HomeMy WebLinkAbout2020-12-14 City Council Agendas (21)
City of Palo Alto (ID # 11832)
City Council Staff Report
Report Type: Action Items Meeting Date: 12/14/2020
City of Palo Alto Page 1
Summary Title: Finance Committee Recommendation Regarding the Roth
Building
Title: Finance Committee Recommends the City Council Direct Staff to
Complete the Following in Regards to the ROTH Building, 300 Homer Ave: 1)
Identify Funding for a "Cold Shell"; 2) Return to Council With Additional
Funding and a Lease or Lease Option; and 3) Work With the Palo Alto
Museum Regarding Lease Terms
From: City Manager
Lead Department: Administrative Services
Recommendation
The Finance Committee recommends the City Council direct staff to:
1) Identify funding for a “cold shell” construction project ($6.5 million) including use of
“Available Financial Sources” as identified in Table 1 in staff report #11611, with
additional funding needs to be identified by the City ranging between $500,000 - $1.0
million;
2) Return to the City Council with both additional funding and a lease or lease option
agreement with the Palo Alto Museum (PAM) for a finite period; some funding, such as
PAM donor funds, necessitate using PAM approved plans, and to identify other
potential funding options; and
3) Work with museum staff to suggest a length of time for the museum to have
enforceable lease terms, subject to conditions.
Discussion
On November 17, 2020 the Finance Committee discussed options for the rehabilitation and
future use of the Roth Building including funding options, construction phasing and financial
support requested by the Palo Alto Museum (PAM) (CMR 11611 and Attachment A). Action
minutes from the meeting are attached (Attachment B) and are available at this link. The video
of the item can be found at this link and the presentations at this link. The Finance Committee
approved the above recommendation on a 3-0 vote.
City of Palo Alto Page 2
During the meeting PAM presented their request of the Council to fund the full construction of
the Roth Building (requiring additional funding of approximately $3.71 million), issue a 40-year
lease and commit to a partnership to rehabilitate the Roth Building. Committee discussion
focused on the potential available funding sources outlined in the staff report including impact
fees, Stanford University Medical Center funds, and the General Fund (operating and/-or capital
funding).
During the meeting the committee deliberated extensively about the partnership with PAM,
the long-term plans, fundraising goals, and comparisons to other projects and partnerships. The
Committee arrived at the above recommendation for the City Council's review and deliberation
and ultimately for City Council direction to staff on next steps. These next steps would
supersede those provided by the City Council in March 2020, as outlined in the Finance
Committee staff report. Specifically, this potential direction to staff was requested as an action
item for discussion by the full City Council given the financial and funding needs even though it
was a unanimous vote and would typically be a consent item under standard practices.
Stakeholder Engagement
Staff continues to meet with representatives of PAM including their construction contractor to
discuss the current status of the project, shared space options, phasing of the construction
project, and any additional potential next steps. In addition, staff continues to discuss funding
feasibility, legal restrictions, zoning options, as well as construction details with necessary
partner departments including but not limited to Public Works, Community Services, the City
Attorney’s Office, and Planning & Development Services departments.
Resource Impact
Additional financial contribution ranging between $0.2 million to an estimated $4.2 million are
necessary to close the gap in funding for either a “cold shell” or the completion of the Phase 1
construction rehabilitation project. Depending on the funding options selected, impacts to the
current priorities outlined in the City Council approved FY 2021-2025 Capital Improvement Plan
will require City Council action to rebalance. Staff identified potential funding impacts in the
attached report as well as funding sources for the Council’s reference and to assist in informing
Council’s deliberations.
Environmental Review
The proposed action is to provide direction on next steps for staff efforts with respect to the
future use of the Roth Building and does not constitute a project under the California
Environmental Quality Act (CEQA).
Attachments:
• Attachment A: Finance Committee Rehabilitation and Future Use of the Roth Building
Options Staff Report #11611
• Attachment B: Finance Committee Action Minutes 11-17-2020
City of Palo Alto (ID # 11611)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 11/17/2020
City of Palo Alto Page 1
Summary Title: Rehabilitation and Future Use of the Roth Building Options
for City Council Review
Title: Discussion With the Palo Alto History Museum and Recommended
Direction to the City Council Regarding Options for the Rehabilitation and
Future use of the Roth Building, Including: Funding, Construction Phasing,
and Financial Support Requested by the Museum
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Finance Committee:
•review and discuss the current goal of the partnership between the City and Palo Alto
History Museum (PAHM, also known as Palo Alto Museum or “PAM”) in the
rehabilitation of the Roth Building;
•discuss the return on investment in cultural and community benefits, including the
current status of project financing and the current request for City support in this
partnership; and
•discuss the financial scenarios and specific funding options to provide direction on next
steps.
