of reserve is used in other utility funds (Water, Gas, and Wastewater Collection) as well. • Supply and Distribution Rate Stabilization Reserves: These reserves are intended to be empty unless one or more large rate increases are anticipated in the forecast period. In that case, funds can be accumulated to spread the impact of those future rate increases across multiple years. This type of reserve is used in other utility funds (Gas, Wastewater Collection, and Water) as well. • Supply and Distribution Operations Reserves: These are the primary contingency reserves for the Electric Utility and are used to manage yearly variances from budget for operational costs and electric supply costs (aside from variances related to hydroelectric generation). This type of reserve is used in other utility funds (Gas, Wastewater Collection, and Water) as well. • Unassigned Reserves (Supply/Distribution): As in the other utility funds, these reserves are for any financial resources not assigned to the other reserves and are normally empty. SECTION 4F: COMPETITIVENESS For the median consumption level, the annual CPAU residential electric bill for calendar year 2022 was $792, which was $683 (46%) lower than the annual bill for a PG&E customer with the same consumption ($1,475) and approximately $142 (22%) higher than the annual bill for a City of Santa Clara customer ($649). The bill calculations for PG&E customers are based on PG&E Climate Zone X, which includes most surrounding comparison communities. 23IPage Item 15: Staff Report Pg. 32 Packet Pg. 603 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Table 8 presents sample median residential bills for Palo Alto, PG&E, and the City of Santa Clara (Silicon Valley Power) for several usage levels. Rates used to calculate the monthly bills shown below were in effect as of January 1, 2023. Over the next several years low usage customers in PG&E territory are expected to continue to see higher percentage rate increases than high usage customers as PG&E compresses its tiers from the highly exaggerated levels that have been in place since the energy crisis. This is likely to make the bill for the median Palo Alto consumer look even more favorable compared to most PG&E customers. Even with the compressed tiers, bills for high usage Palo Alto consumers are likely to remain substantially lower than the bills for high usage PG&E customers. Table 8: Residential Monthly Electric Bill Comparison (Effective 1/1/2023, $/mo.) Season Usage (kwh) Palo Alto PG&E Santa Clara 300 57.74 94.11 39.31 453 (Median) 94.42 143.32 60.09 Winter 650 143.94 221.07 86.85 1200 282.18 438.13 161.54 300 57.74 97.76 39.31 (Median) 365 72.31 123.41 48.14 Summer 650 143.94 235.88 86.85 1200 282.18 452.94 161.54 SECTION 5A: LOAD FORECAST Figure 5 shows a 38 -year history of Palo Alto electricity consumption. Average electricity consumption grew from 1986 to 1998, then returned to 1986 levels by 2002. Since then electricity consumption has declined slowly as a result of a continuing focus on energy efficiency, as well as the adoption of more stringent appliance efficiency standards and energy standards in building codes. Electrification will likely reverse some of this trend, although the pace of that impact is uncertain at this time. In recent years, some larger commercial customers have relocated operations or shifted to more light -commercial type usage. It is unknown how long this trend may continue, or what the longer -term impacts of COVID and work -from home policies might mean for commercial utilization in Palo Alto. 24 1 Item 15: Staff Report Pg. 33 Packet Pg. 604 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Figure 5: Historical Electricity Consumption 1,150 1,100 1,050 1,000 950 900 850 800 .n l0 IN W M O .ti N T W N 0O O1 O .y N T 7 W N 0O O1 O .y n t0 1N W M O N N Qt O1 Of Of Ot Ot Qt O1 O1 M M M M M a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O O Figure 6 shows the forecast of electricity consumption through FY 2028. The solid black straight line is the long-term average trend of usage. The small -dash red line represents the projected retail sales used in the financial forecast. Sales are assumed to recover to a level slightly above the long-term trend line due to conservative expected load growth from data centers. These projections will be revised if continuing sales change. 25IPage Item 15: Staff Report Pg. 34 Packet Pg. 605 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Figure 6: Forecasted Electricity Consumption 1,100 1,000 a 1100 /00 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 SECTION 5B: FY 2018 TO FY 2022 COST AND REVENUE TRENDS As shown in Appendix A: Electric Utility Financial Forecast Detail, annual expenses for the Electric Utility increased markedly in FY 2018 but came back down in FYs 2019 and 2020 before increasing again in FY 2021 and FY 2022. On the capital side, the large Upgrade Downtown CIP project began in FY 2018. Electric supply costs increased as new renewable projects came online, and transmission costs rose and have continued to rise as improvements are made to the California grid. Section 6A: Electricity Purchases discusses the factors influencing Electric Utility expenses. During the last drought in FYs 2014 and 2015 commodity costs were higher due to lower than average output from hydroelectric resources, and similar circumstances are occurring in FY 2021, FY 2022 and are projected to continue through FY 2024. Transmission costs have increased as projected in prior financial plans. Better than average hydro conditions in FY 2019 led to lower than expected generation expenses as well as better than expected surplus energy revenues, but extreme drought followed. Commodity costs have increased, on average, by about 4.8% per year over this timeframe. Operations costs have increased by about 2.9% annually on average. Revenues have increased 26 I P a g e Item 15: Staff Report Pg. 35 Packet Pg. 606 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan on average by about 0.5% per year over this period and have been negatively a to declining sales and COVID. Figure 7 shows the electric utility revenues, expenses, and proposed rate changes for the previous five years, the current year, and the projections for the next five years. The percentages listed do not include the hydroelectric rate adjuster. The total rate, including the adjuster, is shown in Figure 8. Embedded in the revenue line in Figure 7 is the assumption that the hydroelectric rate adjuster will be cut in half in FY 2024 and the proposed rates changes are just the changes to base rates. Figure 7: Electric Utility Revenues, Expenses, and Rate Changes: Actual Costs through FY 2022 and Projections through FY 2028 $300 ------------------------- I RATE CHANGES: 14% 6% 8% 0% 0% 5% 21% 5% 5% 5% 5% ,o $250 $200 $150 $100 $50 $0 00 r-1 O LL LL Q1 0 r1 N M It LJl .o I. �--I N N N N N N N N 0 0 0 0 0 0 0 0 0 N N N N N N N N N L}L L LLLL U- U- U- U- U- U- 00 N O N >- U - I. Electric Commodity =Capital Investment =Transfers C=Operations =Debt Service —Revenue Figure 8, similar to Figure 7, shows the historical and projected revenues and expenses, but instead of showing the proposed base rate changes, it shows the change to the overall system rate, including both the base rate and the hydroelectric rate adjuster. This shows how significantly rates increased in FY 2022 and FY 2023 due to poor hydroelectric conditions and steeply increasing electricity market prices. In FY 2024, the system average rate decreases 5% from the current system average rate 27 I P a g e Item 15: Staff Report Pg. 36 Packet Pg. 607 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan established on January 1, 2023. These forecasts could change depending on changes ctric generation and electricity market prices. Figure 8: Electric Utility Revenues, Expenses, and Rate Changes: Actual Costs through FY 2022 and Projections through FY 2028 $300 — RATE CHANGES: DElectric Commodity 14% 6% 8% 0% 0% 37%(1) -5%)z) 5% 5% 5% 5'% =Capital Investment $25O $2OO N C O $150 $10O -- $50 $0 W �--� 0 O'I O .- .-1 N N O O O N m N N O O itt N N 0 O LL Actuals Projecti =Transfers =Operations =Grid Modernization Debt =Debt Service Revenue Notes: 1) The 37% increase includes April 2022 actviation of the Hydroelectric Rate Adjuster (HRA), a 5% base rate increase, and the January 1, 2023 increase of the HRA from $0.013/kWh to $0.048/kWh. 2) Because the full 37% rate increase was only in effect for partof the year, FY 2024 revenue will still increase despite the 5% rate decrease. Note that the FY 2024 revenue shown does not include the CVPIA settlement. SECTION 5C: FY 2022 RESULTS FY 2022 revenues were $4 million lower than projections, as retail sales and surplus energy sales combined were $2 million less than projected. Revenues from the HRA were also $2 million less than projected as the rate went into effect later than anticipated. Net supply purchase costs came in $12 million higher than projected, but these costs were partially offset by approximately $6 million savings from surplus energy sales as well as lower administration and demand side management (DSM) costs. Capital projects costs exceed projections by $4 million. Item 15: Staff Report Pg. 37 Packet Pg. 608 of 853 Table 9 FY 2022, Actual Results vs. FY 2022 Financial Plan Forecast ($000) Net Cost/(Benefit) Type of change Lower revenues from retail sales, surplus energy sales, and Hydroelectric Rate Adjuster $4,000 Revenue decrease High Capital Projects cost $4,000 Cost increase Higher net purchase cost $12,446 Cost increase Lower Admin, DSM, and Surplus Energy Costs (5,962) Cost decrease Net Cost / (Benefit) of Variances $14,482 Item 15 Attachment B - FY24 Electric Utility Financial Plan 6*14910l►Ey 110WAMIl►�dtl3fal:lftMM►G1 Net purchase costs are currently projected to increase by about $19.6 million, due to significantly higher market prices and poor hydro conditions. Some of this increased cost is being recovered by the increase to the hydroelectric rate adjuster on January 1, 2023. About $8 million more in revenue is expected for FY 2023 than the FY 2022 as a result. Surplus energy costs and administration costs are roughly $3 million lower than projected, partially offsetting higher supply costs. However, the increased revenues and lower costs are not sufficient to offset the higher purchase costs completely, leading to a $8.5 million decrease in the Operations Reserve in FY 2023. Table 10 FY 2022, Change in Projected Results, 2023 Forecast vs. 2022 Forecast ($000) Net Cost/(Benefit) Type of change Sales revenues higher than forecasted ($8,000) Revenue increase Purchased electricity costs higher than forecasted $19,609 Cost increase Reduced Surplus Energy Cost and Admin ($3,064) Cost decrease Net Cost / (Benefit) of Variances to Ops Reserve $8,545 SECTION 5E: FY 2024 — FY 2028 PROJECTIONS As shown in Figure 7 above, the Electric Utility's costs rose significantly in FY 2023 due to extremely high power market prices combined with deep, extended drought that decreased the amount of power coming from the City's hydroelectric resources. Some recovery of hydroelectric generation and reduction in prices is forecasted in FY 2024, but not to normal levels given the dry ground and low reservoir levels, which are expected to absorb a significant share of precipitation even if it is above average. Normal levels of hydroelectric generation are not forecasted until FY 2026, assuming normal rainfall in the winter of 2022/2023 and 2023/2024. To reduce hydroelectric -related volatility in the future, staff is now making its rate projections assuming that long-term "normal" production from the City's hydroelectric resources is about 80% of historical average levels. Staff projects other costs for the Electric Utility to increase through FY 2028 and as a result projects rate increases in FY 2025 through FY 2028 to keep revenues in line with expenses over the next five years. Beyond hydro conditions, electricity purchase costs are increasing substantially as transmission costs rise to make improvements to the California grid. Operations costs are expected to increase at or near the average inflation rate (2-3%/year) through the 29 1 Item 15: Staff Report Pg. 38 Packet Pg. 609 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan forecast period. Projected capital expenses are higher due to the re uiiaing or existing underground districts, substation and line voltage upgrades. The City is also evaluating the cost and scope of other system resiliency projects, such as pole replacements, which may increase costs as well as rates in the future. Reserves trends based on these revenue projections are shown in Figure 9 (for Supply Fund Reserves) and Figure 10 (for Distribution Fund Reserves), below. The Supply and Distribution Operations Reserves are not projected to recover until FY 2026. However, the benefits of repaying the loan from the Electric Special Projects Reserve early and transferring $8 million to the Hydro Stabilization Reserve allow staff to comfortably recommend keeping the supply and distribution operation reserves below guidelines in FY 2024 and FY 2025. This forecast includes transfers from the Electric Special Projects Reserve to the Operations Reserve for Advanced Metering Infrastructure expenses, as approved by Council in 2018, but not for other potential projects that might be approved by Council for Electric Special Projects Reserve funding, such as a second transmission line. Figure 9: Electric Utility Reserves (Supply Fund): Actual Reserve Levels through FY 2022 and Projections through FY 2028 $140 C 0 2 $120 $100 $80 $60 $40 $20 $0 N m Iq Ln LD n Co N N N N N N N O O a O O O O N N N N N N N LL IL ILL LL LL LL ILL Item 15: Staff Report Pg. 39 Unassigned (Supply) D Supply Rate Stabilization Reserve ® Hydro Stabilization Reserve ® Supply Operations Reserve Electric Special Projects Reserve • Cap and Trade/Local Decarb • Emergency Plant Replacement ■ Reserve for Commitments ■ Reserve for Reappropriations 30 I P a g e Packet Pg. 610 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Figure 10: Electric Utility Reserves (Distribution Fund): Actual Reserve Levels through FY 2022 and Projections through FY 2028 60 O 50 40 30 20 10 0 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 SECTION 5F: RISK ASSESSMENT AND RESERVES ADEQUACY ■ Low Carbon Fuel Standard • Public Benefits Reserve • Distribution Rate Stabilization Reserve El Distribution Operations Reserve ■ Underground Loan Reserve 17 Capital Reserve • Reserve for Commitments • Reserve for Reappropriations The Electric Utility currently has two primary contingency reserves, the Supply Operations Reserve and the Distribution Operations Reserve. In addition, the Electric Utility has a Hydro Stabilization Reserve, an ESP Reserve, and a Capital Reserve, which can be utilized with Council approval. This Financial Plan does not maintain reserves above the reserve minimum for both the Supply and Distribution Operations Reserves in FY 2024 and FY 2025, but does between FY 2026 and FY 2028. Reserve levels also exceed the short-term risk assessment level for the Distribution Fund. There are a variety of risks associated with the Supply Fund related to resource generation variability, market price volatility, transmission cost increases, regulatory changes to market rules. Because of the high range of uncertainty in energy price predictions more than three years in the future, this risk assessment is only performed for the first two fiscal years of the forecast period. It is important to note that the likelihood of all of these adverse scenarios occurring simultaneously and to the degree described in Table 12 is very low. 311 'age Item 15: Staff Report Pg. 40 Packet Pg. 611 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Table 12: Electric Supply Fund Risk Assessment Categories of Electric Supply Cost Uncertainties Estimates of Adverse Outcomes (M$) Estimates of Adverse Outcomes (M$) FY 2024 FY 2025 1. Load Net Revenue 4.9 5.0 2. Hydro Production: Western & Calaveras 8.1 9.1 3. Renewable Production: Landfill & Wind & Solar 1.8 1.8 4. REC Purchases 0.52 0.56 5. REC Sales -0.52 -0.56 6. Market Price 0.7 0.2 7. Resource Adequacy 1 1 8. Transmission/CAISO 3.9 4.3 9. Plant Outage 1 1 10. Western Cost 1.1 1.6 11. Legislative & Regulatory 0 0 12. Supplier Default+ 0.2 0.2 Electric Supply Fund Risks 22.73 24.22 Of the risks faced by the Electric Utility's Supply Fund, the risk of a dry year with very low hydroelectric output is normally the largest, accounting for more than one-third ($8.1 million) of all the adverse cost uncertainty. Since the utility's costs for its hydroelectric resources are almost entirely fixed, costs do not decline when the output of those resources are low, but the utility needs to buy power to replace the lost output. The converse happens when hydroelectric output is higher than average. Of the remaining risks for FY 2024, $3.9 million is related to potential transmission cost increases (above staff's current forecast). $4.9 million is related to the potential that total load (and the 32IPage Item 15: Staff Report Pg. 41 Packet Pg. 612 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan associated retail sales revenue) may be lower than projected, $1.8 millio is associatea with uncertainty around renewables production, and $1.0 million is associated with possible decreases in Resource Adequacy capacity sales revenues (and/or increases in Resource Adequacy capacity purchase costs). As shown in Figure 11, staff projects the Supply Operations Reserve to drop below the minimum guideline levels in FY 2023 but return to minimum levels and slowly increase towards the end of the forecast period. Figure 12 shows that the combined Hydro Stabilization and Supply Operations Reserves are projected to be above what is needed for the risk assessment level in FY 2023, but that FY 2024 are approximately at the Risk Assessment level. Figure 11: Electric Supply Operations Reserve Adequacy $50 O $45 $40 $35 1---- $30 $25 ------------ ------------- $20 --------- $15 --------------------------- --------------------------- -----Maxi um---------- Reserve Maximum ----------------------------------------------------------------- ---------- ------------- - — Reserve Target $10 — Reserve Minimum $5 $ 0 - Reserve (Year -End) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 33 1 Page Item 15: Staff Report Pg. 42 Packet Pg. 613 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Figure 12: Adequacy of Supply Operations and Hydro Stabilization Reserves, omoinea $60 C Hydro Stabilization Reserve (Year - End) =Operations Reserve (Year -End) $50 Risk Assessment $40 $30 $20 $10 $0 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Table 13 summarizes the risk assessment calculation for the Distribution Operations Reserve through FY 2027. As shown in Figure 13, the Distribution Operations Reserve is also projected to drop near to the minimum reserve guidelines in FY 2024, but is projected to recover to near target levels over the course of the forecast period. The risk assessment includes the revenue shortfall that could accrue due to: 1. Lower than forecasted sales revenue; and 2. An increase of 10% of planned system improvement CIP expenditures for the budget year. Table 13: Electric Distribution Fund Risk Assessment ($000) 34 1 Item 15: Staff Report Pg. 43 Packet Pg. 614 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan 1Y LuLl 8 FY 2024 FY 2025 FY 2026 Total non -commodity revenue $76,791 $82,662 $88,987 $99,524 $109,529 Max. revenue variance, previous ten years 8% 8% 8% 8% 8% Risk of revenue loss $6,061 $6,524 $7,023 $7,855 $8,645 CIP Budget $25,508 $24,610 $22,644 $22,716 $22,730 CIP Contingency @10% $2,551 $2,461 $2,264 $2,272 $2,273 Total Risk Assessment value $8,612 $8,985 $9,288 $10,126 $10,918 Figure 13: Electric Distribution Operations Reserve Adequacy N $20 C O 2 $18 $16 $14 $12 $10 --------------------- ----------------------------------------------------------------------------------------------------------------- Reserve Maximum ------------------------------------------------------------------------------------------ Reserve Target ------------------ Reserve Minimum -Reserve ---------------------------------------------------------------------------------------------------- - --------- -- (Year -End) Risk Assessment FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 The Electric Utility also has a CIP Reserve that acts as a reserve for short term capital contingencies or as a place to set aside funds for large, one-time projects that the Utilities would otherwise need to debt -fund. In the future, staff would also like to use this reserve to manage cash flow for capital projects on an ongoing basis. Figure 14 below reflects the maximum and minimum CIP Reserve guideline levels, starting in FY 2022. Because of the fluctuating annual dollar amounts and timing of CIP projects budgeted to 35 Page Item 15: Staff Report Pg. 44 Packet Pg. 615 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan occur during the forecast period, as well as the potential for new ongoing pr jects to oe mci ded in the CIP plan in later years, four years of budgeted CIP are used to calculate the reserve maximum levels. The minimum CIP Reserve level is 20% of the maximum CIP Reserve guideline level. Because of constrained operating conditions resulting from COVID, increasing power supply costs and a desire not to raise rates more than needed, the 2024 Financial Plan doesn't anticipate funding the CIP Reserve from the Distribution Operations Reserve. In future years, the CIP Reserve will reflect actual fluctuations in CIP expenditures (money spent on actual projects in a given year). CIP expenditures are currently reflected in the Operations Reserve. Staff is anticipating, once the CIP Reserve has an adequate ending balance, to annually fund the CIP reserve with an amount based on average anticipated CIP spending for that year (currently estimated at $20 to $25 million in FY 2024 through FY 2026 and increasing to $30 to $35 million once grid modernization expenses ramp up in FY 2027 and FY 2028. Moving forward, the reserve will allow any cost savings or over -runs be reflected in the CIP Reserve instead of the Operations Reserve, as described above. This will allow for better transparency and accounting of CIP related funds, will address uneven annual funding associated with ongoing CIP projects, and offer a funding source for one-time or immediately needed projects. Having the reserve guidelines in place will ensure the reserve has sufficient funding for budgeted CIP as fluctuating annual amounts of capital investment occur going forward. Figure 14 shows the projected CIP Reserve balances and guideline levels for FY 2022 through FY 2028, as well as the prior reserve and guidelines in FY 2022. Because of constrained financial conditions, the CIP reserve is projected to be below the minimum guideline for two years, until reserve funding can take place. Per the Reserves Management Practices (Appendix B), Section 10, any rate plan that does not return CIP reserves to minimum levels within one year requires Council approval. Council approved the FY 2023 Electric Utility Financial Plan, which included keeping the CIP Reserve below minimum until FY 2027, and this FY 2024 Financial Plan modifies that plan to keep CIP Reserves below minimum until FY 2026. 36 I P a g e Item 15: Staff Report Pg. 45 Packet Pg. 616 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Figure 14: Electric CIP Reserve Adequacy $40 �, $35 C O $30 $25 $20 $15 $10 $5 $0 FY FY FY FY FY FY FY 2022 2023 2024 2025 2026 2027 2028 SECTION 5G: LONG-TERM OUTLOOK ® CIP Reappropriations (Year -End) ® CIP Reserve (Year -End) CIP Commitments (Year - End) Reserve Minimum Reserve Target Reserve Maximum This forecast covers the period from FY 2024 through FY 2028, but various long-term developments may create new costs for the utility over the next 10 to 35 years. While it is challenging to accurately forecast the impact these events will have on the utility's costs, it is worth noting them as future milestones and keeping them in mind for long-term planning purposes. For the supply portfolio, the 2020s will see a number of notable events. The contract with the Western Area Power Administration (Western) for power from the Central Valley Project (CVP) will expire in 2024. Determining the future relationship with Western after 2024 will be important in the years leading up to the contract expiration, especially because this resource represents nearly 40% of the electric portfolio and is the utility's largest source of carbon -free electricity. The utility's three earliest and lowest cost renewable contracts will also begin expiring around that time, with the first contract expired in 2021 and the last in 2028. These three 37 1 Item 15: Staff Report Pg. 46 Packet Pg. 617 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan contracts, plus one more expiring in 2030, currently provide 17% to 18% or me energy ror the utility's supply portfolio at prices under $65 per megawatt -hour (MWh). It is difficult to know what renewable energy prices will be when those contracts expire. Although recent prices have been in that range (or even lower), and costs may decrease in the future, current renewable projects also benefit from a wide range of tax and other incentives that may or may not be available in the 2020s and beyond. However, staff procured a replacement for the contract expiring in 2021 at a lower price than any of the City's current renewable contracts. In addition, staff is in the process of procurement for a renewable geothermal project expected to start in 2025. The costs of the Calaveras hydroelectric project will also change in the 2020s, with debt service costs dropping by half or approximately $4 million in 2025 as some of the debt is paid off, and all debt retired by the end of 2032. Some additional debt may be issued to fund the costs of relicensing the project, but this is not anticipated to be as high as the current debt service. The project will only be 40 years old at that time, and hydroelectric projects can last for 70-100 years before major rebuilding is needed. Calaveras debt service represents roughly 70% of the annual costs of that project (and nearly 7% of the utility's total costs), so when the debt is retired, the project could be a low-cost asset for the utility, providing carbon -free energy equal to around 13% of the Electric Utility's supply needs in an average year. Another factor that may affect the utility's supply costs in the long run is carbon allowance revenue. Currently the Electric Utility receives $3 to $5 million per year in revenue from allocated carbon allowances under the State's cap -and -trade program. It uses that revenue to pay for energy efficiency programs and to purchase renewable energy to support the utility's Carbon Neutral Plan. Staff expects that revenue source to continue in some fashion through 2030, although the number of allowances allocated to Palo Alto have been reduced. Discussions at the state level are ongoing to determine any further restrictions CARB may wish to enact on both the number of future allowances received as well as usage of allocation sales revenues. If the Electric Utility no longer received these allowances or was limited in how it could spend revenues, it would have to fund these programs from sales revenues. Transmission costs are also continuing to rise. If the State continues to increase mandates or incentives for renewable energy development, integrating these new projects into the transmission grid will be an ever-increasing challenge, some costs of which will be borne by Palo Alto. The planned expansion of the CAISO to a larger regional grid control area may result in additional transmission costs that could further increase CPAU's transmission costs. In addition to the costs of new transmission lines that will need to be built, flexible resources will be required to balance rapid changes in wind or solar output throughout the day. Palo Alto will likely bear some of the costs of these new lines and resources. CPAU is also currently investigating installing a second transmission interconnection for Palo Alto, which could be funded by the Electric Special Projects Reserve. 38 I P a g e Item 15: Staff Report Pg. 47 Packet Pg. 618 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Over the next several years the Electric Utility will continue to execute I s usuai monit ring, repair, and replacement routine for the distribution system, but will also begin the rollout of various smart grid technologies. The utility is actively promoting electric vehicle ownership and gas -to -electric fuel switching in Palo Alto. In the coming years these factors are expected to create notable increases in electric consumption and have a variety of impacts on the distribution system. Other technologies such as battery storage and rooftop solar installations are also becoming even more common. The utility has already started to take some of these factors into account in its long-term planning processes but will need to continue to incorporate them into its planning methodologies. Over the long term, electricity may replace natural gas and petroleum almost entirely as part of the City's efforts to combat climate change. Many, if not most, vehicles would use electricity, though hydrogen is another potential fuel source under development and other technologies might be developed. Staff is undertaking initial analysis of these types of scenarios in the context of the Sustainability and Climate Action Plan (S/CAP) development process. These types of scenarios require careful planning for the associated load growth to make sure the distribution system does not end up overloaded, or conversely, to avoid over -investment, and the evaluation of changes to utility distribution system management to accommodate integration of the various technologies involved in electrification. Utility analyses in progress that take into account potential load growth include a grid modernization study, the Electric Integrated Resource Plan, and a potential upcoming S/CAP funding needs and sources study that may help assess the impact of these trends on rates. Staff will integrate results from these studies in Financial Plans as they become available. SECTION 5H: ALTERNATIVE RATE PROJECTIONS As an alternative to the proposed rate increases shown above in figures 7 and 8 of -5% (21% increase to base rates) in FY 2024, 5% in FY 2025 -FY 2028, staff could instead set rates to increase the supply and operations reserves to minimum guidelines in FY 2024 as opposed to FY 2026. This alternative still assumes that the HRA is removed starting in FY 2024 and that revenues must be derived from general rates. This leads to a 1% system average rate reduction (or a 27% increase to base rates) in FY 2024, followed by increases of 2%, 0%, 3%, and 9% in the following years. Supply and Distribution Operations Reserves would reach the minimum guideline levels in FY24 and target levels thereafter. 391Page Item 15: Staff Report Pg. 48 Packet Pg. 619 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Figure 15: Alternative Rate Proposal $30O --------------------- RATE CHANGES: 14% 6%8% 0%8% 27% 2% 0% 0% $250 ----- - ---- $200 --------- ------- - ___--..-.-.-. C O $150 $100 $50 $0 Actuals v, N N O O N N LL W Projections =Electric Commodity =Capital Investment =Transfers =Operations =Grid Modernization Debt I=Debt Service SECTION 6A: ELECTRICITY PURCHASES As shown in Figure 16 the utility is projected to get roughly 40% of its energy from hydroelectric projects in a normal year, but only 30% is expected or projected during FY 2023 and FY 2024 due 40 I P a g e Item 15: Staff Report Pg. 49 Packet Pg. 620 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan to the drought. Contracts with renewable sources make up approximately o 01 tne por olio in FY 2024 before increasing to 60% by FY 2025. Staff expects contracts with renewable sources to continue at approximately 50% of the portfolio for the forecast period. The remainder comes from unspecified market sources. Under the City's Carbon Neutral Plan, CPAU purchases RECs corresponding to the amount of market energy it purchases. Figure 16: Electricity Supply by Source 80% 60% 40% 20% 0% -20% _ __ / _ p_ p ❑ Market Purchases + RECs ❑ Market Purchases M Renewable 13 Hydroelectric Figure 16 shows the historical and projected costs for the electric supply portfolio,9 as well as average and actual hydroelectric generation.10 FY 2021, FY 2022, FY 2023, and FY2024 had lower hydroelectric generation than or are projected to be lower. In addition, staff has reduced average hydro generation output expectations to more closely align with the past 10 year of historical averages. Renewable energy costs have stayed relatively flat as one renewable energy contract ended while another renewable project came online to fulfill the City's carbon neutral and RPS goals. The current market outlook is uncertain for newer renewables projects because of headwinds from supply chain issues and tailwinds from federal subsidies. Transmission charges are projected to increase as new transmission lines are built throughout California to 9 Costs are shown net of wholesale revenues and cannot be directly compared with the electric supply purchase figures shown in Appendix A: Electric Utility Financial Forecast Detail. 10 Average hydroelectric generation based on the current E-HRA rate schedule. 41 I Page Item 15: Staff Report Pg. 50 Packet Pg. 621 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan accommodate new renewable projects. In total, net electric supply costs are project d to increase from about average of $80 million from FY 2018 through FY 2022 to about $100 million between FY 2023 through FY 2028. Figure 17: Electric Supply Portfolio Costs, Historical and Projected $120 $100 • $80 o $60 a � n $40 w $20 $0 H H 11 u L- $20 00 O 0 N N N N O O O O O O 0 N N N N N N N LL LL LL LL LL LL lL Ln to N 00 N N N N O O O O N N N N LL LL L.L LL 700,000 600,000 Net Market Purchases / (Sales) 500,000 L ® Renewables 400,000 •° Hydroelectric Cost l7 Transmission 300,000 a a O Other Costs I 200,000 100,000 Average Hydro Generation • Actual/Projected Hydro Generation SECTION 6B: OPERATIONS CPAU's Electric Utility operations include the following activities: • Administration, including financial management of charges allocated to the Electric Utility for administrative services provided by the General Fund and for Utilities Department administration, as well as debt service and other transfers. Additional detail on Electric Utility debt service is provided in Section 6D (Debt Service) • Customer Service • Engineering work for maintenance activities (as opposed to capital activities) • Operations and Maintenance of the distribution system; and • Resource Management Appendix C: Description of Electric utility Operational Activities includes detailed descriptions of the work associated with each of these activities. 42IPage Item 15: Staff Report Pg. 51 Packet Pg. 622 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan From FY 2018 to FY 2022, overall operations costs have risen annually by a o O11 a age. Operations and maintenance costs are increasing mainly due to higher inflation, especially in salaries and benefits, as well as the use of contract line crew to help while the Utility is understaffed. These costs may be reduced depending on how much work is needed and may be phased out as longer -term employees are gained. Debt service is also forecasted to increase due to grid modernization and fiber investments. Figure 18 80 0 0 2 $70 $60 $5O $30 $20 $10 $0 Historical and Projected Electric Utility Operational Costs P12018 FY 2019 P12020 P12021 FY 2022 P12023 P12024 FY 2025 FY 2026 P12027 FY 2028 SECTION 6C: CAPITAL IMPROVEMENT PROGRAM (CIP) p Debt service and transfers ® Operations & Maintenance (including Engineering) ® Demand Side Management e Administration (excluding debt service and transfers) ■ Resource Management ® Customer Service Staff projects CIP spending for FY 2024 through FY 2028 to be consistent with last year's forecast, though there is a slight shift in the funding by project category. There will be a reduction in funding for undergrounding conversion from overhead to underground as current projects are completed and others are delayed. There will be an increase in funding for underground rebuilding and 4/12kV conversion as improvements are made to the system in portions of the Crescent Park/Duveneck/St. Francis/Community Center/Leland Manor/Garland neighborhoods to facilitate rebuild of the Hopkins Substation. An increase in funding is also needed for replacement of distribution system and substation facilities that are at the end of their useful life. Other significant projects are deteriorated wood pole replacements, substation physical security upgrades, smart grid implementation, and ongoing capital investment in the electric distribution 43 1 Item 15: Staff Report Pg. 52 Packet Pg. 623 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan system to maintain/improve reliability. This forecast assumes that the utility grid projects (along with funding from the water and gas funds), the Foothill fire mitigation rebuilds, and the 115kV electric interconnection from the ESP Reserve. Bond financing may also be considered for some of these capital projects. Excluding the one-time projects listed above, the CIP plan for FY 2024 to FY 2028 is primarily funded by utility rates, but other sources of funds include connection fees (for Customer Connections), phone and cable companies (primarily for undergrounding), and other funds (for smart grid, foothill rebuilds, electric interconnection). The details of the CIP budget will be available in the Proposed FY 2024 Utilities Capital Budget. Table 14 shows the FY 2022 projected budget and the five year CIP spending plan, although these figures are preliminary pending budget discussions starting in May. The 'committed' column represents funds committed to contracts for which work has not yet been completed or invoices paid. Table 14: Electric Utility CIP Spending ($000) Project Category Current Budget * FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 One Time Projects 6,987 6,647 7,350 1,000 1,000 - Reliability 6,802 3,915 4,765 4,765 3,400 529 Undergrounding 190 - - 100 3,000 - 4/12 kV Conversion 3,500 1,500 1,500 - - - Underground Rebuild 2,395 - 400 1,850 1,600 - Ongoing 9,211 5,339 5,415 5,375 5,586 6,093 Customer Connections 5,490 2,700 2,700 2,700 2,700 2,700 Grid Modernization and Fiber** 12,984 28,000 25,000 50,000 50,000 50,000 Electrification - - - 4,300 7,800 19,700 Total 47,560 48,101 47,130 70,090 75,086 79,022 * Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year **Will be funded by sequential bonds, debt service for bonds included in Appendix A Expenses outlined in table 14 include grid modernization and fiber investments, which are not shown in table 4. SECTION 6D: DEBT SERVICE The Electric Utility made its last payment on the 2007 Electric Utility Clean Renewable Energy Tax Credit Bonds, Series A in FY 2021. This $1.5 million bond issuance was to fund a portion of the construction costs of solar demonstration projects at the Municipal Services Center, Baylands Interpretive Center, and Cubberley Community Center. The Electric Utility also pledges reserves and net revenue as security for the bond issuances listed in Table 15, even though the Electric Utility is not responsible for the debt service payments. The Electric Utility's reserves or net revenues would only be called upon if the responsible utilities are 441Page Item 15: Staff Report Pg. 53 Packet Pg. 624 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan unable to make their debt service payments. Staff does not currently foresee g. In FY 2022, the Electric Utility's net revenues dropped to -12% of debt service. However, the other utilities listed in Table 15 below were able to make their debt service payments in FY 2022 and Electric Utility's net revenues were not needed. Staff projects that the Electric Utility's net revenues in each future year will exceed 125% of debt service (see Appendix B, line 70). Table 15: Other Issuances Secured by Electric Utility's Revenues or Reserves Annual Debt Secured by Electric Utility's: Bond Issuance Responsible Utilities Service ($000) Net Revenues Reserves 1999 Utility Revenue Bonds, Series A Storm Drain Wastewater Collection $1,207 No Yes Wastewater Treatment 2009 Water Revenue Bonds (Build Water $1,977* No Yes America Bonds) 2011 Utility Revenue Refunding Gas $1,457 No Yes Bonds, Series A Water *Net of Federal interest subsidy Embedded in this year's financial plan is the assumption that grid modernization and fiber investments will begin in FY 2024. While the financing details are still being assessed and may differ a bit from these assumptions, the current financial plan assumes the city will issue sequential $50 million bonds every 18 months beginning in FY 2024 until $300 million or 6 bonds have been issued. In addition, the fiber investment costs are estimated to be $13 million and included in the first bond, for a total of $63 million in FY 2024 and $313 million cumulatively. As shown in Appendix A, the financial plan assumes debt service costs beginning in FY 2025 of $2 million and increasing to $9.6 million in FY 2028. Depending on the scope of work, schedule and bond issuance costs, the timing, number of bonds, and amount of the bonds maybe be adjusted. Table 16 illustrates the estimated bond proceeds and debt service costs over the next ten years. Table 16: Projected Bond Proceeds and Debt Service Costs Expenses ($000) FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 Bond Proceeds 63,000 50,000 0 50,000 50,000 0 50,000 50,000 0 0 Debt Service Costs 0 -2,032 -3,632 -6,432 -9,632 -12,832 -16,032 -19,232 -20,032 -20,032 SECTION 6E: EQUITY TRANSFER The City calculates the equity transfer from its Electric Utility based on a methodology adopted by Council in 2009, which has remained unchanged since then." Each year it is calculated according to the 2009 Council -adopted methodology and does not require additional Council action. 11 For more detail on the ordinance adopting the 2009 transfer methodology, see CMR 280:09, Budget Adoption Ordinance for Fiscal Years 2009 and 2010; and CMR 260:09, Finance Committee Report explaining proposed changes to equity transfer methodology. 45 Page Item 15: Staff Report Pg. 54 Packet Pg. 625 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan [.y�41KQ09yAYJ1ill.l4*y-�1a11301:80DMI ��\11Z6jri1:8M10 9�\11111�►1 The Electric Utility receives most of its revenues from sales of electricity, but about 20 to 25% comes from other sources. Of these other sources, about 50% to 75% represents wholesale revenues of surplus energy sales. These revenues may offset electric supply purchase costs, smooth rate increases, or fund reserves or other costs. Of the remaining revenues, the largest revenue sources are interest on reserves, connection fees for new or replacement electric services, and carbon allowance revenues associated with the State's cap -and -trade program Revenues from connection fees have increased since FY 2009 but vary from year to year. Connection fee revenues are collected to offset costs incurred in setting up new connections and are pass -through in nature. Staff forecasts $1.8 million in in FY 2024. Staff projects carbon allowance and interest income revenues to stay relatively stable through the forecast period. However, both of these revenue sources are subject to some uncertainty. This forecast assumes the program State's cap -and -trade program will remain in place but with declining returns through 2030. It is possible this funding source may be removed entirely in the future, as the current CARB plan in the gas fund is for free allowances to stop entirely by 2030. The forecast for interest income assumes current interest rates continue and there are no major reserve reductions aside from what is anticipated in this Financial Plan. If interest rates rise, interest income could increase, and if reserves decrease (due to drought or a withdrawal from the ESP reserve for a major project), interest income would decrease. SECTION 6G: SALES REVENUES The load forecast in Section 5A: Load Forecast and the projected rate changes shown in Figure 7 provide the basis for sales revenue projections. As discussed in Section 5A, sales revenues for this utility have been decreasing due to load reduction but are helped by the mild climate in Palo Alto. Palo Alto is a built -out City, so the opportunities for increased load growth are limited to the existing footprint of commercial structures and incremental growth in population. As utilization of existing spaces changes, and energy efficiency measures continue, Palo Alto could see greater load loss. Increased loads from electric vehicles and the electrification of households may increase loads somewhat. 46 1 Pae' Item 15: Staff Report Pg. 55 Packet Pg. 626 of 853 The fiscal year (FY) 2024 electric utility communications strategy covers these primary areas: market price increases, cost containment measures, efficiency services and utility bill savings, capital improvement, operations and maintenance for infrastructure safety and reliability, renewables, carbon neutral portfolio, and beneficial electrification. City of Palo Alto Utilities (CPAU) communication methods include use of the utilities website, utility bill inserts, messaging on utility bills, email newsletters, print and digital ads in local publications, social media, and community message boards. In advance of the rate -setting process, staff working on rates and communications are focusing on informing customers of higher than anticipated electric rates this year due to lower revenues from rates and interest income, impacts to hydroelectric supplies as a result of drought conditions, higher purchase costs, and contract line crew costs. The goal is to help customers navigate a challenging economic situation through efficiency services, rate assistance and bill payment relief programs. CPAU customers also benefit from local control and policy setting, and community values -driven programs and services, including the decision to go carbon neutral in 2013. Palo Alto's renewable energy purchase agreements contribute to our utility's long-term energy security and commitment to sustainability. Power purchase agreements have allowed CPAU to procure long- term renewable electric supplies at low costs. CPAU will highlight these environmental attributes and value in our communications. Programs such as the Home Efficiency Genie and commercial energy efficiency audits help residents and businesses better understand energy usage, activities and/or upgrades they can implement to improve efficiency and keep utility costs low. For several years, CPAU has offered a Genie in -home assessment, including a virtual option during the pandemic, and webinars about home energy and water efficiency to help customers keep utility costs low. Now the Genie program provides a home electrification readiness assessment so customers who may want to switch out gas for electric appliances or install an electric vehicle (EV) charger, can understand what may be necessary for electric panel upgrades. Recently CPAU also launched new programs to help businesses improve energy efficiency and investigate the potential to switch from natural gas/fossil-fuel energy supplies to electricity. The Business Energy Advisor provides a "concierge" service for businesses to evaluate areas of their facility for efficiency improvements such as in the areas of building envelope, lighting, and heating. The Business Energy Advisor acts as the flagship program for businesses to then learn about available rebates for appliance or facility upgrades and opportunities for building electrification. CPAU also offers programs to help businesses, multi -family properties, non -profits and schools install EV charging infrastructure to assist employees and tenants with goals to switch from fossil fueled transportation to clean, electric driving. 471Page Item 15: Staff Report Pg. 56 Packet Pg. 627 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan Appendix A: Electric Utility Financial Forecast Detail Appendix B: Electric Utility Reserves Management Practices Appendix C: Description of Electric utility Operational Activities Appendix D: Samples of Recent Electric Utility Outreach Communications Item 15: Staff Report Pg. 57 Packet Pg. 628 of 853 Item 15 Attachment B - FY24 Electric Utility Financial Plan APPENDIX A: ELECTRIC UTILITY FINANCIAL FORECAST DETAIL Item 15: Staff Report Pg. 58 Packet Pg. 629 of 853 6056714 Item 15 Attachment B - FY24 Electric Utility Financial Plan (page intentionally left blank) Item 15: Staff Report Pg. 59 Packet Pg. 630 of 853 6056714 2 I Item 15 3 IELECTRIC LOAD 160 159 Attachment B - FY24 Electric Utility 4 Purchases (MWh) 925,329 905,071 879,913 827,106 836,828 849,043 869,163 869,404 S Sales (MWh) 899,997 884,322 854,761 813,881 812,841 809,059 830,051 843,322 Financial Plan 6 7 I BILL AND RATE CHANGES 8 System Average Rate ($/kWh) $ 0.1413 $ 0.1487 $ 0.1624 $ 0.1590 $ 0.1606 $ 0.2010 $ 0.2078 $ 0.2172 $ 0.2270 $ 0.2374 $ 0.2491 9 Change in System Average Rate 13% 5% 9% -2% 1% 25% 3% 5% 5% 5"/, 5% 10 Change in Average Residential Bill 11% 6% 8% -1% -1% 5% 21 % 40/s 5% 40/a 5% 11 12 ISTARTING RESERVES 13 Reappropriations (Non-CIP) - 56,811 120,000 120,000 120,000 120,000 120 000 120,000 14 Commitments (Non-CIP) 2,970,955 3,725,000 3,910,695 3,518,525 3,512 355 .