ATTACHMENT A
City of Palo Alto Page 2
Executive Summary
In response to the City Council request as part of the FY 2021 Budget process and the March
2020 City Council referral to the Finance Committee, this staff report provides options for
potentially funding the gap for rehabilitation of the Roth Building as the new home for the Palo
Alto Museum. Staff is seeking Finance Committee consideration of potential project elements,
including potential funding options and finance limitations. PAM will provide a presentation of
the status of the project, rehabilitation options – rehabilitation is called Phase 1 and can be
done in two parts, “Cold Shell” and “Phase 1 Completion (full rehabilitation)”, shared space
options, and funding options they wish to explore. The PAM request is attached to this report
and outlines the requested City partnership and financial support to accomplish this
rehabilitation and therefore facilitate opening of a museum (Attachment A). Based on this
request, and the direction from the City Council, staff has reviewed potential options of funding
Phase 1 of the Roth Building project including the funding gap and impacts of use of those
funding sources. The allocation of additional City financial support will require a prioritization
of resources as the City continues to face a significant recession, impacting key revenues that
support City operations and capital investments.
Staff is seeking Finance Committee consideration of potential project elements, including
potential funding options and finance limitations. Staff recommends that the Finance
Committee recommend City Council direction to pursue one of the following options or a
variation of:
Option A: Recommend the City Council direct staff to identify funding for a “cold shell”
construction project ($6.5 million) including use of “Available Financial Sources” as
identified in Table 1, with additional funding needs to be identified by the City
ranging between $500,000 - $1.0 million and return to the City Council with both
additional funding and a lease or lease option agreement with the Palo Alto
Museum for a finite period. Some funding, such as PAM donor funds, necessitate
using PAM approved plans.
Option B: Recommend the City Council direct staff to identify funding for a full rehabilitation
of the Roth building (Phase 1 of the Roth Building project as outlined by PAM, $10.5
million) including use of “Available Financial Sources” and “Pledges” as identified in
Table 1, with additional funding needs to be identified by the City ranging between
$4.0 - $4.3 million and return to the City Council with both additional funding and a
long-term (40 year) lease agreement with the museum.
Option C: Recommend the City Council direct staff to continue with the prior direction
provided by the City Council on March 2, 2020 and return to the City Council with
options for the issuance of a Request for Proposal (RFP) including potential
rezoning of the site and long term-ground lease structure.
Option D: Recommend the City Council direct staff to explore variations of the above options,
or similar direction provided in the past by the City Council such as recommend the
City Council provide the PAM a fundraising target and timeline to raise additional
funds (net of expenses incurred) for the project and direct staff to return to the City
City of Palo Alto Page 3
Council with a long-term (40 year) lease agreement with the museum that includes
a termination clause should there be project delays or lack of funding within a
designated period of time.
As noted above, staff is seeking Finance Committee recommendation for City Council
consideration. These options are not intended to be mutually exclusive or all-encompassing,
they are examples for the Committee’s consideration.
Background
In April 2000, the City Council approved the $1,957,000 purchase of the Roth Building and its
0.41 acre site for potential development as a “public facility or alternative use if a public facility
is not feasible,” in conjunction with the South of Forest Avenue Coordinated Area Plan (SOFA
CAP). On May 20, 2002, Council approved a Request for Proposals (RFP) and directed staff to
solicit proposals for the lease of the Roth Building. The RFP specified that preference be given
to non-profit groups located in or serving Palo Alto, that the property be improved and
operated at no cost to the City, and that public access to the Roth Building restrooms by users
of the neighboring park be provided.
In response to the RFP, one proposal was received in November 2003. The Palo Alto Museum
now referred to as the Palo Alto Museum (PAM or the Museum) proposed to restore, preserve,
and improve the historic Roth Building for use as a museum. PAM’s proposal was accepted by
the Council in April 2004, at which time staff sent the Museum a draft Option and Lease
Agreement for its review. In February 2006, staff received the Museum’s proposed changes to
the draft Agreement including a request that the City contribute up to $300,000 to repair
leaking and drainage problems at the Roth Building. On July 10, 2006, Council created a Capital
Improvement Program (CIP) for Roth Building maintenance in the amount of $415,000 to
provide funding for interim measures to prevent further deterioration of the building until the
Museum would take over the site. On May 14, 2007, Council authorized the Mayor to execute
the Option Agreement and approved a City contribution of $150,000 for repair of the leaking
and drainage problems. The Option Agreement was executed on June 22, 2007 with a twenty-
four-month term.
Since 2007, PAM personnel and City staff have examined a variety of proposals to fund the
capital and operating needs of the Roth Building museum and the City Council has extended the
option agreement several times. Additional background information can be found by referring
to prior staff reports on this topic (CMRs: 2197, 2891, 4703, 5365, 5551, 5879 and 8612).
Although the 2007 option agreement was extended several times over the past 13 years, it
lapsed in late 2018 and is no longer in effect.