$,679,000 6,679,000 6,679,000 6,679,000 6 679 000 $,79,000 15 Low Carbon Fuel Standard (LCFS) Reserve 6,340,000 6,943 525 7,235,894 6,213,691 5,141,701 4,574,052 4,121,071 3 668,090 16 Cap and Trade Pro ram 1,189,000 1,189,000 5,612,019 8,576,096 11 307,292 11,307,292 $4,07,292 17 Underground Loan Reserve 730,147 730,147 726,659 726,659 726,659 726,659 726,659 726,859 726,659 726,659 726,659 18 Public Benefits Reserves 681,330 681,330 809,700 1,904,547 3,027,599 3,890,774 4,608,011 5,380,396 6,175,499 6,910,325 7,584,849 19 Electric Special Projects Reserve 51,837,855 41,837,855 41,664_55 46,664,855 46,664,855 24,649,000 17,649,000 24,649,000 24 649,000 26,649,000 28,649,000 20 21 Hydro Stabilization Reserve Capital Reserves 11,400,000 879,964 11,400,000 879,964 11,400 000 879,964 15,400,000 5,879,964 15,400,000 879,964 400,000 879,964 400,000 879,964 8,400,000 879,964 8,400,000 879,964 0,400,000 5,879,964 8,400,000 10,879,964 22 23 Rate Stabilization Reserves Operations Reserves (Supply & Dist) 9,010,840 29,912,981 9,010,840 18,600,000 - 45,244,167 - 38,538,459 - 29,902,850 - 30,142,000 - 19,455,158 - 21,211,224 - 30,057,451 - 38,353,661 - 45,440,073 24 Unassigned I -I 244,354 - 0 (0) 844,513 - - - - - 25 TOTAL STARTING RESERVES 107,424,072 87,109,490 104,636,040 118,973,010 108,303,618 76,756,805 62,343,503 81,764,839 93,568,917 109,146,972 123,454,927 26 27 I REVENUES 28Net Sales 127,172,308 131,471,245 137,026,504 129,389,001 130 557,545 162,595,679 172,499,236 183 169,260 189,432,176 196,079,973 203,727,979 29 Wholesale Revenues 18,106,327 21,060,071 20,686,925 25,959,207 25,529,188 24,751,851 25,801,694 27,834,224 28,388,544 26,324,976 26,540,307 30 Other Revenues and Transfers In 13,373,312 19,914,635 15,260,937 9,324,996 9,348,837 9,235,543 34,092,443 10,654,877 13,334,635 13,638,723 10,469,612 31 TOTAL REVENUES 158,651,947 172,445,951 172,974,366 164,673,204 165,435,570 196,583,072 232,393,373 221,658,360 231,155,355 236,043,672 240,737,898 32 33 IEXPENSES 34 Electric Supply Purchases 94,629,654 89,625,027 90,645,768 98,460,911 112,524,986 117,899,840 118,019,453 115,637,790 118,068,830 118,850,995 121,028,178 35 Operating Expenses 36 Administration 110_0% 37 Allocated Charges 6,374,241 4,568,027 6,146,498 6,674,515 5,732,098 6,018,937 6,217,658 6,404,293 6,596,079 6,793,665 6,997,186 38 Rent 5,284,977 5,454,097 5,666,805 5,949,976 6,069,000 6,182,562 6,329,377 6,479,932 6,635,163 6,794,135 6,956,847 39 Debt Service 8,867,395 8,464,883 7,170,631 7,841,922 8,068,219 8,502,737 8,275,943 6,253,175 7,855,970 10,694,458 13,851,850 40 Transfers and Other Adjustments 13,632,059 13.342.321 10.133,943 9,610,379 13.811,097 14.572,449 15,482,046 15,629.938 16,040,156 16,449,711 16,838.612 41 Subtotal, Administration 34 158,672 31,829,328 29 117,878 30,076,792 33,680,414 35 276 685 36,305,024 34,767,338 37 127,368 40,731,968 44,644,494 42 Resource Management 1,873,954 2,082 405 2,870,524 2,781,010 2,824,303 2,991,189 3,100,525 3,205,176 3,263,228 3,328,493 3,407,229 43 Demand Side Management 3,889,846 3,655,547 2,733,047 3,819,646 4,086,083 6,179,462 6,693,931 6,543,793 6,809,407 6,831,864 3,040,455 44 Operations and Mtc 11 528,747 11,606,585 13,450 568 15 988,315 16,576,083 20,981,726 18,712,141 19,309,318 19 771,526 20,263,837 20,773,883 45 Engineering (Operating) 1,790,942 1,838,799 2,051,303 2,408,524 1,806,550 1,898,848 1,962,319 2,022,073 2,079,850 2,139,750 2,201,511 46 Customer Service 2,291,246 2,180,400 2,228,469 2,320,338 2,974,968 3,145,349 3,258,085 3,365,609 3,434,569 3,510,129 3,588,840 47 Allowance for Unspent Budget - - - - - (568,039) (587,742) (606,422) (621,182) (636,877) (654,081) 48JSubtotal, op Operating Expenses 55,533,407 53,193,063 52,451,788 57,394,624 61,948,401 69,905,219 69,444,285 68,606,884 71,864,768 76,169,165 77,002,331 49 Capital Program Contribution 18,803,467 10,770,456 15,539,840 21,487,061 34,524,744 28,991,316 25,508,299 25,609,608 25,643,701 26,715,557 35,730,230 50 TOTAL EXPENSES 168,966,528 153,588,546 158,637,396 177,342,596 208,998,131 216,796,374 212,972,036 209,854,282 215,577,300 221,735,717 233,760,738 51 52 (ENDING RESERVES 53 Reappropriations (Non-CIP) 54 Commitments (Non-CIP) S5 Low Carbon Fuel Standard (LCFS) Reserve $6 Cap and Trade Program 57 Underground Loan Reserve 58 Public Benefits Reserves 59 Electric Special Projects Reserve 60 Hydro Stabilization Reserve 57 Capital Reserve 58 Rate Stabilization Reserve 59 Operations Reserve (Supply & Dist) 60 Unassigned 61 TOTAL ENDING RESERVES 62 63 IOPERATIONS RESERVE 64 Min (60 days of non -capital expenses) 65 Target (90 days of non -capital expenses) 66 Max(120 days of non -capital expenses) _ 67 Risk Assessment Value _ 68 69 I DEBT SERVICE COVERAGE RATIO 70 Net Revenues (125% of Debt Service) 71 Available Reserves (5x Debt Service)* 9,063,000 - - 8,637,000 3,910,695 3,518,525 - - 6,340,000 730,147 726,659 726,659 681330 80,7$f. 1,904,547 41,837855 41,664,f 46,664,855 11,40__000 11,400.0$ 15,400,000 877_964 879`64 5,879,964 9,010,840 - - 18,600,000 45,244,167 38,538,459 244,354 - 0 101,084,490 104,636,040 118,973,010 25,849,452 24,700,922 25,579,071 37.071.179 35.342.766 36.507.588 56,811 120,000 3,512,355 6,679,000 6,943,525 7,235,894 1,189,000 1,189,000 726,659 726,$59 3,027,599 3,890,774 46,664,855 24,649,000 15,400,000 400,000 8�9 964 879,964 29,902,850 30,142,000 (0) 844,513 108,303,618 76,756,805 Item 15: Staff Report Pg. 60 120,000 120,000 120,000 120,000 120,000 120,000 6,679,000 6,679,000 6,679,000 6,679,000 6,679,000 6,679,000 6,213,691 5,141,701 4,574,052 4,121,071 3,668,090 3,668,090 5,612,019 8,576,896 11,307,292 11,307,292 11,307,292 11,307 292 726,659 72659 726,659 726,659 726,659 726,659 4,608,011 5,380,396 6,175,499 6,910,325 7,584 849 8,199,937 17`49,000 24,649,000 24,649,000 26,649,000 28,649,000 30,649,000 400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 879,964 879,964 879,964 ,964 10,873,964 L 15,879,964 19,455,158 21,211,224 30,057,451 38,353,661 45,440,073 44,802,144 62,343,503 81,764,839 93,568,917 109,146,972 123,454,927 130,432,086 Packet Pg. 631 of 853 [SM1T1iC1 1 iII 0 2I Item 15 3 REVENUES I I I Attachment B - FY24 Electric Utility 4 Net Sales 80% 76% 79% 79% 78% 71% 74% 83% IFinancial Plan 5 Other Revenues and Transfers In 20% 24% 21% 21% 21% 17% 26% 17% 6 TOTAL REVENUES 100% 100% 100% 100% 99% 88% 100% 100% 100% 100% 100% 6056714 9 Commodity Purchases 50% 53% 53% 53% 56% 56% 55% 52% 51% 51% 49% 10 Operating Expenses 11 Administration 12 Allocated Charges 4% 3% 4% 4% 3% 3% 3% 3% 3% 3% 3% 13 Rent 3% 4% 4% 3% 3% 3% 3% 3% 3% 3% 3% 14 Debt Service 5% 6% 5% 4% 4% 4% 4% 3% 4% 5% 6% 15 Transfers and Other Adjustments 8% 9% 6% 5% 7% 7% 7% 7% 7% 7% 7% 16 Subtotal, Administration 20% 21% 18% 17% 17% 17% 17% 17% 17% 18% 19% 17 Resource Management 1% 1% 2% 2% 1% 1% 1% 2% 2% 2% 1% 18 Operations and Mtc 7% 8% 8% 9% 8% 10% 9% 9% 9% 9% 9% 19 Engineering (Operating) 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 20 Customer Service _ 1% 1% 1% 1% 2% 1% 2% 2% 2% 2% 2% 21 Allowance for Unspent Budget 0% 0% 0% 0% 0% 0% 0% 0% 0% 0°/ 0% 22 Subtotal, Operating Expenses 31% 32% 31% 31% 29% 30°/ 29% 30% 30% 31°/ 32°/ 23 Capital Program Contribution 11% 7% 10% 11% 11% 10% 12% 12% 12% 12% 15% 24 TOTAL EXPENSES 91% 92% 95% 94% 97% 97% 96% 94% 94% 94% 96% 25 26 RISK ASSESSMENT DETAIL (SUPPLY FUND) 27 28 1. Load Net Revenue 29 2. Hydro Production: Western & Calaveras 30 3. Renewable Production: Landfill & Wind & Solar 31 4. Carbon Neutral Cost 32 5. Market Price 33 6. Local Capacity 34 7. Transmission/CAISO 35 8. Plant Outage 36 9. Western Cost 37 10. Regulatory & Legal 38 11. Supplier Default 39 TOTAL Supply Operations + Hydro Stabilization 40 Reserves, % of Risk Assessment 41 42 RISK ASSESSMENT DETAIL (DISTRIBUTION FUND) 43 44 Distribution Revenue Variance 3,742,109 3,915,276 4,447,787 4,432,418 4,417,304 4,864,696 6,206,135 6,686,850 7,338,421 7,944,105 8,869,398 45 10% CIP Program Contingency 1,880,347 1,077,046 1,553,984 1,948,706 2,250,900 2,199,132 2,550,830 2,560,961 2,564,370 2,671,556 3,573,023 46 Total Risk Asssessment Value 5,622,455 4,992,321 6,001,771 6,381,125 6,668,204 7,0631 8,756 964 9,247,811 9,902,791 10,615,661 12,442,421 47 Projected Operations Reserve _ 18,600_000 45,244,167 38,538,459 29,902,850 30,142,000 19,455,158 21,211,224 30 057,451 38,353,661 45,440,073 44,802,144 48 Operations Reserve, % of Risk Value 331% 906% 642% 469% 452% 275% 242% 325% 387% 428% 360% 49 44 ISUPPLYOPERATIONSRESERVE 45 Min (60 days of non -capital expenses) 17,841,143 16,831,022 16,957,154 18,345,636 20,817,535 21,749,445 21,765,198 20,738,810 21,164,097 21,325,772 21,705,956 46 Target (90 days of non -capital expenses) 26,761,715 25,246,533 25,435,732 27,518,453 31,226,303 32,624,168 32,647,797 31,108,216 31,746,145 31,988,658 32,558,934 47 Max (120 days of non -capital expenses) 35,682,287 33,662,044 33,914,309 36,691,271 41,635,071 43,498,891 43,530,397 41,477,621 42,328,193 42,651,545 43,411,912 48 49 DISTRIBUTION OPERATIONS RESERVE 50 Min (60 days of non -capital expenses) 8,008,309 7,869,900 8,621,917 8,051,581 7,811,860 9,057,464 8,913,063 9,458,289 9,974,828 10,658,331 10,787,723 51 Target (90 days of non -capital expenses) 10,309,464 10,096,233 11,071,856 10,898,913 10,608,212 12,421,038 12,165,946 12,947,629 13,685,392 14,672,468 14,827,230 52 Max (120 days of non -capital expenses) 12,610,618 12,322,566 13,521,795 13,746,245 13,404,564 15,784,612 15,418,828 16,436,969 17,395,955 18,686,605 18,866,737 53 Risk Assessment Value 5,622,455 i 4,992,321 6,001,771 6,381,125 6,668,204 7,063,828 8,756,964 9,247,811 9,902,791 10,615,661 12,442,421 54 55I DEBT SERVICE COVERAGE RATIO 56 Net Revenues (125% of Debt Service) 196° Item 15: Staff Report Pg. 61 Packet Pg. 632 of 853 57 Available Reserves (5x Debt Service)* 9.4 Item 15 FY24 ELECTRIC UTILITY FINANCIAL PLAN Attachment B Financial Electric Utility Financial Plan APPENDIX B: ELECTRIC UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices are used when developing the Electric Utility Financial Plan: Section 1. Definitions a) "Financial Planning Period" — The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b) "Fund Balance" —As used in these Reserves Management Practices, Fund Balance refers to the Utility's Unrestricted Net Assets. c) "Net Assets" - The Government Accounting Standards Board defines a Utility's Net Assets as the difference between its assets and liabilities. d) "Unrestricted Net Assets" - The portion of the Utility's Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Supply Fund Reserves The Electric Supply Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 4 (Reserve for Commitments) b) For operating budgets reappropriated from previous years, as described in Section 5 (Reserve for Reappropriations) c) For special projects for the benefit of the Electric Utility ratepayers, as described in Section 6 (Electric Special Projects Reserve) d) For year to year balancing of costs associated with the Electric Utility's hydroelectric resources, as described in Section 7 (Hydroelectric Stabilization Reserve) e) For rate stabilization, as described in Section 1.d) (Rate Stabilization Reserves) f) For operating contingencies, as described in Section 12 (Operations Reserves) g) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 13 (Unassigned Reserves). Section 3. Distribution Fund Reserves The Electric Distribution Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 4 (Reserves for Commitments) b) For operating and capital budgets reappropriated from previous years, as described in Section 5 (Reserves for Reappropriations) c) As an offset to underground loan receivables, as described in Section 8 (Underground Loan Reserve) d) To hold Public Benefit Program funds collected but not yet spent, as described in Section 9 (Public Benefits Reserve) e) For cash flow management and contingencies related to the Electric Utility's Capital Improvement Program (CIP), as described in Section 10 (CIP Reserve) f) For rate stabilization, as described in Section 11.d) (Rate Stabilization Reserves) g) For operating contingencies, as described in Section 12 (Operations Reserves) h) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 14 (Unassigned Reserves). June 2018 531 Item 15: Staff Report Pg. 62 Packet Pg. 633 of 853 Item 15 Attachment B ELECTRIC UTILITY FINANCIAL PLAN Electric Utility Financial Plan Section 4. Reserves for Commitments At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund Reserves for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Electric Supply Fund and Electric Distribution Fund, respectively, at that time. Section 5. Reserves for Reappropriations At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund Reserves for Reappropriations will be set to an amount equal to the amount of all remaining capital and non -capital budgets that will be reappropriated to the following fiscal year for each Fund in accordance with Palo Alto Municipal Code Section 2.28.090. Section 6. Electric Special Projects Reserve The Electric Special Projects Reserve (ESP Reserve) will be managed in accordance with the policies set forth in Resolution 9206 (Resolution of the Council of the City of Palo Alto Approving Renaming the Calaveras Reserve to the Electric Special Project Reserve and Adoption of Electric Special Project Reserve Guidelines). These policies are included from Resolution 9206 as amended to refer to the reserves structure set forth in these Reserves Management Practices: a) The purpose of the ESP Reserve is to fund projects that benefit electric ratepayers; b) The ESP Reserve funds must be used for projects of significant impact; c) Projects proposed for funding must demonstrate a need and value to electric ratepayers. The projects must have verifiable value and must not be speculative, or high -risk in nature; d) Projects proposed for funding must be substantial in size, requiring funding of at least $1 million; e) Set a goal to commit funds by the end of FY 2025; f) Any uncommitted funds remaining at the end of FY 2030 will be transferred to the Electric Supply Operations Reserve and the ESP Reserve will be closed; Section 7. Hydroelectric Stabilization Reserve The Hydroelectric Stabilization Reserve is used to manage the supply cost impacts associated with variations in generation from hydroelectric resources. Staff will manage the Hydroelectric Stabilization Reserve as follows: a) Projected Hydro Output: Near the end of each fiscal year, staff will determine the actual and expected hydro output for that fiscal year, compare that to the long-term average annual output level (495,957 MWh as of March 2018), and multiply the difference by the average of the monthly round-the-clock forward market prices for each month of the current fiscal year. b) Changes in Reserves. Staff is authorized to transfer the amount described in Sec. 7(a) from the Operations Reserve to the Hydroelectric Stabilization Reserve for hydro output deviations above long-term average levels, or transfer this amount from the Hydroelectric Stabilization Reserve to the Operations Reserve for hydro output deviations below long-term average levels. June 2018 54IPage Item 15: Staff Report Pg. 63 Packet Pg. 634 of 853 Item 15 ELECTRIC UTILITY FINANCIAL Pi Attachment B FY24 nni Electric Utility Financial Plan c) Implementation of HRA. The level of the Hydroelectric Stabilization Feserve ajterthe transfers described above shall be the basis for staff's determination, with Council approval, of whether to implement the Hydro Rate Adjuster (Electric Rate E-HRA) for the following fiscal year. d) Reserve Guidelines. Staff will manage the Hydroelectric Stabilization Reserve according to the following guideline levels: Minimum Level $3 million Target Level $19 million Maximum Level $35 million Section 8. Underground Loan Reserve At the end of each fiscal year, the Underground Loan Reserve will be adjusted by the principal payments made against outstanding underground loans. Section 9. Public Benefits Reserve The Public Benefits Reserve will be increased by the amount of unspent Public Benefits Revenues remaining at the end of each fiscal year. Expenditure of these funds requires action by the City Council. Section 10. CIP Reserve The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for capital contingencies. Staff will manage the CIP Reserve according to the following practices: a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period and approved by Council resolution. Minimum Level 20% of the maximum CIP Reserve guideline level Maximum Level Average annual (12 month)12 CIP budget, for 48 months of budgeted CIP expensesl3 b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the Reserve for Commitments when funds are added to or removed from the Reserve for Commitments as a result of a change in contractual commitments related to CIP projects. Any other additions to or withdrawals from the CIP reserve require Council action. c) Minimum Level: i) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered by the end of the following fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the next fiscal year. For example, if the CIP Reserve is below its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In addition, staff 12 Each month is calculated based upon 1/12 of the annual budget. 13 For example, in the Financial Plan for FY 2021, the 48 month period to use to derive the annual average is FY 2021 through FY 2024. In the FY 2022 Financial Plan, the 48 month period to use to derive the annual average would be FY 2022 through FY 2025 etc. June 2018 55�page Item 15: Staff Report Pg. 64 Packet Pg. 635 of 853 Item 15 Attachment B ELECTRIC UTILITY FINANCIAL PLAN Electric Utility Financial Plan may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve, or that does so in a shorter period of time. d) Maximum Level: If there are funds in this reserve in excess of the maximum level staff must propose in the next Financial Plan to transfer these funds to another reserve or return them to ratepayers in the funds to ratepayers, or designate a specific use of funds for CIP investments that will be made by the end of the next Financial Planning period. Staff may also seek City Council to approve holding funds in this reserve in excess of the maximum level if they are held for a specific future purpose related to the CIP. Section 11. Rate Stabilization Reserves Funds may be added to the Electric Supply or Distribution Fund's Rate Stabilization Reserves by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from either Rate Stabilization Reserve requires action by the City Council. If there are funds in either Rate Stabilization Reserve at the end of any fiscal year, any subsequent Electric Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. The Council may approve exceptions to this requirement, when proposed by staff to provide greater rate stabilization to customers. Section 12. Operations Reserves The Electric Supply Fund and Electric Distribution Fund Operations Reserves are used to manage normal variations in the costs of providing electric service and as a reserve for contingencies. Any portion of the Electric Utility's Fund Balance not included in the reserves described in Section 4 to 11 above will be included in the appropriate Operations Reserve unless the reserve has reached its maximum level as set forth in Section 12 (e) below. Staff will manage the Operations Reserves according to the following practices: a) The following guideline levels are set forth for the Electric Supply Fund Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of Supply Fund O&M and commodity expense Target Level 90 days of Supply Fund O&M and commodity expense Maximum Level 120 days of Supply Fund O&M and commodity expense b) The following guideline levels are set forth for the Electric Distribution Fund Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of O&M expense forecasted for that year in the Financial Plan. Minimum Level 60 days of Distribution Fund O&M expense Target Level 90 days of Distribution Fund O&M expense Maximum Level 120 days of Distribution Fund O&M expense c) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Supply Fund or Distribution Fund's Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a June 2018 561 Item 15: Staff Report Pg. 65 Packet Pg. 636 of 853 Item 15 Attachment B ELECTRIC UTILITY FINANCIAL PLAN Electric Utility Financial Plan minimum, result in the reserve reaching its minimum level by the end ot the tollowlng fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present an alternative plan that takes longer than one year to replenish the reserve. d) Target Level: If, at the end of any fiscal year, either Operations Reserve is higher or lower than the target level, any Financial Plan created for the Electric Utility shall be designed to return both Operations Reserves to their target levels by the end of the forecast period. e) Maximum Level: If, at any time, either Operations Reserve reaches its maximum level, no funds may be added to this Reserve. Any further increase in that fund's Fund Balance shall be automatically included in the Unassigned Reserve described in Section 13, below. Section 13. Unassigned Reserves If the Operations Reserve in either the Electric Supply Fund or the Electric Distribution Fund reaches its maximum level, any further additions to that fund's Fund Balance will be held in the Unassigned Reserve. If there are any funds in either Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Electric Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2016, and the next Financial Planning Period is FY 2017 through FY 2021, the Financial Plan shall include a plan to return or assign the funds in the Unassigned Reserve by the end of FY 2017. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. Section 14. Intra-Utility Transfers between Supply and Distribution Funds Transfers between Electric Distribution Fund Reserves and Electric Supply Fund Reserves are permitted if consistent with the purposes of the two reserves involved in the transfer. Such transfers require action by the City Council. Section 15. Low Carbon Fuel Standard (LCFS) Reserve This reserve tracks revenues earned via the sale of Low Carbon Fuel Credits allocated by the California Air Resources Board to the City, as well as expenses incurred, in accordance with California's Low Caron Fuel Standard program. At the end of each fiscal year, the LCFS Reserve will be adjusted by the net of revenues and expenses associated with California's LCFS program. Section 16. Cap and Trade Program Reserve This reserve tracks unspent or unallocated revenues from the sale of carbon allowances freely allocated by the California Air Resources Board to the electric utility, under the State's Cap and Trade Program. Funds in this Reserve are managed in accordance with the City's Policy on the Use of Freely Allocated Allowances under the State's Cap and Trade Program (the Policy), adopted by Council Resolution 9487 in January 2015. June 2018 571 Item 15: Staff Report Pg. 66 Packet Pg. 637 of 853 Item 15 Attachment B ELECTRIC UTILITY FINANCIAL PLAN Electric Utility Financial Plan APPENDIX C: DESCRIPTION OF ELECTRIC UTILITY OPERATIONAL ACTIVITIES This appendix describes the activities associated with the various cost categories referred to in this Financial Plan. Customer Service: This category includes the Electric Utility's share of the call center, meter reading, collections, and billing support functions. Billing support encompasses staff time associated with bill investigations and quality control on certain aspects of the billing process. It does not include maintenance of the billing system itself, which is included in Administration. This category also includes CPAU's key account representatives, who work with large commercial customers who have more complex requirements for their electric services. Resource Management: This category includes supply portfolio management, energy procurement, rate setting, and tracking of legislation and regulation related to the electric industry. Operations and Maintenance: This category includes the costs of a variety of distribution system maintenance activities, including: • monitoring the substations and performing routine maintenance; • performing preventative maintenance on the system; • monitoring the system's status from the UCC using SCADA; • maintaining the SCADA system; • investigating outages and other customer complaints and performing emergency repairs; • clearing vegetation near overhead power lines; and • testing and replacing meters to ensure accurate sales metering. Administration: Accounting, purchasing, legal, and other administrative functions provided by the City's General Fund staff, as well as shared communications services, Utilities Department administrative overhead and billing system maintenance costs. Demand Side Management: Includes the cost of administering energy efficiency programs and the direct cost of rebates paid. Includes solar rebates. Engineering (Operating): The Electric Utility's engineers focus primarily on the CIP, but a small portion of their time is spent assisting with distribution system maintenance. June 2018 581 Item 15: Staff Report Pg. 67 Packet Pg. 638 of 853 Item 15 Attachment B - FY24 APPENDIX D: SAMPLES OF RECENT ELECTRIC UTILITY OUTREACH COMMIS Electric Utility Financial HOW CAN YOUR BUSINESS BENEFIT FROM BUSINESS ELECTRIFICATION TECHNICAL ASSISTANCE? ✓ , .-t, :.. . managers. tend,:, d -Id ul'l,-n ,dn enjoy ii'rld'r of electrification. l ncludivg. Plan BUSINESS ELECTRIFICATION TECHNICAL ASSISTANCE PROGRAM Simple and Substantive Ways to Lower Your Energy Bill. - his winter. Cep the uu' L _.. ni i . s gun, Widu uourte i ecped and lmpal olmsors offer over -the -phone energy and water efficiency advice to help Palo Alto residents snot money and stay comfortable Here are some ways to start saving on your own with help from the Genre 4 Program your thrmmat to tuns on only when you we home and new to he Use you curtains to let the sunshine in and keep the cold out 4 Unless you are nanrg a fire in your fireplace, keep the damper close. ftplewyewAan on SdOpUeds OMdW y and keep your air clean. \ .• f UpPtleyM holeey h....d..M* I .Etg to LEDs. ��•• # tyMStM•*(P Mid vl�t MOII d your doors. windows. and ak leakage point,. Fret --itat— Gerw.wn rennet, Improved Mal, weww dpportueia contractor, which your utilit EV STAnSnCA IN PALO ALTO: includes a rebate. • which in, t FEEL GOOD ABOUT YOURSELF, YOUR COMPANY, AND �C` YOUR PLANET• ergy an w r encmg yonr owneu, energy are water conwmpten snot only • not way to protect Vie pl aret. tint Nso helps you sit+, nterey and gear cusmnrr loyalty. t I Wtlr the no Sttelear. IaeaSy AANew (SEA) Programbusiness customers can eN 9.4 1... hendsgr esseunce and generous rebate to nstail energy and water IIICIe efficient pulpment. folio, the Climate Action Slag Seep.• at medlum.com/ • paloaffoconrect Sign up lac City update, at eon cityolpaloano. org/neeslett•npnvp Item 15: Staff Report Pg. 68 Packet Pg. 639 of 853 Item 15 Attachment C - Rate Schedules Combined RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-1 A. B. C. D. APPLICABILITY: This Rate Schedule applies to separately metered single-family residential dwellings receiving Electric Service from the City of Palo Alto Utilities. TERRITORY: This rate schedule applies everywhere the City of Palo Alto provides Electric Service. UNBUNDLED RATES: Per kilowatt-hour (kWh) Commodity Tier 1 usage Tier 2 usage Any usage over Tier 1 Minimum Bill ($/day) 0_13873044 $5-S SPECIAL NOTES: 1. Calculation of Cost Components Distribution Public Benefits Total 0.175210.1444 5 0.203354666 The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Calculation of Usage Tiers Tier 1 Electricity usage shall be calculated and billed based upon a level of 11 kWh per day, prorated by Meter reading days of Service. As an example, for a 30 -day bill, the Tier 1 level would be 330 kWh. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. [End) CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-1-1 dated 7-120-1-92022 ;r PALO ALTO UTILITIES Item 15: Staff Report Pg. 69 Sheet No E-1-1 Effective 7-1-X22023 Packet Pg. 640 of 853 Item 15 Attachment C - Rate Schedules Combined RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-2 APPLICABILITY: This Rate Schedule applies to the following Customers receiving Electric Service from the City of Palo Alto Utilities: 1. Small non-residential Customers receiving Non -Demand Metered Electric Service; and 2. Customers with Accounts at Master -Metered multi -family facilities. B. C. TERRITORY: This rate schedule applies everywhere the City of Palo Alto provides Electric Service. UNBUNDLED RATES: Per kilowatt-hour (kWh) Summer Period Winter Period Minimum Bill ($/day) D. SPECIAL NOTES: Commodity Distribution Public Benefits 0.142160.121 $ $ 5-1 0.117750 .09276 0.005680.00469 1. Calculation of Cost Components Total 0.2655909 6 0.186250. 1535 1.06460.8777 The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use in both the Summer and the Winter Periods, the usage will be prorated based on the number of days in each CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-2-1 Sheet No E-2-1 dated 7-1-20-192022 : r PALO ALTO UTILITIES Effective 7-1-12023 Item 15: Staff Report Pg. 70 l Packet Pg. 641 of 853 Item 15 Attachment C - Rate Schedules Combined RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-2 seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kWh for three consecutive months, a maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in service until the monthly use of energy has fallen below 6,000 kWh for twelve consecutive months, whereupon, at the option of the City, it may be removed. The maximum Demand in any month will be the maximum average power in kilowatts taken during any 15 -minute interval in the month provided that if the Customer's load is intermittent or subject to fluctuations, the City may use a 5 -minute interval. A thermal -type Demand Meter which does not reset after a definite time interval may be used at the City's option. The billing Demand to be used in computing charges under this schedule will be the actual maximum Demand in kilowatts for the current month. An exception is that the billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual maximum Demand of such Customers between the hours of noon and 6 pm on weekdays. {End) CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-2-2 dated 7-1-2-0-1-92022 : r PALO ALT O UTILITIES Item 15: Staff Report Pg. 71 Sheet No E-2-2 Effective 7-1-X22023 Packet Pg. 642 of 853 Item 15 Attachment C - Rate Schedules Combined RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -2-G A. APPLICABILITY: This Rate Schedule applies to the following Customers receiving Electric Service from the City of Palo Alto Utilities under the Palo Alto Green Program: 1. Small non-residential Customers receiving Non -Demand Metered Electric Service; and 2. Customers with Accounts at Master -Metered multi -family facilities. B. TERRITORY: This rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: 1. 100% Renewable Option: Palo Alto Public Green Per kilowatt-hour (kWh) Commodity Distribution Benefits Charge Total $ $ $ $ 0.142160 0.11775079 0.005680:0 0.273090 Summer Period 4-5-1- 276 0469 $ 0.0075 22646 0.101960708 0.078610706 0.00568070 $ 0.19375 Winter Period 74-s 1-74 0469 0.0075 0.16105 Minimum Bill ($/day) 1.06460.8777 2. 1000 kWh Block Purchase Option: Public Per kilowatt-hour (kWh) Commodity Distribution Benefits Total $ $ $ $ 0.142160l4 0.11775009 0.00568070 0.265590 Summer Period 4-54 2-76 0469 21896 0.101960708 0.078610706 0.00568070 0.186250 Winter Period 7-s 4-74 0469 15355 Minimum Bill ($/day) 1.06460.8777 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No E -2-G-1 dated 7-1-20221 t CITY OF PALO ALTO UTILITIES Item 15: Staff Report Pg. 72 Sheet No E -2-G-1 Effective 7-1-2023-2 Packet Pg. 643 of 853 Item 15 Attachment C - Rate Schedules Combined RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -2-G Palo Alto Green Charge (per 1000 kWh block) $7.50 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use in both the Summer and Winter Periods, usage will be prorated based upon the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewable sources, and create a transparent and sustainable market that encourages new development of wind and solar power. Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No E -2-G-2 CITY OF.. F PALO ALT O dated 7-1-20221 UTILITIES Item 15: Staff Report Pg. 73 Sheet No E -2-G-2 Effective 7-1-20232 Packet Pg. 644 of 853 Item 15 Attachment C - Rate Schedules Combined RESIDENTIAL MASTER -METERED AND SMALL NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -2-G 4. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kWh for three consecutive months, a maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in service until the monthly use of energy has fallen below 6,000 kWh for twelve consecutive months, whereupon, at the option of the City, it may be removed. The maximum Demand in any month will be the maximum average power in kilowatts taken during any 15 -minute interval in the month, provided that if the Customer -s load is intermittent or subject to fluctuations, the City may use a 5 -minute interval. A thermal -type Demand Meter which does not reset after a definite time interval may be used at the City's option. The billing Demand to be used in computing charges under this schedule will be the actual maximum Demand in kilowatts for the current month. An exception is that the billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual maximum Demand of such Customers between the hours of noon and 6 pm on weekdays. [End] CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No E -2-G-3 CITY OF.. F PALO ALT O dated 7-1-20221 UTILITIES Item 15: Staff Report Pg. 74 Sheet No E -2-G-3 Effective 7-1-20232 Packet Pg. 645 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4 A. B. C. D. APPLICABILITY: This Rate Schedule applies to Demand metered Secondary Electric Service for Customers with a maximum Demand below 1,000 kilowatts. This Rate Schedule applies to three-phase Electric Service and may include Service to master -metered multi -family facilities or other facilities requiring Demand -metered Service, as determined by the City. TERRITORY: This rate schedule applies anywhere everywhere the City of Palo Alto provides Electric Service. UNBUNDLED RATES: Rates per kilowatt (kW) and kilowatt-hour (kWh): Public Commodity Distribution Benefits Total Summer Period Demand Charge (per kW) Energy Charge (per kWh) Winter Period Demand Charge (per kW) Energy Charge (per kWh) Minimum Bill ($/day) $_5.2845 $3 1.5425.84 $ 3.29282 $ 20.8717.10 $_36.8230.36 0.094610:07 0.026380.020 0.005680.004 94-3 63 69 0.126670.10443 SPECIAL NOTES: 1. Calculation of Cost Components 22.0012 379 The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-4-1 PALO ALTO dated 7-1-20229 UTILITIES Item 15: Staff Report Pg. 75 Sheet No E-4-1 Effective 7-1-20223 Packet Pg. 646 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use both in the Summer and the Winter Periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kWh for three consecutive months, a Maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has fallen below 6,000 kWh for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Maximum Demand in any month will be the maximum average power in kilowatts taken during any 15 -minute interval in the month, provided that if the Customer's load is intermittent or subject to fluctuations, the City may use a 5 -minute interval. A thermal -type Demand Meter which does not reset after a definite time interval may be used at the City's option. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts for the current month. An exception is that the Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual Maximum Demand of such Customers between the hours of noon and 6 pm on weekdays. 4. Power Factor For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option of installing applicable Metering to calculate a Power Factor. The City may remove such Metering from the Service of a Customer whose Demand has been below 200 kilowatts for four consecutive months. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-4-2 Sheet No E-4-2 dated 7-1-20224-9 PALO ALT O UTILITIES Effective 7-1-2023 Item 15: Staff Report Pg. 76 l Packet Pg. 647 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4 When such metering is installed, the monthly Electric bill will include a "Power Factor Adjustment", if applicable. The adjustment will be applied to a Customer's bill prior to the computation of any primary voltage discount. The Power Factor Adjustment is applied by increasing the total energy and Demand charges for any month by 0.25 percent (0.25%) for each one percent (1%) that the monthly Power Factor of the Customer's load was less than 95%. The monthly Power Factor is the average Power Factor based on the ratio of kilowatt hours to kilovolt -ampere hours consumed during the month. Where time -of -day Metering is installed, the monthly Power Factor shall be the Power Factor coincident with the Customer's Maximum Demand. 5. Changing Rate Schedules Customers may request a rate schedule change at any time to any City of Palo Alto full - service rate schedule as is applicable to their kilowatt -Demand and kilowatt-hour usage profile. 6. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be offered, but the City is not required to supply Service at a particular line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's electrical requirements, as determined in the City's sole discretion. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving the discount in this section. The Customer then has the option to change his system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt -ampere size limitation. 7. Standby Charge a. Applicability: The standby charge, subject to the exemptions in subsection D(7)(e), applies to Customers that have a non -utility generation source interconnected on the Customer's side of the City's revenue meter and that occasionally require backup power from the City due to non -operation of the non - utility generation source. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-4-3 Sheet No E-4-3 dated 7-1-20224-9 PALO ALT O UTILITIES Effective 7-1-20223 Item 15: Staff Report Pg. 77 l Packet Pg. 648 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4 b. Standby Charges: Commodity Distribution Total Standby Charge (per kW of Reserved Capacity) Summer Period $0.69 $15.23 $15.92 Winter Period $0.63 $9.04 $9.67 c. Meters. A separate Meter is required for each non -utility generation source. d. Calculation of Maximum Demand Credit. (1) In the event the Customer's Maximum Demand (as defined in Section D.3) occurs when one or more of the non -utility generators on the Customer's side of the City's revenue meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non -utility generators, but in no event shall the Customer's Maximum Demand be reduced below zero. (2) If the non -utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions. (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an "Eligible Customer -generator" as defined in California Public Utilities Code Section 2827(b)(4), as amended. (3) The applicability of these exemptions shall be determined at the discretion of the Utilities Director. {End) CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-4-4 Sheet No E-4-4 dated 7-1-20224-9 PALO ALT O UTILITIES Effective 7-1-2023 Item 15: Staff Report Pg. 78 Packet Pg. 649 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -4-G A. APPLICABILITY: This Rate Schedule applies to Demand metered Secondary Electric Service for Customers with a maximum Demand below 1,000 kilowatts (kW) who receive power under the Palo Alto Green Program. This Rate Schedule applies to three-phase Electric Service and may include Service to Master -metered multi -family facilities or other facilities requiring Demand metered Service, as determined by the City. B. TERRITORY: The rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: 1. 100% Renewable Option: Palo Alto Public Green Commodity Distribution Benefits Charge Total Summer Period Demand Charge (per kW) Energy Charge (per kWh) Winter Period $ 5.2842 $ 31.544 0.1315704-0 0.026380.020 0.005680: 960 64- 00469 Demand Charge (per kW) $_3.292782 $ 20.8717.10 0.094610 0.026380.020 0.005680: Energy Charge (per kWh) 94- 64 00469 Minimum Bill ($/day) CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No E -4-G-1 dated 7-1-20224 CITY OF PALO ALTO UTILITIES Item 15: Staff Report Pg. 79 36.8230:3 6 0.171130: 0.0075 14240 24.1643 2 0.134170: 0.0075 11193 22.001218. 1379 Sheet No E -4-G-1 Effective 7-1-20223 Packet Pg. 650 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -4-G 2. 1000 kWh Block Purchase Option: Public Commodity Distribution Benefits Total Summer Period 36.82 Demand Charge (per kW) $_5.2845 $_31.5425.81 6 0.13157040 0.026380.020 0.005680: 0.163630: Energy Charge (per kWh) 960 64 00469 13190 Palo Alto Green Charge (per 1000 kWh block) $7.50 Winter Period 24.161-979 Demand Charge (per kW) $_3.2928 $_20.8717.10 2- 0.094610 0.026380.020 0.005680: 0.126670: Energy Charge (per kWh) 944 64 00469 10443 Palo Alto Green Charge (per 1000 kWh block) $7.50 Minimum Bill ($/day) 22.00121 8.1379 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges, and/or taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use both in the Summer and the Winter Periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three consecutive months, a Maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E -4-G-2 Sheet No E -4-G-2 dated 7-1-20224 :r PALO ALTO UTILITIES Effective 7-1-20223 Item 15: Staff Report Pg. 80 Packet Pg. 651 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -4-G dropped below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Maximum Demand in any month will be the maximum average power in kilowatts taken during any 15 -minute interval in the month, provided that if the Customer's load is intermittent or subject to fluctuations, the City may use a 5 -minute interval. A thermal -type Demand Meter, which does not reset after a definite time interval, may be used at the City's option. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts for the current month. An exception is that the Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual Maximum Demand of such Customers between the hours of noon and 6 PM on weekdays. 4. Power Factor For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option of installing applicable Metering to calculate a Power Factor. The City may remove such Metering from the Service of a Customer whose Demand has dropped below 200 kilowatts for four consecutive months. When such Metering is installed, the monthly Electric bill will include a "Power Factor Adjustment", if applicable. The adjustment will be applied to a Customer's bill prior to the computation of any primary voltage discount. The Power Factor Adjustment is applied by increasing the total energy and Demand charges for any month by 0.25 percent or (1/4) for each one percent (1%) that the monthly Power Factor of the Customer's load was less than 95%. The monthly Power Factor is the average Power Factor based on the ratio of kilowatt- hours to kilovolt -ampere hours consumed during the month. Where time -of -day Metering is installed, the monthly Power Factor shall be the Power Factor coincident with the Customer's Maximum Demand. 5. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable full -service rate schedule as is applicable to their kilowatt -Demand and kilowatt-hour usage profile. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E -4-G-3 Sheet No E -4-G-3 dated 7-1-20224 :r PALO ALTO UTILITIES Effective 7-1-2023 Item 15: Staff Report Pg. 81 l Packet Pg. 652 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -4-G 6. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and creates a transparent and sustainable market that encourages new development of wind and solar. Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. 7. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2.5 percent for available line voltages above 2 kilovolts will be offered, but the City is not required to supply Service at a particular line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's electrical requirements, as determined in the City's sole discretion. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving the discount in this section. The Customer then has the option to change the system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt -ampere size limitation. 8. Standby Charge a. Applicability: The standby charge, subject to the exemptions in subsection D(8)(e), applies to Customers that have a non -utility generation source interconnected on the Customer's side of the City's revenue Meter and that occasionally require backup power from the City due to non -operation of the non - utility generation source. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E -4-G-4 dated 7-1-20221 : r PALO ALT O UTILITIES Item 15: Staff Report Pg. 82 Sheet No E -4-G-4 Effective 7-1-20223 Packet Pg. 653 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -4-G b. Standby Charges: Commodity Distribution Total Standby Charge (per kW of Reserved Capacity) Summer Period $0.69 $15.23 $15.92 Winter Period $0.63 $9.04 $9.67 c. Meters: A separate Meter is required for each non -utility generation source. d. Calculation of Maximum Demand Credit: (1) In the event the Customer's Maximum Demand (as defined in Section D.3) occurs when one or more of the non -utility generators on the Customer's side of the City's revenue Meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non -utility generators, but in no event shall the Customer's Maximum Demand be reduced below zero. (2) If the non -utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions: (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an "Eligible Customer -generator" as defined in California Public Utilities Code Section 2827(b)(4), as amended. (3) The applicability of these exemptions shall be determined at the discretion of the Utilities Director. {End) CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E -4-G-5 dated 7-1-20221 : r PALO ALT O UTILITIES Item 15: Staff Report Pg. 83 Sheet No E -4-G-5 Effective 7-1-202-23 Packet Pg. 654 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-4 TOU A. APPLICABILITY: This voluntary Rate Schedule applies to Demand metered Secondary Electric Service for Customers with Demand between 500 and 1,000 kilowatts per month and who have sustained this level of usage for at least three consecutive months during the most recent 12 month period. This Rate Schedule applies to three-phase Electric Service and may include Service to Master - Metered multi -family facilities or other facilities requiring Demand -metered Service, as determined by the City. In addition, this Rate Schedule is applicable for Customers who did not pay power factor adjustments during the last 12 months. B. TERRITORY: This rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: Rates per kilowatt (kW) and kilowatt-hour (kWh): Commodity Distribution Public Benefits Summer Period Demand Charge (per kW) Peak $_3.22277-1 Mid -Peak 1.110:9-7 Off -Peak 1.119797 Energy Charge (per kWh) 0.1202004-0 Peak 022 0.15204042 Mid -Peak 647 0.0922997 Off -Peak 724 Winter Period Demand Charge (per kW) Peak $_1.83-L5-7 Off -Peak 1.83-57 CITY OF PALO ALTO UTILITIES Issued by the City Council $_11.639753 11.633 CITY OF Supersedes Sheet No E-4-TOU-1 PALO ALTO dated 7-1-20224-9 UTILITIES Item 15: Staff Report Pg. 84 Total $_13.4611.10 13.4611.10 Sheet No E-4-TOU-1 Effective 7-1-20232 Packet Pg. 655 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-4 TOU Commodity Energy Charge (per kWh) 1474404-2 Peak 268 0.1261904-0 Off -Peak 54-6 Minimum Bill ($/day) D. SPECIAL NOTES: 1. Calculation of Cost Components Distribution Public Benefits Total 11111 ,1 11 • : ZI!.�. •MlYl11.W bIS1 The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Definition of Time Periods SUMMER PERIOD (Service from May 1 to October 31): Peak: 12:00 noon to 6:00 p.m. Monday through Friday (except holidays) Mid Peak: 8:00 a.m. to 12:00 noon Monday through Friday (except holidays) 6:00 p.m. to 9:00 p.m. Off -Peak: 9:00 p.m. to 8:00 a.m. Monday through Friday (except holidays) All day Saturday, Sunday, and holidays WINTER PERIOD (Service from November 1 to April 30): Peak: 8:00 a.m. to 9:00 p.m. Monday through Friday (except holidays) Off -Peak: 9:00 p.m. to 8:00 a.m. Monday through Friday (except holidays) All day Saturday, Sunday, and holidays SEASONAL RATE CHANGES: When the billing period includes use in both the Summer and the Winter periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No E-4-TOU-2 CITY o F Sheet No E-4-TOU-2 dated 7-1-20229 PALO UTILITALTOIES Effective 7-1-2023 Item 15: Staff Report Pg. 85 Packet Pg. 656 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-4 TOU discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Demand Meter Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three consecutive months, a Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has fallen below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts taken during any 15 -minute interval in each of the designated time periods as defined under Section D.2. 4. Power Factor Adjustment Time of Use Customers must not have had a power factor adjustment assessed on their Service for at least 12 months. Power factor is calculated based on the ratio of kilowatt hours to kilovolt -ampere hours consumed during the month, and must not have fallen below 95% to avoid the power factor adjustment. Should the City of Palo Alto Utilities Department find that the Customer's Service should be subject to power factor adjustments, the Customer will be removed from the E-4-TOU rate schedule and placed on another applicable rate schedule as is suitable to their kilowatt Demand and kilowatt-hour usage. 5. Changing Rate Schedules Customers electing to be served under E-4 TOU must remain on said Rate Schedule for a minimum of 12 months. Should the Customer so wish, at the end of 12 months, the Customer may request a Rate Schedule change to any applicable City of Palo Alto full - service Rate Schedule as is suitable to their kilowatt Demand and kilowatt-hour usage. 6. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be offered, but the City is not required to supply Service at a particular line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's electrical requirements, as determined in the City's sole CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-4-TOU-3 Sheet No E-4-TOU-3 dated 7-1-20224-9 PALO ALTO UTILITIES Effective 7-1-2023 Item 15: Staff Report Pg. 86 l Packet Pg. 657 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-4 TOU discretion. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving the discount in this section. The Customer then has the option to change his system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt -ampere size limitation. 7. Standby Charge a. Applicability: The standby charge, subject to the exemptions in subsection D(7)(e), applies to Customers that have a non -utility generation source interconnected on the Customer's side of the City's revenue Meter and that occasionally require backup power from the City due to non -operation of the non - utility generation source. b. Standby Charges: Commodity Distribution Total Standby Charge (per kW of Reserved Capacity) Summer Period $0.69 $15.23 $15.92 Winter Period $0.63 $9.04 $9.67 c. Meters. A separate Meter is required for each non -utility generation source. d. Calculation of Maximum Demand Credit. (1) In the event the Customer's Maximum Demand occurs when one or more of the non -utility generators on the Customer's side of the City's revenue Meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non -utility generators, but in no event shall the Customer's Maximum Demand be reduced below zero. (2) If the non -utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions. (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-4-TOU-4 dated 7-1-20224-9 : f PALO ALTO UTILITIES Item 15: Staff Report Pg. 87 Sheet No E-4-TOU-4 Effective 7-1-20232 Packet Pg. 658 of 853 Item 15 Attachment C - Rate Schedules Combined MEDIUM NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-4 TOU offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an "Eligible Customer -generator" as defined in California Public Utilities Code Section 2827(b)(4), as amended. (3) The applicability of these exemptions shall be determined at the discretion of the Utilities Director. {End) CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-4-TOU-5 PALO ALTO dated 7-1-20229 UTILITIES Sheet No E-4-TOU-5 Effective 7-1-2023-2 Item 15: Staff Report Pg. 88 Packet Pg. 659 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7 A. APPLICABILITY: This Rate Schedule applies to Demand Metered Service for large non-residential Customers with a Maximum Demand of at least 1,000KW per month per site, who have sustained this Demand level at least 3 consecutive months during the last twelve months. B. TERRITORY: This rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. RATES: Rates per kilowatt (kW) and kilowatt-hour (kWh): Public Commodity Distribution Benefits Total Summer Period Demand Charge (kW) Energy Charge (kWh) Winter Period Demand Charge (kW) Energy Charge (kWh) Minimum Bill ($/day) D. SPECIAL NOTES: $ 6.03546 $_33.0527.06 $_39.0832.22 0.13917044 476 0.000750.00059 0.005680.00469 0.145600 004 $3.46236 $18.25 94 $21.7117.90 0.09212047 5 0.000750.00059 0.005680 0469 0.098550.0 8125 1. Calculation of Charges 62.553951.5696 The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No E-7-1 dated 7-1-20224-9 CITY OF PALO ALTO r UTILITIES Item 15: Staff Report Pg. 89 Sheet No E-7-1 Effective 7-1-20232 Packet Pg. 660 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use both in the summer and in the winter periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Request for Service Qualifying Customers may request Service under this schedule for more than one Account or one Meter if the Accounts are on one site. A site, for the purposes of this Rate Schedule, consists of one or more Accounts which cover contiguous parcels of land with no intervening public right-of-ways (e.g. streets) and which have a common billing address. 4. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three consecutive months, a Maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has fallen below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Maximum Demand in any month will be the maximum average power in kilowatts taken during any 15 -minute interval in the month provided that if the Customer's load is intermittent or subject to fluctuations, the City may use a 5 -minute interval. A thermal - type Demand Meter which does not reset after a definite time interval may be used at the City's option. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts for the current month. An exception is that the Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual Maximum Demand of such Customers between the hours of noon and 6 pm on weekdays. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-7-2 PALO ALTO dated 7-1-20224-9 r UTILITIES Item 15: Staff Report Pg. 90 Sheet No E-7-2 Effective 7-1-20232 Packet Pg. 661 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7 5. Power Factor For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option to install applicable Metering to calculate a Power Factor. The City may remove such Metering from the Service of a Customer whose Demand has been below 200 kilowatts for four consecutive months. When such metering is installed, the monthly Electric bill shall include a "Power Factor Adjustment", if applicable. The adjustment shall be applied to a Customer's bill prior to the computation of any primary voltage discount. The power factor adjustment is applied by increasing the total energy and Demand charges for any month by 0.25 percent (0.25%) for each one percent (1%) that the monthly Power Factor of the Customer's load was less than 95%. The monthly Power Factor is the average Power Factor based on the ratio of kilowatt hours to kilovolt -ampere hours consumed during the month. Where time -of -day Metering is installed, the monthly Power Factor shall be the Power Factor coincident with the Customer's Maximum Demand. 6. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable full service rate schedule as is applicable to their kilowatt -Demand and kilowatt-hour usage profile. 7. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be offered, but the City is not required to supply Service at a particular line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's electrical requirements, as determined in the City's sole discretion. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving the discount in this section. The Customer then has the option to change his system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kVA size limitation. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-7-3 PALO ALTO dated 7-1-20224-9 r UTILITIES Item 15: Staff Report Pg. 91 Sheet No E-7-3 Effective 7-1-20232 Packet Pg. 662 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7 8. Standby Charge a. Applicability: The standby charge, subject to the exemptions in subsection D(8)(e), applies to Customers that have a non -utility generation source interconnected on the Customer's side of the City's revenue Meter and that occasionally require backup power from the City due to non -operation of the non - utility generation source. b. Standby Charges: Commodity Distribution Total Standby Charge (per kW of Reserved Capacity) Summer Period $0.84 $12.55 $13.39 Winter Period $0.72 $6.04 $6.76 c. Meters. A separate Meter is required for each non -utility generation source. d. Calculation of Maximum Demand Credit. (1) In the event the Customer's Maximum Demand (as defined in Section D.4) occurs when one or more of the non -utility generators on the Customer's side of the City's revenue Meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non -utility generators, but in no event shall the Customer's Maximum Demand be reduced below zero. (2) If the non -utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions. (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an "Eligible Customer -generator" as defined in California Public Utilities Code CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-7-4 PALO ALTO dated 7-1-20224-9 r UTILITIES Item 15: Staff Report Pg. 92 Sheet No E-7-4 Effective 7-1-20232 Packet Pg. 663 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7 Section 2827(b)(4) , as amended. (3) The applicability of these exemptions shall be determined at the discretion of the Utilities Director. {End) CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-7-5 PALO ALTO dated 7-1-20224-9 r UTILITIES Item 15: Staff Report Pg. 93 Sheet No E-7-5 Effective 7-1-20232 Packet Pg. 664 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -7-G A. APPLICABILITY: This Rate Schedule applies to Demand metered Service for large non-residential Customers who choose Service under the Palo Alto Green Program. A Customer may qualify for this Rate Schedule if the Customer's Maximum Demand is at least 1,000KW per month per site, who have sustained this Demand level at least 3 consecutive months during the last twelve months. B. TERRITORY: The rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: 1. 100% Renewable Option: Palo Alto Public Green Commodity Distribution Benefits Charge Total Summer Period 39.08-? Demand Charge (per kW) $ 6.03546 $_33.0527.06 0.139170A4 0.000754.00 0.005680: 0.15310 Energy Charge (per kWh) 476 0 3 00469 0.0075 0.12754 Winter Period 21.714? Demand Charge (per kW) $3.462706 $ 18.2514.94 }0 0.092120707 0.000750:00 0.005680: 0.10605 Energy Charge (per kWh) 59-7 059 00469 0.0075 0.08875 Minimum Bill ($/day) CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No E -7-G-1 dated 7-1-20221 CITY OF PALO ALTO UTILITIES Item 15: Staff Report Pg. 94 62.553951.5696 Sheet No E -7-G-1 Effective 7-1-2023-2 Packet Pg. 665 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -7-G 2. 1000 kWh Block Purchase Option: Commodity Distribution Public Benefits Total Summer Period 39.0832,? Demand Charge (per kW) $_6.035-46 $_33.0527.06 22 0.13917044 0.000750:00 0.14560 Energy Charge (per kWh) 426 059 0.005680.00469 0.12004 Palo Alto Green Charge (per 1000 kWh block) $7.50 Winter Period 21.71 1-7 Demand Charge (per kW) $ 3.46296 $18.25 14.94 90 0.092120707 0.000750700 0.09855 Energy Charge (per kWh) 0-59 0.005680.00469 0.08125 Palo Alto Green Charge (per 1000 kWh block) $7.50 Minimum Bill ($/day) 62.553951 5696 D. SPECIAL NOTES: 1. Calculation of Charges The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use both in the Summer and the Winter Periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E -7-G-2 PALO ALTO dated 7-1-20224 UTILITIES Item 15: Staff Report Pg. 95 Sheet No E -7-G-2 Effective 7-1-20232 Packet Pg. 666 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -7-G consecutive months, a Maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has dropped below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Maximum Demand in any month will be the maximum average power in kilowatts taken during any 15 -minute interval in the month, provided that if the Customer's load is intermittent or subject to fluctuations, the City may use a 5 -minute interval. A thermal -type Demand Meter which does not reset after a definite time interval may be used at the City's option. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts for the current month. An exception is that the Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual Maximum Demand of such Customers between the hours of noon and 6 PM on weekdays. 