In December 2018 (CMR #9767) the City Council reviewed the status of the Roth Building
project and directed staff, over the next six months, to validate the PAM’s recent fundraising
milestone of $1.75 million - a target set by Council for a certain period of time, between 2017
and 2018. The PAM at this time articulated fundraising of $1.86 million towards the City’s $1.75
City of Palo Alto Page 4
million challenge. At that time, the Council also directed staff to update the option and lease
agreement, which had not been updated since 2007, for later consideration by Council.
In working to complete the validation of the fundraising milestone of $1.75 million that was
discussed on December 2018, staff engaged a consultant to review the pledges, cash, and
fundraising activities of PAM to confirm the fundraising goal was met prior to beginning
drafting new agreements. On March 2, 2020 (CMR 10276) the City Council reviewed the
consultant report and the progress of PAM’s fundraising to meet the $1.75 million target and
articulated gross fundraising efforts as well as those funds raised net of expenses incurred. At
this meeting, the Council approved the following motion which is currently guiding staff work:
A. Move forward with options for an RFP, including potential rezoning of the site;
B. Additionally, include a possible shared space arrangement;
C. Return to City Council by Monday, May 4, 2020 with a status report; and
D. Refer to the Finance Committee discussion of the possibility that the City fund the
build-out [this was intended to be specifically related to the current PAM partnership
and build-out]
On June 15 staff provided an update on the Roth Building (CMR 11287) as requested in part C of
the March 2 meeting motion. This item provides information and a forum for a discussion on
part D for potential direction to the City Council. As staff and PAM have been partnering
through this period to explore options and the path forward on this project, work on part A was
paused as well as drafting work on documents to extend the option and lease agreement. It is
expected that this discussion with the Finance Committee will be brought to the full City
Council for action as appropriate.
Discussion
Staff is seeking Finance Committee consideration of potential project elements, including
potential funding options and finance limitations and recommend next steps for City Council
consideration. There are two primary elements for the Finance Committee to consider in order
to facilitate the partnership between the City and the PAM:
1. Roth Facility and Funding of the Rehabilitation of the Building
2. Lease Agreement Between the City and the PAM
The various sections below articulate the PAM request for City support and partnership and
provide details associated with the elements above. These details provided below are intended
to assist the committee in informing their recommendation to the City Council. Staff have
provided options for the Committee’s consideration that are not intended to be mutually
exclusive or all-encompassing but examples for consideration.
City of Palo Alto Page 5
The PAM request is attached to this report and outlines the requested City partnership and
financial support to continue this rehabilitation and opening of a museum (Attachment A).
Staff recommends that the Finance Committee recommend City Council direction to pursue
one of the options outlined in the Executive Summary.
Based on the PAM request, and the direction from the City Council, staff has focused this report
on the review of potential options of funding Phase 1 of the Roth Building project including the
funding gap and impacts of use of those funding sources. The allocation of additional City
financial support will require a prioritization of resources as the City continues to face a
significant recession, impacting key revenues that support City operations and capital
investments.
PAM has partnered with Vance Brown for construction contract services for the Phase One
Rehabilitation project. Currently the Palo Alto Museum has two phases planned:
Phase 1 which is the rehabilitation and build out of the facility to make it suitable for
occupancy also known as a “warm shell” estimated at $10.5 million; and
Phase 2 which is the interior build out of the museum and exhibits readying the facility to
welcome visitors estimated at $8 million.
Approximately $1.8 million has been spent by PAM on the prep work for design and ultimately
permit acquisition and approval for the current rehabilitation plans of the facility. These plans
conform to requirements as a historical building and allow for the use of Transfer of
Development Rights (TDR) proceeds to fund improvements. Based on work with Vance Brown,
it is estimated that the remaining cost for the build out of Phase 1 would be $10.5 million.
Over the past several months staff has met with PAM to discuss options for moving forward on
the Phase 1 Roth Building museum project. Options discussed have ranged from a minimal
rehabilitation and construction of the building, known as the “cold shell” option, to reviewing
different funding sources for a full build out of the museum to satisfy Phase 1. Incorporated as
an attachment to the staff report (Attachment A) is a letter from the PAM on requested funding
and partnership goals necessary to rehabilitate the facility and ultimately open a new museum.
Based on this request, staff has pulled together financial information for the Finance
Committee’s review and discussion. Based on the Finance Committee’s direction staff would
defer returning with an RFP option until the financing options discussion is complete.
Palo Alto Museum’s Request of the City & Identified Community Contributions Summary
1. Fund the remaining Phase 1 construction cost, PAM estimates at $3.71 million from
possible library, community center, or parks impact fees.
2. Issue a 40-year lease between the City and the PAM, which would allow for donor funds
to be released for construction costs in Phase 1.