4. Request for Service Qualifying Customers may request Service under this schedule for more than one Account or one Meter if the Accounts are at one site. A site, for the purposes of this Rate Schedule, consists of one or more Accounts which cover contiguous parcels of land with no intervening public right-of-ways (e.g. streets) and which have a common billing address. 5. Power Factor For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option of installing applicable Metering to calculate a Power Factor. The City may remove such Metering from the Service of a Customer whose Demand has dropped below 200 kilowatts for four consecutive months. When such Metering is installed, the monthly Electric bill shall include a "Power Factor Adjustment", if applicable. The adjustment shall be applied to a Customer's bill prior to the computation of any primary voltage discount. The power factor adjustment is applied by increasing the total energy and Demand charges for any month by 0.25 percent or (1/4) for each one percent (1%) that the monthly Power Factor of the Customer's load was less than 95%. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E -7-G-3 Sheet No E -7-G-3 dated 7-1-20221 PALO ALTO Effective 7-1-20232 UTILITIES Item 15: Staff Report Pg. 96 Packet Pg. 667 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -7-G The monthly Power Factor is the average Power Factor based on the ratio of kilowatt- hours to kilovolt -ampere hours consumed during the month. Where time -of -day Metering is installed, the monthly Power Factor shall be the Power Factor coincident with the Customer's Maximum Demand. 6. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable full service rate schedule as is applicable to their kilowatt -Demand and kilowatt-hour usage profile 7. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and creates a transparent and sustainable market that encourages new development of wind and solar. Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. 8. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be offered, but the City is not required to supply Service at a qualified line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's Electrical requirements, as determined in the City's sole discretion. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving the discount in this section. The Customer then has the option to change the system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt -ampere size limitation. 9. Standby Charge CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E -7-G-4 Sheet No E -7-G-4 dated 7-1-20221 PALO ALTO Effective 7-1-20232 UTILITIES Item 15: Staff Report Pg. 97 l Packet Pg. 668 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -7-G a. Applicability: The standby charge, subject to the exemptions in subsection D(9)(e), applies to Customers that have a non -utility generation source interconnected on the Customer's side of the City's revenue Meter and that occasionally require backup power from the City due to non -operation of the non - utility generation source. b. Standby Charges: Commodity Distribution Total Standby Charge (per kW of Reserved Capacity) Summer Period $0.84 $12.55 $13.39 Winter Period $0.72 $6.04 $6.76 c. Meters: A separate Meter is required for each non -utility generation source. d. Calculation of Maximum Demand Credit: (1) In the event the Customer's Maximum Demand (as defined in Section D.3) occurs when one or more of the non -utility generators on the Customer's side of the City's revenue Meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non -utility generators, but in no event shall the Customer's Maximum Demand be reduced below zero. (2) If the non -utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions: (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an "Eligible Customer -generator" as defined in California Public Utilities Code Section 2827(b)(4), as amended. (3) The applicability of these exemptions shall be determined at the discretion of CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E -7-G-5 Sheet No E -7-G-5 dated 7-1-20221 PALO ALTO Effective 7-1-2023-2 UTILITIES Item 15: Staff Report Pg. 98 Packet Pg. 669 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E -7-G the Utilities Director. {End) CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E -7-G-6 Sheet No E -7-G-6 dated 7-1-20221 PALO ALTO Effective 7-1-20232 UTILITIES Item 15: Staff Report Pg. 99 Packet Pg. 670 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-7 TOU A. APPLICABILITY: This voluntary Rate Schedule applies to Demand Metered Service for non-residential Customers with a Maximum Demand of at least 1,000KW per month per site, who have sustained this Demand level at least 3 consecutive months during the last twelve months. In addition, this Rate Schedule is applicable for Customers who did not pay power factor adjustments during the last 12 months. B. TERRITORY: This rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: Rates per kilowatt (kW) and kilowatt-hour (kWh): Commodity Distribution Public Benefits Summer Period Demand Charge (per kW) Peak Mid -Peak Off -Peak Energy Charge (per kWh) Peak Mid -Peak Off -Peak Winter Period Demand Charge (per kW) Peak Off -Peak Energy Charge (per kWh) Peak $_3.8624 1.130:9-9 1.130:9-9 0.14457044 9 0.182050 044 0.11171073 24 $_1.781-54 1.781-54 $_11.08070g 11.089 11.089 Total $_14.9412.32 12.2110.07 12.2110.07 $ $ $ 0.000750.00059 0.005680.00469 0.151000 449 1 111 �T.T.T.��=�T�T� s�7.T�T��r__�=ITi[�EErfflffr ez�l [II7 TITITILY�TiTiTi�i=iTiTiZi.S�l�TiTi7.EIIS=iXBEIEEiTiTWALAI $_9.2275� 9.22756 $_11.00970 11.0097 $ $ $ $ 0.0969707 0.000750.00059 0.005680 0469 0.103400 .08525 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No E-7-TOU-1 dated 7-1-20224-9 CITY OF PALO ALTO UTILITIES Item 15: Staff Report Pg. 100 Sheet No E-7-TOU-1 Effective 7-1-20232 Packet Pg. 671 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-7 TOU 947 0.083239:06 Off -Peak 8-64 0.000750.00059 0.005680.00469 0.089660.07392 Minimum Bill ($/day) 62.553951 96 D. SPECIAL NOTES: 1. Calculation of Charges The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer's bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Definition of Time Periods SUMMER PERIOD (Service from May 1 to October 31): Peak: 12:00 noon to 6:00 p.m. Mid Peak: 8:00 a.m. to 12:00 noon 6:00 p.m. to 9:00 p.m. Off -Peak: WINTER PERIOD Peak: Off -Peak: 9:00 p.m. to 8:00 a.m. All day Monday through Friday (except holidays) Monday through Friday (except holidays) Monday through Friday Saturday, Sunday, and holidays (Service from November 1 to April 30): 8:00 a.m. to 9:00 p.m. Monday through Friday (except holidays) 9:00 p.m. to 8:00 a.m. Monday through Friday (except holidays) All day Saturday, Sunday, and holidays SEASONAL RATE CHANGES: When the billing period includes use in both the Summer and the Winter periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-7-TOU-2 PALO ALTO Sheet No E-7-TOU-2 dated 7-1-20224-9 UTILITIES Effective 7-1-20232 Item 15: Staff Report Pg. 101 Packet Pg. 672 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-7 TOU 3. Request for Service Qualifying Customers may request Service under this schedule for more than one Account or one Meter if the Accounts are on one site. A site, for the purposes of this Rate Schedule, consists of one or more Accounts which cover contiguous parcels of land with no intervening public right- of-ways (e.g. streets) and which have a common billing address. 4. Demand Meter Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three consecutive months, a Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has fallen below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts taken during any 15 -minute interval in each of the designated time periods as defined under Section D.2. 5. Power Factor Adjustment Time of Use Customers must not have had a power factor adjustment assessed on their Service for at least 12 months. Power factor is calculated based on the ratio of kilowatt hours to kilovolt - ampere hours consumed during the month, and must not have fallen below 95% to avoid the power factor adjustment. Should the City of Palo Alto Utilities Department find that the Customer's Service should be subject to power factor adjustments, the Customer will be removed from the E-7-TOU rate schedule and placed on another applicable rate schedule as is suitable to their kilowatt Demand and kilowatt-hour usage. 6. Changing Rate Schedules Customers electing to be served under E-7 TOU must remain on said Rate Schedule for a minimum of 12 months. Should the Customer so wish, at the end of 12 months, the Customer may request a Rate Schedule change to any applicable City of Palo Alto full -service Rate Schedule as is suitable to their kilowatt Demand and kilowatt-hour usage. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-7-TOU-3 PALO ALTO Sheet No E-7-TOU-3 dated 7-1-20224-9 UTILITIES Effective 7-1-20232 Item 15: Staff Report Pg. 102 Packet Pg. 673 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-7 TOU 7. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be offered, but the City is not required to supply Service at a particular line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's electrical requirements, as determined in the City's sole discretion. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving the discount in this section. The Customer then has the option to change his system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt -ampere size limitation. 8. Standby Charge a. Applicability: The standby charge, subject to the exemptions in subsection D(8)(e), applies to Customers that have a non -utility generation source interconnected on the Customer's side of the City's revenue Meter and that occasionally require backup power from the City due to non -operation of the non -utility generation source. b. Standby Charges: Commodity Distribution Total Standby Charge (per kW of Reserved Capacity) Summer Period $0.84 $12.55 $13.39 Winter Period $0.72 $6.04 $6.76 Meters. A separate Meter is required for each non -utility generation source. d. Calculation of Maximum Demand Credit. (1) In the event the Customer's Maximum Demand occurs when one or more of the non -utility generators on the Customer's side of the City's revenue Meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non -utility generators, but in no event shall the Customer's Maximum Demand be reduced below zero. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-7-TOU-4 PALO ALTO Sheet No E-7-TOU-4 dated 7-1-20224-9 UTILITIES Effective 7-1-20232 Item 15: Staff Report Pg. 103 Packet Pg. 674 of 853 Item 15 Attachment C - Rate Schedules Combined LARGE NON-RESIDENTIAL ELECTRIC TIME OF USE SERVICE UTILITY RATE SCHEDULE E-7 TOU (2) If the non -utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions. (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an "Eligible Customer -generator" as defined in California Public Utilities Code Section 2827(b)(4) , as amended. (3) The applicability of these exemptions shall be determined at the discretion of the Utilities Director. [End] CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF Supersedes Sheet No E-7-TOU-5 PALO ALTO Sheet No E-7-TOU-5 dated 7-1-20224-9 UTILITIES Effective 7-1-20232 Item 15: Staff Report Pg. 104 Packet Pg. 675 of 853 Item 15 Attachment C - Rate Schedules Combined NET METERING NET SURPLUS ELECTRICITY COMPENSATION UTILITY RATE SCHEDULE E-NSE-1 A. APPLICABILITY: This Rate Schedule applies to eligible residential and small commercial Net Energy Metering Customers who, at the end of an annual settlement period, as described in Rule 29, are Net Surplus Customer -Generators of electricity who elect to receive monetary compensation as such preference is indicated on the net surplus electricity election form. This Rate Schedule only applies to Customers who participate in Net Energy Metering, and does not apply to Customers that take service under the City's Net Energy Metering Successor Rate, as each of these terms are defined in Rule and Regulation 2. B. TERRITORY: This rate schedule applies everyanywhere the City of Palo Alto provides eElectric Seervice. C. RATES: Per kWh Net Surplus Electricity Compensation rate D. SPECIAL CONDITIONS $ 0.1535 0.1026 1. Net Surplus Electricity Compensation Rate eligibility shall be determined as specified in Rule 29. Net surplus electricity, as specified in Rule 29, if applicable, will be multiplied by the above compensation rate to determine the Customer's annual net surplus electricity compensation stated in dollars. 2. Additional terms, conditions and definitions govern Net Energy Metering Service and Interconnection, as described in Rule 29. {End} CITY OF PALO ALTO UTILITIES Issued by the City Council CI Supersedes Sheet No. E-NSE-1 PTY O F dated 07-01-20224 � PALO ALTO UTILITIES Item 15: Staff Report Pg. 105 Sheet No. E-NSE-1 Effective 7-1-2023-2 Packet Pg. 676 of 853 Item 15 Attachment C - Rate Schedules Combined EXPORT ELECTRICITY COMPENSATION UTILITY RATE SCHEDULE E -EEC -1 A. APPLICABILITY: This Rate Schedule applies in conjunction with the otherwise applicable Rate Schedules for each Customer class. This Rate Schedule may not apply in conjunction with any time -of -use Rate Schedule. This Rate Schedule applies to Customer -Generators as defined in Rule and Regulation 2 who are either not eligible for Net Energy Metering or who are eligible for Net Energy metering but elect to take Service under this Rate Schedule. B. TERRITORY: This rate schedule Aapplies everywhere to locations within the service area the City of Palo Alto provides Electric Service. C. RATE: The following compensations rate shall apply to all electricity exported to the grid. Per kWh Export electricity compensation rate $ 0.1685 0v1045 D. SPECIAL CONDITIONS 1. Metering equipment: Electricity delivered by CPAU to the Customer -Generator or received by CPAU from the Customer -Generator shall be measured using a Meter capable of registering the flow of electricity in two directions (aka "bidirectional meter"). The electrical power measurements will be used for billing the Customer -Generator. CPAU shall furnish, install and own the appropriate Meter. 2. Billing: a. CPAU shall measure during the billing period, in kilowatt-hours, the electricity delivered and received after the Customer -Generator serves its own instantaneous load. b. CPAU shall bill the Customer -Generator consumption charges for the electricity delivered by CPAU to the Customer -Generator based on the Customer -Generator's applicable Rate Schedule. c. In the event the electricity generated exceeds the electricity consumed and therefore is received by CPAU, the Customer will receive a credit for all electricity received by CPAU at the buyback Rate designated in section C above. [End] CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No. E -EEC -1 CITY OF Sheet No.E-EEC-1 dated 7-1-2024-2 _ PA LO ALT 0 Effective - -20232 Item 15: Staff Report Pg. 106 Packet Pg. 677 of 853 Item 6 Supplemental Report (TT City Council Supplemental Report CITY O F From: Jonathan Lait, Planning and Development Services Director PALO Meeting Date: April 17, 2023 ALTO Item Number: 6 Report #:2304-1292 TITLE Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021-2022 - Supplemental Report DISCUSSION Following discussion with SUMC after the publication of the SUMC Annual Report to Council Fiscal Year 2021-2022 (CMR #2303-1129), staff determined that the published text in the staff recommendation and the Executive Summary may have mischaracterized the SUMC Parties' current compliance with the requirements of the Development Agreement. As a result, staff wish to modify the staff recommendation and the Executive Summary as set forth below. In addition, staff wish to correct a clerical error in Attachment C. The remainder of the report (CMR #2303-1129) remains unchanged. For clarity, the limited modifications are provided in underline/strikeout format. :�X��I►�II►II�hU7_��[�Ll Staff recommends that the City Council: 1. Review the Stanford University Medical Center (SUMC) Annual Report for Fiscal Year 2021- 2022, and find that Stanford Hospitals & Clinics, Lucile Packard Children's Hospital, and Stanford University (SUMC Parties) have complied in good faith with the terms and conditions of the SUMC Development Agreement; 2. Find that the SUMC Parties are not in default with the terms and conditions of the Agreement in all sections, with the ^ ption of alternative ^d^ share target for which the SUMC Partics hovc claimed a permittcd delay duc to thc effects of thc COVlD19 ; and 3. Accept the City of Palo Alto's (City) Annual Report Supplements regarding the funds received from the SUMC Parties, as required under Section 12(d) of the Development Agreement (Attachment Q. Item No. 6. Pa e 1 of 3 Item 6: Staff Report Pg. 1 Packet Pg. 678 of 853 Item 6 Supplemental Report EXECUTIVE SUMMARY The City Council is required to review the SUMC Development Agreement (the "Agreement") to confirm compliance with the Agreement's terms. The Agreement is between Stanford Hospital and Clinics, Lucile Packard Children's Hospital, Stanford University (SUMC Parties), and the City of Palo Alto. The City also uses this Annual Report to Council to provide information on the City's compliance obligations, such as providing the required summary and description of how the City expended funds provided by SUMC per the Agreement. As documented in this Annual Report to Council, both SUMC and the City are in compliance with the terms of the Agreement for the reporting period Fiscal Year 2021-2022. with the exception of alternative mode share targets. In regard to the achievement of the alternative mode share milestone targets, however, SUMC was not able to meet the specific target outlined in the Agreement. This was due to the effect of the COVID-19 pandemic on SUMC employee use of alternative transportation modes, such as Caltrain and other public transit systems. The failure to meet alternative mode share targets is not itself a default under the Agreement, as the Agreement contemplates the payment of fees in the event the targets cannot be achieved. In addition, A& rcccivcd by the City on June 14, 2022, the SUMC Parties asserted a permitted delay under the Force Majeure provision of the Agreement. The SUMC Parties and City staff are actively engaged in discussing an amendment to the Agreement to address this issue. In the meantime, the City has deferred any action to collect from the SUMC Parties a $175,000 payment provided for in the Agreement. ATTACHMENT C SUMC Development Agreement, Section 5 - SUMC Parties' Promises FY 2021-2022 Traffic Mitigation and Reduced Vehicle Trips DA Description Summary Activity Complies? Section The SUMC parties Yes, complies - SUMC found that the timely submitted their alternative mode annual Alternative Mode share milestone Share report for FY 2021 - target of 33% 2022. Monitoring in FY Yearly outlined in SUMC DA 2021-2022 identified that Monitoring of report Section 5(c)(ix) was SUMC missed the 5(c)(ix) TDM regarding not met for 2022, nor alternative mode share alternative was it above the target of 33% for two Programs transit previous 2018 consecutive years. mode use milestone target of As received by the City on 30%; the alternative June 14, 2022, the SUMC mode share rate for Parties asserted a SUMC decreased to permitted delay under the 19.9% in FY 2021- Force Majeure provision of 2022 between use of the Agreement. The SUMC Item No. 6. Pa e 2 of 3 Item 6: Staff Report Pg. 2 Packet Pg. 679 of 853 Item 6 Supplemental Report alternative modes Parties and City staff are versus driving alone, actively engaged in largely due to developing an amendment ongoing pandemic to the Agreement in order conditions. to resolve this issue. APPROVED BY: Jonathan Lait, Planning and Development Services Director Item No. 6. Pa e 3 of 3 Item 6: Staff Report Pg. 3 Packet Pg. 680 of 853 Item AA1 Staff Report City Council Staff Report From: City Attorney CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: City Attorney ALTO Meeting Date: April 17, 2023 Report #:2304-1253 TITLE Adoption of a Resolution Authorizing the City Manager to Execute Participation Agreements on Behalf of the City of Palo Alto to Enter Into Settlement Agreements Regarding Manufacture and Distribution of Opioid Products with Allergan Finance, LLC and related entities (Allergan), Teva Pharmaceutical Industries Ltd. and related entities (Teva); Walgreens Co.; CVS Health Corporation and CVS Pharmacy, Inc. (CVS), and Walmart, Inc.; Agree to the Terms of the Memorandum of Understanding (MOU) Allocating Settlement Proceeds; and Authorize Entry Into the MOU with the California Attorney General. RECOMMENDATION Staff recommends that the City Council adopt a resolution authorizing the City to participate in settlements that have been negotiated by certain litigating public entities to resolve lawsuits that seek to hold certain opioid pharmaceutical supply chain participants accountable for the damage caused by their misfeasance, nonfeasance, and malfeasance. Staff recommends that the City Council adopt Resolution No. , authorizing the City Manager to complete and execute the Settlement Participation Forms to authorize the City of Palo Alto's participation in the settlements, and to take such further actions as necessary to ensure that the City receives settlement proceeds allocated to it under the allocation agreements with the Attorney General. Furthermore, in the event settlement agreements are entered into with additional manufacturers and distributors in the opioid pharmaceutical supply chain, Staff recommends that the City Council authorize the City Manager to complete and execute any future Settlement Participation Forms and to take all necessary action to ensure the City receives proceeds from future settlements in the national opioid litigation. BACKGROUND 2021 National Settlements More than 400 state and local government entities have filed lawsuits against opioids distributors and manufacturers seeking to recover costs incurred due to opioids-related Item AA1: Staff Report Pg. 1 Packet Pg. 681 of 853 Item AA1 Staff Report substance abuse disorder. A coalition of state attorneys general entered into negotiations in an attempt to reach a global resolution with defendants in the litigation. On July 21, 2021, the attorneys general announced final agreements with Janssen/Johnson & Johnson, a manufacturer of prescription opioids, and the three major pharmaceutical distributors, Amerisource Bergen, Cardinal Health, and McKesson ("2021 National Settlements"). Among other things, the 2021 National Settlements included releases to resolve legal claims against these companies stemming from their involvement in the opioid addiction epidemic in return for their payment of up to $26 billion that would be allocated to participating entities across the country to use to address the epidemic. Agencies that wished to participate in the 2021 National Settlements had to opt in to receive settlement proceeds. On December 13, 2021, the City Council authorized the City Manager to complete and submit the necessary forms for participation in the 2021 National Settlements. For further details on the 2021 National Settlements and the City's allocation from these earlier settlements, refer to the Staff Report from December 13, 2021, included as Attachment B. 2022 National Settlements In late 2022, the attorneys general reached additional settlement agreements with three pharmacy chains—CVS, Walgreens, and Walmart—and two manufacturers—Allergan and Teva. As with the 2021 National Settlements, states and local governments that want to participate in the 2022 National Settlements must opt in, and with the greater the level of participation the more funds will ultimately be paid out for abatement. Assuming maximum participation, the 2022 National Settlements require: • Teva to pay up to $3.34 billion over 13 years and to provide either $1.2 billion of its generic version of the drug Narcan over 10 years or $240 million of cash in lieu of product, as each state may elect; • Allergan to pay up to $2.02 billion over 7 years; • CVS to pay up to $4.90 billion over 10 years; • Walgreens to pay up to $5.52 billion over 15 years; and • Walmart to pay up to $2.74 billion in 2023, and all payments to be made within 6 years. As with the 2021 National Settlements, at least 85% of the funds going directly to participating states and subdivisions from the 2022 National Settlements must be used for abatement of the opioid epidemic, with the overwhelming bulk of the proceeds restricted to funding future abatement efforts by state and local governments. California will receive up to approximately $1.8 billion in combined settlement payments from the 2022 National Settlements. The total payment will depend on the extent of participation by cities and counties in the State. Nearly 100% of the 431 eligible counties and cities in California must participate to reach the maximum settlement amount. As participation decreases, so does the total amount. This sliding scale of participation and payment, along with other information, can be found at www.nationalooioidsettlement.com. Item AA1: Staff Report Pg. 2 Packet Pg. 682 of 853 Item AA1 Staff Report The national settlement agreements also provide that each state must negotiate intrastate allocation agreements that allocate funds among the state government and litigating and non - litigating local entities, or otherwise be subject to a default allocation formula specified in the national agreements. On October 27, 2021 the California Attorney General and local government representatives reached an agreement regarding intrastate allocation agreements for California. These allocation agreements were used for the 2021 National Settlements, which the City previously signed, and identical allocation agreements are used for the 2022 National Settlement Agreements. The Intrastate Allocation Agreements Under the intrastate agreements (CA Allocation Agreement for Allergan Settlement (Attachment C); CA Allocation Agreement for Teva Settlement (Attachment D); CA Allocation Agreement for Walgreens Settlement (Attachment E); CA Allocation Agreement for CVS Settlement (Attachment F); CA Allocation Agreement for Walmart Settlement (Attachment G)), 70% of the settlement proceeds are allocated to local government entities, including non - litigating entities like the City of Palo Alto. The remaining 30% of the funds are split equally between the State and litigating entities, including 51 of California's 58 counties. Each county's share of the settlement proceeds is based on measures of the severity of the opioid epidemic: (1) prevalence of opioids abuse disorder; (2) opioids deaths; and (3) estimate opioids dosage. Within each county, the share allocated to each jurisdiction is based on ten factors that reflect spending on opioids treatment and prevention. The national settlements allow state and local governments to spend the settlement proceeds on a wide range of opioids remediation uses. (See Attachment H for allowed uses under the 2022 National Settlements. All agreements provide for the same allowed uses.) Under the intrastate agreement, 50% of funds allocated to local governments must be spent on five State priorities: 1. the provision of matching funds or operating costs for substance use disorder facilities within the Behavioral Health Continuum Infrastructure Program; 2. creating new or expanded substance use disorder treatment infrastructure; 3. addressing the needs of communities of color and vulnerable populations that are disproportionately impacted substance use disorder; 4. diversion of people with substance use disorder from the justice system into treatment; and 5. interventions to prevent drug addiction in vulnerable youth. Palo Alto's Allocation Under the intrastate allocation agreements, Palo Alto could receive up to approximately $437,000 distributed over a period of 14 years. The actual payment will depend on the degree of participation by litigating and non -litigating entities and the terms of each settlement Item AA1: Staff Report Pg. 3 Packet Pg. 683 of 853 Item AA1 Staff Report agreement. The deadline for the City to elect to participate in the 2022 National Settlements is April 18, 2023. If the City declines to participate, the City's allocated settlement funds will default to the State and the City will maintain its right to pursue litigation against Allergan, Teva, Walgreens, CVS, and Walmart. If the City elects to participate, the City has the option of accepting the payments and must spend the funds on qualified programs within five years of receipt or the funds are returned to the State. Alternatively, the City may allocate its payment to the County to fund County opioids remediation programs. If the City elects to receive funds directly, it will be required to report annually to the State Department of Health and Community Services regarding the use of the funds. The City may opt in or out of a direct payment at any time, and may also elect direct payment of only a portion of its share, with the remainder going to the County, by providing notice to the settlement fund administrators at least sixty days prior to a payment date. ANALYSIS Staff recommends that the City Council adopt Resolution No. , authorizing the City Manager to complete and execute the Settlement Participation Forms to authorize the City of Palo Alto's participation in the 2022 National Settlements, and to take such further actions as necessary to ensure that the City receives settlement proceeds allocated to it under the Allocation Agreements. Furthermore, in event settlement agreements are entered into with additional manufacturers and distributors, Staff recommends that the City Council authorize the City Manager to complete and execute any future Settlement Participation Forms and to take all necessary action to ensure the City receives proceeds from future settlements in the national opioid litigation. ENVIRONMENTAL REVIEW The proposed Council action is not a project under the requirements of the California Environmental Quality Act, together with related State CEQA Guidelines (collectively, "CEQA"). ATTACHMENTS Attachment A: Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Attachment B: Staff Report from December 13, 2021 https://www.cityofpaloaIto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2023/new-folder/attach ment-b-12-13-2021-staff- report.pdf Item AA1: Staff Report Pg. 4 Packet Pg. 684 of 853 Item AA1 Staff Report Attachment C: CA Allocation Agreement for Allergan Settlement https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2023/new-folder/attachment-c allergan- participation-form.pdf Attachment D: CA Allocation Agreement for Teva Settlement https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2023/new-folder/attachment-d teva-participation- form.pdf Attachment E: CA Allocation Agreement for Walgreens Settlement https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2023/new-folder/attachment-e walgreens- DarticiDation-form.pdf Attachment F: CA Allocation Agreement for CVS Settlement https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2023/new-folder/attachment-fcvs-participation- form.pdf Attachment G: CA Allocation Agreement for Walmart Settlement https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2023/new-folder/attachment-g walmart- participation-form.pdf Attachment H: Allowed uses under the 2022 National Settlements https://www.citVofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2023/new-folder/attachment-h final-allergan- exhibit-epdf.pdf *Attachments were linked due to the length, totaling more than 400 pages. APPROVED BY: Molly Stump, City Attorney Item AA1: Staff Report Pg. 5 Packet Pg. 685 of 853 *NOT YET APPROVED* Resolution No. Item AA1 A Attachment A Resolution /�+� Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Resolution Authorizing the City Manager to Execute Participation Ag Agreements re Behalf of the City of Palo Alto to Enter Into Settlement Agreement Manufacture and Manufacture and Distribution of Opioid Products with Allergan Fina Distribution of Opioid related entities (Allergan), Teva Pharmaceutical Industries Ltd. arL Products entities (Teva); Walgreens Co.; CVS Health Corporation and CVS Pharmacy, Inc. (CVS), and Walmart, Inc.; Agree to the Terms of the Memorandum of Understanding (MOU) Allocating Settlement Proceeds; and Authorize Entry Into the MOU with the California Attorney General RECITALS A. The State of California, through its Attorney General and certain cities and counties governments, is engaged in litigation seeking to hold certain opioid pharmaceutical supply chain participants accountable for the damage caused by their misfeasance, nonfeasance, and malfeasance; and B. On July 21, 2021, the California Attorney General, along with representatives from 55 other states, commonwealths, and U.S. territories, finalized the terms of a proposed settlement with two manufacturers, Johnson & Johnson, Janssen Pharmaceuticals, Inc., Ortho- McNeil-Janssen Pharmaceuticals, Inc., and Janssen Pharmaceutical, Inc., and three pharmaceutical distributors, McKesson Corporation, Cardinal Health, Inc., and AmerisourceBergen Corporation, to address the impacts of opioid-related substance use disorder on state and local governments ("2021 National Settlements"); and C. The 2021 National Settlements provided that the settling states, commonwealths, and territories would receive a combined total of up to $26 billion to alleviate the impacts of opioids-related substance use disorder that would be allocated to participating subdivisions that affirmatively elect to participate in the settlements, and in doing so releases their claims against the settling defendants; and D. On December 13, 2021, the City Council adopted Resolution No. 10010 authorizing the City Manager to execute participation agreements on behalf of the City of Palo Alto to enter into the 2021 National Settlements; and E. In late 2022, the additional settlement agreements were reached with three pharmacy chains—CVS, Walgreens, and Walmart—and two manufacturers—Allergan and Teva ("2022 National Settlements); and F. The 2022 National Settlements provide that settling states, commonwealths, and territories will receive a combined total of up to approximately $18 billion to address the impacts of the opioid epidemic and, like the 2021 National Settlements, subdivisions that wished to 1 0005 20230406mv30 Item AA1: Staff Report Pg. 6 Packet Pg. 686 of 853 *NOT YET APPROVED* Item AA1 A Attachment A Resolution /�+� Authorizing City Manager to Execute Participation participate had to affirmatively elect to participate to receive an allocation f Agreements obo CPA to ts; Enter into Settlement and Agreements re Manufacture and G. Like 2021 National Settlements, the 2022 National Settlement Distribution ofopioid re may be an intrastate allocation of settlement proceeds in each settling st Products h, and territory to allocate the proceeds among state and local jurisdictions; and H. The California Attorney General and the local government representatives agreed to a Proposed California State -Subdivision Agreement Regarding Distribution and Use of Settlement Funds in the 2021 National Settlement, which allocates proceeds to participating cities and counties; and I. The Distribution and Use Agreements used in the 2021 National Settlements are identical in material terms to the Agreements in the 2022 National Settlement Agreements, attached hereto as Exhibit 1 (Allergan Allocation Agreement); Exhibit 2 (Teva Allocation Agreement); Exhibit 3 (Walgreens Allocation Agreement); Exhibit 4 (CVS Allocation Agreement); Exhibit 5 (Walmart Allocation Agreement); and J. The City of Palo Alto must affirmatively elect to participate in 2022 National Settlements to receive the allocation of settlement proceeds set forth in the Allocation Agreements attached hereto, and in doing so will release its claims against the settling defendants; and NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows: SECTION 1. NOW, THEREFORE, BE IT RESOLVED that the City Council does hereby authorize the City Manager to complete and execute the Settlement Participation Forms to authorize the City of Palo Alto's participation in the 2022 National Settlements, and to take such further actions as necessary to ensure that the City receives settlement proceeds allocated to it under the Allocation Agreements. SECTION 2. In the event settlement agreements are entered into with additional manufacturers and distributors, the City Council does hereby further authorize the City Manager to complete and execute any future Settlement Participation Forms and to take all necessary action to ensure the City receives proceeds from future settlements in the national opioid litigation. // // // // 0005 20230406mv30 2 Item AA1: Staff Report Pg. 7 Packet Pg. 687 of 853 *NOT YET APPROVED* SECTION 3. BE IT FURTHER RESOLVED that this Resolution is not requirements of the California Environmental Quality Act, together with Guidelines (collectively, "CEQA"). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney Mayor APPROVED: City Manager 3 Item AA1 A /�+� Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to he Enter into Settlement A Agreements re Manufacture and Distribution of Opioid Products 0005 20230406mv30 Item AA1: Staff Report Pg. 8 Packet Pg. 688 of 853 DocuSign v nvelope ID: 62182248-11 AB -4F03 -92B1-1 Dv ABv 3FAA2F EXHIBIT K Will your subdivision or special district be signing the settlement participation Teva Settlements at this time? [ ] Yes [ ] No Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Governmental Entity: Palo Alto city State: CA Authorized Signatory: Address 1: Address 2: City, State, Zip: Phone: Email: The governmental entity identified above ("Governmental Entity"), in order to obtain and in consideration for the benefits provided to the Governmental Entity pursuant to the Agreement dated November 22, 2022 ("Allergan Settlement"), and acting through the undersigned authorized official, hereby elects to participate in the Allergan Settlement, release all Released Claims against all Released Entities, and agrees as follows. 1. The Governmental Entity is aware of and has reviewed the Allergan Settlement, understands that all terms in this Election and Release have the meanings defined therein, and agrees that by this Election, the Governmental Entity elects to participate in the Allergan Settlement as provided therein. 2. Following the execution of this Settlement Participation Form, the Governmental Entity shall comply with Section III.B of the Allergan Settlement regarding Cessation of Litigation Activities. The Governmental Entity shall, within fourteen (14) days of the Reference Date and prior to the filing of the Consent Judgment, file a request to dismiss with prejudice any Released Claims that it has filed. With respect to any Released Claims pending in In re National Prescription Opiate Litigation, i DL No. 2804, the Governmental Entity authorizes the i DL Plaintiffs' Executive Committee to execute and file on behalf of the Governmental Entity a Stipulation of Dismissal With Prejudice substantially in the form found at https://nationalopioidsettlement.com. 4. The Governmental Entity agrees to the terms of the Allergan Settlement pertaining to Subdivisions and Special Districts as defined therein. 5. By agreeing to the terms of the Allergan Settlement and becoming a Releasor, the Governmental Entity is entitled to the benefits provided therein, including, if applicable, monetary payments beginning after the Effective Date. 6. The Governmental Entity agrees to use any monies it receives through the Allergan Settlement solely for the purposes provided therein. Item AA1: Staff Report Pg. 9 Packet Pg. 689 of 853 Item AA1 A /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement 7. The Governmental Entity submits to the jurisdiction of the court in the 4 Agreements re S state where the Consent Judgment is filed for purposes limited to that cd Manufacture and d in, and for resolving disputes to the extent provided in, the Allergan Settle Distribution of Opioid 8. The Governmental Entity has the right to enforce the Allergan Settlement Products as pioviucu 11naeni. 9. The Governmental Entity, as a Participating Subdivision or Participating Special District, hereby becomes a Releasor for all purposes in the Allergan Settlement, including, but not limited to, all provisions of Section V (Release), and along with all departments, agencies, divisions, boards, commissions, Subdivisions, districts, instrumentalities of any kind and attorneys, and any person in their official capacity whether elected or appointed to serve any of the foregoing and any agency, person, or other entity claiming by or through any of the foregoing, and any other entity identified in the definition of Releasor, provides for a release to the fullest extent of its authority. As a Releasor, the Governmental Entity hereby absolutely, unconditionally, and irrevocably covenants not to bring, file, or claim, or to cause, assist in bringing, or permit to be brought, filed, or claimed, or to otherwise seek to establish liability for any Released Claims against any Released Entity in any forum whatsoever. The releases provided for in the Allergan Settlement are intended to be broad and shall be interpreted so as to give the Released Entities the broadest possible bar against any liability relating in any way to Released Claims and extend to the full extent of the power of the Governmental Entity to release claims. The Allergan Settlement shall be a complete bar to any Released Claim. 10. The Governmental Entity hereby takes on all rights and obligations of a Participating Subdivision or Participating Special District as set forth in the Allergan Settlement. 11. In connection with the releases provided for in the Allergan Settlement, each Governmental Entity expressly waives, releases, and forever discharges any and all provisions, rights, and benefits conferred by any law of any state or territory of the United States or other jurisdiction, or principle of common law, which is similar, comparable, or equivalent to § 1542 of the California Civil Code, which reads: General Release; extent. A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release that, if known by him or her, would have materially affected his or her settlement with the debtor or released party. A Releasor may hereafter discover facts other than or different from those which it knows, believes, or assumes to be true with respect to the Released Claims, but each Governmental Entity hereby expressly waives and fully, finally, and forever settles, releases and discharges, upon the Effective Date, any and all Released Claims that may exist as of such date but which Releasors do not know or suspect to exist, whether through ignorance, oversight, error, negligence or through no fault whatsoever, and which, if known, would materially affect the Governmental Entities' decision to participate in the Allergan Settlement. 12. Nothing herein is intended to modify in any way the terms of the Allergan Settlement, to which the Governmental Entity hereby agrees. To the extent this Settlement Participation Form is interpreted differently from the Allergan Settlement in any respect, the Allergan Settlement controls. lJ Item AA1: Staff Report Pg. 10 Packet Pg. 690 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F I have all necessary power and authorization to execute this Settlement of the Governmental Entity. Signature: Name: Title: Date: Item AA1 Attachment A Resolution A Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products ci Item AA1: Staff Report Pg. 11 Packet Pg. 691 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Proposed California State -Subdivision Agreement Regarding Distribution and Use of Settlement Funds — Allergan Settlement 1. Introduction Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Pursuant to the Allergan Settlement Agreement, dated as of November 22, 2022, and any revision thereto (the "Allergan Settlement Agreement"), including Section VIII and Exhibit O, the State of California proposes this agreement (the "CA Allergan Allocation Agreement") to govern the allocation, distribution, and use of Settlement Fund payments made to California pursuant to Sections VI, VII, and VIII of the Allergan Settlement Agreement. For the avoidance of doubt, this agreement does not apply to payments made pursuant to Sections XII or XIII of the Allergan Settlement Agreement. Pursuant to Exhibit O, Paragraph 4, of the Allergan Settlement Agreement, acceptance of this CA Allergan Allocation Agreement is a requirement to be an Initial Participating Subdivision.' Further, pursuant to Sections X.B and X.C of the Teva Settlement Agreement and Sections IX.B and IX.C of the Allergan Settlement Agreement, eligible Subdivisions must participate in both the Teva Settlement Agreement and Allergan Settlement Agreement, or neither.2 2. Definitions a) CA Participating Subdivision means a Participating Subdivision that is also (a) a Plaintiff Subdivision and/or (b) a Subdivision with a population equal to or greater than 10,000. For the avoidance of doubt, eligible CA Participating Subdivisions are those California subdivisions listed in Exhibit C (excluding Litigating Special Districts) and/or Exhibit Ito the Allergan Settlement Agreement. b) Teva Settlement Agreement means the Teva Settlement Agreement dated November 22, 2022, and any revision thereto. c) CVS Settlement Agreement means the CVS Settlement Agreement dated December 9, 2022, and any revision thereto as well as any modification thereto entered into by the State of California and CVS. d) Distributor Settlement Agreement means the Distributor Settlement Agreement dated July 21, 2021, and any revision thereto. e) Janssen Settlement Agreement means the Janssen Settlement Agreement dated July 21, 2021, and any revision thereto. 1 A parallel but separate agreement (the "CA Teva Allocation Agreement") will govern the allocation, distribution, and use of settlement fund payments under the Teva Settlement Agreement. 2 However, if Teva enters bankruptcy prior to the Effective Date, an eligible Subdivision can choose to only join the Allergan Settlement Agreement. A Item AA1: Staff Report Pg. 12 Packet Pg. 692 of 853 A Item AA1 /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement f) Walgreens Settlement Agreement means the Walgreens Settleme Agreements re December 9, 2022, and any revision thereto. Manufacture and g) Walmart Settlement Agreement means the Walmart Settlement A Distribution of Opioid November 14, 2022, and any revision thereto. Products h) CA Litigating Special District means a Litigating Special District located in California. CA Litigating Special Districts include Downey Unified School District, Elk Grove Unified School District, Kern High School District, Montezuma Fire Protection District (located in Stockton, California), Santa Barbara San Luis Obispo Regional Health Authority, Inland Empire Health Plan, Health Plan of San Joaquin, San Leandro Unified School District, Pleasant Valley School District Board, and LA Care Health Plan. i) Plaintiff Subdivision means a Subdivision located in California, other than a CA Litigating Special District, that filed a lawsuit, on behalf of the Subdivision and/or through an official of the Subdivision on behalf of the People of the State of California, against one or more Opioid Defendants prior to October 1, 2020. j) Opioid Defendant means any defendant (including but not limited to Teva Pharmaceutical Industries Ltd., Allergan Finance, LLC, Allergan Limited, CVS Health Corporation, CVS Pharmacy, Inc., Walgreen Co., Walmart Inc., Johnson & Johnson, Janssen Pharmaceuticals, Inc., Purdue Pharma L.P., Cardinal Health, Inc., AmerisourceBergen Corporation, and McKesson Corporation) named in a lawsuit seeking damages, abatement, or other remedies related to or caused by the opioid public health crisis in any lawsuit brought by any state or local government on or before October 1, 2020. 3. General Terms This agreement is subject to the requirements of the Allergan Settlement Agreement, as well as applicable law, and the Allergan Settlement Agreement governs over any inconsistent provision of this CA Allergan Allocation Agreement. Terms used in this CA Allergan Allocation Agreement have the same meaning as in the Allergan Settlement Agreement unless otherwise defined herein. Pursuant to Section VIII(E)(1) of the Allergan Settlement Agreement, (a) all Settlement Fund payments will be used for Opioid Remediation, except as allowed by Section VIII(C) of the Allergan Settlement Agreement; and (b) at least seventy percent (70%) of Settlement Fund payment amounts will be used solely for future Opioid Remediation. 4. State Allocation lJ 2 0� Item AA1: Staff Report Pg. 13 Packet Pg. 693 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement The Settlement Fund payments to California,3 pursuant to the Allergan Settle Agreements re shall be allocated as follows: 15% to the State Fund; 70% to the Abatement 1Manufacture and 15% to the Subdivision Fund. For the avoidance of doubt, all funds allocated Distribution of Opioid the Settlement Fund shall be combined pursuant to this CA Allergan Allocat' Products 15% of that total shall be allocated to the State of California (the "State of Ca 1 orma Allocation"), 70% to the California Abatement Accounts Fund ("CA Abatement Accounts Fund"), and 15% to the California Subdivision Fund ("CA Subdivision Fund"). A. State of California Allocation Fifteen percent of the total Settlement Fund payments will be allocated to the State and used by the State for future Opioid Remediation. B. CA Abatement Accounts Fund i. Allocation of CA Abatement Accounts Funds a) Seventy percent of the total Settlement Fund payments will be allocated to the CA Abatement Accounts Fund. The funds in the CA Abatement Accounts Fund will be allocated based on the allocation model developed in connection with the proposed negotiating class in the National Prescription Opiate Litigation (MDL No. 2804), as adjusted to reflect only those cities and counties that are eligible, based on population or litigation status, to become a CA Participating Subdivision. The percentage from the CA Abatement Accounts Fund allocated to each CA Participating Subdivision is set forth in Appendix 1 in the column entitled abatement percentage (the "Local Allocation"). For the avoidance of doubt, CA Litigating Special Districts and California towns, cities, and counties with a population less than 10,000 are not eligible to receive an allocation of CA Abatement Accounts Funds. b) A CA Participating Subdivision that is a county, or a city and county, will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision, and will receive payments as provided in the Allergan Settlement Agreement. c) A CA Participating Subdivision that is a city will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision. The Local Allocation share for a city that is a CA Participating Subdivision will be paid to the county in which the city is located, rather than to the city, so long as: (a) the county is a CA Participating Subdivision, and (b) the city has not advised the Settlement Fund Administrator that it requests direct payment at least 60 days prior to a Payment Date. A Local Allocation share allocated to a city but paid to a county is not required to be spent exclusively for abatement activities in that city, but will become part of the county's share of the CA Abatement Accounts Funds, which will be used in accordance with Section 4.B.ii (Use of For purposes of clarity, use of the term "California" refers to the geographic territory of California and the state and its local governments therein. The term "State" or "State of California" refers to the State of California as a governmental unit. II :o 3 0 Item AA1: Staff Report Pg. 14 Packet Pg. 694 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement CA Abatement Accounts Funds) and reported on in accordance with Agreements re Abatement Accounts Fund Oversight). Manufacture and Distribution of Opioid d) A city within a county that is a CA Participating Subdivision may op Products payment at any time, and it may also elect direct payment of only a portion ot 1 s share, with the remainder going to the county, by providing notice to the Settlement Fund Administrator at least 60 days prior to a Payment Date. For purposes of this CA Allergan Allocation Agreement, the Cities of Los Angeles, Oakland, San Diego, San Jose and Eureka will be deemed to have elected direct payment if they become Participating Subdivisions. e) The State will receive the Local Allocation share of any payment to the Settlement Fund that is attributable to a county or city that is eligible to become a CA Participating Subdivision, but that has not, as of the date of that payment to the Settlement Fund, become a Participating Subdivision. f) Funds received by a CA Participating Subdivision, and not expended or encumbered within five years of receipt and in accordance with the Allergan Settlement Agreement and this CA Allergan Allocation Agreement shall be transferred to the State; provided however, that CA Participating Subdivisions have seven years to expend or encumber CA Abatement Accounts Funds designated to support capital outlay projects before they must be transferred to the State. This provision shall not apply to the Cost Reimbursement Funds, which shall be controlled by Appendix 2. ii. Use of CA Abatement Accounts Funds a) The CA Abatement Accounts Funds will be used for future Opioid Remediation in one or more of the areas described in the List of Opioid Remediation Uses, which is Exhibit E to the Allergan Settlement Agreement. b) In addition to this requirement, no less than 50% of the funds received by a CA Participating Subdivision from the Abatement Accounts Fund in each calendar year will be used for one or more of the following High Impact Abatement Activities: (1) the provision of matching funds or operating costs for substance use disorder facilities within the Behavioral Health Continuum Infrastructure Program; (2) creating new or expanded Substance Use Disorder ("SUD") treatment infrastructure; (3) addressing the needs of communities of color and vulnerable populations (including sheltered and unsheltered homeless populations) that are disproportionately impacted by SUD; (4) diversion of people with SUD from the justice system into treatment, including by providing training and resources to first and early responders (sworn and non -sworn) and implementing best practices for outreach, diversion and deflection, employability, restorative justice, and harm reduction; and/or EIEI (5) interventions to prevent drug addiction in vulnerable youth. 4 O Item AA1: Staff Report Pg. 15 Packet Pg. 695 of 853 Item AA1 A /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement c) The California Department of Health Care Services ("DHCS") may a Agreements re not delete from it) by designating additional High Impact Abatement Manufacture and will make reasonable efforts to consult with stakeholders, including t Distribution of Opioid Subdivisions, before adding additional High Impact Abatement Activ �Pr.cl.cts 11110 1101. d) For the avoidance of doubt, and subject to the requirements of the Allergan Settlement Agreement and applicable law, CA Participating Subdivisions may form agreements or ventures, or otherwise work in collaboration with, federal, state, local, tribal or private sector entities in pursuing Opioid Remediation activities funded from the CA Abatement Accounts Fund. Further, provided that all CA Abatement Accounts Funds are used for Opioid Remediation consistent with the Allergan Settlement Agreement and this CA Allergan Allocation Agreement, a county and any cities or towns within the county may agree to reallocate their respective shares of the CA Abatement Accounts Funds among themselves, provided that any direct distribution may only be to a CA Participating Subdivision and any CA Participating Subdivision must agree to their share being reallocated. iii. CA Abatement Accounts Fund OversigCt a) Pursuant to Section 5 below, CA Participating Subdivisions receiving settlement funds must prepare and file reports annually regarding the use of those funds. DHCS may regularly review the reports prepared by CA Participating Subdivisions about the use of CA Abatement Accounts Funds for compliance with the Allergan Settlement Agreement and this CA Allergan Allocation Agreement. b) If DHCS determines that a CA Participating Subdivision's use of CA Abatement Accounts Funds is inconsistent with the Allergan Settlement Agreement or this CA Allergan Allocation Agreement, whether through review of reports or information from any other sources, DHCS shall send a request to meet and confer with the CA Participating Subdivision. The parties shall meet and confer in an effort to resolve the concern. c) If the parties are unable to reach a resolution, DHCS may conduct an audit of the Subdivision's use of the CA Abatement Accounts Funds within one year of the request to meet and confer, unless the parties mutually agree in writing to extend the meet and confer time frame. d) If the concern still cannot be resolved, the State may bring a motion or action in the court where the State has filed its Consent Judgment to resolve the concern or otherwise O IJ Item AA1: Staff Report Pg. 16 Packet Pg. 696 of 853 Item AA1 A /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement enforce the requirements of the Allergan Settlement Agreement or th Agreements re Allocation Agreement. However, in no case shall any audit be condu Manufacture and brought, as to a specific expenditure of funds, more than five years a Distribution of Opioid which the expenditure of the funds was reported to DHCS, in accord Products agreement. e) Notwithstanding the foregoing, this Agreement does not limit the statutory or constitutional authority of any state or local agency or official to conduct audits, investigations, or other oversight activities, or to pursue administrative, civil, or criminal enforcement actions. C. CA Subdivision Fund i. Fifteen percent of the total Settlement Fund payments will be allocated to the CA Subdivision Fund. All funds in the CA Subdivision Fund will be allocated among the Plaintiff Subdivisions that are Initial Participating Subdivisions. The funds will be used, subject to any limits imposed by the Allergan Settlement Agreement and this CA Allergan Allocation Agreement, to fund future Opioid Remediation and reimburse past opioid-related expenses, which may include fees and expenses related to litigation, and to pay the reasonable fees and expenses of the Special Master as set forth in Appendix 2. The CA Subdivision Funds will be allocated as follows: a) First, funds in the CA Subdivision Fund shall be used to pay the Special Master's reasonable fees and expenses in accordance with the procedures and limitations set forth in Appendix 2 to this document; b) Second, funds will be allocated to Plaintiff Subdivisions that are Initial Participating Subdivisions that have been awarded Costs, as defined by and in accordance with the procedures and limitations set forth in Appendix 2 to this document. c) Funds remaining in the CA Subdivision Fund, which shall consist of no less than 50% of the total CA Subdivision Fund received in any year pursuant to Appendix 2, Section 2.c.v, will be distributed to Plaintiff Subdivisions that are Initial Participating Subdivisions, in relative proportion to the Local Allocation. These funds shall be used to fund future opioid-related projects and to reimburse past opioid-related expenses, which may include fees and expenses related to litigation against any Opioid Defendant. D. Provision for State Back -Stop Agreement On August 6, 2021, Judge Dan Polster of the U.S. District Court, Northern District of Ohio, Eastern Division, issued an order (ECF Docket Number 3814) ("MDL Fees Order") in the National Prescription Opiate Litigation (MDL No. 2804) "cap[ping] all applicable contingent fee agreements at 15%." Private counsel representing Plaintiff Subdivisions should seek its 6 0 Item AA1: Staff Report Pg. 17 Packet Pg. 697 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement contingency fees and costs from the Attorney Fee Fund or Cost Funds under I Agreements re Settlement Agreement and Allergan Settlement Agreement, and, if applicablJ Manufacture and Settlement Agreement, Distributor Settlement Agreement, Janssen Settlemer Distribution of Opioid Walgreens Settlement Agreement, and Walmart Settlement Agreement. Products A Plaintiff Subdivision may separately agree to use its share of the CA Subdivision Fund to pay for fees or costs incurred by its contingency -fee counsel ("State Back -Stop Agreement"), pursuant to Exhibit R, section I(X), of the Allergan Settlement Agreement and the MDL Fees Order, so long as such contingency fees do not exceed a total contingency fee of 15% of the total gross recovery of the Plaintiff Subdivision pursuant to the Allergan Settlement, inclusive of contingency fees from the national Attorney Fee Fund and this State Back -Stop Agreement. Before seeking fees or litigation costs and expenses from a State Back -Stop Agreement, private counsel representing Plaintiff Subdivisions must first seek contingency fees and costs from the Attorney Fee Fund or Cost Funds created under the Allergan Settlement Agreement. Further, private counsel may only seek reimbursement for litigation fees and costs that have not previously been reimbursed through prior settlements or judgments. To effectuate a State Back -Stop Agreement pursuant to this section, an agreement in the form of Appendix 3 may be entered into by a Plaintiff Subdivision, private counsel, and the California Office of the Attorney General. The California Office of the Attorney General shall, upon the request of a Plaintiff Subdivision, execute any agreement executed by a Plaintiff Subdivision and its private counsel if it is in the form of Appendix 3. The California Office of the Attorney General will also consider requests from Plaintiff Subdivisions to execute and enter into agreements presented in other forms. For the avoidance of doubt, this agreement does not require a Plaintiff Subdivision to request or enter into a State Back -Stop Agreement, and no State Back -Stop Agreement shall impose any duty or obligation on the State of California or any of its agencies or officers, including without limitation the Attorney General. 5. State and Subdivision Reporting a) DHCS will prepare an annual written report regarding the State's use of funds from the settlement until those funds are fully expended and for one year thereafter. These reports will be made publicly available on the DHCS web site. b) Each CA Participating Subdivision that receives payments of funds from the settlement will prepare written reports at least annually regarding the use of those funds, until those funds are fully expended and for one year thereafter. These reports will also include a certification that all funds that the CA Participating Subdivision has received through the settlement have been used in compliance with the Allergan Settlement Agreement and this CA Allergan Allocation Agreement. The report will be in a form reasonably determined by DHCS. Prior to specifying the form of the report DHCS will confer with representatives of the Plaintiff Subdivisions. Item AA1: Staff Report Pg. 18 Packet Pg. 698 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F 6. Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement c) The State and all CA Participating Subdivisions receiving CA Abaterl Agreements re Funds will track all deposits and expenditures. Each such subdivision Manufacture and solely for the CA Abatement Accounts Funds it receives. A county i Distribution of Opioid oversight, reporting, or monitoring of CA Abatement Accounts Fund Products within that county that receives direct payment. Unless otherwise exempt, Subthvisions expenditures and uses of CA Abatement Accounts Funds and other Settlement Funds will be subject to the normal budgetary and expenditure process of the Subdivision. d) Each Plaintiff Subdivision receiving CA Subdivision Funds will track all deposits and expenditures, as required by the Allergan Settlement Agreement and this CA Allergan Allocation Agreement. Among other things, Plaintiff Subdivisions using monies from the CA Subdivision Fund for purposes that do not qualify as Opioid Remediation must identify and include in their annual report, the amount and how such funds were used, including if used to pay attorneys' fees, investigation costs, or litigation costs. Pursuant to Section VIII(C) of the Allergan Settlement Agreement, such information must also be reported to the Settlement Fund Administrator and Allergan. e) In each year in which DHCS prepares an annual report DHCS will also host a meeting to discuss the annual report and the Opioid Remediation activities being carried out by the State and Participating Subdivisions. Miscellaneous a) The State or any CA Participating Subdivision may bring a motion or action in the court where the State has filed its Consent Judgment to enforce the requirements of this CA Allergan Allocation Agreement. Before filing such a motion or action the State will meet and confer with any CA Participating Subdivision that is the subject of the anticipated motion or action, and vice versa. b) Except as provided in the Allergan Settlement Agreement, this CA Allergan Allocation Agreement is not enforceable by any party other than the State and the CA Participating Subdivisions. It does not confer any rights or remedies upon, and shall not be enforceable by, any third party. c) Except as provided in the CA Allergan Allocation Agreement, if any provision of this agreement or the application thereof to any person, entity, or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this agreement, or the application of such provision to persons, entities, or circumstances other than those as to which it is invalid or unenforceable, will not be affected thereby, and each other provision of this agreement will be valid and enforceable to the fullest extent permitted by law. d) Except as provided in the Allergan Settlement Agreement, this agreement shall be governed by and interpreted in accordance with the laws of California. lj jti Item AA1: Staff Report Pg. 19 Packet Pg. 699 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F The undersigned, Palo Alto city, ACKNOWLEDGES acceptance of this Propq Subdivision Agreement Regarding Distribution and Use of Settlement Funds is a requirement to be an Initial Participating Subdivision in the Allergan Seti ACCEPTS this Proposed California State -Subdivision Agreement Regarding of Settlement Funds — Allergan Settlement. EXECUTED on Signature: Name: Title: Date: Item AA1 Attachment A Resolution A Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Item AA1: Staff Report Pg. 20 Packet Pg. 700 of 853 O a) 0 C W c m (I) 7 U 0 O Item AA1 A /i Attachment A Resolution Authorizing City Manager 1 • to Execute Participation Agreements obo CPA to Enter into Settlement bA OO p Agreements re O 0 c .� dj Manufacture and •� -O O Distribution of Opioid o o Products 5) 9 V •^ ° on on o `� 0 w ° • 9 •0 0' mI Cd •� ° O �.% •may O r °U •�--I C.) r-- > •y U 0 8 U cC N N bO a S~ 0 , C/) 9l C/1 0 bA o a Cd ( EI �/ O iti to C� CC3 C� Gi F+1 \J V o~- y ° R U •, 0 ° o w o o o •bn o V)i o- bA v1 a0i -o °A o o M ° 0) ai) ate) w 0 a, ; , 0 o o 0 0 y • 0 - c U cd V 0 C� • CSpy Cc ti V am) A �,a� �waaw �wUa °tea Item AA1: Staff Report Pg. 21 Packet Pg. 701 of 853 z a) O O a) c w C C) C) O O 0 O O O Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ o \ C N N 00 �O O � C. 00 O �O �--� 1 N N� � 00 01 � 1 rl to 01 Distribution of Opioic p 01 - N C — 00 N N to ti N 1 t` I C" O O to N 00 00 00 N —0 G1 ' 011 to "O N N 00 to N 00 Products u y N O N 01 00 to 00 N to — - ON IV - y _ v MN 0 O 0 1M -ti 0 00 - 0 00 00 0 01 0 0 - N 0 to O to .--i O to to O N M O to M O M N 00 N \p 'l N N \O O to M N© 00 ' oo - O M 0 N 0 - O 0 to 0 00 O 0 00 !-- 0 N O 0 G � 55 a u cc N 01 N N Sri O a + C N C 1 M N M M CC N t N C 1 M \O to `O 01 D1 N N \O N 'r) O M O M — M N O — V7 N 00 — AO M N — N N If) O M N O V') .--i N +�+ N N O 0 0 0 0 0 0 d a c 'C 'C 'C SC 'C CC ' CC CC CC - CC - CC - CC - CC - CC "G CC - CC }.y ° C/] y CC V] ° V] ° V] ° V] ° V] ° V] ° V] ° C/7 ° i•-I i•-I i-+ i•I i•I i•i i•-I i•I i•-I i--I i•i i-- c © /My�� /y�� /My�� U U U U U U U U a a V c o '�• oUUUUUUUUUUUUUU o oUU O O oUUUUUUU A Item AA1: Staff Report Pg. 22 Packet Pg. 702 of 853 z N O O N C W C C) (I) O O O Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 C C 0 O 0 M 0 N 0 0 t- 0 0 0 0 0 0 0 0 0O 0 0 N 0 0 O 0 0 0 V7 0 qv 0 t` 0 t` 0 r 0 Distribution of 0pioi, o ce M O a1 O- O 'l V) O 0 1 1 00 If) M O M' O \O1 V) - - O M 0O O Products y \p 00 - O1 00 O C - 00 C N a1 O N V) M CO 0O O V) a1 - 3 Q y O O ) O N O M O- - M O - O N- N - - N- 00 00 C1 - a 1 \O M a \ O N N O O - O M O \D O a 1 O--- N !-- O N C a� w O o 0 0 0 0 .n. 'cC Cr,v 0.�� O1 Cr, O O N O •-- rf,a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 �O I- O N M M M C a, y O - O O rn N N — — 0O a, — O1 O O O O O - - - O M ea i 0 0 0 0 0 0 0 0 O O O- N O O OO O O Cr, O O O O O O O O O .o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -� 0 0 0 0 0 0 0 0 0 0 0 0 —� M M cd ct M cd cd M M cd M Z 0 n 0 -- v 0 Cl)-- 0 v 0 Cl)vCl) 0 -- 0 0 ) n 0 Cl)Cl)Cl)C)) 0 0 0 N O 'd O 'd O 'd O O O O O O O O O O O O 7� U U U U U U U U U U U U O s~ S~ r~ > 7 S~ a O M i M I., M S -i M s-. M 7-. M M 7-. M s. m z i Z O O O m O m N m N m N m N m� N N m� N N m� N N m N i ! j j j j j � w w w w w w w w w w w w � O O O O O O O O O O O o Q W W W U U U U U U U U U U U U O d C q C O Qr � �^O �UUUUUUUUUUUU O ODU ODUUUUUUUUUU O o A w Item AA1: Staff Report Pg. 23 Packet Pg. 703 of 853 a) O O a, C w c C) C) 0 O a Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O o C O � (` � � CT N - M In If) 00 O �O � 00 N O .-� 01 In N 0o O Distribution of O ioi, p O 00 N M 00 O O 00 01 t` N In N - T ' '0 N "T '0 N 00 - M M— aN ' 00 In 00 M M M O M O O Products Cs N t— N N 00 N O 01 In O M M 01 M \O N C - L 3 y N N N \p 00 O In ti O M IV 0 In N In ti ' 0 N N O N N O N - O IN 0 \p 0 r" In 0 O - N N M In N N N N M N C O o 0 0 0 0 0 0 E •,,� 'O "0 u M oc N Ot N 01 Cs M O O O O M rf,a Cpip o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N N 00 -- 01 00 C M N "0 N 01 O M 1f) 01 c c M N M N\a In �--� ^� C N I_M IT) ^� M In -� -� I n O -� O -� O M O — O O C O — N— a,, N — N cc Q O O O O O O O O O N O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 a �ti �ti �ti 0 cc Ct • „.., Cj • S• -I Cj • $•-I C5 • i•-I aj • $•-I O ,;----1I ,--I }----I ,;----1I ,�----1I j -''-I,, N V] C) V] V] V] ,--I O O O �+ O i•-I O U O1 ,�-O-yI �-O-yI i•-I ,�-O .�Q-.-y)I ,��-.iyl ,��-.iyl ,��-.iyl ,��-.iyl 1,U 1,U 1,U 1,U 1,U 1,U 1,U 1,q 1,U • �" �" �" �" M M Cpl V% C v' Cc o U on v s ti U U a� U c� U ci v UW�dv�v� q C O O •�" V CL ^O U U U %r' O D U U U Ste" O �". O D U U U U U U U U >:r" O D U U U fir" O D U S~ O U S~ O U U U U U U U A Item AA1: Staff Report Pg. 24 Packet Pg. 704 of 853 z N O O U) C W C C) (I) 0 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \ C O O C� O 00 O O O N O O O M O V) O - O N O N O aD O 'tN e O ' O �--i O N t N O O O O M O O - O 0 Distribution of Opioi o O N O O M .-ti N O .--i '1) 00 N It Oc N 00 O .. O 00 00 00 If t— 01 00 00 N r" N O 01 00 01 C1 `O N 00 Products O M IN V) O 00 00 M 00 C1 01 N N — 01 01 01 t— 00 3 Q y p+ 'I 0 0 . M 0 N 0 O O 0 - N 0 — N 0 ©- O 0 O 0 - - 0 M to 0 N 00 0 IVt( O— 0 0 M O 0 . 00 O 0 . O O 0 . \Z M 0 . N N 0 . O O" 0 . 0 . O O 0 . N V 0 . N— O 0 . M 0 . \O N 0 . N N 0 . CM M— . 0 4 O 0 O 0 O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O C a� O o "C 0O cC v a O r, 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 IT) N M N -a1 — — N M — y CD M O N N O O — O Ot N O v) OIT) — O V) Q O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 4) 4) N 4) N 4) N 4) N 4) N 4) N N Q) 4) O O O O Q) O O O O O O O O O O O O O O O O O O O O O O O O O N N N N N N N N N N N O Jij O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 � O x p Qn 5) cd O 0 0 a Oy� >paUVUU 0C) �QQ W��7C7L7'� � x 0r q C O L O Ctl a'U A ni Item AA1: Staff Report Pg. 25 Packet Pg. 705 of 853 z 0 O O a) O W 0 m (I) O U O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re o O O O O O \ \ O \ O \ o \ e \ \ \ \ \ \ \ cc e e Manufacture and o u C r t- kn kn N 01 01 O O rl .--I kn 0� �O 00 k O 00 N M Distribution of Opioii O M �O �O a1 - \ON N - N 0\ I - -"T 00 M N 00 1Z N kn V i N 'O N 'O N N N 00 O - 00 1. Products uif . u O 0\ 01 00 kn N 01 - 01 N' rl O1 N rl - M IV - 00 - IV M 01 - O I!) I O 00 N M 00 rl - O 3 Q y - - O O O M O- - O N O N N N N M O O N - O O O O O O O O O O O O N O O O O O O O O O O O O O O O O O C C y N C 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 y y 00 ^� M N a1 n M kn O V7 N N N a, V7 N N — M' O N N N N M u 0 0 0 0 0 0 0 0 0 0 0 N0 0 0 0 0 0 0 0 0 0 0 — Q a O O O O O O O O O O O O N O O O O O O O O O O O O O O O O O w w rID rID rID ID rID rID r r r m rID r ID r'A rI0'A Qn InrID 'A C,) C,) rID rID wr/D 5)t) t) t) N N N N t) 4) G) 4) G) N 4) N 4) N 5) N N 5) 5) 5) N 4) N N U1 v1 cn v1 U1 U1 v] U1 0 vD 0 U1 0 C/) O U1 0 U1 0 r 0 U1 0 U1 0 cn 0 U1 0 U) 0 r O U) 0 U1 O C) 0 U1 0 v1 0 Cn 0 Cn 0 U1 0 U1 0 U1 0 1010010,0100 I ---- a, . 5.) r/D 5) CCID C/) 5) -- a O .-O O y 5) C) y N U v� n �i�a�aaa� cd cd cd a >~ n o� O 0Za�aa•�a M z M O O O-r� U a c� C a U N x x /r 6 a MCo C 1111111 U U U U U U U U U U U U U U U U U U U U U U U U U U U U U a � � A ❑ o. Z& Item AA1: Staff Report Pg. 26 Packet Pg. 706 of 853 z a) O 0 a) C w c C) C) O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 C C \O N - N r-i M M N "T 00 O .--i N - .-ti 1n N r4 Distribution of Opioiu o ce - O M 00 N N M M - `O 00 00 O N M M Q1 N 00 O M N .-- 00 C. M M N M C1 �O O Products N ' N M 00 N 00 00 -T C\ \O V) C1 C1 N ' 00 O O N 00 r-i 00 C1 a> 3 Q y N 0 O r- r- N O N r- In N C1 N . O 00 O M O CO rti . 01 O . M O . .-- C\ . O . O . O — . \O N . M \O . Q1 O . - M . \O C . N r -I . \O r -I . N N . N O . N N N 00 f — M O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O C a� w O o 0 0 0 N O M Oen O \O Vl O O O rfl:. O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O — M M cc 01 N 00 "0 O rn O N 1 N"C M N C N C1 ' O 0o C1 01 a1 C1 y O O N M rn O O N O O M M O N N O 00 00 M M Q a O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 5)5.) a) a) N a) N a) Q) N a) N Q) N Q) N Q.) 0 Cd a) a) a) a) a) a) a) a) a) a) a) a) a) a) a) a) N NCd Cd CdO p ' c) cj Cl) vC C/C cn cn cn Cl) Cd) Cd) Cl) Cl) O O O O O O O O O O O O O O O O 00 .� r c V� O L7 O V U N O c vn V QwC7 Cd O x o Cw Cdw a o o Cd sx �U�'�� 1LhL1h jj1.. .4h11 f U U U U U U U U U U U U U U U U U O D U O D U U U O O U U U U A Item AA1: Staff Report Pg. 27 Packet Pg. 707 of 853 Item AA1 /�+� A Attachment A Resolution Authorizing City Manager • to Execute Participation Agreements obo CPA to ❑• ' •❑ Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 v) - Distribution of Opioid o ce �p N W O 00 In V) C1 N t— N N "O 00 N O N' O s + N 00 OC - N N O In M O V) 00 In N 00 M OC r 00 00 00 I!) 00 Products bA C ' If) V) V) O OC N N O N ' - O 'l• M M 01 AO O N M In M M N N 01 N \p O - 00 N O d y N O If) \O N O O M O N O 01 - \O .-ti O M N N N N 3 N O p+ 0 0 0 0 0 0 O� O O O O O O O O N O O 0 0 In O rn O O O O . . . . . . . . . . . . . . . 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C a> w O o 0 0 0 0 0 0 0 0 += + O 01 _ N 01 01 00 N r t - "C Cr) O - a 0 O O O to o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 e E •--i 1p O •--� W) M coc AO 'e•--� C1 't Cr) r- 00 r- 00 .--� M 't r- It M .-� a�� y Iii N O N O " N 0 0 0 0 ON O 00 N- N O "O - 00 00 N Cr) O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0- 0 0 0 0 0 0 0 U C nQIQII)IQI0I0 'C CO CO CO CO CO CO o � 4 O is O O fi 'C 9 O a) O=QE O y� U a Item AA1: Staff Report Pg. 28 Packet Pg. 708 of 853 z a) 0 0 a, C w c C) C) 0 O O Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 C C 0 O 0 0 N 0 O= 0 0 M 0 t— 0 0 0 O1 0 C1 0 O* 0 O 0 O 0 0 O 0 N 0 "o 0 M 0 O 0 0 - 0 1n 0 - 0 Distribution of Opioi, o ce a ' 0O O1 N 00 ' N ' I M ' O u ' N O O 'l N e' 1 .4 `o t1 M .4 N r .-� O1 0O O .--i V) C. 00 C1 00 O1 M Products u I N 00 N M I 1 \o ti- V) C1 N O .-ti 0O \o kn M t .-ti O a� 3 Q y tg N qv . kn t` . M . CN r" O O O O N O O C O r" -- N . M N . a a N O O . 0O O . O . - N . r" . C1 N . O .C . 00 Co \o tre N O M 0O N `o . . . 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C a� -0 o 0 0 0 0 0 0 0 0 0 C � 00 N O 00 O N 00 y ce "C a O l— 'r O C— O M O •--� O —� N N N O O O O O O O O rf, a 0 'r 0 N 0 M 0 [ 0 O1 0 [ 0 t- 0 0 0 O 0 N 0 N 0 00 0 I- 0 C 1 0 O 0 0 0 0 00 0 00 0 N 0 O 0 r 0 M 0 � 0 � 0 Lf) 0 l— 0 0 y V) M• M — O O O O N rn N O O O O N M N O 't •--+ M N O N N 0 0 0 0 0 0 0 0 0 - CD O CD O L O O O - 0 0 0 0 0 iu . 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -� O CD O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 . a CO a q C O Rr v U U U U U U U U U U U U U U O D U U O D U o U U U i C U A a cc Item AA1: Staff Report Pg. 29 Packet Pg. 709 of 853 z a) O 0 a, C w c C) C) 0 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re \ \ \ \ \ \ \ \ \ \ \ \ \ \ Manufacture and C C C� 01 00 It - M M N N — 01 N N to N ' Distribution of Opioi, o ce a' A N N a1 N 00 e' -0 ti N N ti `O V) O 00 O M N QV N 01 N C� C1 v 0, M N O"T M' N v"0"0 If) -V 00 N N Products y \c 00 00 M- - M M IN O N— N 00 N O O N' N 01 \O a�— u- a\O N N N O O O N O N O N O O N O O N—"0 N— M 01 M - 00 N N O M O N 00 O— 00 O C a� w O o 0 0 0 N fI O `O rf,Q, 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 �O � � E —C` � N O [ � ' O C — "C — M N N 00 "C M "C C 1 N 00 O N 00 N y 01 O N' M 0 N 0 0 OC 0 0 N 0 N 0 O 0 0 0 O 0 N 0 C 0 M 0 M — O — O 00 O N O O O kn O N — O N O O O d1 N N N N N N 0 N 05.) N N 0 N N N N N 0 N 0 N N N C.) '." 1_ F- 1 S- 1 1-i 5-i 1) 3-i 1-i 1-i Sr S-, 3 -i 3 -i 5- Sr N N N N N N N N N N U N N N v N Q N U Q N U U U U N N N I- C U C.i O F a a j ] O `d '� S~ O C. p�ZME UU tiW i1,p� tx � �� Q Or � q C O O •�" V CL �." �". S~ a U A Item AA1: Staff Report Pg. 30 Packet Pg. 710 of 853 z 0 0 O 0 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re 0 0 0 0 0 0 0 0 0 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 Manufacture and 0 t- kn O O 140 M 00 M M r- N r 4 00 00 - O Distribution of Opioi o ce r-i M 0� 00 N N \Z M ut r -I M - M O 00 M IV 'l Vi kn O N Vi O 00 - O r- M O\1 M kn - Products 'D .-- LID N I LID .--i .-- a .-- N a� -• �+ 3 Q y p„ �O \C O O 00 - O - N N NLID 00 O N r- LID O N N 01 LID O O1 N NN O O N M N 0 rti N \O N N r - O O O O O O O O M O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C a� w O o 0 0 C •.�. C C u 00 O M 00 ce 00— Q 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 � O a0 (` 00 •-� � t` a1 00 V7 � � .� •--� N0 �O � � � 01 � 'zt- N M 00 N N M \O 0 N N' O N O N O 0 N 0 0 0 O 0 cM 0 O 0 M O O M N 00 W) N N O'ID M- Q a O O O O O CD O O M O 0 0 0 0 0 0 0 0 CD 0 0 0 0 0 0 0 0 0 0 0 O O O O O O O O O O O O O O O O O O O O O O _ -' ' r ' �' CN N N N N N �i �" c�dr c�dr c�dr cd ca�d++ c��d•r•� ca�d•++ c��d•r+ ca�d•++ c��d•r•� cd c��d•r•� cd c��dr+ c� ca�d++ cd ca cd cad+ cd cad+ 7 cd 5) cd 05) CC U C U cC U cC U N GA ) 4) as 4) 1=G 4) as 4) 4) as U 1=G U as U GA U as N GG N as N as N as N as G) as G) as a) as U as N as U xi C/] C/1 Cn Cn U/ V1 C/D V1 I- C O O 'd v N �, U cC O O 'C �� N O I�� O �, r0` v �' V] +,�..'yy '� Y-� y C� c C� • Cd by C Cn �./ rl p CJ O (� �1OV H O ^ti O p -O �I cC e-1 O O iti O N E CC3 O U O N rl N O O y U a U C p C _ U U U U U I4I. O U O III(.) D U U U U U U U U U U U U U U U U U U U A Item AA1: Staff Report Pg. 31 Packet Pg. 711 of 853 z N O O N C W C C) (I) 0 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \ -1 0 0 0 0 0 0 0 0 - 0 M 0 M 0 - 0 00 0 00 0 O 0 Q\ 0 N 0 — 0 -1 0 0 0 0 0 � 0 0 Distribution of Opiou o ce N - N-- 00 a1 OI( 00 00 N O N 00 N 01 V) .--i O 00 N q O \O r" Q1 00 O V) — ti C1 M Q1 M'' 00 In Products a� 01 O Q1 M O N 00 .C M - — M 00 00 V) N O C\ M . O . V) . . M M O\ - . - - . 00 - . V) `C . V) . . M . M . \O N . M . N . . AO N O . M . IT . O . N \O . ' . C a� w a, o 0 0 0 0 0 0 0 0 C i C C cc �en _ N N rn O M M C N O en C O O N M N O O rf,a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 — M "O cc 01 M -- N O M N' 01 M N N "O O OO M M M 01 y O O N o0 — rn N OO • N OO M — r N cc O v') W) — — OO — O O i O -� ^� O ^� O ^� O O O O N O C O O O O O `O O O O O M O o0 Q a O� 0 0 0 0 0 0 0 0 0 0 0 0 --� O O O O M •-� 0 0 0 0 0 0 0 0 0 000 O a a a a a a a a a a a a a a a a a O C C O • C cO d) Q U Q U Q U Q U L U Q U L U Q U Q U Q U Q U Q U Q U Q U Q U Q U Q U Q U O O O O O O O p m p m p m �" ti ti ti ti ti ti •. .7s .73 CO CO CO CO CO CO CO CO CO COCJ CO CO CO CO CO CO CO CO � EJD cti EID Sf) Cl) Cl) Cl) Cl) Cl) ci) Cl) Cl) Cl) ci) Cl) Cl) Cl) ci) o � •≥ U O U O V O _U ^. O v .� U O v y O L� Cl)[ a C C O 7d Qr � ODUUUUUUUUUUUUUUUU �rO�UUUUUU ODU U U U ar V rOl V A Item AA1: Staff Report Pg. 32 Packet Pg. 712 of 853 a) O O a, C w c C) C) 0 O a Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \ C C 0 \C 0 - 0 N 0 - 0 O\ 0 O 1 [� 0 O 0 N 0 - 0 00 0 O� 0 O� 0 `C 0 � 0 .--i 0 — 0 � 0 .-� 0 M 0 00 0 00 0 01 0 Q� 0 Distribution of Opioi� o ce In oo oo N C\ 00 01 kn \O 00 M kn 00 00 00 C\ O - M N O O M N .•-i . — 00 00 00 D\ \C C\ M C\ \C C\ N M Products •) N O N D\ 01 N M M- O C O M N o0 M 00 00 00 01 3 d y I M M - . CC - M CC . - . C - - . CC M O - CC - M O - - N - . O - . M - . CC . N — . O - . N . M . \O N . O O . N O . 00 M . O O . N . 00 01 — — CC O O N . C a) w O o 0 0 •cC "'O v 00 M M O\ rf,:. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 M [- O [- Co-�--� C 01 I- M O Co- M Lr M C 1p — M N M N — � N N 00 t- Co GO � y N N N N N O ' N — ' M O O N r O - O N u 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 — O O O O O N O 0 0 O O O O 4 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 cd cd cd cd cd cC Co O Co - - - - a) a) 6) a) 6) a) 6) Q) 6) a) 6) a) N N C) N Co Co c0 Co Co Co Co C) ._ O O Cn C ay o v, W x w� I�1 IrIDt qC O CL ^O U U U U O D U U U U U U U U U U U U U U O D U U U U O D U U a A O N Item AA1: Staff Report Pg. 33 Packet Pg. 713 of 853 z a) 0 0 a, C w C Cn C) 0 0 a Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 0 00 0 O 0 O 0 0 0 0 0 0 0 Q\ 0 0 0 0O 0 0 \O 0 0 \O 0 0 M 0 M 0 0 M 0 O� 0 NDistribution 0 of Opioi O C M M N N N H O 0O O `O Q1 N `O O C1 M O1 M N t1 M - C1 C1 00 00 C1 C1 C\ M C1 N O' C1 00 - M Products M M 0C ' M C\ ' If) 00 O O 0O - M O M O N 3 Q O - O - C1 N- N M M NIf M O I O - - C - N - N 00 M- a 1 M M M O N M N N- M C1 0O N - N N CO C � w O o 0 0 0 0 •cC "'O v O N M O1 O M O1 M N r15:. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 M MN l0 •--� O1 r M M O M N M 00 O N 00 N - y - .� M •--� M O1 " O N 00 N - vO O1 N 00 O N \O M - O N - - M 00 O O O O O O N O O O N O O O O O N O N N O O O N O O . 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -� 0 0 0 0 0 0 0 0 0 0 0 -� O O C U U U U U U U U U U U U U U U m m i~ O O 2 Cd Y C Q O U O> O "" V v O O V i i $- _O r Cd C O N O O O O Q ct U cC O cd a o�� On �U� c/D;� q C O � •�" V CL S". S:". Ste" �"r S~ a'U A Item AA1: Staff Report Pg. 34 Packet Pg. 714 of 853 z N O O N C W C C) (I) 0 O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 C 0 01 0 O 0 00 0 00 0 M 0 O 0 0 r 0 - 0 O 0 0 0 0 0 0 .-ti 0 0 0 0 0 0 " 0 0 Md 0 Distribution of Opioi, o ce In N N O M It N N N \O N N \O O1 M I Q\ tfi Q1 110 O1 k N N r N a1 N a1 N T N 00 •--I ti 00 N N ii O Products a� O 01 M 01 N O 00 `O `Ott .-- C N t( O N N N - N 3 Q y p+ M O . 0 -- 0 N 0 00 .—I M 0 00 N •--i . O O . - O . N - O . 00 O O . M V) O . N - M . O O . N- N r O . V) 00 O . r 00 — O . M O O . N O O . V) O- O . N O . O M O . O . O I 00 N N . — O O O 0 O 0 . C a� w O o 0 0 0 0 0 ce v MN O d1 O O O O O N rf,a CC o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 E — - N O N — N "O 00 L O ri C 't M N O\ ' M N — N \0 "O N N N 00 y 00 N N - O — — — C O N — 00 O O O O N M C 00 C O O O Q 0 O O O O O O O O O O O O O O O O O O O O O N O 0 0 m C B Z Z 0000EEEEEEEE cct cct C O U O W O - V] • Q •. Q q C O i LLL iJJJ LfL JL CL c oo OFUVUc.�vvvvvv�c.�vvvvvv 7 Cd a � U A Item AA1: Staff Report Pg. 35 Packet Pg. 715 of 853 z a) 0 0 a, C w C C) C) 0 O a 0 0 0 0 0 0 0 0 0 0 0 0 04 N M N O t` C1 O� o R M '. .-- 0 - N O 1 O O 01 - M N N M O 01 N N O u u N' N 01 M 01 M- N If) N 3¢ri,�OOOOOMOOONO O O O O O O O O O O O O + O N 'CC •b C)— N rJ O O O O O O O O O O O O J .�i o Cr) 1- vi N N y Cr) N 00 •--IC N lit & "0 &r b�+ O O O M O O O N O - x O pr �+ CS C � o u ^O .c U U U )cu U O D U U ©u O a � U U U Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products A Item AA1: Staff Report Pg. 36 Packet Pg. 716 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F 1. Additional defined terms: 2. APPENDIX 2 Cost Reimbursement Procedure Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products a) Costs means the reasonable amounts paid for the attorney and other City Attorney and County Counsel staff time for individuals employed by a Plaintiff Subdivision at the contractual rate, inclusive of benefits and overhead, together with amounts paid for court reporters, experts, copying, electronic research, travel, vendors, and the like, which were not previously reimbursed and which were paid or incurred (i) prior to December 31, 2022 in litigation against any Opioid Defendant and/or (ii) in negotiating and drafting any CA Allocation Agreement(s) concerning a settlement with any Opioid Defendant(s). Costs does not include attorneys' fees, costs, or expenses incurred by private contingency fee counsel. No part of the CA Abatement Accounts Fund will be used to reimburse Costs. b) First Claims Date means October 1, 2023 or when all applications for reimbursement of Costs, in whole or in part, from funds available under Section XIV and Exhibit R of the Teva Settlement Agreement, Section XIII and Exhibit R of the Allergan Settlement Agreement, Section X and Exhibit R of the Distributor Settlement Agreement, Section XI and Exhibit R of the Janssen Settlement Agreement, Section X and Exhibit R of the CVS Settlement Agreement, Section IX and Exhibit R of the Walgreens Settlement Agreement, or Section IX and Exhibit R of the Walmart Settlement Agreement, have been finally determined under the provisions of those agreements, whichever comes first. c) Special Master means a retired judicial officer or former public lawyer, not presently employed or retained by a Plaintiff Subdivision, who will aggregate, review, and determine the reasonable Costs to be awarded to each Plaintiff Subdivision that submits a claim for reimbursement of Costs. The Special Master will be selected by a majority vote of the votes cast by Plaintiff Subdivisions, with each such subdivision having one vote. d) Plaintiff Subdivision Committee means the committee of Plaintiff Subdivisions that will review and approve the invoices submitted by the Special Master reflecting his or her reasonable time and expenses. Cost Reimbursement to Plaintiff Subdivision a) Purpose. Substantial resources have been expended to hold Opioid Defendants accountable for creating and profiting from the opioid crisis, and this effort has been a significant catalyst in creating National Opioid Settlements with various manufacturers, distributors, and chain pharmacies. b) Claims Procedure. A Item AA1: Staff Report Pg. 37 Packet Pg. 717 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement i. If a Plaintiff Subdivision is eligible to seek reimbursement of C Agreements re part, from funds available under Section XIV and Exhibit R oft Manufacture and Agreement, Section XIII and Exhibit R of the Allergan Settlem Distribution of Opioid Section X and Exhibit R of the CVS Settlement Agreement, Sec Products R of the Walgreens Settlement Agreement, Section IX and Exhibit of e Walmart Settlement Agreement, Section X or Exhibit R of the Distributor Settlement Agreement, or Section XI or Exhibit R of the Janssen Settlement Agreement, it must first make a timely application for reimbursement from such funds. To allow sufficient time for determination of those applications, no claim for Costs to the CA Subdivision Fund under this Agreement may be made before the First Claims Date. ii. A Plaintiff Subdivision that wishes to be reimbursed from the CA Subdivision Fund must submit a claim to the Special Master no later than forty-five (45) days after the First Claims Date. The Special Master will then compile and redistribute the aggregated claim totals for each Plaintiff Subdivision via email to representatives of all the Plaintiff Subdivisions. A claim for attorney and staff time must list, for each attorney or staff member included in the claim, the following information: name, title, total hours claimed, hourly rate (including, if sought, benefits and share of overhead), and narrative summarizing the general nature of the work performed by the attorney or staff member. For reimbursement of "hard" costs, the subdivision may aggregate across a category (e.g., total for travel costs). It is the intention of the Plaintiff Subdivisions that submission of documents related to reimbursement of Costs does not waive any attorney -client privilege or exemptions to the California Public Records Act. iii. The Special Master may request, at his or her sole option, additional documents or details to assist in the final award of Costs. iv. The Special Master will review claims for reasonableness and will notify each Plaintiff Subdivision of the final determination of its claim, and will provide a list of all final awards to all Plaintiff Subdivisions by email or, upon request, via First Class U.S. Mail. Any Plaintiff Subdivision may ask the Special Master to reconsider any final award within twenty-one (21) days. The Special Master will make a final determination on any such reconsideration request within thirty (30) days of receipt. v. Any decision of the Special Master is final and binding, and will be considered under the California Arbitration Act, Code of Civil Procedure section 1280 et seq. as a final arbitration award. Nothing in this agreement is intended to expand the scope of judicial review of the final award for errors of fact or law, and the Parties agree that they may only seek to vacate the award if clear and convincing evidence demonstrates one of the factors set forth in Code of Civil Procedure, section 1286.2, subdivision (a). Plaintiff Subdivisions will have fourteen (14) days after all final awards are made, together with any final determination of a request for reconsideration, to seek review in the Superior Court of California, pursuant to Code of Civil Procedure, section 1285, where the State has filed its Consent Judgment. o�r�o 2 O`_�< Item AA1: Staff Report Pg. 38 Packet Pg. 718 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement vi. The Special Master will prepare a report of Costs that includes H Agreements re expenses at least ninety (90) days before the Payment Date for e Manufacture and Payment. The Special Master's preparation of a report of Costs Distribution of Opioid Plaintiff Subdivision's reporting requirement under Section VII1t Products Settlement Agreement. vii. A member of the Plaintiff Subdivision Committee, which is a CA Participating Subdivision, will submit to the Settlement Fund Administrator and Allergan a report of the fees and expenses incurred by the Special Master pursuant to Section VIII.C of the Allergan Settlement Agreement. c) Claims Priority and Limitation. i. The Special Master will submit invoices for compensation of reasonable fees and expenses to the Plaintiff Subdivision Committee no later than ninety (90) days prior to the Payment Date for each Annual Payment. The Plaintiff Subdivision Committee will promptly review and, if reasonable, approve the Special Master's invoice for compensation. The Plaintiff Subdivision Committee will submit approved invoices to the Settlement Fund Administrator for payment. The Special Master's approved invoices have priority and will be paid first from the CA Subdivision Fund before any award of Costs, subject to the limitation in Section 2.c.v below. ii. Final Awards of Costs that do not exceed seventy-five thousand dollars ($75,000.00) will be paid next in priority after the Special Master's approved invoices. iii. Final Awards of Costs in excess of seventy-five thousand dollars ($75,000.00) will be paid proportionally from the funds remaining in that year's Annual Payment. iv. Any claim for Costs that is not paid in full will be allocated against the next year's distribution from the CA Subdivision Fund, until all approved claims for Costs are paid in full. v. In no event will more than 50% of the total CA Subdivision Fund received in any year be used to pay Costs or the Special Master's approved invoices. vi. In no event shall more than $28 million of the total CA Subdivision Funds paid pursuant to the Teva Settlement Agreement, Allergan Settlement Agreement, Distributor Settlement Agreement, CVS Settlement Agreement, Janssen Settlement Agreement, Walgreens Settlement Agreement, and the Walmart Settlement Agreement be used to pay Costs. d) Collateral Source Payments and Third -Party Settlement. In the event a Plaintiff Subdivision is awarded compensation, in whole or in part, by any source of funds created as a result of litigation against an Opioid Defendant for its reasonable Costs, it will reduce its claim for Costs from the CA Subdivision Fund by that amount. If a Plaintiff Subdivision has already received a final award Ofd^O of Costs from the CA Subdivision Fund, it will repay the fund up to the prior awarc 3 0; Item AA1: Staff Report Pg. 39 Packet Pg. 719 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement of Costs via a payment to the Settlement Fund Administrator or Agreements re Settlement Fund Administrator that its allocation from the next Manufacture and Annual Payments should be reduced accordingly. If the Plaintifij Distribution of repaying any prior award of Costs, that repayment will occur as f Opioid after the Plaintiff Subdivision's receipt of Cost funds from the c Products no more than 90 days after its receipt from the collateral source. The Settlement Fund Administrator will add any repaid Costs to the CA Subdivision Fund. Any Plaintiff Subdivision that has submitted for reimbursement to any national fund and has not received a final determination by the First Claims Date may request that the settlement administrator withhold some or all of its payment from the CA Subdivision Fund in order to avoid repayment. ii. In the event a Plaintiff Subdivision reaches a monetary settlement or compromise against any Opioid Defendant outside of the National Opioid Settlement, the monetary portion of such settlement, net of fees paid to outside contingency fee counsel and of funds earmarked strictly for abatement, will be credited against its Costs and the subdivision will be ineligible to recover those credited Costs from the CA Subdivision Fund. Plaintiff Subdivisions negotiating monetary settlements or compromises against any Opioid Defendant outside of the National Opioid Settlement will negotiate for funds to repay any Costs it previously received from the CA Subdivision Fund or for Costs it otherwise might be eligible to claim from the CA Subdivision Fund. If such a settlement is paid after all final approved claims for Costs by all Plaintiff Subdivisions are satisfied in full, the settling subdivision will reimburse the CA Subdivision Fund in that amount by making payment to the Settlement Fund Administrator to add to the CA Subdivision Fund in a manner consistent with the repayments described in section 2.d.i above. 4 Item AA1: Staff Report Pg. 40 Packet Pg. 720 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F APPENDIX 3 CALIFORNIA -SUBDIVISION BACKSTOP Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products On August 6, 2021, Judge Polster of the US District Court for the Northern District o issued an Order (the Order), docket number 3814, in In Re National Prescription Opiate Litigation, MDL 2804, addressing contingent attorney fee contracts between political subdivisions eligible to participate in the Allergan Settlement and their counsel. In light of the Order, and at the request of [SUBDIVISION], the [SUBDIVISION], its counsel [COUNSEL], and the California Attorney General, on behalf of the State of California, are entering into this California -Subdivision Backstop Agreement (Backstop Agreement). [SUBDIVISION] and [COUNSEL] intend this Backstop Agreement to constitute a State Back - Stop Agreement as that term is used in the Order and in Exhibit R (Agreement on Attorneys' Fees, Costs, and Expenses) of the Allergan Settlement Agreement. Pursuant to this Backstop Agreement, [SUBDIVISION] may, subject to the limitations of the Allergan Settlement Agreement and CA Allergan Allocation Agreement, as well as any other limitations imposed by law, use funds that it receives from the Allergan Settlement CA Subdivision Fund to pay a contingent fee to [COUNSEL]. Any such payment from [SUBDIVISION] to [COUNSEL], together with any contingency fees that [COUNSEL] may receive from the national Attorney Fee Fund, will not exceed a total contingency fee of [PERCENTAGE NOT TO EXCEED 15%] of the total gross recovery of [SUBDIVISION] from the Allergan Settlement. [COUNSEL] certify that they first sought fees and costs from the Attorney Fee Fund created under the Allergan Settlement Agreement before seeking or accepting payment under this backstop agreement. [COUNSEL] further certify that they are not seeking and will not accept payment under this backstop agreement of any litigation fees or costs that have been reimbursed through prior settlements or judgments. The Attorney General is executing this agreement solely because the definition of "State Back - Stop Agreement" in Exhibit R of the Allergan Settlement Agreement requires such agreements to be between "a Settling State" and private counsel for a participating subdivision. Neither the California Attorney General nor the State of California have any obligations under this Backstop Agreement, and this Backstop Agreement does not require the payment of any state funds to [SUBDIVISION], [COUNSEL], or any other party. [DATE] [SUBDIVISION SIGNATURE BLOCK] [DATE] [COUNSEL SIGNATURE BLOCK] [DATE] [ATTORNEY GENERAL SIGNATURE BLOCK] Item AA1: Staff Report Pg. 41 Packet Pg. 721 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Exhibit K Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Prnducts Governmental Entity: Palo Alto city State: CA Authorized Signatory: Address 1: Address 2: City, State, Zip: Phone: Email: The governmental entity identified above ("Governmental Entity"), in order to obtain and in consideration for the benefits provided to the Governmental Entity pursuant to the Agreement dated November 22, 2022 ("Teva Settlement"), and acting through the undersigned authorized official, hereby elects to participate in the Teva Settlement, release all Released Claims against all Released Entities, and agrees as follows. 1. The Governmental Entity is aware of and has reviewed the Teva Settlement, understands that all terms in this Election and Release have the meanings defined therein, and agrees that by this Election, the Governmental Entity elects to participate in the Teva Settlement as provided therein. 2. Following the execution of this Settlement Participation Form, the Governmental Entity shall comply with Section III.B of the Teva Settlement regarding Cessation of Litigation Activities. The Governmental Entity shall, within 14 days of the Reference Date and prior to the filing of the Consent Judgment, file a request to dismiss with prejudice any Released Claims that it has filed. With respect to any Released Claims pending in In re National Prescription Opiate Litigation, MDL No. 2804, the Governmental Entity authorizes the Plaintiffs' Executive Committee to execute and file on behalf of the Governmental Entity a Stipulation of Dismissal With Prejudice substantially in the form found at https://nationalopioidsettlement.com. 4. The Governmental Entity agrees to the terms of the Teva Settlement pertaining to Subdivisions as defined therein. 5. By agreeing to the terms of the Teva Settlement and becoming a Releasor, the Governmental Entity is entitled to the benefits provided therein, including, if applicable, monetary payments beginning after the Effective Date. 6. The Governmental Entity agrees to use any monies it receives through the Teva Settlement solely for the purposes provided therein. 7. The Governmental Entity submits to the jurisdiction of the court in the Governmental Entity's state where the Consent Judgment is filed for purposes limited to that court's role as provided in, and for resolving disputes to the extent provided in, the Teva Settlement. Item AA1: Staff Report Pg. 42 Packet Pg. 722 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement 8. The Governmental Entity has the right to enforce the Teva Settlement as 11Agreements re Manufacture and 9. The Governmental Entity, as a Participating Subdivision or Participati Distribution of Opioid hereby becomes a Releasor for all purposes in the Teva Settlement, incluj Products to all provisions of Section V (Release), and along with all departments, , ui v i,iuiiS, boards, commissions, districts, instrumentalities of any kind and attorneys, and any person in their official capacity elected or appointed to serve any of the foregoing and any agency, person, or other entity claiming by or through any of the foregoing, and any other entity identified in the definition of Releasor, provides for a release to the fullest extent of its authority. As a Releasor, the Governmental Entity hereby absolutely, unconditionally, and irrevocably covenants not to bring, file, or claim, or to cause, assist or permit to be brought, filed, or claimed, or to otherwise seek to establish liability for any Released Claims against any Released Entity in any forum whatsoever. The releases provided for in the Teva Settlement are intended by Released Entitles and the Governmental Entity to be broad and shall be interpreted so as to give the Released Entities the broadest possible bar against any liability relating in any way to Released Claims and extend to the full extent of the power of the Governmental Entity to release claims. The Teva Settlement shall be a complete bar to any Released Claim. 10. The Governmental Entity hereby takes on all rights and obligations of a Participating Subdivision or Participating Special District as set forth in the Teva Settlement. 11. In connection with the releases provided for in the Teva Settlement, each Governmental Entity expressly waives, releases, and forever discharges any and all provisions, rights, and benefits conferred by any law of any state or territory of the United States or other jurisdiction, or principle of common law, which is similar, comparable, or equivalent to § 1542 of the California Civil Code, which reads: General Release; extent. A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release that, if known by him or her, would have materially affected his or her settlement with the debtor or released party. A Releasor may hereafter discover facts other than or different from those which it knows, believes, or assumes to be true with respect to the Released Claims, but each Governmental Entity hereby expressly waives and fully, finally, and forever settles, releases and discharges, upon the Effective Date, any and all Released Claims that may exist as of such date but which Releasors do not know or suspect to exist, whether through ignorance, oversight, error, negligence or through no fault whatsoever, and which, if known, would materially affect the Governmental Entities' decision to participate in the Teva Settlement. 12. Nothing herein is intended to modify in any way the terms of the Teva Settlement, to which Governmental Entity hereby agrees. To the extent this Election and Release is interpreted differently from the Teva Settlement in any respect, the Teva Settlement controls. lJ Item AA1: Staff Report Pg. 43 Packet Pg. 723 of 853 Item AA1 A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re I have all necessary power and authorization to execute this Election and Release o Governmental Entity. Manufacture and Distribution of Opioid Signature: Products Name: Title: Date: ci Item AA1: Staff Report Pg. 44 Packet Pg. 724 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Proposed California State -Subdivision Agreement Agreements re Regarding Distribution and Use of Manufacture and Settlement Funds — Teva Settlement Distribution of Opioid Products 1. Introduction Pursuant to the Teva Settlement Agreement, dated as of November 22, 2022, and any revision thereto (the "Teva Settlement Agreement"), including Section VIII and Exhibit O, the State of California proposes this agreement (the "CA Teva Allocation Agreement") to govern the allocation, distribution, and use of Settlement Fund payments made to California pursuant to Sections VI, VII, and VIII of the Teva Settlement Agreement. For the avoidance of doubt, this agreement does not apply to payments made pursuant to Sections IX, XIII, or XIV of the Teva Settlement Agreement. Pursuant to Exhibit O, Paragraph 4, of the Teva Settlement Agreement, acceptance of this CA Teva Allocation Agreement is a requirement to be an Initial Participating Subdivision.' Further, pursuant to Sections X.B and X.C of the Teva Settlement Agreement and Sections IX.B and IX.C of the Allergan Settlement Agreement, eligible Subdivisions must participate in both the Teva Settlement Agreement and Allergan Settlement Agreement, or neither. 2. Definitions a) CA Participating Subdivision means a Participating Subdivision that is also (a) a Plaintiff Subdivision and/or (b) a Subdivision with a population equal to or greater than 10,000. For the avoidance of doubt, eligible CA Participating Subdivisions are those California subdivisions listed in Exhibit C (excluding Litigating Special Districts) and/or Exhibit Ito the Teva Settlement Agreement. b) Allergan Settlement Agreement means the Allergan Settlement Agreement dated November 22, 2022, and any revision thereto. c) CVS Settlement Agreement means the CVS Settlement Agreement dated December 9, 2022, and any revision thereto as well as any modification thereto entered into by the State of California and CVS. d) Distributor Settlement Agreement means the Distributor Settlement Agreement dated July 21, 2021, and any revision thereto. e) Janssen Settlement Agreement means the Janssen Settlement Agreement dated July 21, 2021, and any revision thereto. f) Walgreens Settlement Agreement means the Walgreens Settlement Agreement dated December 9, 2022, and any revision thereto. 1 A parallel but separate agreement (the "CA Allergan Allocation Agreement") will govern the allocation, distribution, and use of settlement fund payments under the Allergan Settlement Agreement. Item AA1: Staff Report Pg. 45 Packet Pg. 725 of 853 A Item AA1 /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement g) Walmart Settlement Agreement means the Walmart Settlement A Agreements re November 14, 2022, and any revision thereto. Manufacture and h) CA Litigating Special District means a Litigating Special District Distribution of Opioid California. CA Litigating Special Districts include Downey Unifi Products Elk Grove Unified School District, Kern High School District, Montezuma Fire Protection District (located in Stockton, California), Santa Barbara San Luis Obispo Regional Health Authority, Inland Empire Health Plan, Health Plan of San Joaquin, San Leandro Unified School District, Pleasant Valley School District Board, and LA Care Health Plan. i) Plaintiff Subdivision means a Subdivision located in California, other than a CA Litigating Special District, that filed a lawsuit, on behalf of the Subdivision and/or through an official of the Subdivision on behalf of the People of the State of California, against one or more Opioid Defendants prior to October 1, 2020. j) Opioid Defendant means any defendant (including but not limited to Teva Pharmaceutical Industries Ltd., Allergan Finance, LLC, Allergan Limited, CVS Health Corporation, CVS Pharmacy, Inc., Walgreen Co., Walmart Inc., Johnson & Johnson, Janssen Pharmaceuticals, Inc., Purdue Pharma L.P., Cardinal Health, Inc., AmerisourceBergen Corporation, and McKesson Corporation) named in a lawsuit seeking damages, abatement, or other remedies related to or caused by the opioid public health crisis in any lawsuit brought by any state or local government on or before October 1, 2020. 3. General Terms This agreement is subject to the requirements of the Teva Settlement Agreement, as well as applicable law, and the Teva Settlement Agreement governs over any inconsistent provision of this CA Teva Allocation Agreement. Terms used in this CA Teva Allocation Agreement have the same meaning as in the Teva Settlement Agreement unless otherwise defined herein. Pursuant to Section VIII(E)(1) of the Teva Settlement Agreement, (a) all Settlement Fund payments will be used for Opioid Remediation, except as allowed by Section VIII(C) of the Teva Settlement Agreement; and (b) at least seventy percent (70%) of Settlement Fund payment amounts will be used solely for future Opioid Remediation. 