3. Commit to a partnership for the rehabilitation of the Roth Building and for mutual long-
term success.
City of Palo Alto Page 6
This request above is very similar financially to Option B noted above in the Executive
Summary.
As outlined by the PAM in the attachment the establishment of the museum at Roth is
expected to bring a number of contributions to the community. Those include:
• A park restroom for park visitors (as required by the initial RFP)
• Permanent home for the City-owned historic archives
• Community meeting spaces
• Palo Alto and Stanford exhibits
• Supplements to required studies for second through fourth grade students
• Lab of evolving technologies for all students
• A park-side café
• Venue for speakers and authors
Together with these contributions PAM makes the point that the project is shovel ready and is a
fast and cost-effective way to restore the historic Roth Building.
Estimated Project Options and Funding
Based on estimates from PAM’s contractor, the following reflect project estimated costs for
Phase 1. All costs for Phase 2, estimated at $8 million, including the build out of the museum
interior including exhibits are expected to be funded by PAM donations in order to ready the
facility for opening, though some significant donations have been pledged for this work
according to PAM Initial opening of the Museum to the public would be within the first year
after rehabilitation is completed. Museum installation will be expanded in stages; refer to the
Museum’s 7-year budget plan (Attachment C). It is important to note that this estimate does
not have solidified subcontractor awards and would be subject to change upon approval to
begin Phase 1.
• $6.5 million estimated to complete a “cold shell” option (a partial Phase 1 completion)
• $10.5 million estimated to complete Phase 1 rehabilitation (if completed in stages,
additional cost of $500,000 plus inflation costs expected)
City of Palo Alto Page 7
“Cold Shell” Option: $6.5 million construction cost estimate
The “cold shell” option is a recent idea that would result in a renovated Roth Building
addressing major structural issues, such as water intrusion, seismic upgrades and the
temporary back wall. This option would structurally fortify the facility, however, would stop
short of improvements needed for occupancy of the building by the Museum or any other
possible tenant. As such the “cold shell” option eliminates certain work items and their cost
from the construction plan including but not limited to landscaping; millwork and running trim;
doors, frames and hardware; ceramic tile; floor finishes; toilet part/access and lockers;
elevators; and telephone and data wiring. The reduced “cold shell” option is estimated to cost
$6.5 million vs. the approximate $10.5 million for the full Phase 1 construction. The cold shell
improvements would take an estimated ten-to-twelve months to complete. A breakdown of the
tasks for the cold shell option is shown in Attachment B as provided by Vance Brown, the PAM
construction contractor.
A potential downside of the cold shell option is the added cost once the buildout phase of the
museum is started. Assuming a delay between the finish of the cold shell option and the start of
phase two there could be an added cost of up to approximately $0.5 million plus inflation costs.
This is attributed to the lack of overlap between the construction activity and the off boarding
and re-onboarding of the construction trades. In other words, there would be no concurrent
work performed and the efficiencies of such work. If there was no gap between the two phases
this cost would be reduced or eliminated.
Current Funding Summary & Additional Funding Approaches
The funds identified for the Phase 1 rehabilitation project are outlined in the table below. It
includes a review of already pledged funds either by way of grants, City, and PAM financial
support. All these funds, except for the PAM cash on hand can be used to complete either a
cold shell or the full Phase 1 rehabilitation project. Stipulation on these funds include a project
in line with the expectations of TDRs1 and the development of the City archives. The PAM cash
on hand and pledges, in the category below, may be used for either of these projects, however,
they require completion of a long-term lease agreement with PAM for the operation of the
museum.
The gap in funding is between $0.2 million and $4.2 million depending on the cold shell ($6.5
million) or the full Phase 1 rehabilitation completion ($10.5 million) and assumption
surrounding available pledges.
As directed by the Council, and in response to the request by PAM for additional funds, the next
category in the table outlines potential additional funding sources for the completion of either
a cold shell or the Phase 1 rehabilitation. It also begins to articulate the impacts of providing
this additional funding. Following the table is a description of each of the funding sources, the
tradeoffs that will require City Council realignment of priorities through defunding of planned
1 Transfer of Development Rights (TDRs) funds must be used for the rehabilitation of a city-owned building in the
historic or seismic categories listed in PAMC Section 18.28.060.
City of Palo Alto Page 8
projects to assist the Committee and Council in their deliberations. Potential funding options
for the Finance Committee and City Council’s consideration include the General Fund, General
Capital Improvement Fund, impact fees, Stanford University Medical Center Parties (SUMC)
funds, or additional museum funds. Regardless of the funding source, this additional
investment would require reprioritization of existing financial resources and commitments.