4. State Allocation The Settlement Fund payments to California,' pursuant to the Teva Settlement Agreement, shall be allocated as follows: 15% to the State Fund; 70% to the Abatement Accounts Fund; and 15% to the Subdivision Fund. For the avoidance of doubt, all funds allocated to California from the 2 For purposes of clarity, use of the term "California" refers to the geographic territory of California and the state and its local governments therein. The term "State" or "State of California" refers to the State of California as a governmental unit. lJ 2 0� Item AA1: Staff Report Pg. 46 Packet Pg. 726 of 853 Item AA1 A /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Settlement Fund shall be combined pursuant to this CA Teva Allocation Agr Agreements re that total shall be allocated to the State of California (the "State of California Manufacture and to the California Abatement Accounts Fund ("CA Abatement Accounts Fund Distribution of Opioid California Subdivision Fund ("CA Subdivision Fund"). Products A. State of California Allocation Fifteen percent of the total Settlement Fund payments will be allocated to the State and used by the State for future Opioid Remediation. B. CA Abatement Accounts Fund i. Allocation of CA Abatement Accounts Funds a) Seventy percent of the total Settlement Fund payments will be allocated to the CA Abatement Accounts Fund. The funds in the CA Abatement Accounts Fund will be allocated based on the allocation model developed in connection with the proposed negotiating class in the National Prescription Opiate Litigation (MDL No. 2804), as adjusted to reflect only those cities and counties that are eligible, based on population or litigation status, to become a CA Participating Subdivision. The percentage from the CA Abatement Accounts Fund allocated to each CA Participating Subdivision is set forth in Appendix 1 in the column entitled abatement percentage (the "Local Allocation"). For the avoidance of doubt, CA Litigating Special Districts and California towns, cities, and counties with a population less than 10,000 are not eligible to receive an allocation of CA Abatement Accounts Funds. b) A CA Participating Subdivision that is a county, or a city and county, will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision, and will receive payments as provided in the Teva Settlement Agreement. c) A CA Participating Subdivision that is a city will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision. The Local Allocation share for a city that is a CA Participating Subdivision will be paid to the county in which the city is located, rather than to the city, so long as: (a) the county is a CA Participating Subdivision, and (b) the city has not advised the Settlement Fund Administrator that it requests direct payment at least 60 days prior to a Payment Date. A Local Allocation share allocated to a city but paid to a county is not required to be spent exclusively for abatement activities in that city, but will become part of the county's share of the CA Abatement Accounts Funds, which will be used in accordance with Section 4.B.ii (Use of CA Abatement Accounts Funds) and reported on in accordance with Section 4.B.iii (CA Abatement Accounts Fund Oversight). d) A city within a county that is a CA Participating Subdivision may opt in or out of direct payment at any time, and it may also elect direct payment of only a portion of its share, with the remainder going to the county, by providing notice to the Settlement Fund Administrator at least 60 days prior to a Payment Date. For purposes of this CA Teva ci Item AA1: Staff Report Pg. 47 Packet Pg. 727 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Allocation Agreement, the Cities of Los Angeles, Oakland, San Dieg Agreements re Eureka will be deemed to have elected direct payment if they becom Manufacture and Subdivisions. Distribution of Opioid Products e) The State will receive the Local Allocation share of any payment to the Settlement tun that is attributable to a county or city that is eligible to become a CA Participating Subdivision, but that has not, as of the date of that payment to the Settlement Fund, become a Participating Subdivision. f) Funds received by a CA Participating Subdivision, and not expended or encumbered within five years of receipt and in accordance with the Teva Settlement Agreement and this CA Teva Allocation Agreement shall be transferred to the State; provided however, that CA Participating Subdivisions have seven years to expend or encumber CA Abatement Accounts Funds designated to support capital outlay projects before they must be transferred to the State. This provision shall not apply to the Cost Reimbursement Funds, which shall be controlled by Appendix 2. ii. Use of CA Abatement Accounts Funds a) The CA Abatement Accounts Funds will be used for future Opioid Remediation in one or more of the areas described in the List of Opioid Remediation Uses, which is Exhibit E to the Teva Settlement Agreement. b) In addition to this requirement, no less than 50% of the funds received by a CA Participating Subdivision from the Abatement Accounts Fund in each calendar year will be used for one or more of the following High Impact Abatement Activities: (1) the provision of matching funds or operating costs for substance use disorder facilities within the Behavioral Health Continuum Infrastructure Program; (2) creating new or expanded Substance Use Disorder ("SUD") treatment infrastructure; (3) addressing the needs of communities of color and vulnerable populations (including sheltered and unsheltered homeless populations) that are disproportionately impacted by SUD; (4) diversion of people with SUD from the justice system into treatment, including by providing training and resources to first and early responders (sworn and non -sworn) and implementing best practices for outreach, diversion and deflection, employability, restorative justice, and harm reduction; and/or (5) interventions to prevent drug addiction in vulnerable youth. c) The California Department of Health Care Services ("DHCS") may add to this list (but not delete from it) by designating additional High Impact Abatement Activities. DHCS will make reasonable efforts to consult with stakeholders, including the CA Participating Subdivisions, before adding additional High Impact Abatement Activities to this list. El a 4 O Item AA1: Staff Report Pg. 48 Packet Pg. 728 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement d) For the avoidance of doubt, and subject to the requirements of the Te Agreements re Agreement and applicable law, CA Participating Subdivisions may f Manufacture and ventures, or otherwise work in collaboration with, federal, state, local Distribution of sector entities in pursuing Opioid Remediation activities funded from f Opioid Accounts Fund. Further, provided that all CA Abatement Accounts F Products Opioid Remediation consistent with the Teva Settlement Agreement and this CA Teva Allocation Agreement, a county and any cities or towns within the county may agree to reallocate their respective shares of the CA Abatement Accounts Funds among themselves, provided that any direct distribution may only be to a CA Participating Subdivision and any CA Participating Subdivision must agree to their share being reallocated. iii. CA Abatement Accounts Fund Oversight a) Pursuant to Section 5 below, CA Participating Subdivisions receiving settlement funds must prepare and file reports annually regarding the use of those funds. DHCS may regularly review the reports prepared by CA Participating Subdivisions about the use of CA Abatement Accounts Funds for compliance with the Teva Settlement Agreement and this CA Teva Allocation Agreement. b) If DHCS determines that a CA Participating Subdivision's use of CA Abatement Accounts Funds is inconsistent with the Teva Settlement Agreement or this CA Teva Allocation Agreement, whether through review of reports or information from any other sources, DHCS shall send a request to meet and confer with the CA Participating Subdivision. The parties shall meet and confer in an effort to resolve the concern. c) If the parties are unable to reach a resolution, DHCS may conduct an audit of the Subdivision's use of the CA Abatement Accounts Funds within one year of the request to meet and confer, unless the parties mutually agree in writing to extend the meet and confer time frame. d) If the concern still cannot be resolved, the State may bring a motion or action in the court where the State has filed its Consent Judgment to resolve the concern or otherwise enforce the requirements of the Teva Settlement Agreement or this CA Teva Allocation Agreement. However, in no case shall any audit be conducted, or motion be brought, as to a specific expenditure of funds, more than five years after the date on which the expenditure of the funds was reported to DHCS, in accordance with this agreement. e) Notwithstanding the foregoing, this Agreement does not limit the statutory or constitutional authority of any state or local agency or official to conduct audits, 6 investigations, or other oversight activities, or to pursue administrative, civil, or criminal enforcement actions. Item AA1: Staff Report Pg. 49 Packet Pg. 729 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement C. CA Subdivision Fund Agreements re i. Manufacture and Fifteen percent of the total Settlement Fund payments will be allocat Subdivision Fund. All funds in the CA Subdivision Fund will be allo Distribution of Opioid Plaintiff Subdivisions that are Initial Participating Subdivisions. The Products subject to any limits imposed by the Teva Settlement Agreement and this CA Teva Allocation Agreement, to fund future Opioid Remediation and reimburse past opioid- related expenses, which may include fees and expenses related to litigation, and to pay the reasonable fees and expenses of the Special Master as set forth in Appendix 2. The CA Subdivision Funds will be allocated as follows: a) First, funds in the CA Subdivision Fund shall be used to pay the Special Master's reasonable fees and expenses in accordance with the procedures and limitations set forth in Appendix 2 to this document; b) Second, funds will be allocated to Plaintiff Subdivisions that are Initial Participating Subdivisions that have been awarded Costs, as defined by and in accordance with the procedures and limitations set forth in Appendix 2 to this document. c) Funds remaining in the CA Subdivision Fund, which shall consist of no less than 50% of the total CA Subdivision Fund received in any year pursuant to Appendix 2, Section 2.c.v, will be distributed to Plaintiff Subdivisions that are Initial Participating Subdivisions, in relative proportion to the Local Allocation. These funds shall be used to fund future opioid-related projects and to reimburse past opioid-related expenses, which may include fees and expenses related to litigation against any Opioid Defendant. D. Provision for State Back -Stop Agreement On August 6, 2021, Judge Dan Polster of the U.S. District Court, Northern District of Ohio, Eastern Division, issued an order (ECF Docket Number 3814) ("MDL Fees Order") in the National Prescription Opiate Litigation (MDL No. 2804) "cap[ping] all applicable contingent fee agreements at 15%." Private counsel representing Plaintiff Subdivisions should seek its contingency fees and costs from the Attorney Fee Fund or Cost Funds under the Teva Settlement Agreement and Allergan Settlement Agreement, and, if applicable, the CVS Settlement Agreement, Distributor Settlement Agreement, Janssen Settlement Agreement, Walgreens Settlement Agreement, and Walmart Settlement Agreement. A Plaintiff Subdivision may separately agree to use its share of the CA Subdivision Fund to pay for fees or costs incurred by its contingency -fee counsel ("State Back -Stop Agreement"), pursuant to Exhibit R, section I(X), of the Teva Settlement Agreement and the MDL Fees Order, IJ Item AA1: Staff Report Pg. 50 Packet Pg. 730 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement so long as such contingency fees do not exceed a total contingency fee of 15 Agreements re recovery of the Plaintiff Subdivision pursuant to the Teva Settlement, inclusi Manufacture and fees from the national Attorney Fee Fund and this State Back -Stop Agreeme Distribution of Opioid fees or litigation costs and expenses from a State Back -Stop Agreement, priv Products representing Plaintiff Subdivisions must first seek contingency fees and costs rom the Attorney Fee Fund or Cost Funds created under the Teva Settlement Agreement. Further, private counsel may only seek reimbursement for litigation fees and costs that have not previously been reimbursed through prior settlements or judgments. To effectuate a State Back -Stop Agreement pursuant to this section, an agreement in the form of Appendix 3 may be entered into by a Plaintiff Subdivision, private counsel, and the California Office of the Attorney General. The California Office of the Attorney General shall, upon the request of a Plaintiff Subdivision, execute any agreement executed by a Plaintiff Subdivision and its private counsel if it is in the form of Appendix 3. The California Office of the Attorney General will also consider requests from Plaintiff Subdivisions to execute and enter into agreements presented in other forms. For the avoidance of doubt, this agreement does not require a Plaintiff Subdivision to request or enter into a State Back -Stop Agreement, and no State Back -Stop Agreement shall impose any duty or obligation on the State of California or any of its agencies or officers, including without limitation the Attorney General. 5. State and Subdivision Reporting a) DHCS will prepare an annual written report regarding the State's use of funds from the settlement until those funds are fully expended and for one year thereafter. These reports will be made publicly available on the DHCS web site. b) Each CA Participating Subdivision that receives payments of funds from the settlement will prepare written reports at least annually regarding the use of those funds, until those funds are fully expended and for one year thereafter. These reports will also include a certification that all funds that the CA Participating Subdivision has received through the settlement have been used in compliance with the Teva Settlement Agreement and this CA Teva Allocation Agreement. The report will be in a form reasonably determined by DHCS. Prior to specifying the form of the report DHCS will confer with representatives of the Plaintiff Subdivisions. c) The State and all CA Participating Subdivisions receiving CA Abatement Accounts Funds will track all deposits and expenditures. Each such subdivision is responsible solely for the CA Abatement Accounts Funds it receives. A county is not responsible for oversight, reporting, or monitoring of CA Abatement Accounts Funds received by a city within that county that receives direct payment. Unless otherwise exempt, Subdivisions' expenditures and uses of CA Abatement Accounts Funds and other Settlement Funds will be subject to the normal budgetary and expenditure process of the Subdivision. Item AA1: Staff Report Pg. 51 Packet Pg. 731 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F d) Each Plaintiff Subdivision receiving CA Subdivision Funds will Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re expenditures, as required by the Teva Settlement Agreement and this Manufacture and Agreement. Among other things, Plaintiff Subdivisions using monie Distribution of Opioid Subdivision Fund for purposes that do not qualify as Opioid Remedi Products and include in their annual report, the amount and how such funds were use!, lnclucimg if used to pay attorneys' fees, investigation costs, or litigation costs. Pursuant to Section VIII(C) of the Teva Settlement Agreement, such information must also be reported to the Settlement Fund Administrator and Teva. e) In each year in which DHCS prepares an annual report DHCS will also host a meeting to discuss the annual report and the Opioid Remediation activities being carried out by the State and Participating Subdivisions. 6. Miscellaneous a) The State or any CA Participating Subdivision may bring a motion or action in the court where the State has filed its Consent Judgment to enforce the requirements of this CA Teva Allocation Agreement. Before filing such a motion or action the State will meet and confer with any CA Participating Subdivision that is the subject of the anticipated motion or action, and vice versa. b) Except as provided in the Teva Settlement Agreement, this CA Teva Allocation Agreement is not enforceable by any party other than the State and the CA Participating Subdivisions. It does not confer any rights or remedies upon, and shall not be enforceable by, any third party. c) Except as provided in the CA Teva Allocation Agreement, if any provision of this agreement or the application thereof to any person, entity, or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this agreement, or the application of such provision to persons, entities, or circumstances other than those as to which it is invalid or unenforceable, will not be affected thereby, and each other provision of this agreement will be valid and enforceable to the fullest extent permitted by law. a) Except as provided in the Teva Settlement Agreement, this agreement shall be governed by and interpreted in accordance with the laws of California. lj jti Item AA1: Staff Report Pg. 52 Packet Pg. 732 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F The undersigned, Palo Alto city, ACKNOWLEDGES acceptance of this Propl Subdivision Agreement Regarding Distribution and Use of Settlement Funds requirement to be an Initial Participating Subdivision in the Teva Settlement Proposed California State -Subdivision Agreement Regarding Distribution an Funds — Teva Settlement. EXECUTED on Signature: Name: Title: Date: Item AA1 Attachment A Resolution A Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Item AA1: Staff Report Pg. 53 Packet Pg. 733 of 853 Item AA1 A Attachment A Resolution Authorizing City Manager �fA ` • to Execute Participation Agreements obo CPA to aj Enter into Settlement CID '� pUp bA E Agreements re OManufacture and U N Distribution of Opioid 0 'd Products -O cc Q a a o > c rID oAa o a iz 'd N o pUp a3 O m y O N N O bUA O U N ' a) ;- U O P. O p - O N+ N N (• cd r ct cd c� +' bA U U U 0 U U O N N Q O s" bA zl1 bUA 4-i a N N r U, U.0 a) o v bA cad H :u O bO s� 7C a, cd Fil i•-i � N � y � y � U U O U U W o s~ Q >~ a) a) 0 m 0 a) C W c m 7 U O 0 Item AA1: Staff Report Pg. 54 Packet Pg. 734 of 853 z a) O 0 a) c w C C) C) O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ O \ o \ 0 N N 00 �O O � C. 00 O �O �--� 1 N N� � 00 01 � 1 rl to 01 Distribution of Opioic p o a1 - N C — 00 N N to ti N 1 N I C"0 O O to N 00 t 00 00 N —0 G1 011 to "O N N 00 to N 00 Products u y N O N 01 00 to 00 N to — - ON IV -O y _ v M N 0 O 0 1M -ti M- 0 00 0 00 00 0 01 0 'l 0 - N 0 to O to - '--i O to to O N M O to M O IV M N 00 N \p IV N N � \O O to M N© 00 ' 00 - O M 0 N 0 - O' 0 to 0 00 O 0 00 !-- 0 N O 0 G � u cc N 01 N N Sri O a 0 0 0 0 0 0 0 0 0 0 0 0 0 O O 0 0 0 0 0 0 0 0 0 0 0 0 0 + 0 N C M N M M 00 N t N d1 c) \O V7 `O 01 Q1 N N \O N 'r) O M C O M 1,O — M N O — V7 N 00 — AO M N N N If) O M N O V) -- N +�+ N N O 0 0 0 0 0 0 d a CC3 '''''G CC3 C� 50 Cc - C0 C0 - C0 ''''''''C c0 c0 c0 C0 (0 CO cO }.y ° C/] y CO V] ° V] ° V) ° V] ° V] ° V] ° V] ° V] ° (1) 0) 5) 5.) 5)5.) 5) ,C -L) 5) 0 5) 5) 5) roo o rat U U U U U U U U i•-I i•-I i-+ i•I i•I i•i i•-I i•I i•-I i--I i•i i-- c U /My�� /y�� /My�� U U U U U U U U a a V o '�• oUUUUUUUUUUUUUU o oUU O O oUUUUUUU A Item AA1: Staff Report Pg. 55 Packet Pg. 735 of 853 z a) 0 O N C W C C) (I) O O O Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 C C 0 O 0 M 0 N 0 0 r 0 0 0 0 0 0 0 0 0O 0 0 0 0 0 - 0 0 0 0 N 0 t` 0 r 0 Distribution of 0pioi� 0 ce M O O1 O- O 'l V) O `O 0 1 1 00 If) M O M' O \O1 V) — - O M 0O O Products y \p 00 - O1 00 O C - 00 C N O N V) M CO 0O O V) G1 - 3 Q y O O ) O N O M O - M O O N N - N 00 00 O1 a \O M a O N N O O - O M O \D O a O N !-- O N C � w O o 0 0 0 0 .n. 'cC Cr,v 0.�� O1 Cr, O O N O •-- r,:. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O I- O N M M M C a, y O — O O rn N N — — 00 al — O1 O O O O O — — — O M iv 0 0 0 0 0 0 0 0 ^� O O O- N O O 00 O O Cr, O O O O O O O O ^� O Q 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -� 0 0 0 0 0 0 0 0 0 0 0 0 —� M M cd ct M cd cd M M cd M Z 0 n 0 -- v 0 Cl)-- 0 v 0 Cl)vCl) 0 -- 0 0 ) n 0 Cl)Cl)Cl)C)) 0 0 0 N O 'd O 'd O 'd O O O O O O O O O O O O U U U U U U U U U U U U O s~ S~ r~ > 7 S~ a O M i-, M s-. M S -i M s-. M 7-. M s-. M 7-. M s. S-. m s. 7-. z i-. Z O O O m dJ m N m N m N m N m� N N m� N N m� N N m N � w w w w w w w w w w w w � O O O O O O O O O O O o Q W W W U U U U U U U U U U U U 0) d C � C O Qr � C U U U U U U U U U U U U O O D U O D U U U U U U U U U U O O A Ln O N Item AA1: Staff Report Pg. 56 Packet Pg. 736 of 853 a) O 0 a, C w c C) C) 0 O a Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \ C O � (` � � Q\ N � M In If) O �O � 00 � O .-� Q1 � N 00 O Distribution of O ioi, p O ce \D 00 N M 00 O O 00 Q1 N N In N - T ' '0 N "T 01 '0 N 00 - M M a1 — ' 00 In 00 M M M O M O O Products N t— N N 00 CV -O N O C1 In O M M C1 M \O N C - y 3 y N N N \p 00 O In ti O M IV O In N In ti ' O N N O N N O N - O IN O \p O r" In O O - N N M In N N N N M N C a� O o 0 0 0 0 0 0 o C •,� O "C M oc N Ot N 01 Cs C)rf, M O O O O M a Cpip o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N N 00 -- 01 00 C M N "O N 01 O M 1f) 01 c c M N M r� \a In �--� ^� C N In ^� M In —� —� I_M n O -� O -� O M O — O O C O. N— a,, N — N c c Q O O O O O O O O O N O O O O O O O O O O O O O O O O O O O a �ti �ti �ti O cc Ct • „.., Cj • S• -I Cj • $•-I C5 • i•-I aj • $•-I O ,;----1I ,--I }----I ,;----1I ,�----1I j -''-I,, N V] C) V] V] V] ,--I O O O �+ O i•-I O U O1 ,�-O-yI �-O-yI i•-I ,�-O .�Q-.-y)I ,��-.iyl ,��-.iyl ,��-.iyl ,��-.iyl 1,U 1,U 1,U 1,U 1,U 1,U 1,U 1,q 1,U • �" �" �" �" M M Cpl V% C i' CC o U on v s ti U U a� U c� U ci v UW�dv�v� CC � C O � •`n•' V CL ^O U U U %r' O D U U U Ste" O �". O D U U U U U U U U >:r" O D U U U fir" O D U S~ O U S~ O U U U U U U U A Item AA1: Staff Report Pg. 57 Packet Pg. 737 of 853 z N O O U) C W C C) (I) 0 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \ C O O C� O 00 O O O N O O O M O It O - O N O N O aD O 'tN e O ' O �--i O N t N O O O O M O O - O 0 Distribution of Opioi O O N O O M .-ti N O .--i V') 00 N It 00 N 00 O 0\ M .. O 00 00 00 If t— 01 00 00 N r" N O 01 00 01 C1 \O N 00 Products O M IN V) O 00 00 M 00 C1 01 N N — 01 01 C t— 00 3 Q y p+ 'I 0 0 . M 0 N 0 O O 0 - N 0 — N 0 ©- O 0 O 0 - - 0 M to 0 N 00 0 IVt( O— 0 0 M O 0 . 00 O 0 . O O 0 . \Z M 0 . N N 0 . O O" 0 . 0 . O O 0 . N V 0 . N— O 0 . M 0 . \O N 0 . N N 0 . CM M— . 0 4 O 0 O 0 O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O C a� O o "C 0O cC v A. O rn 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 IT) N M N -a1 — — N M — y CD M O N N O O — O Ot N O v) OIT) — O V) Q O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 4) 4) N 4) N 4) N 4) N 4) N 4) N N Q) 4) O O O O Q) O O O O O O O O O , O O 6) 6) 6) 6) 6) 6) 6) O 6) O 6) O 6) N N N N N N N N N N N Jij 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Qn a Oy� >paUVUU 0C) �QQ W��7C7L7'� � ee x 0r � C O II U A Ln O u Item AA1: Staff Report Pg. 58 Packet Pg. 738 of 853 z a) O O a) O W 0 m (I) O U O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re o O O O O O O O O O \ O \ O \ O \ o \ e \ \ \ \ \ \ \ \ \ e Manufacture and o C r t- kn kn N 01 01 O O rl .--I kn 0 t` 00 t` N M Distribution of Opioii o M �O - to a\ to \O 01 - Ili 0\ - 00 ' N 00 - 1. Products if O 01 kn N 01 - 01 N rl ' O1 N rl - M IV - 00 - qv M 0\ - O I!) ' O 00 N M 00 - - O 3 Q y - . O O O M O- - O N O N N N N M O O N r-i ON O i O O O O O O O O O O O O O N O O O O O O O O O O O O O O O O O C a� w O o C y N a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 y y 00 ^� M N a1 n M kn O W N- N N a, V) N N — M' O N N N N M u 0 0 0 0 0 0 0 0 0 0 0 N0 0 0 0 0 0 0 0 0 0 0 — Q a O O O O O O O O O O O O N O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 rID w rID rID rID ID rID rID r r r M rID r rA r rA rIOrA Cn Qn rn C,) wr/D 5) t) 5) 4) N N N N N N N G) N 4) N 4) N 5) N N 5) 5) 5) N 4) N N 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 rn 0 r 0 rID 0 r 0 rID 0 rID 0 C) 0 CA 0 rn 0 Cn 0 rn 0 C/D 0 C/) 0 C/D 0 a��aaaaaaaaaa�aaaaaaaaaaaaaa-a rID C .y V N U v� n�i�a�aaa� C� CC cd cd o� oZa�aa•�a O O O�r� U a a O lillill U U U U U U U U U U U U U U U U U U U U U U U U U U U U U A ❑ o. Item AA1: Staff Report Pg. 59 Packet Pg. 739 of 853 z a) O 0 a) C w c C) C) O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 C C \O N - N r-i M M N "T 00 O .--i N - .-ti 1n N r4 Distribution of Opioiu o ce - O M 00 N N M M - `O 00 00 O N M M Q1 N 00 O M N .-- 00 C. M M N M C1 �O O Products N ' N M 00 N 00 00 -T C\ \O V) C1 C1 N ' 00 O O N 00 r-i 00 C1 a> 3 Q y N 0 O r- r- N O N r- In N C1 N . O 00 O M O CO rti . 01 O . M O . .-- C\ . O . O . O — . \O N . M \O . Q1 O . - M . \O C . N r -I . \O r -I . N N . N O . N N N 00 f — M O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O C a� w O o 0 0 0 N O M Oen O \O Vl O O O rfl:. O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O - M M cc 01 N OO "0 O rn O N 1 N"C M N C N C1 ' O 0o C1 01 a1 C1 O N M rn O O N O O M M O N N O OO OO M M Q a O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 5)5.) 2 a) N a) N a) Q) N a) N Q) N Q) N Q.) O Cd Cd N �. 5. 1-. �, S:, fJ c_) U . Cl) C/I C/I Cn cn CI) CI) Cd) Cd) Cl) O O O O O O O O O O O O O O O O 00 •�'. V .c V� O L7 O V U N O c vn V (�wC7 Cd sx O x o Cw Cdw a o o Cd �U�'�� fiO ...LI4 i U U U U U U U U U U U U U U U U U O D U O D U U U O O U U U U A Ln O Item AA1: Staff Report Pg. 60 Packet Pg. 740 of 853 Item AA1 /�+� A Attachment A Resolution �f Authorizing City Manager 2 • to Execute Participation Agreements obo CPA to ❑• ' •❑ Enter into Settlement Agreements re Manufacture and - Distribution of Opioid o ce �D N `Dfl O 00 In V) C1 N t— N N "O 00 N O N' O s + N o0 00 - N N O In M O V) 00 In N 00 M 0C r 00 00 00 I!) 00 Products bA C ' If) V) V) O 00 N N O N ' - O 'l• M M 01 AO O N M In M M N N 01 N \p O - 00 N O d y N O If) \O N O O M O N O 01 - \O .-ti O M N N N N 3 N O p+ 0 0 0 0 0 0 O� O O O O O O O O N O O 0 0 In O rn O O O O . . . . . . . . . . . . . . . 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C a> w O o 0 0 0 0 0 0 0 0 += + O 01 _ N 01 01 00 N r t - "C Cr) O - a 0 O O O to o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 e E •--i 1p O •--� W) M coc AO 'e•--� C1 't Cr) r- 00 r- 00 .--� M 't r- It M .-� a� y Iii N O N O " N 0 0 0 0 ON O 00 - N- N O "O - 00 00 N Cr) O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0- 0 0 0 0 0 0 0 U C nQIQII)IQI0I0 'C CO CO CO CO CO CO O � 4 O is O O fi 'C 9 O a) O O U O c� ii'- - Item AA1: Staff Report Pg. 61 Packet Pg. 741 of 853 z a) 0 0 a, C w c C) C) 0 O O Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 C C 0 O 0 0 N 0 O= 0 0 M 0 t— 0 0 0 O1 0 C1 0 O* 0 O 0 O 0 0 O 0 N 0 "o 0 M 0 O 0 0 - 0 1n 0 - 0 Distribution of Opioi, o ce a ' 0O O1 N 00 ' N ' I M ' O u ' N O O 'l N e' 1 .4 `o t1 M .4 N r .-� O1 0O O .--i V) C. 00 C1 00 O1 M Products u I N 00 N M I 1 \o ti- V) C1 N O .-ti 0O \o kn M t .-ti O a� 3 Q y tg N qv . kn t` . 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O .C . 00 Co \o tre N O M 0O N `o . . . 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C a� -0 o 0 0 0 0 0 0 0 0 0 C � 00 N O 00 O N 00 y ce "C a O l— 'r O C— O M O •--� O —� N N N O O O O O O O O rf,:. 0 'r 0 N 0 M 0 [ 0 O1 0 [ 0 t- 0 0 0 O 0 N 0 N 0 00 0 I- 0 C 1 0 O 0 0 0 0 00 0 00 0 N 0 O 0 r 0 M 0 � 0 � 0 Lf) 0 l— 0 0 y V) M• M — O O O O N rn N O O O O N M N O 't •--+ M N O N N 0 0 0 0 0 0 0 0 0 - CD O CD O L O O O - 0 0 0 0 0 iv . 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -� O CD O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 . a CO a � C O U U U U U U U U U U U U U U O D U U O D U o U U U i C U A Ln a 0C Item AA1: Staff Report Pg. 62 Packet Pg. 742 of 853 z a) O 0 a, C w c C) C) 0 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re \ \ \ \ \ \ \ \ \ \ \ \ \ \ Manufacture and C C C� 01 00 It - M M N N — 01 N N to N ' Distribution of Opioi, o ce a' In A N N 01 N 00 M -0 ti N N ti `O V) O 00 O M N CV N 01 N C\ C1 v 0, M N O"T M' N v"0 If) -V AO 00 N N Products y \c 00 00 M- - M M IN O N— N 00 N O O N' N 01 \O a�— u- a\O N N N O O O N O N O N O O N O O N—"0 N— M C1 M - 00 N N O M O N 00 O— 00 O C a� w O o 0 0 0 N fI O `O arn 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 �O � � E —C` � N O [ � ' C O — "C — M N N 00 "C M "C C 1 N 00 O N 00 N y 01 O N' M 0 N 0 0 OC 0 0 N 0 N 0 O 0 0 0 O 0 N 0 C 0 M 0 M — O — O 00 O N O O O kn O N — O N O O O a, N N N N N N 0 N 05.) N N 0 N N N N N 0 N 0 N N N C.) '." 1_ F- 1 S- 1 1-i 5-i 1) 3-i 1-i 1-i Sr S-, 3 -i 3 -i 5- Sr N N N N N N N N N N U N N N v N Q N U Q N U U U U N N N O C.i O F a y] aj O d S~ O n U U O C. p�ZME UU tiW i1,p� tx � �� Q ea Or � � C O CL a U A Ln O Item AA1: Staff Report Pg. 63 Packet Pg. 743 of 853 z 0 0 O 0 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re 0 0 0 0 0 0 0 0 0 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 Manufacture and 0 C C N O C1 O t- kn O O 140 M 00 M M r- N r 4 00 00 - O Distribution of Opioi o cd rH M 0� 00 N N \Z M ut r -I M - M O 00 M ' IV ' Vi kn O N Vi O 00 - O - M O\ M kn - Products 'D .-- LID N I LID .--i .-- a .-- N -• �+ 3 Q y p„ �O \C O O 00 - O - N N NLID 00 O N r- LID O N N 01 LID O O1 N NN O O N M N 0 rti N \O N N r - O O O O O O O O M O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C a� w O o 0 0 C •.�. C C u 00 O M 00 ce 00— Q rIDA. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O 00 N 00 — N a1 00 V7 •--� •--� NC O - Q 01 Q N M 00 N N M 0 N N O N O N O 0 N 0 0 0 O 0 cM 0 O 0 M O O M N 00 W) N N O'ID M- Q a O O O O O O O O M O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CD 0 0 0 O O O O O O O O O O O O O O O O O O O O O O — ' r �' �' N N N N N N >:". �" cC cC cC cC c�C+ c�C••� c�C•+ c�C•+ c�C•+ c�C••� cC c�C••� cC c�C+ c� c�C+ cC ca cC cC cC cC 7 cd 5) cd 05) CC U C U cC U cC U N GA ) 4) as 4) 1=G 4) as 4) 4) as U 1=G U as U GA U as N GG N as N as N as N as G) as G) as a) as U as N as U xi C/] C/1 Cn Cn U/ U1 C/D V1 I- 0 O O 'd v N �, U cC O O 'C �� N }-� U E,10V ;� �' -� V] +,�..'yy (~ '� Y-� y C� c C� S-i • Cd t-0 C Cn p CJ O O O p -O cC e-1 O N E O U O N N O y U G U U a to O (~ C O E000-000 O U O III(.) D U U U U U U U U U U U U U U U U U U U A Item AA1: Staff Report Pg. 64 Packet Pg. 744 of 853 z N 0_ O N C W C C) (I) 0 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \ -1 0 0 0 0 0 0 0 0 - 0 M 0 M 0 - 0 00 0 00 0 O 0 01 0 N 0 — 0 -1 0 0 0 0 0 � 0 0 Distribution of Opiou o ce N - N 00 - - 01 O 00 I( 00 N O N 00 N 01 V) .--i C-, O 00 N q O r" 01 00 O V) — ti 01 M C1 M 00 ' In ' Products a� CT O M O N 00 .D M - — M 00 00 V) N O 01 M . O . V) . . - . - - . 00 - . V) `C . V) . . M . M . \O N . M . N . . AO N O . M . IT . O . N \O . ' . C a� w a, o 0 0 0 0 0 0 0 0 C i C C cc �en _ N N rn O M M C1 N O en 0c'1 O O N M N O O r,:. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - M "O cc 01 M -- N O M N' 01 M N N "O O OO M M M 01 y O O N 00 "0 — rn N 00 • N 0o M — r N 00 O v') kn — — 00 — O O i O -� ^� O ^� O ^� O O O O N O 01 O O O O O `O O O O O M O o0 Q a O� 0 0 0 0 0 0 0 0 0 0 0 0 --� O O O O M •-� 0 0 0 0 0 0 0 0 0 000 O a a a a a a a a a a a a a a a a a O C • C cO ) Q U Q U Q U Q U L U Q U L U Q U Q U Q U Q U Q U Q U Q U Q U Q U Q U Q U O O O O C O O 0 O p m p m p m CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO � EJD cti EID Sf) Cl) Cl) Cl) Cl) Cl) ci) Cl) Cl) Cl) ci) Cl) Cl) Cl) ci) o � •≥ U O O U v .� O U V O _U ^. O v y O L� o �[ a UU w az0 C4O }-¢ GA C �UrODUUUUUUUUUUUUUUU �rO�UUUUUU 0UU O U U aU A Item AA1: Staff Report Pg. 65 Packet Pg. 745 of 853 a) O O a, C w c C) C) 0 O a Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \ C C 0 \O 0 - 0 N 0 - 0 01 0 O 1 [� 0 O 0 N 0 - 0 00 0 O� 0 O� 0 `O 0 � 0 .--i 0 — 0 � 0 .-� 0 M 0 00 0 00 0 01 0 Q� 0 Distribution of Opioi� o ce In oo oo N C, 00 Cr kn \O 00 M kn 00 00 00 O - M N O O M N .•-i . — 00 00 00 \O G1 M C1 \O G1 N M Products N O N 01 N M M- O C O M N o0 M 00 00 00 01 ) 3 d y M MCC -- . CC . - . CC - - . CC M-- O CC M O - - N - . O - . MCC - . . N — . O - . N . M . \O N . O O . N O . 00 M . O O . N . 00 01 — — \D O O N . C a) w O o 0 0 00 M O\ rf,:. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 M [- O [- Co-�--� C 01 I- M O Co- M Lr M C 1p — M N M N — � N N 00 t- Co GO � y N N N N N O ' N — ' M O O N r O - O N v 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 — O O O O O N O 0 0 O O O O 4 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 cd cd cd cd cd cC Co O Co - - - - a) a) 6) a) 6) a) 6) Q) 6) a) 6) a) N N C) N Co Co c0 rIDrrID rID rID r/D r/Drr/D rID r/D rID c/D r/D rID r/D Co Co Co CovDvDvDvD C) o � o ._ o O C ,on ay o v, W x w� I�1 IrIDt �C O II U A O N Item AA1: Staff Report Pg. 66 Packet Pg. 746 of 853 z a) 0 0 a, C w C Cn C) 0 0 a Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 0 00 0 O 0 O 0 0 0 0 0 0 0 Q\ 0 0 0 0O 0 0 \O 0 0 \O 0 0 M 0 M 0 0 M 0 O� 0 NDistribution 0 of Opioi C O M M N N N H O 0O O `O Q1 N `O O C1 M O1 M N t1 M - C1 C1 00 00 C1 C1 C\ M C1 N O' C1 00 - M Products M M 0C ' M C\ ' If) 00 O O 0O — M O M O N 3 Q O - O - C1 N- N M M NIf M O I O - - C — N - N 00 M— a 1 M M M O N M N N- M C1 0O N - N N CO C � w O o 0 0 0 0 •cC "'C v O N M O1 O M O1 M N r15:. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 M M N M M O M N M 00 O N 00 N — y — .� M •� M O1 " O N 00 N — vO O1 N 00 O N \O M — O N — — M 00 w O O O O O O N O O O N O— O O O O N O N N O O— O— N O O . 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -� 0 0 0 0 0 0 0 0 0 0 0 -� O O C U U U U U U U U U U U U U U U m m i~ O O 2 Y C 0 O 0 O> O "" V v O N V i i $- _O CS r cd ---o- O N O O O-..._•— Q ct U cC O cd a o�� On �U� c/D;� � C O IIU A Item AA1: Staff Report Pg. 67 Packet Pg. 747 of 853 z N O O N C W C C) (I) 0 O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and \ \ \ \ \ \ \ \ \ \ \ \ \ \1 C 0 O\ 0 O 0 00 0 00 0 M 0 O 0 0 r 0 - 0 O 0 0 0 0 0 0 .-ti 0 0 0 0 0 0 " 0 0 Md 0 Distribution of Opioi, O ce In N N O M It N N N \O N N \O C\ M I Q\ tfi Q1 110 o1 k N N N N Q1 N Q\ N T N 00 •--I ti 00 N N ii O Products a� O 01 M 01 N O 00 `O `Ott .-- C N t( O N N N - N L 3 Q y p+ M O . 0 - 0 N - 0 00 - MN 0 00 •--i . O O . - O . N O . 00 O O . M If) O . N .-- M . O O . N N r O . V) 00 O . r 00 O . M O O . N O O . V) O O . N O . O M O . O . O I 00 N N — O O O 0 O 0 C a� w O o 0 0 0 0 0 ce v MN O d1 O O O O O N r,:. CC o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 E — - N O N — N "O 00 L O ri C 't M N O\ ' M N — N \0 "O N N N 00 y 00 N N - O — — — C O N — 00 O O O O N M C 00 C O O O Q 0 O O O O O O O O O O O O O O O O O O O O O N O 0 0 m C B Z Z 0000EEEEEEEE cct cct C O CZ s. O O O U O W O O - V] • Q •. Q � C O i LLL iJJJ LfL JL CL 7 Cd UVUc.�vvvvvv�c.�vvvvvv a � U TfltV FT A Item AA1: Staff Report Pg. 68 Packet Pg. 748 of 853 Item AA1 /�+� A Attachment A Resolution I�f Authorizing City Manager 2 to Execute Participation Agreements obo CPA to O Enter into Settlement z a) 0 0 a) C w C C) C) 0 O a 0 0 0 0 0 0 0 0 0 0 0 0 a0 � O c3 M M .-- 00 - N O 1 O O O1 - M N N M O O1 N N O u u N' N O1 M O1 M- N I N 3¢ri,�OOOOOMOOONO O O O O O O O O O O O O + O N 'CC •b C)— N rJ O O O O O O O O O J .�i o � Cr) 1- vi N N Cr)i �O oc ' i- y li) N 0O •--I C (N lit V') C &r b�+ O O O M O O O N O - M cd M cd M I- - x O pr �+ CS C � o •c . u ^O W U U U )cu U O D U U ©u � a U U U Agreements re Manufacture and Distribution of Opioid O Products Item AA1: Staff Report Pg. 69 Packet Pg. 749 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F APPENDIX 2 Cost Reimbursement Procedure 1. Additional defined terms: Item AA1 Attachment A Resolution A Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products a) Costs means the reasonable amounts paid for the attorney and other City Attorney and County Counsel staff time for individuals employed by a Plaintiff Subdivision at the contractual rate, inclusive of benefits and overhead, together with amounts paid for court reporters, experts, copying, electronic research, travel, vendors, and the like, which were not previously reimbursed and which were paid or incurred (i) prior to December 31, 2022 in litigation against any Opioid Defendant and/or (ii) in negotiating and drafting any CA Allocation Agreement(s) concerning a settlement with any Opioid Defendant(s). Costs does not include attorneys' fees, costs, or expenses incurred by private contingency fee counsel. No part of the CA Abatement Accounts Fund will be used to reimburse Costs. b) First Claims Date means October 1, 2023 or when all applications for reimbursement of Costs, in whole or in part, from funds available under Section XIV and Exhibit R of the Teva Settlement Agreement, Section XIII and Exhibit R of the Allergan Settlement Agreement, Section X and Exhibit R of the Distributor Settlement Agreement, Section XI and Exhibit R of the Janssen Settlement Agreement, Section X and Exhibit R of the CVS Settlement Agreement, Section IX and Exhibit R of the Walgreens Settlement Agreement, or Section IX and Exhibit R of the Walmart Settlement Agreement, have been finally determined under the provisions of those agreements, whichever comes first. c) Special Master means a retired judicial officer or former public lawyer, not presently employed or retained by a Plaintiff Subdivision, who will aggregate, review, and determine the reasonable Costs to be awarded to each Plaintiff Subdivision that submits a claim for reimbursement of Costs. The Special Master will be selected by a majority vote of the votes cast by Plaintiff Subdivisions, with each such subdivision having one vote. d) Plaintiff Subdivision Committee means the committee of Plaintiff Subdivisions that will review and approve the invoices submitted by the Special Master reflecting his or her reasonable time and expenses. 2. Cost Reimbursement to Plaintiff Subdivision a) Purpose. Substantial resources have been expended to hold Opioid Defendants accountable for creating and profiting from the opioid crisis, and this effort has been a significant catalyst in creating National Opioid Settlements with various manufacturers, distributors, and chain pharmacies. b) Claims Procedure. Item AA1: Staff Report Pg. 70 Packet Pg. 750 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement i. If a Plaintiff Subdivision is eligible to seek reimbursement of C Agreements re part, from funds available under Section XIV and Exhibit R oft Manufacture and Agreement, Section XIII and Exhibit R of the Allergan Settlem Distribution of Opioid Section X and Exhibit R of the CVS Settlement Agreement, Sec Products R of the Walgreens Settlement Agreement, Section IX and Exhibit of e Walmart Settlement Agreement, Section X or Exhibit R of the Distributor Settlement Agreement, or Section XI or Exhibit R of the Janssen Settlement Agreement, it must first make a timely application for reimbursement from such funds. To allow sufficient time for determination of those applications, no claim for Costs to the CA Subdivision Fund under this Agreement may be made before the First Claims Date. ii. A Plaintiff Subdivision that wishes to be reimbursed from the CA Subdivision Fund must submit a claim to the Special Master no later than forty-five (45) days after the First Claims Date. The Special Master will then compile and redistribute the aggregated claim totals for each Plaintiff Subdivision via email to representatives of all the Plaintiff Subdivisions. A claim for attorney and staff time must list, for each attorney or staff member included in the claim, the following information: name, title, total hours claimed, hourly rate (including, if sought, benefits and share of overhead), and narrative summarizing the general nature of the work performed by the attorney or staff member. For reimbursement of "hard" costs, the subdivision may aggregate across a category (e.g., total for travel costs). It is the intention of the Plaintiff Subdivisions that submission of documents related to reimbursement of Costs does not waive any attorney -client privilege or exemptions to the California Public Records Act. iii. The Special Master may request, at his or her sole option, additional documents or details to assist in the final award of Costs. iv. The Special Master will review claims for reasonableness and will notify each Plaintiff Subdivision of the final determination of its claim, and will provide a list of all final awards to all Plaintiff Subdivisions by email or, upon request, via First Class U.S. Mail. Any Plaintiff Subdivision may ask the Special Master to reconsider any final award within twenty-one (21) days. The Special Master will make a final determination on any such reconsideration request within thirty (30) days of receipt. v. Any decision of the Special Master is final and binding, and will be considered under the California Arbitration Act, Code of Civil Procedure section 1280 et seq. as a final arbitration award. Nothing in this agreement is intended to expand the scope of judicial review of the final award for errors of fact or law, and the Parties agree that they may only seek to vacate the award if clear and convincing evidence demonstrates one of the factors set forth in Code of Civil Procedure, section 1286.2, subdivision (a). Plaintiff Subdivisions will have fourteen (14) days after all final awards are made, together with any final determination of a request for reconsideration, to seek review in the Superior Court of California, pursuant to Code of Civil Procedure, section 1285, where the State has filed its Consent Judgment. o�r�o 2 O`_�< Item AA1: Staff Report Pg. 71 Packet Pg. 751 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement vi. The Special Master will prepare a report of Costs that includes H Agreements re expenses at least ninety (90) days before the Payment Date for e Manufacture and Payment. The Special Master's preparation of a report of Costs Distribution of Opioid Plaintiff Subdivision's reporting requirement under Section VII1t Products Settlement Agreement. vii. A member of the Plaintiff Subdivision Committee, which is a CA Participating Subdivision, will submit to the Settlement Fund Administrator and Teva a report of the fees and expenses incurred by the Special Master pursuant to Section VIII.C of the Teva Settlement Agreement. c) Claims Priority and Limitation. i. The Special Master will submit invoices for compensation of reasonable fees and expenses to the Plaintiff Subdivision Committee no later than ninety (90) days prior to the Payment Date for each Annual Payment. The Plaintiff Subdivision Committee will promptly review and, if reasonable, approve the Special Master's invoice for compensation. The Plaintiff Subdivision Committee will submit approved invoices to the Settlement Fund Administrator for payment. The Special Master's approved invoices have priority and will be paid first from the CA Subdivision Fund before any award of Costs, subject to the limitation in Section 2.c.v below. ii. Final Awards of Costs that do not exceed seventy-five thousand dollars ($75,000.00) will be paid next in priority after the Special Master's approved invoices. iii. Final Awards of Costs in excess of seventy-five thousand dollars ($75,000.00) will be paid proportionally from the funds remaining in that year's Annual Payment. iv. Any claim for Costs that is not paid in full will be allocated against the next year's distribution from the CA Subdivision Fund, until all approved claims for Costs are paid in full. v. In no event will more than 50% of the total CA Subdivision Fund received in any year be used to pay Costs or the Special Master's approved invoices. vi. In no event shall more than $28 million of the total CA Subdivision Funds paid pursuant to the Teva Settlement Agreement, Allergan Settlement Agreement, Distributor Settlement Agreement, CVS Settlement Agreement, Janssen Settlement Agreement, Walgreens Settlement Agreement, and the Walmart Settlement Agreement be used to pay Costs. d) Collateral Source Payments and Third -Party Settlement. i. In the event a Plaintiff Subdivision is awarded compensation, in whole or in part, by any source of funds created as a result of litigation against an Opioid Defendant for 4 its reasonable Costs, it will reduce its claim for Costs from the CA Ofd^O Subdivision Fund by that amount. If a Plaintiff Subdivision has already received a 3 Item AA1: Staff Report Pg. 72 Packet Pg. 752 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement final award of Costs from the CA Subdivision Fund, it will repa Agreements re prior award of Costs via a payment to the Settlement Fund Adm Manufacture and the Settlement Fund Administrator that its allocation from the n Annual Payments should be reduced accordingly. If the Plaintif Distribution of Opioid Products repaying any prior award of Costs, that repayment will occur as after the Plaintiff Subdivision's receipt of Cost funds from the collateral source, but no more than 90 days after its receipt from the collateral source. The Settlement Fund Administrator will add any repaid Costs to the CA Subdivision Fund. Any Plaintiff Subdivision that has submitted for reimbursement to any national fund and has not received a final determination by the First Claims Date may request that the settlement administrator withhold some or all of its payment from the CA Subdivision Fund in order to avoid repayment. ii. In the event a Plaintiff Subdivision reaches a monetary settlement or compromise against any Opioid Defendant outside of the National Opioid Settlement, the monetary portion of such settlement, net of fees paid to outside contingency fee counsel and of funds earmarked strictly for abatement, will be credited against its Costs and the subdivision will be ineligible to recover those credited Costs from the CA Subdivision Fund. Plaintiff Subdivisions negotiating monetary settlements or compromises against any Opioid Defendant outside of the National Opioid Settlement will negotiate for funds to repay any Costs it previously received from the CA Subdivision Fund or for Costs it otherwise might be eligible to claim from the CA Subdivision Fund. If such a settlement is paid after all final approved claims for Costs by all Plaintiff Subdivisions are satisfied in full, the settling subdivision will reimburse the CA Subdivision Fund in that amount by making payment to the Settlement Fund Administrator to add to the CA Subdivision Fund in a manner consistent with the repayments described in section 2.d.i above. 4 Item AA1: Staff Report Pg. 73 Packet Pg. 753 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F APPENDIX 3 CALIFORNIA -SUBDIVISION BACKSTOP Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products On August 6, 2021, Judge Polster of the US District Court for the Northern District o issued an Order (the Order), docket number 3814, in In Re National Prescription Opiate Litigation, MDL 2804, addressing contingent attorney fee contracts between political subdivisions eligible to participate in the Teva Settlement and their counsel. In light of the Order, and at the request of [SUBDIVISION], the [SUBDIVISION], its counsel [COUNSEL], and the California Attorney General, on behalf of the State of California, are entering into this California -Subdivision Backstop Agreement (Backstop Agreement). [SUBDIVISION] and [COUNSEL] intend this Backstop Agreement to constitute a State Back - Stop Agreement as that term is used in the Order and in Exhibit R (Agreement on Attorneys' Fees, Costs, and Expenses) of the Teva Settlement Agreement. Pursuant to this Backstop Agreement, [SUBDIVISION] may, subject to the limitations of the Teva Settlement Agreement and CA Teva Allocation Agreement, as well as any other limitations imposed by law, use funds that it receives from the Teva Settlement CA Subdivision Fund to pay a contingent fee to [COUNSEL]. Any such payment from [SUBDIVISION] to [COUNSEL], together with any contingency fees that [COUNSEL] may receive from the national Attorney Fee Fund, will not exceed a total contingency fee of [PERCENTAGE NOT TO EXCEED 15%] of the total gross recovery of [SUBDIVISION] from the Teva Settlement. [COUNSEL] certify that they first sought fees and costs from the Attorney Fee Fund created under the Teva Settlement Agreement before seeking or accepting payment under this backstop agreement. [COUNSEL] further certify that they are not seeking and will not accept payment under this backstop agreement of any litigation fees or costs that have been reimbursed through prior settlements or judgments. The Attorney General is executing this agreement solely because the definition of "State Back - Stop Agreement" in Exhibit R of the Teva Settlement Agreement requires such agreements to be between "a Settling State" and private counsel for a participating subdivision. Neither the California Attorney General nor the State of California have any obligations under this Backstop Agreement, and this Backstop Agreement does not require the payment of any state funds to [SUBDIVISION], [COUNSEL], or any other party. [DATE] [SUBDIVISION SIGNATURE BLOCK] [DATE] [COUNSEL SIGNATURE BLOCK] [DATE] [ATTORNEY GENERAL SIGNATURE BLOCK] Item AA1: Staff Report Pg. 74 Packet Pg. 754 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F EXHIBIT K Subdivision Participation and Release Form Will your subdivision or special district be signing the settlement participation form Settlement at this time? [ ] Yes [ ] No Item AA1 Attachment A Resolution A Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Governmental Entity: Palo Alto city State: CA Authorized Signatory: Address 1: Address 2: City, State, Zip: Phone: Email: The governmental entity identified above ("Governmental Entity"), in order to obtain and in consideration for the benefits provided to the Governmental Entity pursuant to the Settlement Agreement dated December 9, 2022 ("Walgreens Settlement"), and acting through the undersigned authorized official, hereby elects to participate in the Walgreens Settlement, release all Released Claims against all Released Entities, and agrees as follows. 1. The Governmental Entity is aware of and has reviewed the Walgreens Settlement, understands that all terms in this Participation and Release Form have the meanings defined therein, and agrees that by executing this Participation and Release Form, the Governmental Entity elects to participate in the Walgreens Settlement and become a Participating Subdivision as provided therein. 2. The Governmental Entity shall promptly, and in any event no later than 14 days after the Reference Date and prior to the filing of the Consent Judgment, dismiss with prejudice any Released Claims that it has filed. With respect to any Released Claims pending in In re National Prescription Opiate Litigation, MDL No. 2804, the Governmental Entity authorizes the Plaintiffs' Executive Committee to execute and file on behalf of the Governmental Entity a Stipulation of Dismissal with Prejudice substantially in the form found at https://nationalopioidsettlement.com. 3. The Governmental Entity agrees to the terms of the Walgreens Settlement pertaining to Participating Subdivisions as defined therein. 4. By agreeing to the terms of the Walgreens Settlement and becoming a Releasor, the Governmental Entity is entitled to the benefits provided therein, including, if applicable, monetary payments beginning after the Effective Date. 5. The Governmental Entity agrees to use any monies it receives through the Walgreens Settlement solely for the purposes provided therein. Item AA1: Staff Report Pg. 75 Packet Pg. 755 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement 6. The Governmental Entity submits to the jurisdiction of the court in the 1 Agreements re state where the Consent Judgment is filed for purposes limited to that cou Manufacture and and for resolving disputes to the extent provided in, the Walgre Distribution of Opioid Governmental Entity likewise agrees to arbitrate before the National Products provided in, and for resolving disputes to the extent otherwise provide in, the Waigre Settlement. 7. The Governmental Entity has the right to enforce the Walgreens Settlement as provided therein. 8. The Governmental Entity, as a Participating Subdivision, hereby becomes a Releasor for all purposes in the Walgreens Settlement, including without limitation all provisions of Section XI (Release), and along with all departments, agencies, divisions, boards, commissions, districts, instrumentalities of any kind and attorneys, and any person in their official capacity elected or appointed to serve any of the foregoing and any agency, person, or other entity claiming by or through any of the foregoing, and any other entity identified in the definition of Releasor, provides for a release to the fullest extent of its authority. As a Releasor, the Governmental Entity hereby absolutely, unconditionally, and irrevocably covenants not to bring, file, or claim, or to cause, assist or permit to be brought, filed, or claimed, or to otherwise seek to establish liability for any Released Claims against any Released Entity in any forum whatsoever. The releases provided for in the Walgreens Settlement are intended by the Parties to be broad and shall be interpreted so as to give the Released Entities the broadest possible bar against any liability relating in any way to Released Claims and extend to the full extent of the power of the Governmental Entity to release claims. The Walgreens Settlement shall be a complete bar to any Released Claim. 9. The Governmental Entity hereby takes on all rights and obligations of a Participating Subdivision as set forth in the Walgreens Settlement. 10. In connection with the releases provided for in the Walgreens Settlement, each Governmental Entity expressly waives, releases, and forever discharges any and all provisions, rights, and benefits conferred by any law of any state or territory of the United States or other jurisdiction, or principle of common law, which is similar, comparable, or equivalent to § 1542 of the California Civil Code, which reads: GenerTi ReleTse; extent. A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release that, if known by him or her would have materially affected his or her settlement with the debtor or released party. A Releasor may hereafter discover facts other than or different from those which it knows, believes, or assumes to be true with respect to the Released Claims, but each Governmental Entity hereby expressly waives and fully, finally, and forever settles, releases and discharges, upon the Effective Date, any and all Released Claims that may exist as of such date but which Releasors do not know or suspect to exist, whether through ignorance, oversight, error, negligence or through no fault whatsoever, and which, if known, would materially affect the Governmental Entities' decision to participate in the Walgreens Settlement. lJ Item AA1: Staff Report Pg. 76 Packet Pg. 756 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement 11. Nothing herein is intended to modify in any way the terms of the Wal Agreements re which Governmental Entity hereby agrees. To the extent this Participatid Manufacture and is interpreted differently from the Walgreens Settlement in any res Distribution of Opioid Settlement controls. Products I have all necessary power and authorization to execute this Participation and Release Form on behalf of the Governmental Entity. Signature: Name: Title: Date: 3 ci Item AA1: Staff Report Pg. 77 Packet Pg. 757 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Proposed California State -Subdivision Agreement Agreements re Regarding Distribution and Use of Manufacture and Settlement Funds — Walgreens Settlement Distribution of Opioid Products 1. Introduction Pursuant to the Walgreens Settlement Agreement, dated as of December 9, 2022, and any revision thereto (the "Walgreens Settlement Agreement"), including Section V and Exhibit O, the State of California proposes this agreement (the "CA Walgreens Allocation Agreement") to govern the allocation, distribution, and use of Settlement Fund payments made to California pursuant to Sections IV and V of the Walgreens Settlement Agreement. For the avoidance of doubt, this agreement does not apply to payments made pursuant to Section IX of the Walgreens Settlement Agreement. Pursuant to Exhibit O, Paragraph 4, of the Walgreens Settlement Agreement, acceptance of this CA Walgreens Allocation Agreement is a requirement to be an Initial Participating Subdivision. 2. Definitions a) CA Participating Subdivision means a Participating Subdivision that is also (a) a Plaintiff Subdivision and/or (b) a Primary Subdivision with a population equal to or greater than 10,000. For the avoidance of doubt, eligible CA Participating Subdivisions are those California subdivisions listed in Exhibit C (excluding Litigating Special Districts) and/or Exhibit Ito the Walgreens Settlement Agreement. b) Allergan Settlement Agreement means the Allergan Settlement Agreement dated November 22, 2022, and any revision thereto. c) CVS Settlement Agreement means the CVS Settlement Agreement dated December 9, 2022, and any revision thereto as well as any modification thereto entered into by the State of California and CVS. d) Distributor Settlement Agreement means the Distributor Settlement Agreement dated July 21, 2021, and any revision thereto. e) Janssen Settlement Agreement means the Janssen Settlement Agreement dated July 21, 2021, and any revision thereto. f) Teva Settlement Agreement means the Teva Settlement Agreement dated November 22, 2022, and any revision thereto. g) Walmart Settlement Agreement means the Walmart Settlement Agreement dated November 14, 2022, and any revision thereto. h) CA Litigating Special District means a Litigating Special District located in California. CA Litigating Special Districts include Downey Unified School District, Elk Grove Unified School District, Kern High School District, Montezuma Fire Protection District (located in Stockton, California), Santa Barbara San Luis Obispo Regional Health Authority, Inland Empire Health Plan, Health Plan of San Joaquin, San Leandro Unified School District, O O Item AA1: Staff Report Pg. 78 Packet Pg. 758 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Pleasant Valley School District Board, and LA Care Health Plan. Agreements re i) Plaintiff Subdivision means a Subdivision located in California, O Manufacture and Litigating Special District, that filed a lawsuit, on behalf of the St Distribution of Opioid and/or through an official of the Subdivision on behalf of the Peo Products of California, against one or more Opioid Defendants prior to October 1, 2020. j) Opioid Defendant means any defendant (including but not limited to Walgreen Co., Teva Pharmaceutical Industries Ltd., Allergan Finance, LLC, Allergan Limited, CVS Health Corporation, CVS Pharmacy, Inc., Walmart Inc., Johnson & Johnson, Janssen Pharmaceuticals, Inc., Purdue Pharma L.P., Cardinal Health, Inc., AmerisourceBergen Corporation, and McKesson Corporation) named in a lawsuit seeking damages, abatement, or other remedies related to or caused by the opioid public health crisis in any lawsuit brought by any state or local government on or before October 1, 2020. 