In addition, as noted by the preliminary fiscal update provided on October 19, 2020 (CMR
#11596), the City remains in a serious fiscal environment due to the longstanding pandemic and
resulting economic slowdown. Notably, the City has seen significant reductions in key General
Fund tax revenues such as transient occupancy tax (TOT) and sales tax. Continued fiscal
uncertainties remain and due to the significant reduction in estimated TOT receipts, a
rebalancing of the General Capital Improvement Plan will be necessary to align with current
estimates in early 2021. Council direction on October 19 include waiting to see
City of Palo Alto Page 9
TABLE 1: SUMMARY OF PHASE 1 PROJECT FUNDING
AV
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FUNDING SOURCE
ESTIMATED
FUNDING
CONTRIBUTION
PROJECTED
GAP TO
PHASE 1
$10.5M
TDR proceeds and a $1.0 million contribution from
the General Fund
$4.9 M
Grants from the County of Santa Clara
(roof replacement $0.3 million)
$0.3 M
Library impact fees designated for the
establishment of the City archives
$0.3 M
PAM cash on hand (MGO reports approximately $0.8
million available with some needs for operating costs)
$0.5 M
Readily Available Funds $6.0 M ($4.5 M)
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PAM pledges; MGO Audit report estimated $0.2
million are more likely to be collectable $0.2 - $0.5 M
Additional Funds including pledges $6.2 - $6.5 M ($4.0 – 4.3M)
AD
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Additional City Impact Fees $0.6 M
Additional City Impact Fees requires defunding
planned projects
(Rinconada Park Improvements per the approved Parks Master
Plan and Library Automated Material Handling)
$2.5 M
SUMC or General Fund/General Capital
Improvement Fund
Requires defunding existing projects impacting the 2014
Council Infrastructure plan projects
$1.2 M - $0.9M
$10.5 M $0
Impact Fees
Impact fees may be used for the refurbishment of existing buildings however they may not be
used for operations or future maintenance of capital improvements. The Mitigation Fee Act
allows cities to levy impact fees on developments to mitigate the demand for public facilities
reasonably related to the development project in order to “(1) refurbish existing facilities to
maintain the existing level of service or (2) achieve an adopted level of service that is consistent
with the general plan” (Government Code Section 660001(g)). The Mitigation Fee Act, the
Municipal Code, other statutes, and case law place limits on how fees may be levied and used.
The use of the funds must also comply with City code, which provides that the library fee may
be used for “development and improvements to libraries,” the park fee may be used for
“acquisition of land and improvements for neighborhood and district parks,” and the
City of Palo Alto Page 10
community center fee may be used for “development and improvements to community
centers” (PAMC § 16.58.020(a)-(c)).
• Must comply with the allowed uses specified in the Municipal Code (see PAMC §
16.58.020(a)-(c)).
• Must be used for capital costs (construction of new building, refurbishment of existing
building, build-out of new space).
• May not be used for operation and maintenance of an improvement.
• May not be used to address existing deficiencies in public facilities (i.e., insufficient
parkland to meet existing needs); must be used to address the impacts (i.e.,
deterioration of the service) due to new and future development (development paying
the impact fee).
Development impact fees may pay for improvements to existing buildings, to build new
buildings, and to pay for new impacts and increased public use resulting from new
development.
Below are the development impact fees that the Museum has suggested might be considered
surrounding further investment in the Roth Building, and their potential eligibility for use. These
funds would have to go towards specific parts of the rehabilitation project to fund eligible
improvements. Available funds of $600,000 may be dedicated to the Roth Building
rehabilitation, depending on qualifying square footage allocations, without impacting the 2021-
2025 capital improvement plan (CIP) as reviewed by the Council as part of the adoption of the
FY 2021 Capital Budget. Up to $3.1 million may be available depending on qualifying square
footage allocations and the defunding of currently planned capital investments outlined as part
of the five-year CIP.
City of Palo Alto Page 11
TABLE 2: DEVELOPMENT IMPACT FEE FUNDING ELIGIBILITY AND AVAILABILITY
FUNDING
SOURCE ELIGIBLE?
PURPOSE &
AUTHORITY FOR
COLLECTION
POTENTIAL USES
IDENTIFIED
(FOR FUNDING ROTH)
AVAILABLE/
ELIGIBLE
FUNDS
ARE THESE FUNDS
ALLOCATED TO A DIFFERENT
CAPITAL PROJECT IN THE FY
2021-2025 CIP?
IMPACT FEE -
COMM. CTR.
(211)
Maybe Fees imposed on
new residential and
non-residential
development
approved after Jan
28, 2002 for
Community Centers.
PAMC Ch. 16.58
To use these funds, the Roth
Building would need to
contain aspects qualifying as
a community center (as
defined by the nexus study).
Potentially eligible funds
reflect 19.4% of the building:
community room, board
room, and education spaces.
$0.1M /
$2.3M
Yes: Funding beyond $0.1M
would require defunding
Rinconada Improvements (PE-
08001, $2.4M) which coincides
with the JMZ upgrade project and
upgrade to the entire area for the
new JMZ and surrounding areas.