3. General Terms This agreement is subject to the requirements of the Walgreens Settlement Agreement, as well as applicable law, and the Walgreens Settlement Agreement governs over any inconsistent provision of this CA Walgreens Allocation Agreement. Terms used in this CA Walgreens Allocation Agreement have the same meaning as in the Walgreens Settlement Agreement unless otherwise defined herein. Pursuant to Section V(D)(1) of the Walgreens Settlement Agreement, (a) all Settlement Fund payments will be used for Opioid Remediation, except as allowed by Section V(B)(2) of the Walgreens Settlement Agreement; and (b) at least seventy percent (70%) of Settlement Fund payment amounts will be used solely for future Opioid Remediation. 4. State Allocation The Settlement Fund payments to California,' pursuant to the Walgreens Settlement Agreement, shall be allocated as follows: 15% to the State Fund; 70% to the Abatement Accounts Fund; and 15% to the Subdivision Fund. For the avoidance of doubt, all funds allocated to California from the Settlement Fund shall be combined pursuant to this CA Walgreens Allocation Agreement, and 15% of that total shall be allocated to the State of California (the "State of California Allocation"), 70% to the California Abatement Accounts Fund ("CA Abatement Accounts Fund"), and 15% to the California Subdivision Fund ("CA Subdivision Fund"). 1 For purposes of clarity, use of the term "California" refers to the geographic territory of California and the state and its local governments therein. The term "State" or "State of California" refers to the State of California as a governmental unit. lJ Item AA1: Staff Report Pg. 79 Packet Pg. 759 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement A. State of California Allocation Agreements re Manufacture and Fifteen percent of the total Settlement Fund payments will be allocated to th Distribution of Opioid the State for future Opioid Remediation. Products B. CA Abatement Accounts Fund i. Allocation of CA Abatement Accounts Funds a) Seventy percent of the total Settlement Fund payments will be allocated to the CA Abatement Accounts Fund. The funds in the CA Abatement Accounts Fund will be allocated based on the allocation model developed in connection with the proposed negotiating class in the National Prescription Opiate Litigation (MDL No. 2804), as adjusted to reflect only those cities and counties that are eligible, based on population or litigation status, to become a CA Participating Subdivision. The percentage from the CA Abatement Accounts Fund allocated to each CA Participating Subdivision is set forth in Appendix 1 in the column entitled abatement percentage (the "Local Allocation"). For the avoidance of doubt, CA Litigating Special Districts and California towns, cities, and counties with a population less than 10,000 are not eligible to receive an allocation of CA Abatement Accounts Funds. b) A CA Participating Subdivision that is a county, or a city and county, will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision, and will receive payments as provided in the Walgreens Settlement Agreement. c) A CA Participating Subdivision that is a city will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision. The Local Allocation share for a city that is a CA Participating Subdivision will be paid to the county in which the city is located, rather than to the city, so long as: (a) the county is a CA Participating Subdivision, and (b) the city has not advised the Settlement Fund Administrator that it requests direct payment at least 60 days prior to a Payment Date. A Local Allocation share allocated to a city but paid to a county is not required to be spent exclusively for abatement activities in that city, but will become part of the county's share of the CA Abatement Accounts Funds, which will be used in accordance with Section 4.B.ii (Use of CA Abatement Accounts Funds) and reported on in accordance with Section 4.B.iii (CA Abatement Accounts Fund Oversight). d) A city within a county that is a CA Participating Subdivision may opt in or out of direct payment at any time, and it may also elect direct payment of only a portion of its share, with the remainder going to the county, by providing notice to the Settlement Fund Administrator at least 60 days prior to a Payment Date. For purposes of this CA Walgreens Allocation Agreement, the Cities of Los Angeles, Oakland, San Diego, San Jose and Eureka will be deemed to have elected direct payment if they become Participating Subdivisions. ci Item AA1: Staff Report Pg. 80 Packet Pg. 760 of 853 Item AA1 A /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement e) The State will receive the Local Allocation share of any payment to t Agreements re that is attributable to a county or city that is eligible to become a CA ii Manufacture and Subdivision, but that has not, as of the date of that payment to the Sell Distribution of Opioid become a Participating Subdivision. Products f) Funds received by a CA Participating Subdivision, and not expended or encumbered within five years of receipt and in accordance with the Walgreens Settlement Agreement and this CA Walgreens Allocation Agreement shall be transferred to the State; provided however, that CA Participating Subdivisions have seven years to expend or encumber CA Abatement Accounts Funds designated to support capital outlay projects before they must be transferred to the State. This provision shall not apply to the Cost Reimbursement Funds, which shall be controlled by Appendix 2. ii. Use of CA Abatement Accounts Funds a) The CA Abatement Accounts Funds will be used for future Opioid Remediation in one or more of the areas described in the List of Opioid Remediation Uses, which is Exhibit E to the Walgreens Settlement Agreement. b) In addition to this requirement, no less than 50% of the funds received by a CA Participating Subdivision from the Abatement Accounts Fund in each calendar year will be used for one or more of the following High Impact Abatement Activities: (1) the provision of matching funds or operating costs for substance use disorder facilities within the Behavioral Health Continuum Infrastructure Program; (2) creating new or expanded Substance Use Disorder ("SUD") treatment infrastructure; (3) addressing the needs of communities of color and vulnerable populations (including sheltered and unsheltered homeless populations) that are disproportionately impacted by SUD; (4) diversion of people with SUD from the justice system into treatment, including by providing training and resources to first and early responders (sworn and non -sworn) and implementing best practices for outreach, diversion and deflection, employability, restorative justice, and harm reduction; and/or (5) interventions to prevent drug addiction in vulnerable youth. c) The California Department of Health Care Services ("DHCS") may add to this list (but not delete from it) by designating additional High Impact Abatement Activities. DHCS will make reasonable efforts to consult with stakeholders, including the CA Participating Subdivisions, before adding additional High Impact Abatement Activities to this list. d) For the avoidance of doubt, and subject to the requirements of the Walgreens Settlement Agreement and applicable law, CA Participating Subdivisions may form agreements or O :O 4 Item AA1: Staff Report Pg. 81 Packet Pg. 761 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement ventures, or otherwise work in collaboration with, federal, state, local Agreements re sector entities in pursuing Opioid Remediation activities funded from Manufacture and Accounts Fund. Further, provided that all CA Abatement Accounts Fl Distribution of Opioid Opioid Remediation consistent with the Walgreens Settlement Agree Products Walgreens Allocation Agreement, a county and any cities or towns within the county may agree to reallocate their respective shares of the CA Abatement Accounts Funds among themselves, provided that any direct distribution may only be to a CA Participating Subdivision and any CA Participating Subdivision must agree to their share being reallocated. iii. CA Abatement Accounts Fund Oversight a) Pursuant to Section 5 below, CA Participating Subdivisions receiving settlement funds must prepare and file reports annually regarding the use of those funds. DHCS may regularly review the reports prepared by CA Participating Subdivisions about the use of CA Abatement Accounts Funds for compliance with the Walgreens Settlement Agreement and this CA Walgreens Allocation Agreement. b) If DHCS determines that a CA Participating Subdivision's use of CA Abatement Accounts Funds is inconsistent with the Walgreens Settlement Agreement or this CA Walgreens Allocation Agreement, whether through review of reports or information from any other sources, DHCS shall send a request to meet and confer with the CA Participating Subdivision. The parties shall meet and confer in an effort to resolve the concern. c) If the parties are unable to reach a resolution, DHCS may conduct an audit of the Subdivision's use of the CA Abatement Accounts Funds within one year of the request to meet and confer, unless the parties mutually agree in writing to extend the meet and confer time frame. d) If the concern still cannot be resolved, the State may bring a motion or action in the court where the State has filed its Consent Judgment to resolve the concern or otherwise enforce the requirements of the Walgreens Settlement Agreement or this CA Walgreens Allocation Agreement. However, in no case shall any audit be conducted, or motion be brought, as to a specific expenditure of funds, more than five years after the date on which the expenditure of the funds was reported to DHCS, in accordance with this agreement. e) Notwithstanding the foregoing, this Agreement does not limit the statutory or constitutional authority of any state or local agency or official to conduct audits, investigations, or other oversight activities, or to pursue administrative, civil, or criminal enforcement actions. IJ Item AA1: Staff Report Pg. 82 Packet Pg. 762 of 853 Item AA1 A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement C. CA Subdivision Fund Agreements re Manufacture and Fifteen percent of the total Settlement Fund payments will be allocat Distribution of Opioid Subdivision Fund. All funds in the CA Subdivision Fund will be allo Products Plaintiff Subdivisions that are Initial Participating Subdivisions. The funds will e use , subject to any limits imposed by the Walgreens Settlement Agreement and this CA Walgreens Allocation Agreement, to fund future Opioid Remediation and reimburse past opioid-related expenses, which may include fees and expenses related to litigation, and to pay the reasonable fees and expenses of the Special Master as set forth in Appendix 2. The CA Subdivision Funds will be allocated as follows: a) First, funds in the CA Subdivision Fund shall be used to pay the Special Master's reasonable fees and expenses in accordance with the procedures and limitations set forth in Appendix 2 to this document; b) Second, funds will be allocated to Plaintiff Subdivisions that are Initial Participating Subdivisions that have been awarded Costs, as defined by and in accordance with the procedures and limitations set forth in Appendix 2 to this document. c) Funds remaining in the CA Subdivision Fund, which shall consist of no less than 50% of the total CA Subdivision Fund received in any year pursuant to Appendix 2, Section 2.c.v, will be distributed to Plaintiff Subdivisions that are Initial Participating Subdivisions, in relative proportion to the Local Allocation. These funds shall be used to fund future opioid-related projects and to reimburse past opioid-related expenses, which may include fees and expenses related to litigation against any Opioid Defendant. D. Provision for State Back -Stop Agreement On August 6, 2021, Judge Dan Polster of the U.S. District Court, Northern District of Ohio, Eastern Division, issued an order (ECF Docket Number 3814) ("MDL Fees Order") in the National Prescription Opiate Litigation (MDL No. 2804) "cap[ping] all applicable contingent fee agreements at 15%." Private counsel representing Plaintiff Subdivisions should seek its contingency fees and costs from the Attorney Fee Fund or Cost Funds under the Walgreens Settlement Agreement, and, if applicable, the Teva Settlement Agreement, Allergan Settlement Agreement, CVS Settlement Agreement, Distributor Settlement Agreement, Janssen Settlement Agreement, and Walmart Settlement Agreement. A Plaintiff Subdivision may separately agree to use its share of the CA Subdivision Fund to pay for fees or costs incurred by its contingency -fee counsel ("State Back -Stop Agreement"), pursuant to Exhibit R, section I(Y), of the Walgreens Settlement Agreement and the MDL Fees Order, so long as such contingency fees do not exceed a total contingency fee of 15% of the total gross recovery of the Plaintiff Subdivision pursuant to the Walgreens Settlement, inclusive of contingency fees from the national Attorney Fee Fund and this State Back -Stop Agreement. Before seeking fees or litigation costs and expenses from a State Back -Stop Agreement, private counsel representing Plaintiff Subdivisions must first seek contingency fees and costs from the Attorney Fee Fund or Cost Funds created under the Walgreens Settlement Agreement. Further, M 6 Item AA1: Staff Report Pg. 83 Packet Pg. 763 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Item AA1 Attachment A Resolution A Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement private counsel may only seek reimbursement for litigation fees and costs th Agreements re been reimbursed through prior settlements or judgments. IManufacture and Distribution of Opioid To effectuate a State Back -Stop Agreement pursuant to this section, an agree Products Appendix 3 may be entered into by a Plaintiff Subdivision, private counsel, a Office of the Attorney General. The California Office of the Attorney General shall, upon the request of a Plaintiff Subdivision, execute any agreement executed by a Plaintiff Subdivision and its private counsel if it is in the form of Appendix 3. The California Office of the Attorney General will also consider requests from Plaintiff Subdivisions to execute and enter into agreements presented in other forms. For the avoidance of doubt, this agreement does not require a Plaintiff Subdivision to request or enter into a State Back -Stop Agreement, and no State Back -Stop Agreement shall impose any duty or obligation on the State of California or any of its agencies or officers, including without limitation the Attorney General. 5. State and Subdivision Reporting a) DHCS will prepare an annual written report regarding the State's use of funds from the settlement until those funds are fully expended and for one year thereafter. These reports will be made publicly available on the DHCS web site. b) Each CA Participating Subdivision that receives payments of funds from the settlement will prepare written reports at least annually regarding the use of those funds, until those funds are fully expended and for one year thereafter. These reports will also include a certification that all funds that the CA Participating Subdivision has received through the settlement have been used in compliance with the Walgreens Settlement Agreement and this CA Walgreens Allocation Agreement. The report will be in a form reasonably determined by DHCS. Prior to specifying the form of the report DHCS will confer with representatives of the Plaintiff Subdivisions. c) The State and all CA Participating Subdivisions receiving CA Abatement Accounts Funds will track all deposits and expenditures. Each such subdivision is responsible solely for the CA Abatement Accounts Funds it receives. A county is not responsible for oversight, reporting, or monitoring of CA Abatement Accounts Funds received by a city within that county that receives direct payment. Unless otherwise exempt, Subdivisions' expenditures and uses of CA Abatement Accounts Funds and other Settlement Funds will be subject to the normal budgetary and expenditure process of the Subdivision. d) Each Plaintiff Subdivision receiving CA Subdivision Funds will track all deposits and expenditures, as required by the Walgreens Settlement Agreement and this CA Walgreens Allocation Agreement. Among other things, Plaintiff Subdivisions using monies from the CA Subdivision Fund for purposes that do not qualify as Opioid Remediation must identify and include in their annual report, the amount and how such funds were used, including if used to pay attorneys' fees, investigation costs, or litigation costs. Pursuant to Section V(B)(2) of the Walgreens Settlement Agreement, such information must also be reported to the Settlement Fund Administrator and Walgreens. Item AA1: Staff Report Pg. 84 Packet Pg. 764 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F e) In each year in which DHCS prepares an annual report DHCS will to discuss the annual report and the Opioid Remediation activities the State and Participating Subdivisions. 6. Miscellaneous Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products a) The State or any CA Participating Subdivision may bring a motion or action in the court where the State has filed its Consent Judgment to enforce the requirements of this CA Walgreens Allocation Agreement. Before filing such a motion or action the State will meet and confer with any CA Participating Subdivision that is the subject of the anticipated motion or action, and vice versa. b) Except as provided in the Walgreens Settlement Agreement, this CA Walgreens Allocation Agreement is not enforceable by any party other than the State and the CA Participating Subdivisions. It does not confer any rights or remedies upon, and shall not be enforceable by, any third party. c) Except as provided in the CA Walgreens Allocation Agreement, if any provision of this agreement or the application thereof to any person, entity, or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this agreement, or the application of such provision to persons, entities, or circumstances other than those as to which it is invalid or unenforceable, will not be affected thereby, and each other provision of this agreement will be valid and enforceable to the fullest extent permitted by law. d) Except as provided in the Walgreens Settlement Agreement, this agreement shall be governed by and interpreted in accordance with the laws of California. lj jti Item AA1: Staff Report Pg. 85 Packet Pg. 765 of 853 A Item AA1 /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement The undersigned, Palo Alto city, ACKNOWLEDGES acceptance of this Propo Agreements re Subdivision Agreement Regarding Distribution and Use of Settlement Funds Manufacture and Settlement is a requirement to be an Initial Participating Subdivision in the W and ACCEPTS this Proposed California State -Subdivision Agreement Regar Distribution of Opioid Use of Settlement Funds — Walgreens Settlement. EXECUTED on Products Signature: Name: Title: Date: Item AA1: Staff Report Pg. 86 Packet Pg. 766 of 853 z 0 m 0 a) C W c m 7 U O 0 Item AA1 A Attachment A Resolution �!A Authorizing City Manager 3 • to Execute Participation Agreements obo CPA to �: 0 Enter into Settlement co Agreements re s cn p o .rID y Manufacture and N v � O OI Distribution of Opioid .� Products 'd C/;] cd N 9 U p 'y O N N "d bA U O 3, by C% N �w�.. : sI N O O N bOrID U s •� U" p N cd N N sO, C%1 V] OO ^o P- Cad 4- • bn O N y N cd N U N `* N N V •° bA O C o o w o F" 'y J!I aI v� O cd O O 0 bA N bA •y bA P bA cd qo ¢ U vi a p O -C 5)0 Item AA1: Staff Report Pg. 87 Packet Pg. 767 of 853 Item AA1 /i A Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to WOM Enter into Settlement Agreements re Manufacture and o . . . . . . . .. . . o Distribution of Opioid b y N N 00 O kn 00 O - N N M 00 01 In �-- V) 0\ 0 - �O N - N O �Z �O 00 00 N 01 c N 00 N M Products } 0\ .-ti N 00 N V) N N If) N 00 - Vi 00 M '—' O aD y t` O N Q\ 00 00 \O \O N V) - N a1 M .-ti .-- 00 .0 N Q\ 00 y v M NO M 00 00 - N V) 00 "T M 00 ' O ti ti I) 00 00 N O N N - N ) - 00 0\ N O - M M M N N �O M 00 M N O O- a 0 0 0 0 0 0 0 0 0 0 O O N \p N O N 0 0 0 0 0 O O O N O O O O O O O O O O O C O O O C C C C N C C 0 0 0 0 0 o p y O C C r— ee ^C u o0 O W1 N C N i N It— i . a N O O -� O N 0 p ap o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ++ N O\ M N M M 00 S C O N 01 M V7 a1 Q N S N V7 O r Op y y M �D - tr M N /') N 00 .--' '-O M' N .-' N N i O M N O V') N C �� M O O -� 0 0 '--� --� 0 0 0 0 O O N �O N O N O •--� 0 0 0 0 0 0 0 N 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 — O O O O N O 0 0 0 0 0 0 5)1 a) 5)1 a)a)a)a)a)a)a)a)a)a)- r U U U U U U U U 0 _ U U U U U U U U o o 01 II oII I I I J II HQ W w x a Z O a a O? ti U U W Item AA1: Staff Report Pg. 88 Packet Pg. 768 of 853 a) 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O O O O O O O o Distribution of O i ^O p ca O M N ZO r- N O O O M 0 O M N 'O N O rl .-ti O ' M N N 00 N O I Products a 0 rl - 00 N ItM 4 00 O N "O in O 0 "O N \O M 3� y 0 D\ 0 M 0 N 0 M- O .-- M O O N N N 00 -- 00 O1 N r \O "C 01 O M If) 01 O N N O O - O O O O H - - - N C a, o 0 0 0 0 = v O d1 00 — N v, a 0 0 0 0 0 0 0 0 a,00 0 0 a, a, 0 a, ..a, 0 0 0 0 a, a, 0 0 0 0 0 V7 N V7 00 N t 00 N 00 V7 t` O kn -� N N N N 00 00 01 C' �O -� C1 C' O O O O O -� O M 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C1 cg a3 a3 'A Cn� r En 'A m� U) O O O 000000000 n n n n cd cd cd cd cd cC cd cd cd cd c� c� % O O O 5) 5)5)5)5)5)5)5)5)5)5) O N O N N O N N O N U U U U U U U U U U U U 5) b ^^ O O O C.i ~ O O p V N N -� V o U N O O a .� �, y o �' o. O a A W u_ a a 0 o •V" ^O U U U U U aU Did A a Item AA1: Staff Report Pg. 89 Packet Pg. 769 of 853 a) 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O 0 \ \ 0 \ 0 0 \ 0 0 \ o Distribution of O i P ^O C C as O D 00 N- M O 00 ON N - O\ - . N O\ N H IV M r - O 00 .C .O M M M O 00 Products � N O ZZ O\ NN N N 00 4 C- �O IN O C. i O M M 01 M \O N `O - kn N O C. a' y - N \O N N 00 O I r O' M O I IN l - O N N' O N N O N - O - N 0 \p 0 - W) 0 O r N N M� - M N g N N N M - N C • a) o 0 0 0 0 0 0 •.� R ^C v M 00 00 s to N 01 M O O O O M o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 a ayi y (n N- N M 00 ,-- a1 00 "0 M N N " O— N O1 O O M M O to M C O 00 O M 01 N O M N N "0 r 01 .—.—a1 N N N 000 O O — O O O N O O O O O — O 0 O 0 O N O O N 0 O 0 O 0 O 0 O 6 O 0 O 6 O 0 N 6 O 0 O 6 O 6 O 0 N- 6 0 6 0 0 M 0 O 0 a) N E 3'"+ E E C C C a U ar o ou a C 0 o ODUUU O ODUUUUUUUU ODUUU ODU oU O aU U U U U U U U Did A kn O M Item AA1: Staff Report Pg. 90 Packet Pg. 770 of 853 0 O O a) O W 0 m (I) O O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O O O O O O O o Distribution of O i 'O C o ca N O\ O 00 O O V) O N M - N N 00 N N'T '0 N N 00 N N O' N Q\ M O\ ON - .O If) 00 O N Products y O M N V) O 00 00 ' 1 ' M 00 O\ Q\ N N - O O\ N 00 00 00 N c) 3 y O IT M 'O N O O - N - N \O 0 --0 0 - M In N.. 00 O If) r" M O 00 O O M N N O O I O O N v N- O M N N N 'O M- M O"t O O O C C C C O C O C C O C C O C O O O O C O O C O C O O O C C o C 2 C •R ^C v 00 M O a O v, 0 0 0 0 0 0 0 0 0 0 0 0 c...0 0 0 0 0 a) a) 0.a) ca) 0 0 0 0 0 0 ar y O M O N N N O kn O Wn O M M M .O O )n v 0 0 0 0 6 0 0 0 0 0 a 0 0 0 0 O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C) 0 0 0 0 0 CD 0 0 0 0 'A rID Cd0 rID C, rID 'A Cn rID rID rID r/D rID r/D r/D rID r rI) r/D r Ln rID CD N N N N N N N N N N N N N N N N N N N N N N N U vi O rn O V] O V] O V] O VI O Cl) O V] O Vl O Cl) O V] O CI) O VI O V] O 'n O Cl) O V] O V] O Cl) O Cl) O V] O V) O VI O V] O V) O Cl) O V] O V1 O Cl) O VJ O o .� x '��d a �� a>i�UUUU�j�jUU QQ W�UC7C7'3 `� a ti� U U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U Did A Item AA1: Staff Report Pg. 91 Packet Pg. 771 of 853 0 O O a) O W 0 m (I) O U O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O \ O O O O O O O 0 0 0 0 0 0 0 o Distribution of i O P 'O p as N O N \O N 01 in - N N N 0\ 00 01 0\ O o', - M O 'l - It) •-- -0 In 'l 0\ \O 00 00 N V) V) O N N N 00 N N N N O M 00 -4 N Products y V) O 0\ in 01 - S N' N ti 1 00 101 O in ' O Z 00 V) M .--i O M- N 'O 00 ci 3 y• p, 0 o\ r -I 0 00 0 N O 0 M O O 00 O O M O - O O 0\ - O - O O M O O -0 \O M - N 00 M r-i O -0 O O 'O N O M O O V) N 0 V) N 0 If) N 0 In N 0 N M 0 to O 0 0\ O 0 O N r 00 4 O 01 O - O O O In O N O O O O C C C O C C O C C O N C O C C O O O O O O O O O O O O C C � w o 0 C y •R ^C v N M a v, 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ?r y 0o — M N O� W) M 0 Wn 0— O Wn O N O O M .-- -- O M O M M M M O •-- ' N ^- O IC O v O O O O 0 0 0 0 0 0 0 � r- O O O O 0 0 0 0 0 0 0 — O - O O O O O O O O O O O O O O O N O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 d) d) U G) N U G) G) G) G) G) G) 4) 6) G) U G) G) U G) N G) 6) U d) d) G) 5) G) G) N bJJ N U N N U N N N N N N N N N U N N U N N N N N N N N N N U rA 0 rA 0 Cn 0 r 0 cn 0 rn 0 rA 0 Cn 0 CI) 0 C 0 Ci) 0 Ci) 0 CI) 0 CI) 0 Ci) 0 C 0 CI) 0 Ci) 0 C 0 CI) 0 Ci) 0 rn 0 C 0 CI) 0 CI) 0 C 0 r 0 CA 0 cn 0 r 0 5) o " 0 >~ cd a O O N O O 0 y O O O 0 P S. V p- a o ti U U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U Did A ❑ o. Item AA1: Staff Report Pg. 92 Packet Pg. 772 of 853 0 0 O a) 0 W 0 m 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O °° O O O O O O 0 0 0 0 0 0 0 0 o Distribution of O i ' o ca O — t` M \O N - M - '.O 00 M O N N 00 O I!) r - 01 N - N N 01 - O N Products O N 00 N M 00 t- 00 00 'T 00 O ON 00 NT 00 01 00 0\ \O 00 r 3 N 0 O - - O - N 01 N O 00 O O O O a1 O O O N M 0\ O .q M \O 00 N 'O ti N N N O N N N 00 l- N M O C O C C C C C O C C O C C O C O O O O O O O O O O O O O C C � w o 0 0 0 0 N v, a 0 0 0 0 0 0 0 0 0.0 0 0 0 0 0 0 00 0 0 0 0...0 00 0 0 0 0 0 N M 00 V) "O O O •-- O O N N O N — "0 O a1 - M — N M"t a1 N a a, M kn O N 00 N O� O O1 00 -t 00 O1 M O1 M 0 0 0 0 0 0 0 0 0 6 0 0- 0 0 6 0 M O O 0 0 0 0 0 0 .1-.O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 d) G) G) G) d) G) G) G) G) (1) G) ( N c 6) c G) c G) c G) c G) d) 00 cbJA —i 5�—i 7�r f.' f-.'S"�. >•+" O U . V O Q � � � � � � � � � � � � Q � � � � a) N • � � cd�"� O O C.J �N+ 'yam H N N v 000000000000000000 n rn Cl) Cl) /y b 'A -°o ; o °) °o ° o CCI)C C0 00 stn a, ar ou a a 0 o a ; a '�^a �UUUUUUUUUUUUUUUUUU ODU ODUUUU O oU aU U U U U )id A kn O Item AA1: Staff Report Pg. 93 Packet Pg. 773 of 853 0 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ Distribution of i O P C p o ca N D -O M N lIDO 00lID N in lID 00 Q\ O i N ZO N N N O N V) N ON MF— N in O M ZO r - N a0 Products y N . 00 M 00 in i) O N 00 N O N O M N"T"0 O M 00 qv M N00 - O M W 00 \O l� N 00 Q\ 00 N 00 M M 00 M N C\ 00 00 - lI) a y N N o,, r IV O �-- O N M O M O 7 �-- M M O N N Q\ �-- \O O Q\ Q\ M .-ti N �- C, N O M- �--i tn N O- N N 00 N N N :5? w 0 0 0 0 0 0 0 0 0 C\ N 01 01 00 N 00 N M NrD V7 a� a}"i O 0 0 •--� O O V'� O O v, a 0 0 0 0 0 0 a, a, 0 o.,0 0 0 0 0 0 0 0 o...0 0 0 0 0 0 0 0 0 0 0 —� \O O ,--i V7 M 00 \O V7 r-- •--� 01 "t M t` 00 r- 00 ,--i M "t "t "t 1,O r— M •--i ar y u7 N O N ¼-O ¼-C N 0 0 0 •--a 't O C , N O 00 - t` 't N O ¼-O .- u7 00 00 N M v) O O O O O O 01 0 0 0 0 0 6 O O N O O 4 O O M O It) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 I. O a. t) s, t) t, t) a. t) s. 4) s. N a, N s� U s, cd cd cd N N N N N N U N 00 i-. a-. Fr Fr N N s•. i_ s_ I•. s.. s.. s•. 3., a) ri o C ,� y . �• W N U O 0) N N >~ cv >~ O .U, ta..� cd cd G) O V tl U Z O cn U 0) O n �" N M t, aU 0 o %a %^a EEI U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U 1 Did A Item AA1: Staff Report Pg. 94 Packet Pg. 774 of 853 0 O 0 a) O W 0 m (I) O 0 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o Distribution of O i ^O o O N O O MN - r — Products o ca 00 O i,N Q5 in in N 00 N M V i N ti - kA 01 N O'0 00 I- O N N r-i 1.0 V i in u c) y p, V) am' O N .-ti V) N in N 0 - - 0 O 0 O 0 N 0 - 0 O O O- O H O N V M N ON N 0 O O 0 0 O 0 O 0 - N- \O 0 O\ N 0 O 0 00 O 00 O ' - 0 It) N 0 0 C a� o O O O O 0 0 0 0 0 O � '�e . 00 N O r- 00 O M O I) O _ N 00 N c. (l) O .c v, a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 v M t` t` — O N N 00 O 01 •—� 00 00 N O kn M u7 —� �O ar y &n ' M 0 0 O .-- N I) N O O O O N M N O M N O — N N 0 - - 0 0 0 0 In 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o c� c� cC c� c� cd cd cd cd cd cd c� cC c� c� cd c� c� cd cd cd cd cd cd cd c� cd cd cd cd L) O O O O O O O O O O O O O O O O O O O O O O O O O O a a a a f i V -C our, a a 0 o oUUU E;= �UUUUUUUUUUUUUUUUUUUUUUUUUU U ar�U Did A kn O Item AA1: Staff Report Pg. 95 Packet Pg. 775 of 853 a) O O a) C W 0 m (I) O C O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O \ O \ O \ O \ O \ o \ e \ e C e C e C e \ e C e C e C e \ o \ Distribution of O i P 'O C o ca 01 kn 0\ N \O 01 00 in M 4 r" '" 14 'l rm d' kn M 00 M M N IV N 01 ' 01 .--I 01 O\ N M 01 O 00 M N N it N ' t 00 a1 Products kn N 00 rO .-ti r" �O M O M O N O N- t- N 01 00 01 t- 01 M O T N' kn IV N oo O - 'O I4 O N kn y `O N NN O\ O O O V7 O N O N O O N kn O O N r-i "0 N M - 0\ M .--i 00 N N O N O r O C a� C 0 N n O �O d v, a G C C G C C C C C C C C C C O 0 G G C G C C C C C G C 0 0 ar y 0� O M. N .O N N O t/') Ln O N '.O M M 1'— 00 N O kn "O `— N O O O O O O O O O O O O O O O O O O O O O O O O O O O O O M 4) 4) N 4) N d) N d) d) N 'Cl) U) d) d) G) G) N G) G) d) 4) U) 4) 4) C4 4) N 5) Cl) Cl) U ♦Z+ �" � � � � � W � � Fri � � Fri � � � � � � � W W W W W � � � � . ° ° r. 0 Q ..Cl)F II p O 0 ) � Q � t_ a C o 0 %^a EU O oUUUUUUUUUUUUUUUUUUUUUUUUUU UU U U Did A Ti kn O J Item AA1: Staff Report Pg. 96 Packet Pg. 776 of 853 0 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O 0 0 0 0 O O O O O o e e e e o Distribution of O i 'O p ca N r. 01 O -T 01 N O M N r" M N O IT O 'O ZZ u M 00 00 M M IVu.n �--� N .--IC 00 �--I O �O Products a y V) \O O M X "D r M 00 Z t- N M M O - " 01 " N N 01 M r" N ( 00 ci y O O1 00 r �O O *1 O - N N N 00 Z O O N N r N u.nO O M N N 01 u.nO1 O N N O N O N M N 00 - N N N - O O C C C O O O M O O O O O O C C O C O C C C C O O C O O C w o 0 N 0 0 ACC "C U 0C 00 M --i 00 01 v, a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ar y &n M O O N O N .--+ O M O O M N 00 M -- c� O O O O O O O O O M O 0 0 0 0 0 0 0 0 0 0 0 O O O 0 0 0 0 0 0 O O O O O O O O O O 0 0 0 0 E 0 0 0 0 0 0 0 0 0 0 O �"� O ;0) •E .E .E .E .E .E . 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'm M M M O N M \O N tn N- M C. 00 N '0 N OC N M \O \O \O N \O \O w 0 0 o 0 0 � 0 c C •� C •R ^C U \O M � G1 M M � N � v, a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 i y M -- M \O M •--i 01 M 0\ r-- \O O M t/') M 00 O N M kn •-- M \O 01, N 00 O 00 N O \O --� M \O ,-- Q1 O ,-� N •-- t-- \0 00 N M •--� 00 c� M cd ct cd cd M 0 c� c� N cC c' c' co 0 0 0 0 0 0 0 0 0 O cd cd cd cd cd cC cd cd cC cd cd cd cd cd co cd cd cd cd O O O O O O Or r ,0 V i 4 iti �1 iy iti iti V-} �I �•I iti iti iti iti i•-I Cn Ln Cn ^ Vl (n U� Un V� Cn to un r� to 0 x o r" `� U o o a ° c• j- o E N v U O y a as � ar t_ a a o 0 U D U U D U U U ^O U U U U U U U V U U O U D U U U O U O U O U U V O U D U aU Did Item AA1: Staff Report Pg. 100 Packet Pg. 780 of 853 0 O O O O W 0 m (I) O O O O Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O 0 0 0 . 0 \ 0 \ 0 \ 0 \ o \ e \ e \ e \ e . e \ e \ e \ 0 \ o \ o \ Distribution of Opi P C C o ca O1 in O N 00 M 00 O1 M N O �O O1 Vi �O '0 M O O1 Q\ O1 �O 00 IT N IT ' kn _0 N ZO N O1 1 O1 N O\ N O1 t` rl r" in le M N N N Products 0 y O O\ M O1 N O 00 ZZ V i "O V') - O1 ZO '.O N M O ZO N N N -I N If) N r -I N O N c y ' M - V) 00 - N - 00 - ' M 00 rO - N - 00 O M M N rl O \O " N- - If) 00 .-ti • - '0 M O N O V) O- N O M 't V') IV O 00 N rl O N O 1O O O O C C rl C O O O O O O O O O O C C C O O O O O O O N O O O C a) w o 0 0 0 0 0 O C •R ^C v N OO1 O1 00 M N •� a1 V') �O v, a 0 O O O OO O O O O O O O O 0 0 O O 0 0 O O O 0 O O O O O O 0 i y 00 N -- .� N O •� -- •� -- -- •� "O O r- - � 00 O ^� O O O N N In M IO M O1 O O O C v O - O O S O N O O O O O M O N O O 00 O O O O O O O r O O O O O O O O O O O O O O O O O O O O O O O O O O O O N O O 0 O O O O cd M cd cd cd C CS:"i t" S:"i 3•", ci)ci) S:"i S", f~r' t~r" �+" ~ n �"" �'"-' , '� '� '� '� '� ~O U O C/1 O r/� O V1 O to V cC V co V V co V cC V V cd V1 cl] N [� H H H H H H H H N N 0 C O U�° ri °U ° o > o o H o a V1 h .� •ti W a ar ou C a C o 0 0 ;� a �^aUUUU ODUUUUUU U oU U OU U o U oUUUUUUU U O U ODUU U aU Did Item AA1: Staff Report Pg. 101 Packet Pg. 781 of 853 Item AA1 /i A Attachment A Resolution Authorizing City Manager 3 _ to Execute Participation Agreements obo CPA to O 0 Enter into Settlement a) 0 O a) 0 W 0 m (I) 0 O O 0 0 0 0 0 0 0 0 0 0 0 0 0 C 00 V) - N M N 01 N - C a) M 00 - N' O O O- OE M N N ) O N N y p, • N 0 O N 0 - 0 M O N O - N M V) O • V) O N ' O N N N - u- O O O C O O O C C O C O O C 0 0 0 l— CC "C U v, a 0 i kn N 00 N It) V') "O V') c� O O O O O M O O O N O O O O O C O as a � 00 on 0 a a 0 o `.! c..� r � `/ r � U c)0 U c..) U U U L) U Qy V Agreements re Manufacture and Distribution of Opioid IC Products J n Item AA1: Staff Report Pg. 102 Packet Pg. 782 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F APPENDIX 2 Cost Reimbursement Procedure 1. Additional defined terms: Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products a) Costs means the reasonable amounts paid for the attorney and other City Attorney and County Counsel staff time for individuals employed by a Plaintiff Subdivision at the contractual rate, inclusive of benefits and overhead, together with amounts paid for court reporters, experts, copying, electronic research, travel, vendors, and the like, which were not previously reimbursed and which were paid or incurred (i) prior to December 31, 2022 in litigation against any Opioid Defendant and/or (ii) in negotiating and drafting any CA Allocation Agreement(s) concerning a settlement with any Opioid Defendant(s). Costs does not include attorneys' fees, costs, or expenses incurred by private contingency fee counsel. No part of the CA Abatement Accounts Fund will be used to reimburse Costs. b) First Claims Date means October 1, 2023 or when all applications for reimbursement of Costs, in whole or in part, from funds available under Section IX and Exhibit R of the Walgreens Settlement Agreement, Section XIV and Exhibit R of the Teva Settlement Agreement, Section XIII and Exhibit R of the Allergan Settlement Agreement, Section X and Exhibit R of the Distributor Settlement Agreement, Section XI and Exhibit R of the Janssen Settlement Agreement, Section X and Exhibit R of the CVS Settlement Agreement, or Section IX and Exhibit R of the Walmart Settlement Agreement, have been finally determined under the provisions of those agreements, whichever comes first. c) Special Master means a retired judicial officer or former public lawyer, not presently employed or retained by a Plaintiff Subdivision, who will aggregate, review, and determine the reasonable Costs to be awarded to each Plaintiff Subdivision that submits a claim for reimbursement of Costs. The Special Master will be selected by a majority vote of the votes cast by Plaintiff Subdivisions, with each such subdivision having one vote. d) Plaintiff Subdivision Committee means the committee of Plaintiff Subdivisions that will review and approve the invoices submitted by the Special Master reflecting his or her reasonable time and expenses. 2. Cost Reimbursement to Plaintiff Subdivision a) Purpose. Substantial resources have been expended to hold Opioid Defendants accountable for creating and profiting from the opioid crisis, and this effort has been a significant catalyst in creating National Opioid Settlements with various manufacturers, distributors, and chain pharmacies. b) Claims Procedure. If a Plaintiff Subdivision is eligible to seek reimbursement of Costs, in whole or in part, from funds available under Section IX and Exhibit R of the Walgreens 0 0 Item AA1: Staff Report Pg. 103 Packet Pg. 783 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Settlement Agreement, Section XIV and Exhibit R of the Teva Agreements re Agreement, Section XIII and Exhibit R of the Allergan Settlem Manufacture and Section X and Exhibit R of the CVS Settlement Agreement, Sec Distribution of Opioid R of the Walmart Settlement Agreement, Section X or Exhibit Products Settlement Agreement, or Section XI or Exhibit R of the Janssen Agreement, it must first make a timely application for reimbursement from such funds. To allow sufficient time for determination of those applications, no claim for Costs to the CA Subdivision Fund under this Agreement may be made before the First Claims Date. ii. A Plaintiff Subdivision that wishes to be reimbursed from the CA Subdivision Fund must submit a claim to the Special Master no later than forty-five (45) days after the First Claims Date. The Special Master will then compile and redistribute the aggregated claim totals for each Plaintiff Subdivision via email to representatives of all the Plaintiff Subdivisions. A claim for attorney and staff time must list, for each attorney or staff member included in the claim, the following information: name, title, total hours claimed, hourly rate (including, if sought, benefits and share of overhead), and narrative summarizing the general nature of the work performed by the attorney or staff member. For reimbursement of "hard" costs, the subdivision may aggregate across a category (e.g., total for travel costs). It is the intention of the Plaintiff Subdivisions that submission of documents related to reimbursement of Costs does not waive any attorney -client privilege or exemptions to the California Public Records Act. iii. The Special Master may request, at his or her sole option, additional documents or details to assist in the final award of Costs. iv. The Special Master will review claims for reasonableness and will notify each Plaintiff Subdivision of the final determination of its claim, and will provide a list of all final awards to all Plaintiff Subdivisions by email or, upon request, via First Class U.S. Mail. Any Plaintiff Subdivision may ask the Special Master to reconsider any final award within twenty-one (21) days. The Special Master will make a final determination on any such reconsideration request within thirty (30) days of receipt. v. Any decision of the Special Master is final and binding, and will be considered under the California Arbitration Act, Code of Civil Procedure section 1280 et seq. as a final arbitration award. Nothing in this agreement is intended to expand the scope of judicial review of the final award for errors of fact or law, and the Parties agree that they may only seek to vacate the award if clear and convincing evidence demonstrates one of the factors set forth in Code of Civil Procedure, section 1286.2, subdivision (a). Plaintiff Subdivisions will have fourteen (14) days after all final awards are made, together with any final determination of a request for Item AA1: Staff Report Pg. 104 Packet Pg. 784 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement reconsideration, to seek review in the Superior Court of Califorri Agreements re of Civil Procedure, section 1285, where the State has filed its Ct1 Manufacture and Distribution of Opioid vi. The Special Master will prepare a report of Costs that includes Products expenses at least ninety (90) days before the Payment Date for each nnua Payment. The Special Master's preparation of a report of Costs does not discharge a Plaintiff Subdivision's reporting requirement under Section V(B)(2) of the Walgreens Settlement Agreement. vii. A member of the Plaintiff Subdivision Committee, which is a CA Participating Subdivision, will submit to the Settlement Fund Administrator and Walgreens a report of the fees and expenses incurred by the Special Master pursuant to Section V(B)(2) of the Walgreens Settlement Agreement. c) Claims Priority and Limitation. The Special Master will submit invoices for compensation of reasonable fees and expenses to the Plaintiff Subdivision Committee no later than ninety (90) days prior to the Payment Date for each Annual Payment. The Plaintiff Subdivision Committee will promptly review and, if reasonable, approve the Special Master's invoice for compensation. The Plaintiff Subdivision Committee will submit approved invoices to the Settlement Fund Administrator for payment. The Special Master's approved invoices have priority and will be paid first from the CA Subdivision Fund before any award of Costs, subject to the limitation in Section 2.c.v below. ii. Final Awards of Costs that do not exceed seventy-five thousand dollars ($75,000.00) will be paid next in priority after the Special Master's approved invoices. iii. Final Awards of Costs in excess of seventy-five thousand dollars ($75,000.00) will be paid proportionally from the funds remaining in that year's Annual Payment. iv. Any claim for Costs that is not paid in full will be allocated against the next year's distribution from the CA Subdivision Fund, until all approved claims for Costs are paid in full. v. In no event will more than 50% of the total CA Subdivision Fund received in any year be used to pay Costs or the Special Master's approved invoices. vi. In no event shall more than $28 million of the total CA Subdivision Funds paid pursuant to the Walgreens Settlement Agreement, Teva Settlement Agreement, Allergan Settlement Agreement, Distributor Settlement Agreement, CVS Settlement Agreement, Janssen Settlement Agreement, and the Walmart Settlement Agreement be used to pay Costs. Item AA1: Staff Report Pg. 105 Packet Pg. 785 of 853 Item AA1 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement d) Collateral Source Payments and Third -Party Settlement. Agreements re Manufacture and In the event a Plaintiff Subdivision is awarded compensation, in Distribution of Opioid by any source of funds created as a result of litigation against arit Products for its reasonable Costs, it will reduce its claim for Costs from the CA Subdivision Fund by that amount. If a Plaintiff Subdivision has already received a final award of Costs from the CA Subdivision Fund, it will repay the fund up to the prior award of Costs via a payment to the Settlement Fund Administrator or notify the Settlement Fund Administrator that its allocation from the next and subsequent Annual Payments should be reduced accordingly. If the Plaintiff Subdivision is repaying any prior award of Costs, that repayment will occur as soon as is feasible after the Plaintiff Subdivision's receipt of Cost funds from the collateral source, but no more than 90 days after its receipt from the collateral source. The Settlement Fund Administrator will add any repaid Costs to the CA Subdivision Fund. Any Plaintiff Subdivision that has submitted for reimbursement to any national fund and has not received a final determination by the First Claims Date may request that the settlement administrator withhold some or all of its payment from the CA Subdivision Fund in order to avoid repayment. ii. In the event a Plaintiff Subdivision reaches a monetary settlement or compromise against any Opioid Defendant outside of the National Opioid Settlement, the monetary portion of such settlement, net of fees paid to outside contingency fee counsel and of funds earmarked strictly for abatement, will be credited against its Costs and the subdivision will be ineligible to recover those credited Costs from the CA Subdivision Fund. Plaintiff Subdivisions negotiating monetary settlements or compromises against any Opioid Defendant outside of the National Opioid Settlement will negotiate for funds to repay any Costs it previously received from the CA Subdivision Fund or for Costs it otherwise might be eligible to claim from the CA Subdivision Fund. If such a settlement is paid after all final approved claims for Costs by all Plaintiff Subdivisions are satisfied in full, the settling subdivision will reimburse the CA Subdivision Fund in that amount by making payment to the Settlement Fund Administrator to add to the CA Subdivision Fund in a manner consistent with the repayments described in section 2.d.i above. Item AA1: Staff Report Pg. 106 Packet Pg. 786 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F APPENDIX 3 CALIFORNIA -SUBDIVISION BACKSTOP Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products On August 6, 2021, Judge Polster of the US District Court for the Northern District of Ohio issued an Order (the Order), docket number 3814, in In Re National Prescription Opiate Litigation, MDL 2804, addressing contingent attorney fee contracts between political subdivisions eligible to participate in the Walgreens Settlement and their counsel. In light of the Order, and at the request of [SUBDIVISION], the [SUBDIVISION], its counsel [COUNSEL], and the California Attorney General, on behalf of the State of California, are entering into this California -Subdivision Backstop Agreement (Backstop Agreement). [SUBDIVISION] and [COUNSEL] intend this Backstop Agreement to constitute a State Back - Stop Agreement as that term is used in the Order and in Exhibit R (Agreement on Attorneys' Fees, Costs, and Expenses) of the Walgreens Settlement Agreement. Pursuant to this Backstop Agreement, [SUBDIVISION] may, subject to the limitations of the Walgreens Settlement Agreement and CA Walgreens Allocation Agreement, as well as any other limitations imposed by law, use funds that it receives from the Walgreens Settlement CA Subdivision Fund to pay a contingent fee to [COUNSEL]. Any such payment from [SUBDIVISION] to [COUNSEL], together with any contingency fees that [COUNSEL] may receive from the national Attorney Fee Fund, will not exceed a total contingency fee of [PERCENTAGE NOT TO EXCEED 15%] of the total gross recovery of [SUBDIVISION] from the Walgreens Settlement. [COUNSEL] certify that they first sought fees and costs from the Attorney Fee Fund created under the Walgreens Settlement Agreement before seeking or accepting payment under this backstop agreement. [COUNSEL] further certify that they are not seeking and will not accept payment under this backstop agreement of any litigation fees or costs that have been reimbursed through prior settlements or judgments. The Attorney General is executing this agreement solely because the definition of "State Back - Stop Agreement" in Exhibit R of the Walgreens Settlement Agreement requires such agreements to be between "a Settling State" and private counsel for a participating subdivision. Neither the California Attorney General nor the State of California have any obligations under this Backstop Agreement, and this Backstop Agreement does not require the payment of any state funds to [SUBDIVISION], [COUNSEL], or any other party. [DATE] [SUBDIVISION SIGNATURE BLOCK] [DATE] [COUNSEL SIGNATURE BLOCK] [DATE] [ATTORNEY GENERAL SIGNATURE BLOCK] Item AA1: Staff Report Pg. 107 Packet Pg. 787 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement EXHIBIT K Agreements re Manufacture and Subdivision Participation and Release Form Distribution of Opioid Products Will your subdivision or special district be signing the settlement participation form for me CVS Settlement at this time? [ ] Yes [ ] No Governmental Entity: Palo Alto city State: CA Authorized Signatory: Address 1: Address 2: City, State, Zip: Phone: Email: The governmental entity identified above ("Governmental Entity"), in order to obtain and in consideration for the benefits provided to the Governmental Entity pursuant to the Settlement Agreement dated December 9, 2022 ("CVS Settlement"), and acting through the undersigned authorized official, hereby elects to participate in the CVS Settlement, release all Released Claims against all Released Entities, and agrees as follows. 1. The Governmental Entity is aware of and has reviewed the CVS Settlement, understands that all terms in this Participation and Release Form have the meanings defined therein, and agrees that by executing this Participation and Release Form, the Governmental Entity elects to participate in the CVS Settlement and become a Participating Subdivision as provided therein. 2. The Governmental Entity shall promptly, and in any event no later than 14 days after the Reference Date and prior to the filing of the Consent Judgment, dismiss with prejudice any Released Claims that it has filed. With respect to any Released Claims pending in In re National Prescription Opiate Litigation, MDL No. 2804, the Governmental Entity authorizes the Plaintiffs' Executive Committee to execute and file on behalf of the Governmental Entity a Stipulation of Dismissal with Prejudice substantially in the form found at https://nationalopioidsettlement.com. 3. The Governmental Entity agrees to the terms of the CVS Settlement pertaining to Participating Subdivisions as defined therein. 4. By agreeing to the terms of the CVS Settlement and becoming a Releasor, the Governmental Entity is entitled to the benefits provided therein, including, if applicable, monetary payments beginning after the Effective Date. The Governmental Entity agrees to use any monies it receives through the CVS Settlement solely for the purposes provided therein. Item AA1: Staff Report Pg. 108 Packet Pg. 788 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement 6. The Governmental Entity submits to the jurisdiction of the court in the Agreements re state where the Consent Judgment is filed for purposes limited to that coullManufacture and and for resolving disputes to the extent provided in, the CVS Settleme Distribution of Opioid Entity likewise agrees to arbitrate before the National Arbitration Panel resolving disputes to the extent otherwise provided in, the CVS Settlement. Products 7. The Governmental Entity has the right to enforce the CVS Settlement as provided therein. 8. The Governmental Entity, as a Participating Subdivision, hereby becomes a Releasor for all purposes in the CVS Settlement, including without limitation all provisions of Section XI (Release), and along with all departments, agencies, divisions, boards, commissions, districts, instrumentalities of any kind and attorneys, and any person in their official capacity elected or appointed to serve any of the foregoing and any agency, person, or other entity claiming by or through any of the foregoing, and any other entity identified in the definition of Releasor, provides for a release to the fullest extent of its authority. As a Releasor, the Governmental Entity hereby absolutely, unconditionally, and irrevocably covenants not to bring, file, or claim, or to cause, assist or permit to be brought, filed, or claimed, or to otherwise seek to establish liability for any Released Claims against any Released Entity in any forum whatsoever. The releases provided for in the CVS Settlement are intended by the Parties to be broad and shall be interpreted so as to give the Released Entities the broadest possible bar against any liability relating in any way to Released Claims and extend to the full extent of the power of the Governmental Entity to release claims. The CVS Settlement shall be a complete bar to any Released Claim. 9. The Governmental Entity hereby takes on all rights and obligations of a Participating Subdivision as set forth in the CVS Settlement. 10. In connection with the releases provided for in the CVS Settlement, each Governmental Entity expressly waives, releases, and forever discharges any and all provisions, rights, and benefits conferred by any law of any state or territory of the United States or other jurisdiction, or principle of common law, which is similar, comparable, or equivalent to § 1542 of the California Civil Code, which reads: General Release; extent. A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release that, if known by him or her would have materially affected his or her settlement with the debtor or released party. A Releasor may hereafter discover facts other than or different from those which it knows, believes, or assumes to be true with respect to the Released Claims, but each Governmental Entity hereby expressly waives and fully, finally, and forever settles, releases and discharges, upon the Effective Date, any and all Released Claims that may exist as of such date but which Releasors do not know or suspect to exist, whether through ignorance, oversight, error, negligence or through no fault whatsoever, and which, if known, would materially affect the Governmental Entities' decision to participate in the CVS Settlement. lJ Item AA1: Staff Report Pg. 109 Packet Pg. 789 of 853 A Item AA1 /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement 11. Nothing herein is intended to modify in any way the terms of the CVS Agreements re h Governmental Entity hereby agrees. To the extent this Participation Manufacture and s interpreted differently from the CVS Settlement in any respect, the CVS S Distribution of Opioid Products I have all necessary power and authorization to execute this Participation and Release Form on behalf of the Governmental Entity. Signature: Name: Title: Date: IJ Item AA1: Staff Report Pg. 110 Packet Pg. 790 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Proposed California State -Subdivision Agreement Regarding Distribution and Use of Settlement Funds — CVS Settlement 1. Introduction Item AA1 Attachment A Resolution A Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Pursuant to the CVS Settlement Agreement, dated as of December 9, 2022, and any revision thereto as well as any modification thereto entered into by the State of California and CVS (the "CVS Settlement Agreement"), including Section V and Exhibit O, the State of California proposes this agreement (the "CA CVS Allocation Agreement") to govern the allocation, distribution, and use of Settlement Fund payments made to California pursuant to Sections IV and V of the CVS Settlement Agreement. For the avoidance of doubt, this agreement does not apply to payments made pursuant to Sections IX or X of the CVS Settlement Agreement. Pursuant to Exhibit O, Paragraph 4, of the CVS Settlement Agreement, acceptance of this CA CVS Allocation Agreement is a requirement to be an Initial Participating Subdivision. 2. Definitions a) CA Participating Subdivision means a Participating Subdivision that is also (a) a Plaintiff Subdivision and/or (b) a Primary Subdivision with a population equal to or greater than 10,000. For the avoidance of doubt, eligible CA Participating Subdivisions are those California subdivisions listed in Exhibit C (excluding Litigating Special Districts) and/or Exhibit Ito the CVS Settlement Agreement. b) Allergan Settlement Agreement means the Allergan Settlement Agreement dated November 22, 2022, and any revision thereto. c) Distributor Settlement Agreement means the Distributor Settlement Agreement dated July 21, 2021, and any revision thereto. d) Janssen Settlement Agreement means the Janssen Settlement Agreement dated July 21, 2021, and any revision thereto. e) Teva Settlement Agreement means the Teva Settlement Agreement dated November 22, 2022, and any revision thereto. f) Walgreens Settlement Agreement means the Walgreens Settlement Agreement dated December 9, 2022, and any revision thereto. g) Walmart Settlement Agreement means the Walmart Settlement Agreement dated November 14, 2022, and any revision thereto. h) CA Litigating Special District means a Litigating Special District located in California. CA Litigating Special Districts include Downey Unified School District, Elk Grove Unified School District, Kern High School District, Montezuma Fire Protection District (located in Stockton, California), Santa Barbara San Luis Obispo Regional Health Authority, Inland Empire Health Plan, Health Plan of San Joaquin, San Leandro Unified School District, Pleasant Valley School District Board, and LA Care Health Plan. i) Plaintiff Subdivision means a Subdivision located in California, other than a CA Item AA1: Staff Report Pg. 111 Packet Pg. 791 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Litigating Special District, that filed a lawsuit, on behalf of the S Agreements re and/or through an official of the Subdivision on behalf of the Peo Manufacture and of California, against one or more Opioid Defendants prior to Oc Distribution of Opioid j) Opioid Defendant means any defendant (including but not limite Products Pharmaceutical Industries Ltd., Allergan Finance, LLC, Allergan Limited, CVS Health Corporation, CVS Pharmacy, Inc., Walgreen Co., Walmart Inc., Johnson & Johnson, Janssen Pharmaceuticals, Inc., Purdue Pharma L.P., Cardinal Health, Inc., AmerisourceBergen Corporation, and McKesson Corporation) named in a lawsuit seeking damages, abatement, or other remedies related to or caused by the opioid public health crisis in any lawsuit brought by any state or local government on or before October 1, 2020. 3. General Terms This agreement is subject to the requirements of the CVS Settlement Agreement, as well as applicable law, and the CVS Settlement Agreement governs over any inconsistent provision of this CA CVS Allocation Agreement. Terms used in this CA CVS Allocation Agreement have the same meaning as in the CVS Settlement Agreement unless otherwise defined herein. Pursuant to Section V(E)(1) of the CVS Settlement Agreement, (a) all Settlement Fund payments will be used for Opioid Remediation, except as allowed by Section V(B)(2) of the CVS Settlement Agreement; and (b) at least seventy percent (70%) of Settlement Fund payment amounts will be used solely for future Opioid Remediation. 4. State Allocation The Settlement Fund payments to California,' pursuant to the CVS Settlement Agreement, shall be allocated as follows: 15% to the State Fund; 70% to the Abatement Accounts Fund; and 15% to the Subdivision Fund. For the avoidance of doubt, all funds allocated to California from the Settlement Fund shall be combined pursuant to this CA CVS Allocation Agreement, and 15% of that total shall be allocated to the State of California (the "State of California Allocation"), 70% to the California Abatement Accounts Fund ("CA Abatement Accounts Fund"), and 15% to the California Subdivision Fund ("CA Subdivision Fund"). 1 For purposes of clarity, use of the term "California" refers to the geographic territory of California and the state and its local governments therein. The term "State" or "State of California" refers to the State of California as a governmental unit. lJ Item AA1: Staff Report Pg. 112 Packet Pg. 792 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement A. State of California Allocation Agreements re Manufacture and Fifteen percent of the total Settlement Fund payments will be allocated to th Distribution of Opioid the State for future Opioid Remediation. Products B. CA Abatement Accounts Fund i. Allocation of CA Abatement Accounts Funds a) Seventy percent of the total Settlement Fund payments will be allocated to the CA Abatement Accounts Fund. The funds in the CA Abatement Accounts Fund will be allocated based on the allocation model developed in connection with the proposed negotiating class in the National Prescription Opiate Litigation (MDL No. 2804), as adjusted to reflect only those cities and counties that are eligible, based on population or litigation status, to become a CA Participating Subdivision. The percentage from the CA Abatement Accounts Fund allocated to each CA Participating Subdivision is set forth in Appendix 1 in the column entitled abatement percentage (the "Local Allocation"). For the avoidance of doubt, CA Litigating Special Districts and California towns, cities, and counties with a population less than 10,000 are not eligible to receive an allocation of CA Abatement Accounts Funds. b) A CA Participating Subdivision that is a county, or a city and county, will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision, and will receive payments as provided in the CVS Settlement Agreement. c) A CA Participating Subdivision that is a city will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision. The Local Allocation share for a city that is a CA Participating Subdivision will be paid to the county in which the city is located, rather than to the city, so long as: (a) the county is a CA Participating Subdivision, and (b) the city has not advised the Settlement Fund Administrator that it requests direct payment at least 60 days prior to a Payment Date. A Local Allocation share allocated to a city but paid to a county is not required to be spent exclusively for abatement activities in that city, but will become part of the county's share of the CA Abatement Accounts Funds, which will be used in accordance with Section 4.B.ii (Use of CA Abatement Accounts Funds) and reported on in accordance with Section 4.B.iii (CA Abatement Accounts Fund Oversight). d) A city within a county that is a CA Participating Subdivision may opt in or out of direct payment at any time, and it may also elect direct payment of only a portion of its share, with the remainder going to the county, by providing notice to the Settlement Fund Administrator at least 60 days prior to a Payment Date. For purposes of this CA CVS Allocation Agreement, the Cities of Los Angeles, Oakland, San Diego, San Jose and Eureka will be deemed to have elected direct payment if they become Participating Subdivisions. ci Item AA1: Staff Report Pg. 113 Packet Pg. 793 of 853 Item AA1 A /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement e) The State will receive the Local Allocation share of any payment to t Agreements re that is attributable to a county or city that is eligible to become a CA ii Manufacture and Subdivision, but that has not, as of the date of that payment to the Sell Distribution of Opioid become a Participating Subdivision. Products f) Funds received by a CA Participating Subdivision, and not expended or encumbered within five years of receipt and in accordance with the CVS Settlement Agreement and this CA CVS Allocation Agreement shall be transferred to the State; provided however, that CA Participating Subdivisions have seven years to expend or encumber CA Abatement Accounts Funds designated to support capital outlay projects before they must be transferred to the State. This provision shall not apply to the Cost Reimbursement Funds, which shall be controlled by Appendix 2. ii. Use of CA Abatement Accounts Funds a) The CA Abatement Accounts Funds will be used for future Opioid Remediation in one or more of the areas described in the List of Opioid Remediation Uses, which is Exhibit E to the CVS Settlement Agreement. b) In addition to this requirement, no less than 50% of the funds received by a CA Participating Subdivision from the Abatement Accounts Fund in each calendar year will be used for one or more of the following High Impact Abatement Activities: (1) the provision of matching funds or operating costs for substance use disorder facilities within the Behavioral Health Continuum Infrastructure Program; (2) creating new or expanded Substance Use Disorder ("SUD") treatment infrastructure; (3) addressing the needs of communities of color and vulnerable populations (including sheltered and unsheltered homeless populations) that are disproportionately impacted by SUD; (4) diversion of people with SUD from the justice system into treatment, including by providing training and resources to first and early responders (sworn and non -sworn) and implementing best practices for outreach, diversion and deflection, employability, restorative justice, and harm reduction; and/or (5) interventions to prevent drug addiction in vulnerable youth. c) The California Department of Health Care Services ("DHCS") may add to this list (but not delete from it) by designating additional High Impact Abatement Activities. DHCS will make reasonable efforts to consult with stakeholders, including the CA Participating Subdivisions, before adding additional High Impact Abatement Activities to this list. d) For the avoidance of doubt, and subject to the requirements of the CVS Settlement Agreement and applicable law, CA Participating Subdivisions may form agreements or O :O 4 O Item AA1: Staff Report Pg. 114 Packet Pg. 794 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement ventures, or otherwise work in collaboration with, federal, state, local Agreements re sector entities in pursuing Opioid Remediation activities funded from Manufacture and Accounts Fund. Further, provided that all CA Abatement Accounts Fl Distribution of Opioid Opioid Remediation consistent with the CVS Settlement Agreement k Products Allocation Agreement, a county and any cities or towns within the county may agree t reallocate their respective shares of the CA Abatement Accounts Funds among themselves, provided that any direct distribution may only be to a CA Participating Subdivision and any CA Participating Subdivision must agree to their share being reallocated. iii. CA Abatement Accounts Fund Oversight a) Pursuant to Section 5 below, CA Participating Subdivisions receiving settlement funds must prepare and file reports annually regarding the use of those funds. DHCS may regularly review the reports prepared by CA Participating Subdivisions about the use of CA Abatement Accounts Funds for compliance with the CVS Settlement Agreement and this CA CVS Allocation Agreement. b) If DHCS determines that a CA Participating Subdivision's use of CA Abatement Accounts Funds is inconsistent with the CVS Settlement Agreement or this CA CVS Allocation Agreement, whether through review of reports or information from any other sources, DHCS shall send a request to meet and confer with the CA Participating Subdivision. The parties shall meet and confer in an effort to resolve the concern. c) If the parties are unable to reach a resolution, DHCS may conduct an audit of the Subdivision's use of the CA Abatement Accounts Funds within one year of the request to meet and confer, unless the parties mutually agree in writing to extend the meet and confer time frame. d) If the concern still cannot be resolved, the State may bring a motion or action in the court where the State has filed its Consent Judgment to resolve the concern or otherwise enforce the requirements of the CVS Settlement Agreement or this CA CVS Allocation Agreement. However, in no case shall any audit be conducted, or motion be brought, as to a specific expenditure of funds, more than five years after the date on which the expenditure of the funds was reported to DHCS, in accordance with this agreement. e) Notwithstanding the foregoing, this Agreement does not limit the statutory or constitutional authority of any state or local agency or official to conduct audits, investigations, or other oversight activities, or to pursue administrative, civil, or criminal enforcement actions. Item AA1: Staff Report Pg. 115 Packet Pg. 795 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F C. CA Subdivision Fund Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Fifteen percent of the total Settlement Fund payments will be allocat Distribution of Opioic Subdivision Fund. All funds in the CA Subdivision Fund will be allo Products Plaintiff Subdivisions that are Initial Participating Subdivisions. The funds will e use subject to any limits imposed by the CVS Settlement Agreement and this CA CVS Allocation Agreement, to fund future Opioid Remediation and reimburse past opioid- related expenses, which may include fees and expenses related to litigation, and to pay the reasonable fees and expenses of the Special Master as set forth in Appendix 2. The CA Subdivision Funds will be allocated as follows: a) First, funds in the CA Subdivision Fund shall be used to pay the Special Master's reasonable fees and expenses in accordance with the procedures and limitations set forth in Appendix 2 to this document; b) Second, funds will be allocated to Plaintiff Subdivisions that are Initial Participating Subdivisions that have been awarded Costs, as defined by and in accordance with the procedures and limitations set forth in Appendix 2 to this document. c) Funds remaining in the CA Subdivision Fund, which shall consist of no less than 50% of the total CA Subdivision Fund received in any year pursuant to Appendix 2, Section 2.c.v, will be distributed to Plaintiff Subdivisions that are Initial Participating Subdivisions, in relative proportion to the Local Allocation. These funds shall be used to fund future opioid-related projects and to reimburse past opioid-related expenses, which may include fees and expenses related to litigation against any Opioid Defendant. D. Provision for State Back -Stop Agreement On August 6, 2021, Judge Dan Polster of the U.S. District Court, Northern District of Ohio, Eastern Division, issued an order (ECF Docket Number 3814) ("MDL Fees Order") in the National Prescription Opiate Litigation (MDL No. 2804) "cap[ping] all applicable contingent fee agreements at 15%." Private counsel representing Plaintiff Subdivisions should seek its contingency fees and costs from the Attorney Fee Fund or Cost Funds under the CVS Settlement Agreement, and, if applicable, the Teva Settlement Agreement, Allergan Settlement Agreement, Distributor Settlement Agreement, Janssen Settlement Agreement, Walgreens Settlement Agreement, and Walmart Settlement Agreement. A Plaintiff Subdivision may separately agree to use its share of the CA Subdivision Fund to pay for fees or costs incurred by its contingency -fee counsel ("State Back -Stop Agreement"), pursuant to Exhibit R, section I(Y), of the CVS Settlement Agreement and the MDL Fees Order, so long as such contingency fees do not exceed a total contingency fee of 15% of the total gross recovery of the Plaintiff Subdivision pursuant to the CVS Settlement, inclusive of contingency fees from the national Attorney Fee Fund and this State Back -Stop Agreement. Before seeking fees or litigation costs and expenses from a State Back -Stop Agreement, private counsel Item AA1: Staff Report Pg. 116 Packet Pg. 796 of 853 Item AA1 A /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement representing Plaintiff Subdivisions must first seek contingency fees and cost Agreements re Fee Fund or Cost Funds created under the CVS Settlement Agreement. Furtli Manufacture and may only seek reimbursement for litigation fees and costs that have not prev Distribution of Opioid reimbursed through prior settlements or judgments. Products To effectuate a State Back -Stop Agreement pursuant to this section, an agreement in the form of Appendix 3 may be entered into by a Plaintiff Subdivision, private counsel, and the California Office of the Attorney General. The California Office of the Attorney General shall, upon the request of a Plaintiff Subdivision, execute any agreement executed by a Plaintiff Subdivision and its private counsel if it is in the form of Appendix 3. The California Office of the Attorney General will also consider requests from Plaintiff Subdivisions to execute and enter into agreements presented in other forms. For the avoidance of doubt, this agreement does not require a Plaintiff Subdivision to request or enter into a State Back -Stop Agreement, and no State Back -Stop Agreement shall impose any duty or obligation on the State of California or any of its agencies or officers, including without limitation the Attorney General. 5. State and Subdivision Reporting a) DHCS will prepare an annual written report regarding the State's use of funds from the settlement until those funds are fully expended and for one year thereafter. These reports will be made publicly available on the DHCS web site. b) Each CA Participating Subdivision that receives payments of funds from the settlement will prepare written reports at least annually regarding the use of those funds, until those funds are fully expended and for one year thereafter. These reports will also include a certification that all funds that the CA Participating Subdivision has received through the settlement have been used in compliance with the CVS Settlement Agreement and this CA CVS Allocation Agreement. The report will be in a form reasonably determined by DHCS. Prior to specifying the form of the report DHCS will confer with representatives of the Plaintiff Subdivisions. c) The State and all CA Participating Subdivisions receiving CA Abatement Accounts Funds will track all deposits and expenditures. Each such subdivision is responsible solely for the CA Abatement Accounts Funds it receives. A county is not responsible for oversight, reporting, or monitoring of CA Abatement Accounts Funds received by a city within that county that receives direct payment. Unless otherwise exempt, Subdivisions' expenditures and uses of CA Abatement Accounts Funds and other Settlement Funds will be subject to the normal budgetary and expenditure process of the Subdivision. d) Each Plaintiff Subdivision receiving CA Subdivision Funds will track all deposits and expenditures, as required by the CVS Settlement Agreement and this CA CVS Allocation Agreement. Among other things, Plaintiff Subdivisions using monies from the CA Subdivision Fund for purposes that do not qualify as Opioid Remediation must identify and include in their annual report, the amount and how such funds were used, including if used to pay attorneys' fees, investigation costs, or litigation costs. Pursuant to Section V(B)(2) of the CVS Settlement Agreement, such information must also be reported to the Settlement Fund Administrator and CVS. 7 04a Item AA1: Staff Report Pg. 117 Packet Pg. 797 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F e) In each year in which DHCS prepares an annual report DHCS will to discuss the annual report and the Opioid Remediation activities the State and Participating Subdivisions. 6. Miscellaneous Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products a) The State or any CA Participating Subdivision may bring a motion or action in the court where the State has filed its Consent Judgment to enforce the requirements of this CA CVS Allocation Agreement. Before filing such a motion or action the State will meet and confer with any CA Participating Subdivision that is the subject of the anticipated motion or action, and vice versa. b) Except as provided in the CVS Settlement Agreement, this CA CVS Allocation Agreement is not enforceable by any party other than the State and the CA Participating Subdivisions. It does not confer any rights or remedies upon, and shall not be enforceable by, any third party. c) Except as provided in the CA CVS Allocation Agreement, if any provision of this agreement or the application thereof to any person, entity, or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this agreement, or the application of such provision to persons, entities, or circumstances other than those as to which it is invalid or unenforceable, will not be affected thereby, and each other provision of this agreement will be valid and enforceable to the fullest extent permitted by law. d) Except as provided in the CVS Settlement Agreement, this agreement shall be governed by and interpreted in accordance with the laws of California. lj jti Item AA1: Staff Report Pg. 118 Packet Pg. 798 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F The undersigned, Palo Alto city, ACKNOWLEDGES acceptance of this Propi Subdivision Agreement Regarding Distribution and Use of Settlement Funds a requirement to be an Initial Participating Subdivision in the CVS Settlemen Proposed California State -Subdivision Agreement Regarding Distribution an Funds — CVS Settlement. EXECUTED on Signature: Name: Title: Date: Item AA1 Attachment A Resolution A Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Item AA1: Staff Report Pg. 119 Packet Pg. 799 of 853 z 0 a) 0 a) C W c m (I) 7 U O 0 Item AA1 A A Attachment A Resolution Authorizing City Manager 4 • to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re 0 Manufacture and ° y bN U N U N Distribution of Opioid Products bOn .O c� V O of y 0 > U3 Q a 0 \0. rID "d �c S~ 'd N N N C cd t/1 - � •� rz, �o E EE U (_) 3± rID O d pO y v o o C a 5) a o U an rya ° 0 CID O— °- NI N C/] N O(ID N N> bA Th U > >~ O O o >~ EdID 5)U 5) 5) ' •'" O9 an N " 5) ° •y o Item AA1: Staff Report Pg. 120 Packet Pg. 800 of 853 Item AA1 /�+� A Attachment A Resolution Authorizing City Manager 4 to Execute Participation Agreements obo CPA to a a Enter into Settlement Agreements re Manufacture and o . . . . . . . .. . . o Distribution of Opioid b y N N 00 O kn 00 O - t` t` v M 00 01 to �-- V) 0\ 0 - �O N - N O �Z �O 00 00 N 01 c N 00 N M Products } 0\ " N 00 N V) N N If) N 00 r V) N 00 M O aD y t` O N Q\ 00 00 \O \O N V) - N a1 M .-ti .-- 7=== 00 y v M NO M 00 00 - N V) 00 "T M 00 ' O ti NN- N M - 00 0\ N O - I M M M t` N C C O C C C C C C O C C O O O C C C C N C C 0 o p y O C C E— ee ^C u o0 O W1 N C N i N It— i . a N O O -- N 0 p ap o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ++ N O\ M N M M 00 S N 01 M V7 a1 Cn N S N V7 O r Op y y M �D - tr M N /') N 00 .--' '-O M' N .-' N N i O M N O V') N C �� M O O -� 0 0 '--� --� 0 0 0 0 O O N �O N O N O •--� 0 0 0 0 0 0 0 N 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 — O O O O N O 0 0 0 0 0 0 5)1 a) 5)1 a)a)a)a)a)a)a)a)a)a)- r U U U U U U U U 0 _ U U U U U U U U o o 01 I oII I I I J HQ W w x a Z O a a O? ti U U W Item AA1: Staff Report Pg. 121 Packet Pg. 801 of 853 a) 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O O O O O O O o Distribution of O i ^O p ca O M M O� N O ZO r- N O O O M 0 O M N 'O N O rl .-ti O ' M t` N 00 N O I Products a 0 rl - 00 N ItM 4 00 O N "O in O 0 "O N \O M 3� y 0 D\ 0 M 0 N 0 M- O .-- M O O N N N 00 -- 00 O1 N r \O "C 01 O M If) C' O N N O O - O M O C O O\ O H N- - - N C a, o 0 0 0 0 = v O d1 00 — N v, a 0 0 0 0 0 0 0 0 a,00 0 0 a, a, 0 a, .a, 0 0 0 0 a, a, 0 0 0 0 0 V7 N V7 00 N t 00 N 00 V7 t-- O kn -� N N N N 00 00 01 C' �O -� C1 C' O O O O O -� O M 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C1 cg a3 a3 'A Cn� r En 'A m� U) O O O 000000000 n n n n cd cd cd cd cd cC cd cd cd cd c� c� % O O O 5) 5)5)5)5)5)5)5)5)5)5) O N O N N O N N O N � � � � � � � � � � � � � � •� •� ^, w w w w w w w w w w w w � U U U U U U U U U U U U 5) b ^^ O O x O C.i ~ O O p V N N -� V o U N O O a .� �, y o �' o. O a A W u_ a a 0 o •V" ^O U U U U U aU Did A a Item AA1: Staff Report Pg. 122 Packet Pg. 802 of 853 a) 0 0 a) C W 0 m (I) 0 C 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Distribution of O i ^O C C as O D 00 N- M O 00 ON N - O\ - . N O\ N H IV M r - O 00 .C .O M M M O 00 Products N C\O Q\ IN N N 00 4 C-, �O N O C. i O M M 01 M \O N `O - kn N O C. a' y - N \O N N 00 O I r O' M O I IN l - O N N' O N N O N - O - N 0 \O 0 - 1() 0 O r N N M� - M N g N N N M rl N C a) o 0 0 0 0 0 0 •.� R ^C v M 0000 s to N 01 M O O O O M C G C C C C C C C C C C C C C C C C C C C G C O a 0 (n N- N M 00 ,-- a1 00 "0 MN N '-- C O N —+ C O O M M O t M 01 O 00 O M a1 N O M N"0 N to C 1 .—.-01 N N N 000 v O O — O O O N O O O O O — O 0 O 0 O N O O N 0 O 0 O 0 O 0 O 6 O 0 O 6 O 6 N 6 O 6 O 6 O 6 O 6 6 0 6 0 0 M 0 O 0 a) N E 3'"+ E E C C 4. o U V ti C .� U U O U w > �. OM d FO Q U ¢ O ar ou a C 0 o 'C^a 5000 ODUUU O ODUUUUUUUU ODUUU oUU oU O aU U U U U U U U Did A kn O M Item AA1: Staff Report Pg. 123 Packet Pg. 803 of 853 0 O O a) O W 0 m (I) O O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O O O O O O O o Distribution of O i 'O C o ca N O\ O 00 O O V) O N M - t` N 00 N N'T '0 N N N O' M - If) O Products y O M N V) O 00 00 4 1 ' M 00 O\ Q\ N N - O O\ N 00 00 00 N c) 3 y O IT M 'O N O O - N - N \O 0 --0 0 - M In N 00 IV O If) r" M O 00 O O M N N O O" I O O N v N- O M N N N 'O M- M O"t O O O C C C C O C O C C O C C O C O O O O C O O C O C O O O C C o C 2 C •R ^C v 00 M O a O v, 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 a) a) 0 0 ca) 0 0 0 op 0 ar y O M O N N N O kn O Wn O M M M .O O )n v 0 0 0 0 6 0 0 0 0 0 a 0 0 0 0 O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C) 0 0 0 0 0 CD 0 0 0 0 'A rID Cd0 rID C, rID 'A Cn rID rID rID r/D rID r/D r/D rID r rI) r/D r Ln rID CD N N N N N N N N N N N N N N N N N N N N N N N U vi O rn O V] O V] O V] O VI O Cl) O V] O Vl O Cl) O V] O CI) O VI O V] O 'n O Cl) O V] O V] O Cl) O Cl) O V] O V) O VI O V] O V) O Cl) O V] O V1 O Cl) O VJ O o .� x '��d a �� a>i�UUUU�j�jUU QQ W�UC7C7'3 `� a ti� U U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U Did A Item AA1: Staff Report Pg. 124 Packet Pg. 804 of 853 0 O O a) O W 0 m (I) O U O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O \ O O O O O O O 0 0 0 0 0 0 0 o Distribution of i O P 'O p as N O N \O N 01 in - N N N 0\ 00 01 0\ O o', - M O 'l - It) •-- -0 to 'l 0\ \O 00 00 N V) V) O N N N 00 N N N N O M 00 -4 N Products y V) O 0\ in 01 - S N' N ti 1 00 101 O in ' O Z 00 V) M .--i O M- N 'O 00 ci 3 y• p, 0 o\ r -I 0 00 0 N O 0 M O O 00 O O M O - O O 0\ - O - O O M O O -0 \O M - N 00 M r-i O -0 O O 'O N O M O O V) N 0 V) N 0 If) N 0 If) N 0 t` M 0 to O 0 0\ O 0 O N r 00 4 O 01 O - O O O In O N O O O O C C C O C C O C C O N C O C C O O O O O O O O O O O O C C � w o 0 C y •R ^C v N M a v, 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ?r y 0o — M N O� r0 M Wn 0— O Wn O N O O M .-- -- O M O M M M M O •-- '- N ^- O IC O v O O O O 0 0 0 0 0 0 0 � r- O O O O 0 0 0 0 0 0 0 — O - O O O O O O O O O O O O O O O N O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 d) d) U G) N U G) G) G) G) G) G) 4) 6) G) U G) G) U G) N G) 6) U d) d) G) 5) G) G) N bJJ N U N N U N N N N N N N N N U N N U N N N N N N N N N N U rA 0 rA 0 Cn 0 r 0 cn 0 rn 0 rA 0 Cn 0 CI) 0 C 0 Ci) 0 Ci) 0 CI) 0 CI) 0 Ci) 0 C 0 CI) 0 Ci) 0 C 0 CI) 0 Ci) 0 rn 0 C 0 CI) 0 CI) 0 C 0 r 0 CA 0 cn 0 r 0 sr 5) o " 0 >~ cd a O O N O O 0 y O O O 0 P S. 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Item AA1: Staff Report Pg. 125 Packet Pg. 805 of 853 0 0 O a) 0 W 0 m 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O °° O O O O O O 0 0 0 0 0 0 0 0 o Distribution of O i ' o ca O r. t` M \O N r -I N- M - '.O 00 M O N N M 00 ON O N If) O ti N- N H 01 N- wn N ti Products N N N M �C 00 In t- to 00 �O 00 00 �O N M 00 M t` N 'T OC 00 kn O �O ON M OC 00 M �O NT 00 00 01 00 0\ \O 00 t` 3 N 0 O - - O - N 01 N O 00 O O O O a1 O O O N M 0\ O .q M \O 00 N H 'O - N N N O N N N 00 In kn - M O C O C C C C C O C C O C C O C O O O O O O O O O O O O O C C w o 0 0 0 0 N v, a 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 00 0 0 0 0.0 00 0 0 0 0 0 N M 00 W) "O O O •-- to O O N N to O N — "O O a1 - M — N rn"t a1 N a a, M u7 O N 00 N O1 O O1 00 -t 00 O1 M O1 M O O O O 0 0 0 0 0 6 0 0- 0 0 6 O M O O to O O O O O O H O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 d) G) G) G) d) G) G) G) G) (1) G) ( N c 6) c G) c G) c G) c G) d) 00 cbJA —i 5�—i 7�r f.' >--.'S"�. >•+" O U . V O Q � � � � � � � � � � � � Q � � � � a) N • � � cd�"� O O C.J �N+ 'yam H N N v 000000000000000000 n rn Cl) Cl) /y b 'A -°o ; o °) °o ° o CCI)C C0 00 stn a, ar ou a a 0 o a � a '�^a �UUUUUUUUUUUUUUUUUU ODU ODUUUU O oU aU U U U U )id A kn O Item AA1: Staff Report Pg. 126 Packet Pg. 806 of 853 0 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ Distribution of i O P C p o ca N D -O M N lIDO 00lID N in lID 00 Q\ O i N ZO N N N O N V) N ON MF— N in O M ZO r - N a0 Products y N . 00 M 00 in i) O N 00 N O N O M N"T"0 O M 00 qv M N00 - O M W 00 \O l� N 00 Q\ 00 N 00 M M 00 M N C\ 00 00 - lI) a y N N o,, r IV O �-- O N M O M O 7 �-- M M t` O t` N Q\ �-- \O O Q\ Q\ M .-ti N �- C, N O M- �--i tn N O- N N 00 N N N :5? w 0 0 0 0 0 0 0 0 0 C\ N 01 01 00 N 00 N M NrD V7 a� a}"i O 0 0 •--� O O V'� O O v, a 0 0 0 0 0 0 a, a, 0 o.,0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 —� \O O ,--i V7 M 00 \O V7 r-- •--� 01 "t M t` 00 r- 00 ,--i M "t "t "t 1,O r— M •--i ar y u7 N O N ¼-O ¼-C N O 0 0 •--a 't O C , N O 00 - t` 't N O ¼-O .- u7 00 00 N M v) O O O O O O 01 0 0 0 0 0 6 O O N O O 4 O O M O v7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 I. O a. t) s, t) t, t) a. t) s. 4) s. N a, N s� U s, cd cd cd N N N N N N U N 00 i-. a-. Fr Fr N N s•. i_ s_ s•. s.. s.. s•. 3., a) ri o C ,� y . �• W N U O 0) N N >~ cv >~ O .U, ta..� cd cd G) O V tl U Z O cn U 0) O n �" N M t, aU 0 o %a %^a EEI U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U 1 Did A Item AA1: Staff Report Pg. 127 Packet Pg. 807 of 853 0 O 0 a) O W 0 m (I) O 0 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o Distribution of O i ^O o O N O O MN - r — Products o ca 00 O t-N Q5 in in N 00 N M V i N ti - kA 01 N O'0 00 I- O N N r-i 1.0 V i in u c) y p, V) am' O N .-ti V) N in N 0 - - 0 O 0 O 0 N 0 - 0 O O O O H r-i O N V M N ON N 0 O O 0 0 O 0 O 0 - N- \O 0 O\ N 0 O 0 00 O 00 O ' - 0 It) N 0 0 C a� o O O O O 0 0 0 0 0 O � '�e . 00 N O r- 00 O M O I) O _ N 00 N c. (l) O .c v, a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 v M t` t` — O N N 00 O 01 •—� 00 00 N O kn M u7 —� �O ar y &n M 0 0 O .-- N I) N O O O O N M N O M N O — N N 0 - - 0 0 0 0 In 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o c� c� cC c� c� cd cd cd cd cd cd c� cC c� c� cd c� c� cd cd cd cd cd cd cd c� cd cd cd cd L) O O O O O O O O O O O O O O O O O O O O O O O O O O a a a a f i V -C our, a a 0 o oUUU E;= �UUUUUUUUUUUUUUUUUUUUUUUUUU U ar�U Did A kn O Item AA1: Staff Report Pg. 128 Packet Pg. 808 of 853 a) O O a) C W 0 m (I) O C O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O \ O \ O \ O \ O \ o \ e \ e C e C e C e \ e C e C e C e \ o \ Distribution of O i P 'O C o ca 01 kn 0\ N \O 01 00 in M 4 r" '" 14 'l rm d' kn M 00 M M N IV N 01 ' 01 .--I 01 O\ N M 01 O 00 M N N it N ' t 00 a1 Products kn N 00 rO .-ti r" �O M O M O N O N- t- N 01 00 01 t- 01 M O T N' kn IV N 00 l� O - 'O I4 O N to y `O N NN O\ O O O V7 O N O N O O N kn O O N r-i "0 N M - 0\ M .--i 00 N N O N O r O C a� C 0 N n O �O d v, a G C C G C C C C C C C C C C O 0 G G C G C C C C C G C 0 0 ar y 0� O M. N .O N N O to Ln O N '.O M M -- 00 N O kn "O `— N O O O O O O O O O O O O O O O O O O O O O O O O O O O O O M 4) 4) N 4) N d) N d) d) N 'Cl) U) d) d) G) G) N G) G) d) 4) U) 4) 4) C4 4) N 5) Cl) Cl) U ♦Z+ �" � � � � � W � � Fri � � Fri � � � � � � � W W W W W � � � � . ° ° r. 0 Q ..Cl)F II p O 0 ) � Q � t_ a •C o 0 %^a EU O oUUUUUUUUUUUUUUUUUUUUUUUUUU UU U U Did A Ti kn O J Item AA1: Staff Report Pg. 129 Packet Pg. 809 of 853 0 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O 0 0 0 0 O O O O O o e e e e o Distribution of O i 'O p ca N r. 01 O -T 01 N O M N r" M N O IT O 'O ZZ inc M 00 M M IV �--� in N .--IC 00 �--I O �O Products a y V) \O O M X "D r M 00 Z t- N M M O - " 01 " N N 01 M r" N ( 00 ci 3 y O O1 00 r �O O *1 O - N N N 00 Z O O N N r N u.nO O M N N 01 u.nO1 O N N O N O N M IN 00 rI N N N - O O C C C O O O M O O O O O O C C O C O C C C C O O C O O C w o 0 N 0 0 ACC "C U 0C 00 M --i 00 01 v, a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ar y &n M O O N O N .--+ O M O O M N 00 M -- c� O O O O O O O O O M O 0 0 0 0 0 0 0 0 0 0 0 O O O 0 0 O O O O O O O O O O O O O O 0 0 0 0 E 0 0 0 0 0 0 0 0 0 0 O �"� O ;0) •E .E .E .E .E .E . PEE �}y, i-i �CCyy P ��.yI i d CC C6 ,}.-yI ? 4 ��.-yI i t ��-.�yl i d �}yI i-I Cd ��yl i t �}y�, i-I .{.�yl P Cd }�I� P Cd Cd CJ 000000 � W.yy Wy W..yy W..yy W..yy 000000000000000000 W�1 Wy Wy W�1 W.y W W�-yI W�.yy W..yy W�.yy W.yy W..yy W..yy W�.yy W.yy W..yy W�.yy --II UOrn00rnrnUnrnto000rnrArnrn U)000to o M c) >~ hIh o cdO U c� C, a W U W 0 U QI r� a o 0 ^a U U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U Did Item AA1: Staff Report Pg. 130 Packet Pg. 810 of 853 a) 0 O a) 0 W 0 m (I) 0 U O O Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O 0 O O O O O O O O 0 o Distribution of O i 'O C o ca OO r OO oo Vi O1 N OO O1 OO ' O M OO M O1 - - OO 0O O O1 N - O1 O\ O\ V O\ V OO V un O1 - Products r+ bD % y N .•► l� Q\ O -T - O O1 kn M N O N N N OO kn O1 OO O - - 0O M OO kn OO kn N M O M N � N N O S V) M M O1 - - - N M OO - If) \O It) F- - V) M V) N N - N' - - N O M'l O - If) N O\ "O OO O1 - IV N C a� o 0 0 0 0 0 0 0 0 0 C i C00 en O 00 O N N kn M 00 O1 C OO N M N O O v, a O O O O O O G O o O o O C o o o o 0 o O o o O 0 0 o 0 0 0 0 + i y M O "O O 00 N O1 00 zI--C M ,-- 'n W) Vi N N O 00 M •-- N \O u7 N O1 00 M M -- 1n N 00 O kn vi -- 00 O h — — O— O O N O a\ O O O O O O O O O M O 00 O O O O O ott 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 •� •� •�.1 •.�. 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O G7 O cd N ° Q, cd i y cC a U O 3.., p U o � a o I.:1 111111 oo 'b y U U U U U U U U U U U U U U U U U U U U U U U U U U U U aU oU U Did kn O Item AA1: Staff Report Pg. 131 Packet Pg. 811 of 853 a) 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O O O O O O O o Distribution of O i ^O p ca l0 to M 00 N N .--I Nr 01 01 O \O N M O 00 N 00 - O 00 M 0\ N 0\ O \O M in N- - - th 00 - M IV �O M �O N tn Products y -T M 00 N 0\ O oo N to 00 to 00 0\ '0 �Z - O O N oo �O kn 00 00 00 'n 0\ M 0\ 00 01 00 01 00 M kn t` N \O N ci 3� y Wn M M '0 �O '0 M '0 '0 'n ' M .-- .-- O - .-- N - O - M - 'O N - O - N 'n M N O O 00 M O O N 00 a1 ti - '.D O N C R = U M M a rI) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 a) a)O 0 0 0 0 0 00 0 o0 0 0 ?r 0l N N N N zt ^� N - - Vt N V) "t M O O't N V) N v O O O O 0 0 0 0 0 0 0 0 0 0 O O O O O O - 0 0 0 0 0 0 O O O O 0 0 0 0 0 O 0 0 0 0 0 0 0 0 0 0 c cad c cad - O - O - O - O G) Cd U CC N Cd G) Cd G) CC G) Cd 4) Cd 4) Cd N CC 4) C� 4) C� U CC 4) C� 4) C� U CC 4) C� � �•1 �..yy �y �y �..yy �y �..yy ��.yy �yy �y �.y �y �y �--II ��.yI /C/a� W /Cyr W /Cyr W /C�a F••1 /Cyr F+1 •Cy�� F••1 U U U U r0, V . ll . rte•+ .'�•1 . li-1 i-4 i-I i-I i-4 iti ?-1 i-I i-I i-1 i-4 r�-�-I i-1 i-Y i•-I iti y Y Y Y C..�yy i-I C..�yy i-I C..�yy iti C�.�yI iti Cd Cd Cd r/] c C rID CID C/1 (ID (ID Vi 51) O :� o U O C a N O _�' S" U Z cd C O CI] V1 0.1 y C/] U V1 -d v' 5.lD� a o 0 'c^a 50000 oUUUUUUUUUUUUUUU U ODUUUU U ODUU U aU Did kn O N Item AA1: Staff Report Pg. 132 Packet Pg. 812 of 853 a) 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O 0 O O O O O O O O O O O O O © o Distribution of O i 'O p o 0 00 M O N O N 01 r -I 00 O O 00 O \O M N - \O 01 \O \O 01 - 01 00 v V) N M - 01 \O C rI -I M O, M 01 to 01 M O ON N - M 00 Products y M M 00 M IT C. kn 00 O \O O O 00 M O M O '-- \p \O M" \O N 3� y -- - N- M M O to M O M M r-i \O - 00 - N - N tn 00 M C. 'm M M M O N M \O N tn N- M C. 00 N '0 N OC N M \O \O \O N \O \O w 0 0 o 0 0 � 0 c C •� C •R ^C U \O M � G1 M M � N � v, a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 i y M -- M \O M •--i 01 M 0\ r-- \O O M t/') M 00 O N M kn •-- M \O 01, N 00 O 00 N O \O --� M \O ,-- Q1 O ,-� N •-- t-- \0 00 N M •--� 00 c� M cd ct cd cd M 0 c� c� N cC c' c'3 co 0 0 0 0 0 0 0 0 0 O cd cd cd cd cd cC cd cd cC cd cd cd cd cd co cd cd cd cd O O O O O O Or r ,0 V i 4 iti �1 iy iti iti V-} �I �•I iti iti iti iti i•-I Cn Ln Cn ^ Vl (n U� Un V� Cn to un r� to 0 x o r" `� U o o a ° c• j- o E N v U O y a as � ar t_ a a o 0 U D U U D U U U ^O U U U U U U U V U U O U D U U U O U O U O U U V O U D U aU Did Item AA1: Staff Report Pg. 133 Packet Pg. 813 of 853 0 O O O O W 0 m (I) O O O O Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O 0 0 0 . 0 \ 0 \ 0 \ 0 \ o \ e \ e \ e \ e . e \ e \ e \ 0 \ o \ o \ Distribution of Opi P C C o ca O1 in O N 00 M 00 O1 M N O �O O1 Vi �O '0 M O O1 Q\ O1 �O 00 IT N IT ' kn _0 N ZO N O1 1 O1 N O\ N O1 t` rl r" in le M N N N Products 0 y O O\ M O1 N O 00 ZZ V i "O V') - O1 ZO '.O N M O ZO N N N -I N If) N r -I N O N c y ' M - V) 00 - N - 00 - ' M 00 rO - N - 00 O M M N rl O \O " N- - If) 00 .-ti • - '0 M O N O V) O- N O M 't V') IV O 00 N rl O N O 1O O O O C C rl C O O O O O O O O O O C C C O O O O O O O N O O O C a) w o 0 0 0 0 0 O C •R ^C v N OO1 O1 00 M N •� a1 V') �O v, a 0 O O O OO O O O O O O O O 0 0 O O 0 0 O O O 0 O O O O O O 0 i y 00 N -- .� N O •� -- •� -- -- •� "O O r- - � 00 O ^� O O O N N In M IO M O1 O O O C v O - O O S O N O O O O O M O N O O 00 O O O O O O O r O O O O O O O O O O O O O O O O O O O O O O O O O O O O N O O 0 O O O O cd M cd cd cd C CS:"i t" S:"i 3•", ci)ci) S:"i S", f~r' t~r" �+" ~ n �"" �'"-' , '� '� '� '� '� ~O U O C/1 O r/� O V1 O to V cC V co V V co V cC V V cd V1 cl] N [� H H H H H H H H N N 0 C O U�° ri °U ° o > o o H o a V1 h .� o, •ti W a ar ou C a C o 0 0 ;� a �^aUUUU ODUUUUUU U oU U OU U o U oUUUUUUU U O U ODUU U aU Did Item AA1: Staff Report Pg. 134 Packet Pg. 814 of 853 Item AA1 A /�+� Attachment A Resolution Authorizing City Manager to Execute Participation • Agreements obo CPA to O ...0 Enter into Settlement a) 0 O a) 0 W 0 m (I) 0 O O 0 0 0 0 0 0 0 0 0 0 0 0 0 C 00 V) - N M N D\ N - C a) M 00 - N' O O O- OE M N N M O N N y p, • N 0 O N 0 - 0 M O N O - N M V) O • V) O N ' O N N N - u- O O O C O O O C C O C O O C 0 0 0 l— CC "C U v, a 0 i kn N 00 N I "D In v O O O O O M O O O N O O O O O C o as a � 00 on 0 a a 0 o `.! c..� r � `/ r � U c)0 U c..) U U U L) U Qy V Agreements re Manufacture and Distribution of Opioid IC Products J n Item AA1: Staff Report Pg. 135 Packet Pg. 815 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F APPENDIX 2 Cost Reimbursement Procedure 1. Additional defined terms: Item AA1 A Attachment A Resolution /i Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products a) Costs means the reasonable amounts paid for the attorney and other City Attorney and County Counsel staff time for individuals employed by a Plaintiff Subdivision at the contractual rate, inclusive of benefits and overhead, together with amounts paid for court reporters, experts, copying, electronic research, travel, vendors, and the like, which were not previously reimbursed and which were paid or incurred (i) prior to December 31, 2022 in litigation against any Opioid Defendant and/or (ii) in negotiating and drafting any CA Allocation Agreement(s) concerning a settlement with any Opioid Defendant(s). Costs does not include attorneys' fees, costs, or expenses incurred by private contingency fee counsel. No part of the CA Abatement Accounts Fund will be used to reimburse Costs. b) First Claims Date means October 1, 2023 or when all applications for reimbursement of Costs, in whole or in part, from funds available under Section X and Exhibit R of the CVS Settlement Agreement, Section XIV and Exhibit R of the Teva Settlement Agreement, Section XIII and Exhibit R of the Allergan Settlement Agreement, Section X and Exhibit R of the Distributor Settlement Agreement, Section XI and Exhibit R of the Janssen Settlement Agreement, Section IX and Exhibit R of the Walgreens Settlement Agreement, or Section IX and Exhibit R of the Walmart Settlement Agreement, have been finally determined under the provisions of those agreements, whichever comes first. c) Special Master means a retired judicial officer or former public lawyer, not presently employed or retained by a Plaintiff Subdivision, who will aggregate, review, and determine the reasonable Costs to be awarded to each Plaintiff Subdivision that submits a claim for reimbursement of Costs. The Special Master will be selected by a majority vote of the votes cast by Plaintiff Subdivisions, with each such subdivision having one vote. d) Plaintiff Subdivision Committee means the committee of Plaintiff Subdivisions that will review and approve the invoices submitted by the Special Master reflecting his or her reasonable time and expenses. 2. Cost Reimbursement to Plaintiff Subdivision a) Purpose. Substantial resources have been expended to hold Opioid Defendants accountable for creating and profiting from the opioid crisis, and this effort has been a significant catalyst in creating National Opioid Settlements with various manufacturers, distributors, and chain pharmacies. b) Claims Procedure. If a Plaintiff Subdivision is eligible to seek reimbursement of Costs, in whole or in part, from funds available under Section X and Exhibit R of the CVS Settlement pip Item AA1: Staff Report Pg. 136 Packet Pg. 816 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreement, Section XIV and Exhibit R of the Teva Settlement 4 Agreements re XIII and Exhibit R of the Allergan Settlement Agreement, Secti Manufacture and of the Walgreens Settlement Agreement, Section IX and Exhibi Distribution of Opioid Settlement Agreement, Section X or Exhibit R of the Distributo Products Agreement, or Section XI or Exhibit R of the Janssen Settlement 1ca11a11, ii must first make a timely application for reimbursement from such funds. To allow sufficient time for determination of those applications, no claim for Costs to the CA Subdivision Fund under this Agreement may be made before the First Claims Date. ii. A Plaintiff Subdivision that wishes to be reimbursed from the CA Subdivision Fund must submit a claim to the Special Master no later than forty-five (45) days after the First Claims Date. The Special Master will then compile and redistribute the aggregated claim totals for each Plaintiff Subdivision via email to representatives of all the Plaintiff Subdivisions. A claim for attorney and staff time must list, for each attorney or staff member included in the claim, the following information: name, title, total hours claimed, hourly rate (including, if sought, benefits and share of overhead), and narrative summarizing the general nature of the work performed by the attorney or staff member. For reimbursement of "hard" costs, the subdivision may aggregate across a category (e.g., total for travel costs). It is the intention of the Plaintiff Subdivisions that submission of documents related to reimbursement of Costs does not waive any attorney -client privilege or exemptions to the California Public Records Act. iii. The Special Master may request, at his or her sole option, additional documents or details to assist in the final award of Costs. iv. The Special Master will review claims for reasonableness and will notify each Plaintiff Subdivision of the final determination of its claim, and will provide a list of all final awards to all Plaintiff Subdivisions by email or, upon request, via First Class U.S. Mail. Any Plaintiff Subdivision may ask the Special Master to reconsider any final award within twenty-one (21) days. The Special Master will make a final determination on any such reconsideration request within thirty (30) days of receipt. v. Any decision of the Special Master is final and binding, and will be considered under the California Arbitration Act, Code of Civil Procedure section 1280 et seq. as a final arbitration award. Nothing in this agreement is intended to expand the scope of judicial review of the final award for errors of fact or law, and the Parties agree that they may only seek to vacate the award if clear and convincing evidence demonstrates one of the factors set forth in Code of Civil Procedure, section 1286.2, subdivision (a). Plaintiff Subdivisions will have fourteen (14) days after all final awards are made, together with any final determination of a request for Item AA1: Staff Report Pg. 137 Packet Pg. 817 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement reconsideration, to seek review in the Superior Court of Califorri Agreements re of Civil Procedure, section 1285, where the State has filed its Ct1 Manufacture and Distribution of Opioid vi. The Special Master will prepare a report of Costs that includes Products expenses at least ninety (90) days before the Payment Date for each nnua Payment. The Special Master's preparation of a report of Costs does not discharge a Plaintiff Subdivision's reporting requirement under Section V(B)(2) of the CVS Settlement Agreement. vii. A member of the Plaintiff Subdivision Committee, which is a CA Participating Subdivision, will submit to the Settlement Fund Administrator and CVS a report of the fees and expenses incurred by the Special Master pursuant to Section V(B)(2) of the CVS Settlement Agreement. c) Claims Priority and Limitation. The Special Master will submit invoices for compensation of reasonable fees and expenses to the Plaintiff Subdivision Committee no later than ninety (90) days prior to the Payment Date for each Annual Payment. The Plaintiff Subdivision Committee will promptly review and, if reasonable, approve the Special Master's invoice for compensation. The Plaintiff Subdivision Committee will submit approved invoices to the Settlement Fund Administrator for payment. The Special Master's approved invoices have priority and will be paid first from the CA Subdivision Fund before any award of Costs, subject to the limitation in Section 2.c.v below. ii. Final Awards of Costs that do not exceed seventy-five thousand dollars ($75,000.00) will be paid next in priority after the Special Master's approved invoices. iii. Final Awards of Costs in excess of seventy-five thousand dollars ($75,000.00) will be paid proportionally from the funds remaining in that year's Annual Payment. iv. Any claim for Costs that is not paid in full will be allocated against the next year's distribution from the CA Subdivision Fund, until all approved claims for Costs are paid in full. v. In no event will more than 50% of the total CA Subdivision Fund received in any year be used to pay Costs or the Special Master's approved invoices. vi. In no event shall more than $28 million of the total CA Subdivision Funds paid pursuant to the CVS Settlement Agreement, Teva Settlement Agreement, Allergan Settlement Agreement, Distributor Settlement Agreement, Janssen Settlement Agreement, Walgreens Settlement Agreement, and the Walmart Settlement Agreement be used to pay Costs. Item AA1: Staff Report Pg. 138 Packet Pg. 818 of 853 Item AA1 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement d) Collateral Source Payments and Third -Party Settlement. Agreements re Manufacture and In the event a Plaintiff Subdivision is awarded compensation, in Distribution of Opioid by any source of funds created as a result of litigation against arit Products for its reasonable Costs, it will reduce its claim for Costs from the CA Subdivision Fund by that amount. If a Plaintiff Subdivision has already received a final award of Costs from the CA Subdivision Fund, it will repay the fund up to the prior award of Costs via a payment to the Settlement Fund Administrator or notify the Settlement Fund Administrator that its allocation from the next and subsequent Annual Payments should be reduced accordingly. If the Plaintiff Subdivision is repaying any prior award of Costs, that repayment will occur as soon as is feasible after the Plaintiff Subdivision's receipt of Cost funds from the collateral source, but no more than 90 days after its receipt from the collateral source. The Settlement Fund Administrator will add any repaid Costs to the CA Subdivision Fund. Any Plaintiff Subdivision that has submitted for reimbursement to any national fund and has not received a final determination by the First Claims Date may request that the settlement administrator withhold some or all of its payment from the CA Subdivision Fund in order to avoid repayment. ii. In the event a Plaintiff Subdivision reaches a monetary settlement or compromise against any Opioid Defendant outside of the National Opioid Settlement, the monetary portion of such settlement, net of fees paid to outside contingency fee counsel and of funds earmarked strictly for abatement, will be credited against its Costs and the subdivision will be ineligible to recover those credited Costs from the CA Subdivision Fund. Plaintiff Subdivisions negotiating monetary settlements or compromises against any Opioid Defendant outside of the National Opioid Settlement will negotiate for funds to repay any Costs it previously received from the CA Subdivision Fund or for Costs it otherwise might be eligible to claim from the CA Subdivision Fund. If such a settlement is paid after all final approved claims for Costs by all Plaintiff Subdivisions are satisfied in full, the settling subdivision will reimburse the CA Subdivision Fund in that amount by making payment to the Settlement Fund Administrator to add to the CA Subdivision Fund in a manner consistent with the repayments described in section 2.d.i above. Item AA1: Staff Report Pg. 139 Packet Pg. 819 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F APPENDIX 3 CALIFORNIA -SUBDIVISION BACKSTOP Item AA1 Attachment A Resolution A Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products On August 6, 2021, Judge Polster of the US District Court for the Northern District of Ohio issued an Order (the Order), docket number 3814, in In Re National Prescription Opiate Litigation, MDL 2804, addressing contingent attorney fee contracts between political subdivisions eligible to participate in the CVS Settlement and their counsel. In light of the Order, and at the request of [SUBDIVISION], the [SUBDIVISION], its counsel [COUNSEL], and the California Attorney General, on behalf of the State of California, are entering into this California -Subdivision Backstop Agreement (Backstop Agreement). [SUBDIVISION] and [COUNSEL] intend this Backstop Agreement to constitute a State Back - Stop Agreement as that term is used in the Order and in Exhibit R (Agreement on Attorneys' Fees, Costs, and Expenses) of the CVS Settlement Agreement. Pursuant to this Backstop Agreement, [SUBDIVISION] may, subject to the limitations of the CVS Settlement Agreement and CA CVS Allocation Agreement, as well as any other limitations imposed by law, use funds that it receives from the CVS Settlement CA Subdivision Fund to pay a contingent fee to [COUNSEL]. Any such payment from [SUBDIVISION] to [COUNSEL], together with any contingency fees that [COUNSEL] may receive from the national Attorney Fee Fund, will not exceed a total contingency fee of [PERCENTAGE NOT TO EXCEED 15%] of the total gross recovery of [SUBDIVISION] from the CVS Settlement. [COUNSEL] certify that they first sought fees and costs from the Attorney Fee Fund created under the CVS Settlement Agreement before seeking or accepting payment under this backstop agreement. [COUNSEL] further certify that they are not seeking and will not accept payment under this backstop agreement of any litigation fees or costs that have been reimbursed through prior settlements or judgments. The Attorney General is executing this agreement solely because the definition of "State Back - Stop Agreement" in Exhibit R of the CVS Settlement Agreement requires such agreements to be between "a Settling State" and private counsel for a participating subdivision. Neither the California Attorney General nor the State of California have any obligations under this Backstop Agreement, and this Backstop Agreement does not require the payment of any state funds to [SUBDIVISION], [COUNSEL], or any other party. [DATE] [SUBDIVISION SIGNATURE BLOCK] [DATE] [COUNSEL SIGNATURE BLOCK] [DATE] [ATTORNEY GENERAL SIGNATURE BLOCK] Item AA1: Staff Report Pg. 140 Packet Pg. 820 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F EXHIBIT K Subdivision Participation Form Will your subdivision or special district be signing the settlement participation form Settlement at this time? [ ] Yes [ ] No Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Governmental Entity: Palo Alto city State: CA Authorized Official: Address 1: Address 2: City, State, Zip: Phone: Email: The governmental entity identified above ("Governmental Entity"), in order to obtain and in consideration for the benefits provided to the Governmental Entity pursuant to the Settlement Agreement dated November 14, 2022 ("Walmart Settlement"), and acting through the undersigned authorized official, hereby elects to participate in the Walmart Settlement, release all Released Claims against all Released Entities, and agrees as follows. 1. The Governmental Entity is aware of and has reviewed the Walmart Settlement, understands that all terms in this Election and Release have the meanings defined therein, and agrees that by this Election, the Governmental Entity elects to participate in the Walmart Settlement and become a Participating Subdivision as provided therein. 2. The Governmental Entity shall promptly, and in any event within 14 days of the Effective Date and prior to the filing of the Consent Judgment, dismiss with prejudice any Released Claims that it has filed. With respect to any Released Claims pending in In re National Prescription Opiate Litigation, MDL No. 2804, the Governmental Entity authorizes the Plaintiffs' Executive Committee to execute and file on behalf of the Governmental Entity a Stipulation of Dismissal With Prejudice substantially in the form found at https: //nationalopioidsettlement. com/. 3. The Governmental Entity agrees to the terms of the Walmart Settlement pertaining to Subdivisions as defined therein. 4. By agreeing to the terms of the Walmart Settlement and becoming a Releasor, the Governmental Entity is entitled to the benefits provided therein, including, if applicable, monetary payments beginning after the Effective Date. 5. The Governmental Entity agrees to use any monies it receives through the Walmart Settlement solely for the purposes provided therein. A Item AA1: Staff Report Pg. 141 Packet Pg. 821 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement 6. The Governmental Entity submits to the jurisdiction of the court in the Go Agreements re Entity's state where the Consent Judgment is filed for purposes limited to Manufacture and as provided in, and for resolving disputes to the extent provided in, the W Distribution of Opioid Settlement. Products 7. The Governmental Entity has the right to enforce the Walmart Settlement as provided therein. 8. The Governmental Entity, as a Participating Subdivision, hereby becomes a Releasor for all purposes in the Walmart Settlement, including but not limited to all provisions of Section X (Release), and along with all departments, agencies, divisions, boards, commissions, districts, instrumentalities of any kind and attorneys, and any person in their official capacity elected or appointed to serve any of the foregoing and any agency, person, or other entity claiming by or through any of the foregoing, and any other entity identified in the definition of Releasor, provides for a release to the fullest extent of its authority. As a Releasor, the Governmental Entity hereby absolutely, unconditionally, and irrevocably covenants not to bring, file, or claim, or to cause, assist or permit to be brought, filed, or claimed, or to otherwise seek to establish liability for any Released Claims against any Released Entity in any forum whatsoever. The releases provided for in the Walmart Settlement are intended by the Parties to be broad and shall be interpreted so as to give the Released Entities the broadest possible bar against any liability relating in any way to Released Claims and extend to the full extent of the power of the Governmental Entity to release claims. The Walmart Settlement shall be a complete bar to any Released Claim. 