These fees would also be a
potential funding source for
community center improvements
such as Cubberley
IMPACT FEE -
LIBRARY (212)
Yes Fees imposed on
new residential and
non-residential
development
approved after Jan
28, 2002 for
Libraries. PAMC ch.
16.58
To use these funds, the Roth
Building would need to build
additional library space.
Eligible funds reflect 6.7% of
the building occupied by City
archives.
$0.2M /
$0.5M
($0.5M / $0.8M
total funding
incl. dedicated
$300,000)
Yes: Funding beyond $0.2M in
available funds would require
defunding Library Automated
Mat'l Handling (LB-21000,
$0.6M). The Automated Materials
Handling (AMH) machine will
automate check-in of Library
materials at smaller library
branches to increase efficiency.
Budgets for FY21 and beyond
were created based on the
allocation of Impact Fee funds to
this AMH project and the
Children’s Library reopening
would be impacted.
IMPACT FEE -
PARKS (210)
Yes Fees imposed on
new residential and
non-residential
development
approved after Jan
28, 2002 for Parks.
PAMC Ch. 16.58
To use these funds, the Roth
Building could build a
bathroom outfacing and
accessible to the park.
Assumes average cost to
build a new restroom as
assumed in the five-year CIP.
$0.3M /
$0.3M
No
Stanford University Medical Center Funds (SUMC)
In 2011, the City of Palo Alto entered into a Development Agreement between the City of Palo
Alto and the Stanford University Medical Center Parties (SUMC). Funds received in Fiscal Year
2012 as part of this agreement were used in Fiscal Years 2013, 2014, and beyond as outlined in
the agreement and approved by the City Council. In Fiscal Year 2018, the City received the final
payment of $11.8 million, for a total principal amount of $44.3 million over the course of the
development agreement. The funds received per the development agreement are allocated for
specific purposes, which include funding for the 2014 City Council approved Infrastructure Plan.
Significant details were provided to the Finance Committee in December 2019 and can be
found here CMR 10643.
These funds were separated into six different buckets to guide and prioritize spending:
Community Health & Safety, Expansion Cost Mitigation, Intermodal Transit, Quarry Road
Improvements, Infrastructure and Affordable Housing, and Climate Change & Sustainable
Communities. Over half of these funds have been spent and nearly $16 million in remaining
City of Palo Alto Page 12
balances are programmed for various capital projects over the five-year CIP ($14.6 million
between FY 2021 and FY 2023). Projects to be funded by this resource include but are not
limited to City Council approved 2014 Infrastructure Plan projects Fire Station 4 Replacement,
Public Safety Building, Bicycle and Pedestrian Plan, Quarry Road Improvements and Transit
Center and Railroad Grade Separation (train crossings).
A balance of less than $3 million remains unallocated in the “Community Health and Safety”
expense category to be used on community‐based health and wellness programs that benefit
residents of the City. Funds in this category have been used for Project Safety Net investments
and support in the past.
General Fund and General Capital Improvement Fund
The General Fund and the General Capital Improvement Fund provide primary unrestricted
funding that would be eligible for investment in the Roth Building. However, the City has seen
unprecedented financial impacts as a result of the current public health emergency. The
General Fund or General Capital Improvement Fund could be an immediate source of funds if
priorities are rearranged and planned projects are defunded or deferred more than five years
to support a transfer to the Roth Building project. As is noted in the FY 2021 budget
deliberations, adoption, and preliminary 1st Quarter financial report, due to the significant
reduction in estimated TOT receipts (up to an $11 million shortfall from budgeted estimates), a
rebalancing of the General Capital Improvement Plan will be necessary to align with current
revenue estimates. Therefore, additional financial support of this project would further
constrict and require the deferment or cancelation of scheduled projects. Consideration of this
significantly constrained environment is critical.
As part of the development of the FY 2021 Capital Budget and 2021-2025 Capital Improvement
Plan, General Capital Improvement Fund projects were reviewed and ranked to provide an
analysis on the impact of the reprioritization and rebalancing needed for FY 2020-2021 budget
adoption in light of the City’s fiscal challenges. Projects comprised of mostly maintenance and
keep-up work for Buildings and Facilities and some Parks and Open Space were determined to
have a lower impact if reprioritized further in FY 2021. Examples of these types of projects
include building system improvements, roofing replacements, waterproofing and space
reconfiguration for City Hall, and streets and sidewalk maintenance (which has already been
reduced in FY 2021). The impact of deferring maintenance and keep-up projects is the
increased health/safety issues that would cause an immediate need to perform work or shut
down a facility. Other risks include an increased potential to replace instead of repair
equipment/systems that were not regularly maintained. All these potential impacts could lead
to increased overall costs.
City of Palo Alto Page 13
Additional Funding Updates - Grants
The City was awarded two grants for the Roth Building improvements in April 2020 from the
Santa Clara County Historic Resources Grant Program for the restoration of the original clay tile
roof ($303,000) and a third grant for the protection and restoration of the Arnautoff Frescoes
($105,000). The roof grant is the second grant awarded for construction costs associated with
roof replacement and repair for a total of $303,000 for these costs. Below are the three grants
currently awarded to the City with PAM as of the date of this information report transmittal:
- Santa Clara County Historic Resources Grant Program 2018 award for roof replacement
of $103,000;
- Santa Clara County Historic Resources Grant Program 2019 award for roof replacement
of $200,000; and
- Santa Clara County Historic Resources Grant Program 2019 award for frescoes of
$105,000.
Post Construction Funding
Assuming full construction of Phase 1 rehabilitation, PAM will need funding to develop the
museum and its exhibits and ongoing expenses. PAM has presented a financial forecast
(Attachment C) that funds these needs largely through donations and grants starting in year
one after construction.
Lease (or Lease Option) and Basic Terms
To proceed with the PAM partnership, as revised and updated, the parties would need to enter
into a new lease agreement, or option to lease agreement if PAM has not met certain
thresholds to execute the lease.
As PAM outlines in their request, they are seeking a 40-year long term lease for $1 and be in
place for donor funds to be dedicated towards the building of a “cold shell” or the completion
of Phase 1 rehabilitation in full. For example, in order for the $500,000 of PAM cash on hand to
be used towards funding a lease with the City would need to be executed. With a few
exceptions, the basic terms from the 2007 option and lease agreement (option no longer in
effect, and lease never executed) remain the goal. Potential lease terms similar to the past
lease could include items such as:
• term of 40 years
• demonstration of financial commitments
• develop and operate a museum at no cost to the City
• public restroom available adjacent to the park to be maintained by the City, and
community meeting room
To facilitate this, PAM has expressed a desire to allow sharing of space with a for profit entity,
expanding their options beyond the current terms which stipulate a non-profit organization
only. The shared space option is potentially helpful by possibly reducing cost to the PAHM or
bringing in new revenue. This sharing of space would need to be in alignment with any
City of Palo Alto Page 14
restricted funds such as donor funds or impact fee funds used in the rehabilitation of the
building.
Potential Options Summary
Staff is seeking Finance Committee consideration of potential project elements, including
potential funding options and finance limitations. Staff recommends that the Finance
Committee recommend City Council direction to pursue one of the following options or a
variation of:
Option A: Recommend the City Council direct staff to identify funding for a “cold shell”
construction project ($6.5 million) including use of “Available Financial Sources” as
identified in Table 1, with additional funding needs to be identified by the City
ranging between $500,000 - $1.0 million and return to the City Council with both
additional funding and a lease option or lease agreement with the Palo Alto
Museum for a finite period.
Option B: Recommend the City Council direct staff to identify funding for a full rehabilitation
of the Roth building (Phase 1 of the Roth Building project as outlined by PAM, $10.5
million) including use of “Available Financial Sources” and “Pledges” as identified in
Table 1, with additional funding needs to be identified by the City ranging between
$4.0 - $4.3 million and return to the City Council with both additional funding and a
long-term (40 year) lease agreement with the museum.
Option C: Recommend the City Council direct staff to continue with the prior direction
provided by the City Council on March 2, 2020 and return to the City Council with
options for the issuance of a Request for Proposal (RFP) including potential
rezoning of the site and long term-ground lease structure.
Option D: Recommend the City Council direct staff to explore variations of the above options,
or similar direction provided in the past by the City Council such as recommend the
City Council provide the PAM a fundraising target and timeline to raise additional
funds (net of expenses incurred) for the project and direct staff to return to the City
Council with a long-term (40 year) lease agreement with the museum that includes
a termination clause should there be project delays or lack of funding within a
designated period of time.
City of Palo Alto Page 15
As noted above, staff is seeking Finance Committee recommendation for City Council
consideration. These options are not intended to be mutually exclusive or all-encompassing,
they are examples for the Committee’s consideration.
Stakeholder Engagement
Staff continues to meet with representatives of PAM including their construction contractor to
discuss the current status of the project, shared space options, phasing of the construction
project, and any additional potential next steps. In addition, staff continues to discuss funding
feasibility, legal restrictions, zoning options, as well as construction details with necessary
partner departments including but not limited to Public Works, Community Services, the City
Attorney’s Office, and Planning & Development Services departments.
Resource Impact
Additional financial contribution ranging between $0.2 million to an estimated $4.2 million are
necessary to close the gap in funding for either a “cold shell” or the completion of the Phase 1
construction rehabilitation project. Depending on the funding options selected, impacts to the
current priorities outlined in the City Council approved FY 2021-2025 Capital Improvement Plan
will require City Council action to rebalance.