9. In connection with the releases provided for in the Walmart Settlement, each Governmental Entity expressly waives, releases, and forever discharges any and all provisions, rights, and benefits conferred by any law of any state or territory of the United States or other jurisdiction, or principle of common law, which is similar, comparable, or equivalent to § 1542 of the California Civil Code, which reads: General Release; extent. A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release that, if known by him or her, would have materially affected his or her settlement with the debtor or released party. A Releasor may hereafter discover facts other than or different from those which it knows, believes, or assumes to be true with respect to the Released Claims, but each Governmental Entity hereby expressly waives and fully, finally, and forever settles, releases and discharges, upon the Effective Date, any and all Released Claims that may exist as of such date but which Releasors do not know or suspect to exist, whether through ignorance, oversight, error, negligence or through no fault whatsoever, and which, if known, would materially affect the Governmental Entities' decision to participate in the Walmart Settlement. 10. Nothing herein is intended to modify in any way the terms of the Walmart Settlement, to which Governmental Entity hereby agrees. To the extent this Election and Release is interpreted differently from the Walmart Settlement in any respect, the Walmart Settlement controls. lJ Item AA1: Staff Report Pg. 142 Packet Pg. 822 of 853 Item AA1 A /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement I have all necessary power and authorization to execute this Election and Release Agreements re Governmental Entity. Manufacture and Distribution of Opioid Signature: Products Name: Title: Date: ci Item AA1: Staff Report Pg. 143 Packet Pg. 823 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Proposed California State -Subdivision Agreement Regarding Distribution and Use of Settlement Funds — Walmart Settlement 1. Introduction Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Pursuant to the Walmart Settlement Agreement, dated as of November 14, 2022, and any revision thereto (the "Walmart Settlement Agreement"), including Section V and Exhibit O, the State of California proposes this agreement (the "CA Walmart Allocation Agreement") to govern the allocation, distribution, and use of Settlement Fund payments made to California pursuant to Sections IV and V of the Walmart Settlement Agreement. For the avoidance of doubt, this agreement does not apply to payments made pursuant to Sections VIII or IX of the Walmart Settlement Agreement. Pursuant to Exhibit O, Paragraph 4, of the Walmart Settlement Agreement, acceptance of this CA Walmart Allocation Agreement is a requirement to be a Participating Subdivision. 2. Definitions a) CA Participating Subdivision means a Participating Subdivision that is also (a) a Plaintiff Subdivision and/or (b) a Primary Subdivision with a population equal to or greater than 10,000. For the avoidance of doubt, eligible CA Participating Subdivisions are those California subdivisions listed in Exhibit C (excluding Litigating Special Districts) and/or Exhibit Ito the Walmart Settlement Agreement. b) Allergan Settlement Agreement means the Allergan Settlement Agreement dated November 22, 2022, and any revision thereto. c) CVS Settlement Agreement means the CVS Settlement Agreement dated December 9, 2022, and any revision thereto as well as any modification thereto entered into by the State of California and CVS. d) Distributor Settlement Agreement means the Distributor Settlement Agreement dated July 21, 2021, and any revision thereto. e) Janssen Settlement Agreement means the Janssen Settlement Agreement dated July 21, 2021, and any revision thereto. f) Teva Settlement Agreement means the Teva Settlement Agreement dated November 22, 2022, and any revision thereto. g) Walgreens Settlement Agreement means the Walgreens Settlement Agreement dated December 9, 2022, and any revision thereto. h) CA Litigating Special District means a Litigating Special District located in California. CA Litigating Special Districts include Downey Unified School District, Elk Grove Unified School District, Kern High School District, Montezuma Fire Protection District (located in Stockton, California), Santa Barbara San Luis Obispo Regional Health Authority, Inland Empire Health Plan, Health Plan of San Joaquin, San Leandro Unified School District, Pleasant Valley School District Board, and LA Care Health Plan. A O0 O O Item AA1: Staff Report Pg. 144 Packet Pg. 824 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement i) Plaintiff Subdivision means a Subdivision located in California, o Agreements re Litigating Special District, that filed a lawsuit, on behalf of the S Manufacture and and/or through an official of the Subdivision on behalf of the Peo Distribution of Opioid of California, against one or more Opioid Defendants prior to Oc Products j) Opioid Defendant means any defendant (including but not limited to Teva Pharmaceutical Industries Ltd., Allergan Finance, LLC, Allergan Limited, CVS Health Corporation, CVS Pharmacy, Inc., Walgreen Co., Walmart Inc., Johnson & Johnson, Janssen Pharmaceuticals, Inc., Purdue Pharma L.P., Cardinal Health, Inc., AmerisourceBergen Corporation, and McKesson Corporation) named in a lawsuit seeking damages, abatement, or other remedies related to or caused by the opioid public health crisis in any lawsuit brought by any state or local government on or before October 1, 2020. 3. General Terms This agreement is subject to the requirements of the Walmart Settlement Agreement, as well as applicable law, and the Walmart Settlement Agreement governs over any inconsistent provision of this CA Walmart Allocation Agreement. Terms used in this CA Walmart Allocation Agreement have the same meaning as in the Walmart Settlement Agreement unless otherwise defined herein. Pursuant to Section V(D)(1) of the Walmart Settlement Agreement, (a) all Settlement Fund payments will be used for Opioid Remediation, except as allowed by Section V(B)(2) of the Walmart Settlement Agreement; and (b) at least seventy percent (70%) of Settlement Fund payment amounts will be used solely for future Opioid Remediation. 4. State Allocation The Settlement Fund payments to California,' pursuant to the Walmart Settlement Agreement, shall be allocated as follows: 15% to the State Fund; 70% to the Abatement Accounts Fund; and 15% to the Subdivision Fund. For the avoidance of doubt, all funds allocated to California from the Settlement Fund shall be combined pursuant to this CA Walmart Allocation Agreement, and 15% of that total shall be allocated to the State of California (the "State of California Allocation"), 70% to the California Abatement Accounts Fund ("CA Abatement Accounts Fund"), and 15% to the California Subdivision Fund ("CA Subdivision Fund"). 1 For purposes of clarity, use of the term "California" refers to the geographic territory of California and the state and its local governments therein. The term "State" or "State of California" refers to the State of California as a governmental unit. lJ Item AA1: Staff Report Pg. 145 Packet Pg. 825 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement A. State of California Allocation Agreements re Manufacture and Fifteen percent of the total Settlement Fund payments will be allocated to th Distribution of Opioid the State for future Opioid Remediation. Products B. CA Abatement Accounts Fund i. Allocation of CA Abatement Accounts Funds a) Seventy percent of the total Settlement Fund payments will be allocated to the CA Abatement Accounts Fund. The funds in the CA Abatement Accounts Fund will be allocated based on the allocation model developed in connection with the proposed negotiating class in the National Prescription Opiate Litigation (MDL No. 2804), as adjusted to reflect only those cities and counties that are eligible, based on population or litigation status, to become a CA Participating Subdivision. The percentage from the CA Abatement Accounts Fund allocated to each CA Participating Subdivision is set forth in Appendix 1 in the column entitled abatement percentage (the "Local Allocation"). For the avoidance of doubt, CA Litigating Special Districts and California towns, cities, and counties with a population less than 10,000 are not eligible to receive an allocation of CA Abatement Accounts Funds. b) A CA Participating Subdivision that is a county, or a city and county, will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision, and will receive payments as provided in the Walmart Settlement Agreement. c) A CA Participating Subdivision that is a city will be allocated its Local Allocation share as of the date on which it becomes a Participating Subdivision. The Local Allocation share for a city that is a CA Participating Subdivision will be paid to the county in which the city is located, rather than to the city, so long as: (a) the county is a CA Participating Subdivision, and (b) the city has not advised the Settlement Fund Administrator that it requests direct payment at least 60 days prior to a Payment Date. A Local Allocation share allocated to a city but paid to a county is not required to be spent exclusively for abatement activities in that city, but will become part of the county's share of the CA Abatement Accounts Funds, which will be used in accordance with Section 4.B.ii (Use of CA Abatement Accounts Funds) and reported on in accordance with Section 4.B.iii (CA Abatement Accounts Fund Oversight). d) A city within a county that is a CA Participating Subdivision may opt in or out of direct payment at any time, and it may also elect direct payment of only a portion of its share, with the remainder going to the county, by providing notice to the Settlement Fund Administrator at least 60 days prior to a Payment Date. For purposes of this CA Walmart Allocation Agreement, the Cities of Los Angeles, Oakland, San Diego, San Jose and Eureka will be deemed to have elected direct payment if they become Participating Subdivisions. ci Item AA1: Staff Report Pg. 146 Packet Pg. 826 of 853 Item AA1 A /i DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F AttachmentAResolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement e) The State will receive the Local Allocation share of any payment to t Agreements re that is attributable to a county or city that is eligible to become a CA ii Manufacture and Subdivision, but that has not, as of the date of that payment to the Sell Distribution of Opioid become a Participating Subdivision. Products f) Funds received by a CA Participating Subdivision, and not expended or encumbered within five years of receipt and in accordance with the Walmart Settlement Agreement and this CA Walmart Allocation Agreement shall be transferred to the State; provided however, that CA Participating Subdivisions have seven years to expend or encumber CA Abatement Accounts Funds designated to support capital outlay projects before they must be transferred to the State. This provision shall not apply to the Cost Reimbursement Funds, which shall be controlled by Appendix 2. ii. Use of CA Abatement Accounts Funds a) The CA Abatement Accounts Funds will be used for future Opioid Remediation in one or more of the areas described in the List of Opioid Remediation Uses, which is Exhibit E to the Walmart Settlement Agreement. b) In addition to this requirement, no less than 50% of the funds received by a CA Participating Subdivision from the Abatement Accounts Fund in each calendar year will be used for one or more of the following High Impact Abatement Activities: (1) the provision of matching funds or operating costs for substance use disorder facilities within the Behavioral Health Continuum Infrastructure Program; (2) creating new or expanded Substance Use Disorder ("SUD") treatment infrastructure; (3) addressing the needs of communities of color and vulnerable populations (including sheltered and unsheltered homeless populations) that are disproportionately impacted by SUD; (4) diversion of people with SUD from the justice system into treatment, including by providing training and resources to first and early responders (sworn and non -sworn) and implementing best practices for outreach, diversion and deflection, employability, restorative justice, and harm reduction; and/or (5) interventions to prevent drug addiction in vulnerable youth. c) The California Department of Health Care Services ("DHCS") may add to this list (but not delete from it) by designating additional High Impact Abatement Activities. DHCS will make reasonable efforts to consult with stakeholders, including the CA Participating Subdivisions, before adding additional High Impact Abatement Activities to this list. d) For the avoidance of doubt, and subject to the requirements of the Walmart Settlement Agreement and applicable law, CA Participating Subdivisions may form agreements or ventures, or otherwise work in collaboration with, federal, state, local, tribal or private O sector entities in pursuing Opioid Remediation activities funded from the CA Abatemeni O 4 El Item AA1: Staff Report Pg. 147 Packet Pg. 827 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement Accounts Fund. Further, provided that all CA Abatement Accounts Fl Agreements re Opioid Remediation consistent with the Walmart Settlement Agreem Manufacture and Walmart Allocation Agreement, a county and any cities or towns wit Distribution of Opioid agree to reallocate their respective shares of the CA Abatement Acco Products themselves, provided that any direct distribution may only be to a CA Subdivision and any CA Participating Subdivision must agree to their share being reallocated. iii. CA Abatement Accounts Fund Oversight a) Pursuant to Section 5 below, CA Participating Subdivisions receiving settlement funds must prepare and file reports annually regarding the use of those funds. DHCS may regularly review the reports prepared by CA Participating Subdivisions about the use of CA Abatement Accounts Funds for compliance with the Walmart Settlement Agreement and this CA Walmart Allocation Agreement. b) If DHCS determines that a CA Participating Subdivision's use of CA Abatement Accounts Funds is inconsistent with the Walmart Settlement Agreement or this CA Walmart Allocation Agreement, whether through review of reports or information from any other sources, DHCS shall send a request to meet and confer with the CA Participating Subdivision. The parties shall meet and confer in an effort to resolve the concern. c) If the parties are unable to reach a resolution, DHCS may conduct an audit of the Subdivision's use of the CA Abatement Accounts Funds within one year of the request to meet and confer, unless the parties mutually agree in writing to extend the meet and confer time frame. d) If the concern still cannot be resolved, the State may bring a motion or action in the court where the State has filed its Consent Judgment to resolve the concern or otherwise enforce the requirements of the Walmart Settlement Agreement or this CA Walmart Allocation Agreement. However, in no case shall any audit be conducted, or motion be brought, as to a specific expenditure of funds, more than five years after the date on which the expenditure of the funds was reported to DHCS, in accordance with this agreement. e) Notwithstanding the foregoing, this Agreement does not limit the statutory or constitutional authority of any state or local agency or official to conduct audits, investigations, or other oversight activities, or to pursue administrative, civil, or criminal enforcement actions. O IJ Item AA1: Staff Report Pg. 148 Packet Pg. 828 of 853 Item AA1 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement C. CA Subdivision Fund Agreements re Manufacture and Fifteen percent of the total Settlement Fund payments will be allocat Distribution of Opioic Subdivision Fund. All funds in the CA Subdivision Fund will be alloL Products Plaintiff Subdivisions that are Participating Subdivisions. The funds will e used, su J to any limits imposed by the Walmart Settlement Agreement and this CA Walmart Allocation Agreement, to fund future Opioid Remediation and reimburse past opioid- related expenses, which may include fees and expenses related to litigation, and to pay the reasonable fees and expenses of the Special Master as set forth in Appendix 2. The CA Subdivision Funds will be allocated as follows: a) First, funds in the CA Subdivision Fund shall be used to pay the Special Master's reasonable fees and expenses in accordance with the procedures and limitations set forth in Appendix 2 to this document; b) Second, funds will be allocated to Plaintiff Subdivisions that are Participating Subdivisions that have been awarded Costs, as defined by and in accordance with the procedures and limitations set forth in Appendix 2 to this document. c) Funds remaining in the CA Subdivision Fund, which shall consist of no less than 50% of the total CA Subdivision Fund received in any year pursuant to Appendix 2, Section 2.c.v, will be distributed to Plaintiff Subdivisions that are Participating Subdivisions, in relative proportion to the Local Allocation. These funds shall be used to fund future opioid-related projects and to reimburse past opioid-related expenses, which may include fees and expenses related to litigation against any Opioid Defendant. D. Provision for State Back -Stop Agreement On August 6, 2021, Judge Dan Polster of the U.S. District Court, Northern District of Ohio, Eastern Division, issued an order (ECF Docket Number 3814) ("MDL Fees Order") in the National Prescription Opiate Litigation (MDL No. 2804) "cap[ping] all applicable contingent fee agreements at 15%." Private counsel representing Plaintiff Subdivisions should seek its contingency fees and costs from the Attorney Fee Fund or Cost Funds under the Walmart Settlement Agreement, and, if applicable, the Allergan Settlement Agreement, CVS Settlement Agreement, Distributor Settlement Agreement, Janssen Settlement Agreement, Teva Settlement Agreement, and Walgreens Settlement Agreement. A Plaintiff Subdivision may separately agree to use its share of the CA Subdivision Fund to pay for fees or costs incurred by its contingency -fee counsel ("State Back -Stop Agreement"), pursuant to Exhibit R, section I(W), of the Walmart Settlement Agreement and the MDL Fees Order, so long as such contingency fees do not exceed a total contingency fee of 15% of the total gross recovery of the Plaintiff Subdivision pursuant to the Walmart Settlement, inclusive of contingency fees from the national Attorney Fee Fund and this State Back -Stop Agreement. Before seeking fees or litigation costs and expenses from a State Back -Stop Agreement, private Item AA1: Staff Report Pg. 149 Packet Pg. 829 of 853 Item AA1 /i A DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement counsel representing Plaintiff Subdivisions must first seek contingency fees d Agreements re Attorney Fee Fund or Cost Funds created under the Walmart Settlement Agr Manufacture and private counsel may only seek reimbursement for litigation fees and costs th Distribution of Opioid previously been reimbursed through prior settlements or judgments. Products To effectuate a State Back -Stop Agreement pursuant to this section, an agreement in the form of Appendix 3 may be entered into by a Plaintiff Subdivision, private counsel, and the California Office of the Attorney General. The California Office of the Attorney General shall, upon the request of a Plaintiff Subdivision, execute any agreement executed by a Plaintiff Subdivision and its private counsel if it is in the form of Appendix 3. The California Office of the Attorney General will also consider requests from Plaintiff Subdivisions to execute and enter into agreements presented in other forms. For the avoidance of doubt, this agreement does not require a Plaintiff Subdivision to request or enter into a State Back -Stop Agreement, and no State Back -Stop Agreement shall impose any duty or obligation on the State of California or any of its agencies or officers, including without limitation the Attorney General. 5. State and Subdivision Reporting a) DHCS will prepare an annual written report regarding the State's use of funds from the settlement until those funds are fully expended and for one year thereafter. These reports will be made publicly available on the DHCS web site. b) Each CA Participating Subdivision that receives payments of funds from the settlement will prepare written reports at least annually regarding the use of those funds, until those funds are fully expended and for one year thereafter. These reports will also include a certification that all funds that the CA Participating Subdivision has received through the settlement have been used in compliance with the Walmart Settlement Agreement and this CA Walmart Allocation Agreement. The report will be in a form reasonably determined by DHCS. Prior to specifying the form of the report DHCS will confer with representatives of the Plaintiff Subdivisions. c) The State and all CA Participating Subdivisions receiving CA Abatement Accounts Funds will track all deposits and expenditures. Each such subdivision is responsible solely for the CA Abatement Accounts Funds it receives. A county is not responsible for oversight, reporting, or monitoring of CA Abatement Accounts Funds received by a city within that county that receives direct payment. Unless otherwise exempt, Subdivisions' expenditures and uses of CA Abatement Accounts Funds and other Settlement Funds will be subject to the normal budgetary and expenditure process of the Subdivision. d) Each Plaintiff Subdivision receiving CA Subdivision Funds will track all deposits and expenditures, as required by the Walmart Settlement Agreement and this CA Walmart Allocation Agreement. Among other things, Plaintiff Subdivisions using monies from the CA Subdivision Fund for purposes that do not qualify as Opioid Remediation must identify and include in their annual report, the amount and how such funds were used, including if used to pay attorneys' fees, investigation costs, or litigation costs. Pursuant to Section V(B)(2) of the Walmart Settlement Agreement, such information must also be reported to the Settlement Fund Administrator and Walmart. ti 7 O4a Item AA1: Staff Report Pg. 150 Packet Pg. 830 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F e) In each year in which DHCS prepares an annual report DHCS will to discuss the annual report and the Opioid Remediation activities the State and Participating Subdivisions. 6. Miscellaneous Item AA1 A Attachment A Resolution /i Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products a) The State or any CA Participating Subdivision may bring a motion or action in the court where the State has filed its Consent Judgment to enforce the requirements of this CA Walmart Allocation Agreement. Before filing such a motion or action the State will meet and confer with any CA Participating Subdivision that is the subject of the anticipated motion or action, and vice versa. b) Except as provided in the Walmart Settlement Agreement, this CA Walmart Allocation Agreement is not enforceable by any party other than the State and the CA Participating Subdivisions. It does not confer any rights or remedies upon, and shall not be enforceable by, any third party. c) Except as provided in the CA Walmart Allocation Agreement, if any provision of this agreement or the application thereof to any person, entity, or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this agreement, or the application of such provision to persons, entities, or circumstances other than those as to which it is invalid or unenforceable, will not be affected thereby, and each other provision of this agreement will be valid and enforceable to the fullest extent permitted by law. d) Except as provided in the Walmart Settlement Agreement, this agreement shall be governed by and interpreted in accordance with the laws of California. lj jti Item AA1: Staff Report Pg. 151 Packet Pg. 831 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F The undersigned, Palo Alto city, ACKNOWLEDGES acceptance of this Propi Subdivision Agreement Regarding Distribution and Use of Settlement Funds is a requirement to be an Initial Participating Subdivision in the Walmart Seti ACCEPTS this Proposed California State -Subdivision Agreement Regarding of Settlement Funds — Walmart Settlement. EXECUTED on Signature: Name: Title: Date: Item AA1 Attachment A Resolution A Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products Item AA1: Staff Report Pg. 152 Packet Pg. 832 of 853 z O a) 0 a) C W c m 7 U 0 O Item AA1 A /i Attachment A Resolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement vD O0 Agreements re s O p o .rID y Manufacture and .� a) v •� O- I Distribution of Opioid .� Products N t �.° bA :� M ° : "O U N Off• �' }, N , � cd bA aOA y o >~ o y c,•--•° a?vi '`*- 6+, am) O of cd U N V] >) c a i C6 O O oi N OM Cd bOA a M ;� N •" p -y 5-� tJ)�V)-� rya, O o w o o Cl '5 U Q O >~ -, a) y �, .�, U a) a) U N t .sue I~ ) ate) a) shy a)) ate) "C 0 O O ° 4, Cl) C cd a)J!I o o w Eo Cd o o 'y o a) a) U wJ Cd �+I O •y `�+l aQ C -d -I i-I i•+, a0 5)0 Item AA1: Staff Report Pg. 153 Packet Pg. 833 of 853 Item AA1 /i A Attachment A Resolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o e e Distribution of O ioid b p N N 00 - O 00 O - t` t` Ir 00 01 to ' '0 kn 0\ o t� kn �O 1.0 kn - �O N - N O �Z �O 00 00 N 01 c "t N 00 t` M Products Vi 00 M WD y v M N O ' M 00 00 - u - N it 00 'l• 00 - - 00 00 N 00 N 00 a 0 0 - 0 0 0 0 0 0 In 0 0 O O N \p N O N O O O O O O O O N O O O O O O O O O O O C O C C C C C C N C C 0 0 0 0 0 o p y O C C M O L N N ee ^C u oo O N C N N If N ap o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ++ N O\ M N M M 00 N- C C t N 01 M V7 a1 01 N N N V7 O M O Op y y M .0 v M N O V,) N 00 .-- kO M N .-� N N rO M N N '-- +' � M O O ^� 0 0 '--� --� 0 0 0 0 O O N �O N O N O •--� 0 0 0 0 0 0 0 Op a N 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 — O O O O N O 0 0 0 0 0 0 O O G C G C G C C O C C O O c cC 0 O O O O O O O � v - a� U U U U U U U U 0 _ U U U U U U U U 0 U C q O o 55 o o 01 I oII I I I o J c� a-i • IIoIHy U Cj 0 U Q W w x a Z O a a t4 O? ti U U Q W Item AA1: Staff Report Pg. 154 Packet Pg. 834 of 853 a) 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O O O O O O O o Distribution of O i ^O p ca O M M O� N O ZO r- N O O O M 0 O M N 'O N O rl .-ti O ' M t` N 00 N O I Products a 0 rl - 00 N ItM 4 00 O N "O in O 0 "O N \O M 0 D\ 0 M 0 N 0 M- O .-- M O O N N N 00 -- 00 O1 N r \O "C 01 O M If) C' O N N O O - O M O C O O\ O H N- - - N C a, o 0 0 0 0 ^O v O d1 00 — N v, a 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0.0 0 0 0 0 00 0 0 0 0 0 V7 N V7 00 N t 00 N 00 V7 t-- O kn -� N N N N 00 00 01 C' �O -� C1 C' O O O O O -� O M 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C1 cg a3 a3 'A Cn� r En 'A� m� U) O O O 000000000 n n n n cd cd cd cd cd cC cd cd cd cd c� c� % O O O 5) 5)5)5)5)5)5)5)5)5)5) O N O N N O N N O N � � � � � � � � � � � � � � •� •� ^, w w w w w w w w w w w w � U U U U U U U U U U U U 5) b ^^ O O x O C.i ~ O O p V N N -� V o U N O O a .� �, y o �' o. O a A W u_ a a 0 o •V" ^O U U U U U aU Did A a Item AA1: Staff Report Pg. 155 Packet Pg. 835 of 853 a) 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O 0 0 0 0 0 0 Distribution of O i ^O C C as O D 00 N- M O 00 ON N - O\ - . N O\ N H IV M r - O 00 .C .O M M M O 00 Products a> N O ZZ Q\ NN N N 00 4 C-, �O IN O C. i O M M 01 M \O N `O - kn N O C. d'- y N \O N N 00 O r O' M O I IN l - O N N' O N N O N - O - N 0 \p 0 - W) 0 O r N N M� - M N g N N N M - N C a) o 0 0 0 0 0 0 •.� ^C v M 0000 s to N 01 M O O O O M o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 a (n N- N M 00 ,-- a1 00 "0 M N " O N r C O O M M O to M 01 O 00 O M a1 N O M N N "0 to C 1 .—.-01 N N N 00 O O — O O O N O o O o O — O o O o O N O O N 0 O 0 O 6 O 6 O 6 O 0 O 6 O 6 N 6 O 6 O 6 O 6 O 6 N— 6 0 6 0 0 M 0 O 0 a) N E 3'"+ E E C C 4. o U V ti C .� U U O U w> �. I I d FO Q U ¢ O ar ou a C 0 o 'C^a 5000 ODUUU O ODUUUUUUUU ODUUU oUU oU O aU U U U U U U U Did A kn O M Item AA1: Staff Report Pg. 156 Packet Pg. 836 of 853 0 O O a) C W 0 m (I) O C O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O O O O O O O o Distribution of O i 'O C o ca N O\ O 00 O O V) O N M - t` N 00 N N'T '0 N N N O' M - If) O Products y O M N V) O 00 00 4 1 ' M 00 O\ Q\ N N - O O\ N 00 00 00 N c) 3 Q y O IT M 'O N O O - N - N \O 0 --0 0 - M In N 00 1• O If) r" M O 00 O O M N N O O" I O O N v N- O M N N N 'O M- M O"t O O O C C C C O C O C C O C C O C O O O O C O O C O C O O O C C o C C •� ^O v 00 M O a O v, G C C C O OO C C C C C C.O C OOQ O O G 0© C0 C C O C C C ar y O M O N N N O kn O Wn O M M M .O O )n v 0 0 0 0 6 0 0 0 0 0 a 0 0 0 0 O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C) 0 0 0 0 0 CD 0 0 0 0 'A rID Cd0 rID C, rID 'A Cn rID rID rID r/D rID r/D r/D rID r rI) r/D r Ln rID CD N N N N N N N N N N N N N N N N N N N N N N N U vi O rn O V] O V] O V] O VI O Cl) O V] O Vl O Cl) O V] O CI) O VI O V] O 'n O Cl) O V] O V] O Cl) O Cl) O V] O V) O VI O V] O V) O Cl) O V] O V1 O Cl) O VJ O C .� x rf '��d o, �� a>i�UUUU�j�jUU QQ W�UC7C7'3 `� t o ti� U U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U Did A Item AA1: Staff Report Pg. 157 Packet Pg. 837 of 853 0 O 0 a) O W O m (I) O U 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o Distribution of O i 'O p a) N O N \O N 01 in - N N N 0\ 00 01 0\ O o', - M O 'l - It) •-- -0 to 'l 0\ \O 00 00 N V) V) O N N N 00 N N N N O M 00 -4 N Products y V) O 0\ in 01 - S N' N ti 1 00 101 O in ' O Z 00 V) M .--i O M- N 'O 00 ci 3 Q y•-- p, 0 o\ r 0 00 0 N O 0 M O O 00 O O M O - O O 0\ - O - O O M O O -0 \O M - N 00 M r-i O -0 O O 'O N O M O O V) N 0 V) N 0 If) N 0 If) N 0 t` M 0 to O 0 0\ O 0 O N rl 00 4 O 01 O - O O O In O N O O O O C C C O C C O C C O N C O C C O O O O O O O O O O O O C C � w o O •� ^C v N M a v, 0 0 0 0 0 0 0 0 0 0 0o o0•_0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ?r y 0o — M N O� r0 M Wn 0— O Wn O N O O M .-- -- O M O M M M M O •-- '- N ^- O IC O v O O O O 0 0 0 0 0 0 0 r- O O O O 0 0 0 0 0 0 0 — O - O O O d) d) G) G) N G) G) G) G) G) G) G) 4) 5) G) G) G) G) 0 G) N G) 6) 5) N d) G) 5) G) G) N bJJ N N N N N N N N N N N N N N N N N N N N N N N N N N N N U rA 0 rA 0 Cn 0 r 0 cn 0 rn 0 rA 0 Cn 0 CI) 0 C 0 Ci) 0 Ci) 0 CI) 0 CI) 0 Ci) 0 C 0 CI) 0 Ci) 0 C 0 CI) 0 Ci) 0 rn 0 C 0 CI) 0 CI) 0 C 0 r 0 CA 0 cn 0 r 0 sr 5) •- U ixr '• V - Y o �" 0 i 5) 5) 0-j 'd M° a x w >~ a w y cd a E O � O N �� O 2Cd I~ �0 0 y 7O O O 0 a Qr Y--1 I-� 1-� 1-� a I-� a 0 0 I4 Fy F� Q ^ Q•'i a Q -I "'i ^ w .L a Cdl Cd C6 F-i a o a ;' ti U U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U Did A ❑ o. Item AA1: Staff Report Pg. 158 Packet Pg. 838 of 853 0 0 O a) 0 W 0 m 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O °° O O O O O O O O O O O O O O o Distribution of O i ' o ca O r. N M \Z N - N- M - '.O 00 M O N N M 00 ON O N If) O ti N- N H 01 N- wn N H Products y O N oo -- lN l� M �C 00 t- N to 00 �O 00 00 11 �O 01 N �O M kn 01 00 01 M N N 'T OC 00 kn O �O ON M OC 00 M �O NT 00 00 01 00 0\ \O 00 t` cj 3 Q y N 0 .-- - N O N - It01 N N O 00 O O O O a1 O' O O - N M D\ O - M \O 00 N H ti N N N O N N N 00 kn M O C O C C C C C O C C O C C O C O O O O O O O O O O O O O C C w o 0 0 0 0 N v, a 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 00 0 0 0 0.0 00 0 0 0 0 0 N M 00 W) "O O O •-- to O O N N to O N — "O O a1 - M — N rn"t a1 N a a, M u7 O N 00 N O1 O O1 00 -t 00 O1 M O1 M O O O O 0 0 0 0 0 6 0 0- 0 0 6 O M O O to O O O O O O H O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 d) G) G) G) d) G) G) G) G) (1) G) ( N c 5) c G) c G) c G) c G) d) 00 cbJA —i 5�—i 7�r • f.' >--.'S"�. >•+" O U . V O Q � � � � � � � � � � � � Q � � � � a) N � � cd�"� O O C.J v n rn Cl) Cl) �N+ /y 'yam H N N 000000000000000000 b 'A -°o ; o °) °o ° o CCI)C CO 00 stn a, ar ou a a 0 o a � a '�^a �UUUUUUUUUUUUUUUUUU ODU ODUUUU O oU aU U U U U )id A kn O Item AA1: Staff Report Pg. 159 Packet Pg. 839 of 853 0 0 O a) 0 W 0 m (I) 0 U O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 \ Distribution of i O P C p o ce N D -O M N lIDO 00lID N in lID 00 D\ O i N ZO N N N O N V) N 01 MF— N in O M ZO r - N a0 Products y N . 00 M 00 in i) O N 00 N O N O M N"T"0 O M 00 qv M N00 - O M W 00 \O l� N 00 O\ 00 N 00 M M 00 M N 00 00 - lI) d ci y N N O\ r IV O �-- O N M O M O 7 �-- M M t` O t` N �-- \O O D\ O\ M .-ti N �- 01 N O M- �--i tn N O- N N 00 N N N C w 0 0 0 0 0 0 0 0 0 a1 - N 01 01 00 N 00 N M NrD V7 v, a 0 0 0 0 0 0 a, a, 0 ONO 0 0 0 0 0 0 0.0 0 0 0 0 0 0 0 0 0 —� \O O ,--i V7 M 00 \O V7 r-- •--� 01 "t M t` 00 r- 00 ,--i M "t "t "t 1,O r— M •--i ar y u7 N O N ¼-O ¼-C N O 0 0 •--a 't O C , N O 00 - t` 't N O ¼-O .- u7 00 00 N M v) O O O O O O 01 0 0 0 0 0 6 O O N O O' O O M O v7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 I. . t) , t) , t) . t) . 4) . N , N � U , cd cd cd N N N N N N U N p i-. a-. Fr Fr N N s•. i_ s_ s•. s.. s.. s•. 3., > ri o y O N >~ O G) O tl U Z cn cn N t, aU55 0 o %a %^a EEI U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U 1 Did A Item AA1: Staff Report Pg. 160 Packet Pg. 840 of 853 0 O 0 a) O W 0 m (I) O 0 0 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o Distribution of O i ^O o O N O O MN - r — Products o ce 00 O t-N Q5 in in N 00 N M V i N ti - kA 01 N O- 00 I- O N N - -0 V i in u c) Qy p, V) am' O N .-ti V) N in N 0 - - 0 O 0 O 0 N 0 - 0 0 O 0 O H r-i O N V M N ON N 0 O O 0 0 O 0 O 0 - N- \O 0 O\ N 0 O 0 00 O M O 00 O ' - 0 It) N 0 0 C a� o O O O O 0 0 0 0 0 O � ^C 00 N O r- 00 O M O I) O _ N 00 N (l) O .c v, a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 v M t` t` — O N N 00 O 01 •—� 00 00 N O kn M u7 —� �O ar y &n M 0 0 O .-- N I) N O O O O N M N O M N O — N N 0 - - 0 0 0 0 In 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd cd M cd cd cd L) O O O O O O O O O O O O O O O O O O O O O O O O O O a a a a fi V -C our, a a 0 o oUUU E;= �UUUUUUUUUUUUUUUUUUUUUUUUUU U ar�U Did A kn O Item AA1: Staff Report Pg. 161 Packet Pg. 841 of 853 a) O O a) C W 0 m (I) O C O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O \ O \ O \ O \ O \ o \ e \ e C e C e C e \ e C e C e C e \ o \ Distribution of O i P 'O p o ce 01 kn 0\ N \O 01 00 in M ' r" '" 14 'l rm d' kn M 00 M M N IV N 01 ' 01 .--I 01 O\ N M 01 O 00 M N N it N ' t 00 a1 Products y kn `O 00 N 00 00 M rO .-ti r" �O M O M O N O N- t- N 01 00 01 t- 01 M O T N' kn IV N oo l� O - 'O I4 O N to u y `O N N O\ O O O V7 O N O N O O N kn O O N r-i "0 N M - 0\ M .--i 00 N N O N O r O :5? o ce o_ 0 0 ^C v N n O �O a O v'i d v, a G C C G C C C C C C C C C C O 0 G G C G C C C C C G C G C ar 0� O M' N .O N N O to Ln O N '.O M M 1'— 00 N O kn "O `— N O O O O O O O O O O O O O O O O O O O O O O O O O O O O O M 4) 4) N 4) N d) N d) d) N 'Cl) U) d) d) G) G) N G) G) d) 4) U) 4) 4) C4 4) N 5) C Cl) Cl) U ♦Z+ �" � � � � � W � � Fri � � Fri � � � � � � � W W W W W � � � � . ° ° v o Q p O 0 ) ti N � Q � t_ a •a o 0 %^a EU O oUUUUUUUUUUUUUUUUUUUUUUUUUU UU U U Did A Ti kn O J Item AA1: Staff Report Pg. 162 Packet Pg. 842 of 853 0 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O 0 0 0 0 O O O O O o e e e e o Distribution of O i 'O p ce N r. 01 O -T 01 N O M N r" M N O IT O 'O ZZ inc M 00 M M IV �--� in N .--IC 00 �--I O �O Products a y V) \O O M X "D r M 00 Z t- N M M O - " 01 " N N 01 M r" N ( 00 ci 3 Q y 0 O1 00 r �O O *1 O - N N N 00 Z O O N N r N u.nO O M N N u.nO1 N N N IN 00 rI N N N - O O C C C O O O M O O O O O O C C O C O C C C C O O C O O C w o 0 N 0 0 ACC "C U 0C 00 M --i 00 01 v, a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ar y &n M O O N O N .--+ O M O O M N 00 M -- c� O O O O O O O O O M O 0 0 0 0 0 0 0 0 0 0 0 O O O 0 0 0 0 0 0 O O O O O O O O O O 0 0 0 0 E 0 0 0 0 0 0 0 0 0 0 O �"� O ;0) •E .E .E .E .E .E . PEE �}y, i-i �CCyy P ��.yI i d CC C6 ,}.-yI ? 4 ��.-yI i t ��-.�yl i d �}yI i-I Cd ��yl i t �}y�, i-I .{.�yl P Cd }�I� P Cd Cd CJ 000000 � W.yy Wy W..yy W..yy W..yy 000000000000000000 W�1 Wy Wy W�1 W.y W W�-yI W�.yy W..yy W�.yy W.yy W..yy W..yy W�.yy W.yy W..yy W�.yy --II UOrn00rnrnUnrnto000rnrArnrn U)000to o M c) >~ hIh o cdO U c� C, a W U W 0 U QI r� a o 0 ^a U U U U U U U U U U U U U U U U U U U U U U U U U U U U U U ar�U Did A Item AA1: Staff Report Pg. 163 Packet Pg. 843 of 853 a) 0 O a) 0 W 0 m (I) 0 O O O Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O 0 O O O O O O O O 0 o Distribution of O i 'O C o ca OO r OO oo Vi 01 N OO O1 OO ' O M OO M O1 - - OO 0O O O1 N - O1 O\ O\ V O\ V OO V un O1 - Products r+ U u y.► N l� O\ O -T - O O1 kn M N O N N N OO kn 01 OO O - - 0O M OO kn OO kn N M O M N � N IV aN O c) C, N O O O1 S -••i V) 0 M 0 M 0 01 - - - 0 N M- 0 OO 0 If) \O O It) F- -: - V) O M V) O N O N- O O N' - O - ••i t: N O O M'l O - O O - O If) N"O M O\ O OO OO O1 - O IV N O C a� o +� 0 0 0 0 0 0 0 0 0 C i C00 ^C v O en O 00 O N N kn O M 00 O1 C OO N M N O O v, a O O O O O O G O 0 O 0 O 0.0 o C o o O O 0C O 0 0 0 0 0 0 0 - i O M O "O O 00 N O1 00 zI--C M ,-- 'n W) kn N N O 00 M •-- N \O u7 N O1 00 M M -- 1n N 00 O kn vi -- 00 O h — O — O O N O a\ O O O O O O O O O M O 00 O O O O O 'ott 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 •� •� •�.1 •.�. tt•4 O O O CQQQQQQQQQQQQQQQQQQ w91>~ >~>~ C > Cgg 0 0 0 0 0 0 0 aaa �� n ��tn��tn�� r/D (ID (ID (ID (ID (ID (/D o C �, U• U O >:." G7 cd Q, cd y U 3.., p U a o I.:1 111111 'b y U U U U U U U U U U U U U U U U U U U U U U U U U U U U aU oU U Did kn O Item AA1: Staff Report Pg. 164 Packet Pg. 844 of 853 a) O O a) C W 0 m (I) O C O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O O O O O O O O O O O O O O O o Distribution of O i ^O p ca l0 to M 00 N N .--I Nr 01 01 O \O N M O 00 N 00 - O 00 M 0\ N 0\ O \O M in N- - - th 00 - M IV �O M �O N tn Products y -T M 00 N 0\ O oo N to 00 to 00 0\ '0 �Z - O O N oo �O kn 00 00 00 'n 0\ M 0\ 00 01 00 01 00 M kn N N \O N ci Wn M M '0 �O '0 M kn '0 �O '0 'n ' M .-- .-- O - .-- N - O - M - 'O N - O - N 'n M N O O 00 M O O N 00 a1 ti - '.D O N C R ^C U M M a rI) 0 G C C G C C G C C C OOC C C G G C C C C C CC C C.O C C C ?r 0l N N N N zt ^� N - - Vt N V) "t M O O't N V) N 0 0 0 0 0 6 O O O O O O- 0 0 0 O 0 0 O O O O 0 G) 0 U 0 N 0 G) 0 G) O G) 0 4) 0 4) 0 0 0 0 0 0 0 0 c cad c cad - O - O - O - O Cd CC Cd Cd CC Cd Cd Cd N CC 4) C� 4) C� U CC 4) C� 4) C� U CC 4) C� � �..yy �y �y �..yy �y �..yy ��.yy �yy �y �.y �y �y �--II ��.yI /C/a� W /Cy� W /�C•�� W /C�a F••1 �•Cy� F•i••I •Cy�� F••1 U U U U r0, V . ll . rte•+ .'�•1 . •�•1 li-1 i-4 i-I i-I i-4 iti ?-1 i-I i-I i-1 i-4 r�-�-I i-1 i-Y i•-I iti y Y Y Y C..�yy i-I C..�yy i-I C..�yy iti C�.�yI iti Cd Cd Cd r/] c C rID CID C/1 (ID (ID Vi 51) o O :� o U O C a N O _�' S" U Z cd C O CI] V1 0.1 y C/] U V1 -d v' 5.lD� a o 0 •c^a 50000 oUUUUUUUUUUUUUUU U ODUUUU U ODUU U aU Did 0 . 7� kn O N Item AA1: Staff Report Pg. 165 Packet Pg. 845 of 853 a) 0 O a) 0 W 0 m (I) 0 O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O 0 O O O O O O O O O O O O O © o Distribution of O i 'O o ce 00 M O N O N 01 r -I 00 O O 00 O \O M N - \O 01 \O \O 01 - 01 00 v V) N M - 01 \O C rI -I M O, M 01 to 01 M O ON N - M 00 Products w M M 00 M IT C. kn 00 O \O O O 00 M O M O '-- \p \O M" \O t` 3� Q y- - N- M M M� O to M O M M r-i \O - 00 - N - N tn 00 M C. 'm M M M O N M \O N tn N- M C. 00 N '0 N OC N M \O \O \O N \O \O w 0 0 o 0 0 � 0 c C 2 C •R ^C U \O M G1 M M N 0w a}"i O O - O v, a O O O O 0 0 O 0 O O O 0 C O O G G O O O O O 01 O C C O o O O i y M -- M \p M •--i 01 M 0\ t� \O O M t/') M 00 O N M kn •-- M \O 01, N 00 O 00 N O \O --� M \O ,-- Q1 O ,-� N •-- t-- \0 00 N M •--� 00 0 cC c' c' co 0 0 0 0 0 0 0 0 0 O cd cd cd cd cd cC cd cd cC cd cd cd cd cd co cd cd cd cd O O O Or^ O O Or r ,0 V i 4 iti �1 iy iti iti V-} �I �•I iti iti iti iti i•-I CA Ln Cn V ^ V) (A to V) to CA to CA Cn r� t� 0 x o r" `� U o o a ° c• j o p V �"" �' cd r"i �y cd �" N Q v •.• U m O y V1 � ar t_ a a o 0 ^O U U U U U aU Did Item AA1: Staff Report Pg. 166 Packet Pg. 846 of 853 0 O O 0 O W 0 m (I) O O O 0 Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and O O O O O O O O O O . O \ O \ O \ O \ o \ e \ e \ e \ e . e \ e \ e \ O \ o \ o \ Distribution of Opi P C C o ca 01 in O N 00 M 00 01 M N O �O 01 Vi �O '0 M O 01 Q\ 01 �O 00 IT N IT ' kn _0 N ZO N 01 1 01 N O\ N 01 t` rl r" in le M N N N Products 0 y O 0\ M 01 N O 00 ZZ V i "0 V') - 01 ZO '.O N M O ZO N N N -I N If) N r -I N O N dc y ' M - V) 00 - N - 00 - ' M 00 rO - N - 00 O M M N rl O \O " N- - If) 00 .-ti • - '0 M O N O V) O- N O M 't V') IV O 00 N rl O N O 10 O O O C C rl C O O O O O O O O O O C C C O O O O O O O N O O O C a) w o 0 0 0 0 0 O C ^O v N 001 01 00 M N v, a 0 O O O OO O O O O O O O O 0 0 O O 0 0 O O O 0 O O O O O O 0 i y oo N -- .� N O -- •� •� -- -- •� "O O r- - � 00 00 01 O ^� O M O t` O • N In M �O I'D 0O M N 01 N O N O 00 O C v O — 0 0 S O N O O O O O M O N O O 00 0 0 0 0 0 0 0 r 0 0 0 O O O O O O O O O O O O O O O O O O O O O O O O O N O 0 0 O O O O cd M cd cd cd C CS:"i t" S:"i 3•", ci)ci) S:"i S", f~r' t~r" �+" ~ n �"" �'"-' , '� '� '� '� '� ~O U O C/1 O r/� O V1 O to V cC V co V V co V cC V V cd V1 cl] D N [� H H H H H H H H N N 0 0 U U ri p°, ° �° o o o H o V1 h .� •ti W a ar ou C a C o 0 0 ;� a �^aUUUU ODUUUUUU U oU U OU U o U oUUUUUUU U O U ODUU U aU Did Item AA1: Staff Report Pg. 167 Packet Pg. 847 of 853 a) 0 O a) 0 W 0 m (I) 0 O O 0 0 0 0 0 0 0 0 0 0 0 0 0 C 00 V) - N M N 01 N - C ca r 00 - N' O O- N N M O N N 3 d y p, • N O N - M N - N V) • V)' N N N - u- O O C O O O C C O C O O C 0 0 0 l— b U CSI � U O O O Y a U O O O O O O C C 0 0 C 0 �O kn to N u7 "0 00 -t -t W kn N 00 .O N I "D v O O O O O M O O O N O O O O O C rf C N V c0 o > OQin O C3 as a � 00 on 0 a a 0 o `.! c..� r � `/ r � U c)0 U c..) U U U L) U Qy V Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products A 5 Item AA1: Staff Report Pg. 168 Packet Pg. 848 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F 1. Additional defined terms: 2. APPENDIX 2 Cost Reimbursement Procedure Item AA1 Attachment A Resolution Authorizing City Manager to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products a) Costs means the reasonable amounts paid for the attorney and other City Attorney and County Counsel staff time for individuals employed by a Plaintiff Subdivision at the contractual rate, inclusive of benefits and overhead, together with amounts paid for court reporters, experts, copying, electronic research, travel, vendors, and the like, which were not previously reimbursed and which were paid or incurred (i) prior to December 31, 2022 in litigation against any Opioid Defendant and/or (ii) in negotiating and drafting any CA Allocation Agreement(s) concerning a settlement with any Opioid Defendant(s). Costs does not include attorneys' fees, costs, or expenses incurred by private contingency fee counsel. No part of the CA Abatement Accounts Fund will be used to reimburse Costs. b) First Claims Date means October 1, 2023 or when all applications for reimbursement of Costs, in whole or in part, from funds available under Section IX and Exhibit R of the Walmart Settlement Agreement, Section XIV and Exhibit R of the Teva Settlement Agreement, Section XIII and Exhibit R of the Allergan Settlement Agreement, Section X and Exhibit R of the Distributor Settlement Agreement, Section XI and Exhibit R of the Janssen Settlement Agreement, Section X and Exhibit R of the CVS Settlement Agreement, or Section IX and Exhibit R of the Walgreens Settlement Agreement, have been finally determined under the provisions of those agreements, whichever comes first. c) Special Master means a retired judicial officer or former public lawyer, not presently employed or retained by a Plaintiff Subdivision, who will aggregate, review, and determine the reasonable Costs to be awarded to each Plaintiff Subdivision that submits a claim for reimbursement of Costs. The Special Master will be selected by a majority vote of the votes cast by Plaintiff Subdivisions, with each such subdivision having one vote. d) Plaintiff Subdivision Committee means the committee of Plaintiff Subdivisions that will review and approve the invoices submitted by the Special Master reflecting his or her reasonable time and expenses. Cost Reimbursement to Plaintiff Subdivision a) Purpose. Substantial resources have been expended to hold Opioid Defendants accountable for creating and profiting from the opioid crisis, and this effort has been a significant catalyst in creating National Opioid Settlements with various manufacturers, distributors, and chain pharmacies. b) Claims Procedure. If a Plaintiff Subdivision is eligible to seek reimbursement of Costs, in whole or in 1 A Item AA1: Staff Report Pg. 169 Packet Pg. 849 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F 11. Item AA1 A Attachment A Resolution /i Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement part, from funds available under Section IX and Exhibit R of th Agreements re Settlement Agreement, Section XIV and Exhibit R of the Teva Manufacture and Agreement, Section XIII and Exhibit R of the Allergan Settlem Distribution of Opioid Section X and Exhibit R of the CVS Settlement Agreement, Sec Products R of the Walgreens Settlement Agreement, Section X or Exhibit Distributor Settlement Agreement, or Section XI or Exhibit R of the Janssen Settlement Agreement, it must first make a timely application for reimbursement from such funds. To allow sufficient time for determination of those applications, no claim for Costs to the CA Subdivision Fund under this Agreement may be made before the First Claims Date. A Plaintiff Subdivision that wishes to be reimbursed from the CA Subdivision Fund must submit a claim to the Special Master no later than forty-five (45) days after the First Claims Date. The Special Master will then compile and redistribute the aggregated claim totals for each Plaintiff Subdivision via email to representatives of all the Plaintiff Subdivisions. A claim for attorney and staff time must list, for each attorney or staff member included in the claim, the following information: name, title, total hours claimed, hourly rate (including, if sought, benefits and share of overhead), and narrative summarizing the general nature of the work performed by the attorney or staff member. For reimbursement of "hard" costs, the subdivision may aggregate across a category (e.g., total for travel costs). It is the intention of the Plaintiff Subdivisions that submission of documents related to reimbursement of Costs does not waive any attorney -client privilege or exemptions to the California Public Records Act. The Special Master may request, at his or her sole option, additional documents or details to assist in the final award of Costs. iv. The Special Master will review claims for reasonableness and will notify each Plaintiff Subdivision of the final determination of its claim, and will provide a list of all final awards to all Plaintiff Subdivisions by email or, upon request, via First Class U.S. Mail. Any Plaintiff Subdivision may ask the Special Master to reconsider any final award within twenty-one (21) days. The Special Master will make a final determination on any such reconsideration request within thirty (30) days of receipt. v. Any decision of the Special Master is final and binding, and will be considered under the California Arbitration Act, Code of Civil Procedure section 1280 et seq. as a final arbitration award. Nothing in this agreement is intended to expand the scope of judicial review of the final award for errors of fact or law, and the Parties agree that they may only seek to vacate the award if clear and convincing evidence demonstrates one of the factors set forth in Code of Civil Procedure, section 1286.2, subdivision (a). Plaintiff Subdivisions will have fourteen (14) days after all final awards are made, together with any final determination of a request for 1 Item AA1: Staff Report Pg. 170 Packet Pg. 850 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Item AA1 A Attachment A Resolution /i Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement reconsideration, to seek review in the Superior Court of Califorri Agreements re of Civil Procedure, section 1285, where the State has filed its Ct1 Manufacture and Distribution of Opioid vi. The Special Master will prepare a report of Costs that includes Products expenses at least ninety (90) days before the Payment Date for each nnua Payment. The Special Master's preparation of a report of Costs does not discharge a Plaintiff Subdivision's reporting requirement under Section V(B)(2) of the Walmart Settlement Agreement. vii. A member of the Plaintiff Subdivision Committee, which is a CA Participating Subdivision, will submit to the Settlement Fund Administrator and Walmart a report of the fees and expenses incurred by the Special Master pursuant to Section V(B)(2) of the Walmart Settlement Agreement. c) Claims Priority and Limitation. The Special Master will submit invoices for compensation of reasonable fees and expenses to the Plaintiff Subdivision Committee no later than ninety (90) days prior to the Payment Date for each Annual Payment. The Plaintiff Subdivision Committee will promptly review and, if reasonable, approve the Special Master's invoice for compensation. The Plaintiff Subdivision Committee will submit approved invoices to the Settlement Fund Administrator for payment. The Special Master's approved invoices have priority and will be paid first from the CA Subdivision Fund before any award of Costs, subject to the limitation in Section 2.c.v below. ii. Final Awards of Costs that do not exceed seventy-five thousand dollars ($75,000.00) will be paid next in priority after the Special Master's approved invoices. iii. Final Awards of Costs in excess of seventy-five thousand dollars ($75,000.00) will be paid proportionally from the funds remaining in that year's Annual Payment. iv. Any claim for Costs that is not paid in full will be allocated against the next year's distribution from the CA Subdivision Fund, until all approved claims for Costs are paid in full. v. In no event will more than 50% of the total CA Subdivision Fund received in any year be used to pay Costs or the Special Master's approved invoices. vi. In no event shall more than $28 million of the total CA Subdivision Funds paid pursuant to the Walmart Settlement Agreement, Teva Settlement Agreement, Allergan Settlement Agreement, Distributor Settlement Agreement, CVS Settlement Agreement, Janssen Settlement Agreement, and the Walgreens Settlement Agreement be used to pay Costs. 1 Item AA1: Staff Report Pg. 171 Packet Pg. 851 of 853 Item AA1 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F Attachment A Resolution Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement d) Collateral Source Payments and Third -Party Settlement. Agreements re Manufacture and In the event a Plaintiff Subdivision is awarded compensation, in Distribution of Opioid by any source of funds created as a result of litigation against arit Products for its reasonable Costs, it will reduce its claim for Costs from the CA Subdivision Fund by that amount. If a Plaintiff Subdivision has already received a final award of Costs from the CA Subdivision Fund, it will repay the fund up to the prior award of Costs via a payment to the Settlement Fund Administrator or notify the Settlement Fund Administrator that its allocation from the next and subsequent Annual Payments should be reduced accordingly. If the Plaintiff Subdivision is repaying any prior award of Costs, that repayment will occur as soon as is feasible after the Plaintiff Subdivision's receipt of Cost funds from the collateral source, but no more than 90 days after its receipt from the collateral source. The Settlement Fund Administrator will add any repaid Costs to the CA Subdivision Fund. Any Plaintiff Subdivision that has submitted for reimbursement to any national fund and has not received a final determination by the First Claims Date may request that the settlement administrator withhold some or all of its payment from the CA Subdivision Fund in order to avoid repayment. ii. In the event a Plaintiff Subdivision reaches a monetary settlement or compromise against any Opioid Defendant outside of the National Opioid Settlement, the monetary portion of such settlement, net of fees paid to outside contingency fee counsel and of funds earmarked strictly for abatement, will be credited against its Costs and the subdivision will be ineligible to recover those credited Costs from the CA Subdivision Fund. Plaintiff Subdivisions negotiating monetary settlements or compromises against any Opioid Defendant outside of the National Opioid Settlement will negotiate for funds to repay any Costs it previously received from the CA Subdivision Fund or for Costs it otherwise might be eligible to claim from the CA Subdivision Fund. If such a settlement is paid after all final approved claims for Costs by all Plaintiff Subdivisions are satisfied in full, the settling subdivision will reimburse the CA Subdivision Fund in that amount by making payment to the Settlement Fund Administrator to add to the CA Subdivision Fund in a manner consistent with the repayments described in section 2.d.i above. Item AA1: Staff Report Pg. 172 Packet Pg. 852 of 853 DocuSign Envelope ID: 62182248-11AB-4F03-92B1-1DEABE3FAA2F APPENDIX 3 CALIFORNIA -SUBDIVISION BACKSTOP Item AA1 Attachment A Resolution A Authorizing City Manager 5 to Execute Participation Agreements obo CPA to Enter into Settlement Agreements re Manufacture and Distribution of Opioid Products On August 6, 2021, Judge Polster of the US District Court for the Northern District o issued an Order (the Order), docket number 3814, in In Re National Prescription Opiate Litigation, MDL 2804, addressing contingent attorney fee contracts between political subdivisions eligible to participate in the Walmart Settlement and their counsel. In light of the Order, and at the request of [SUBDIVISION], the [SUBDIVISION], its counsel [COUNSEL], and the California Attorney General, on behalf of the State of California, are entering into this California -Subdivision Backstop Agreement (Backstop Agreement). [SUBDIVISION] and [COUNSEL] intend this Backstop Agreement to constitute a State Back - Stop Agreement as that term is used in the Order and in Exhibit R (Agreement on Attorneys' Fees, Costs, and Expenses) of the Walmart Settlement Agreement. Pursuant to this Backstop Agreement, [SUBDIVISION] may, subject to the limitations of the Walmart Settlement Agreement and CA Walmart Allocation Agreement, as well as any other limitations imposed by law, use funds that it receives from the Walmart Settlement CA Subdivision Fund to pay a contingent fee to [COUNSEL]. Any such payment from [SUBDIVISION] to [COUNSEL], together with any contingency fees that [COUNSEL] may receive from the national Attorney Fee Fund, will not exceed a total contingency fee of [PERCENTAGE NOT TO EXCEED 15%] of the total gross recovery of [SUBDIVISION] from the Walmart Settlement. [COUNSEL] certify that they first sought fees and costs from the Attorney Fee Fund created under the Walmart Settlement Agreement before seeking or accepting payment under this backstop agreement. [COUNSEL] further certify that they are not seeking and will not accept payment under this backstop agreement of any litigation fees or costs that have been reimbursed through prior settlements or judgments. The Attorney General is executing this agreement solely because the definition of "State Back - Stop Agreement" in Exhibit R of the Walmart Settlement Agreement requires such agreements to be between "a Settling State" and private counsel for a participating subdivision. Neither the California Attorney General nor the State of California have any obligations under this Backstop Agreement, and this Backstop Agreement does not require the payment of any state funds to [SUBDIVISION], [COUNSEL], or any other party. [DATE] [SUBDIVISION SIGNATURE BLOCK] [DATE] [COUNSEL SIGNATURE BLOCK] [DATE] [ATTORNEY GENERAL SIGNATURE BLOCK] Item AA1: Staff Report Pg. 173 Packet Pg. 853 of 853