Environmental Review
The proposed action is to provide direction on next steps for staff efforts with respect to the
future use of the Roth Building and does not constitute approval of a project under the
California Environmental Quality Act (CEQA).
Attachments:
• Attachment A: Palo Alto Museum (PAM) Memorandum
• Attachment B: Roth Building Construction Budget
• Attachment C: Palo Alto Museum (PAM) Fiscal Operating Plan
October 6, 2020
TO: Finance Committee, City of Palo Alto
FROM: Rich Green, President, Palo Alto Museum
CC: Kiely Nose, Director of Administrative Services
David Ramberg, Assistant Director, Administrative Services
RE: Oct. 20, 2020 Agenda Item #1: Roth Building Rehabilitation
Thank you for the opportunity to address the City Council Finance
Committee on October 20, 2020. In preparation for that meeting, we
wish to share the following information.
From Problem to Asset
Time is of the essence. The Roth Building is deteriorating rapidly, and
timing is critical to ensure the building’s continued status as a National
Register landmark. We need to move quickly before the building is even
more challenging to rehabilitate.
Partnership between the City and the Museum is the most expedient
and cost-effective path to full rehabilitation and public use of the Roth
Building.
Shovel-ready Project:
•The Museum has invested over $1.8M to secure fully-vetted and approved
construction plans.
•A construction contract with Vance Brown Construction and valid building
permits are in place.
•No other tenant could fill these requirements in a timely manner.
Significant Rehabilitation Funding is Already in Place:
•PAHM secured the building’s place on the national and state historic
registers, enabling preservation funding opportunities including TDRs
and County grants totaling over $4M.
•Over 1,000 community donors have contributed more than $1.5M
toward the rehabilitation project.
PO BOX 676 | PALO ALTO, CA 94302
PALOALTOMUSEUM.ORG
650.322.3089
HONORARY CO-CHAIRS
Clayborne Carson, PhD
Dean T. Clark, MD
Gloria Hom, PhD
David M. Kennedy, PhD
Susan Packard Orr, MBA
BOARD OF DIRECTORS
Rich Green, President
Patricia Sanders, Vice President
Lanie Wheeler, Treasurer
Monica Yeung Arima
Beth Bunnenberg
Kevin Curry
John King
Doug Kreitz
Hal Mickelson
John Northway
Nelson Ng
Steve Staiger
STAFF
Laura Bajuk, Executive Director
Crystal Taylor, Assistant Director
Lynette York, Bookkeeper
A community-driven effort supported by
numerous individuals, corporations,
foundations, Santa Clara County and
the City of Palo Alto.
Founding Supporters:
Palo Alto Historical Association
University South Neighborhood Association
Palo Alto-Stanford Heritage
Museum of American Heritage
Endorsed by:
Palo Alto Woman’s Club
Palo Alto Chamber of Commerce
Professor Gordon Chang, Stanford
Stanford Historical Society
Stanford Special Collections & University
Archives
Palo Alto Housing Corporation
Pacific Art League
Canopy
Tax ID No. 77-0634933
Attachment A
• With rising construction costs, the total remaining construction project is now
$10.5M. With the bulk of the funds successfully committed, the gap to complete
rehabilitation is $3.71M. (see funding illustration below)
We have identified several ways for the City to fund the rehabilitation balance without
impacting the General Fund. Several City functions or required spaces will be housed in the
new Roth Building. City support for the costs of developing those spaces, including the pro
rata cost of Common Areas, would include:
• Library Impact Fees. The City-owned Archives, an extension of the library function
and previously located at Rinconada Library, will occupy 6.7% of the building, which
amounts to $1,051,955.
• Community Center Impact Fees. The City-required meeting, event (including the
Community Room and Board Room) and education spaces will occupy 19.4% of the
building, which amounts to $3,051,426.
• Parks and Recreation Impact Fees. The City-required restroom exclusively serving
Heritage Park is valued at $350,000.
• Exhibit areas will focus on both Palo Alto and Stanford histories, celebrating a rich,
intertwined heritage in a way that justifies use of additional funding from the
Stanford Medical Center Development Fees.
We ask that the City Council take the following decisive actions:
1) Fund the remaining construction cost as outlined above and in keeping with City
investment in other, similar community projects in City-owned buildings.
2) Issue a lease between the City and PAHM. A 40-year, renewable lease is the minimum
required for historic preservation funding and many grants. Once in place, PAHM can
release donor-restricted funds and begin construction.
3) Commit to a full, consistent City-Museum partnership for the rehabilitation of the Roth
Building. City support is ESSENTIAL to our progress. We ask that both parties commit to a
partnership with mutual desire for long-term success.
This is a chance to re-engage, together, in full partnership. We appreciate the support you
have shown in the past and believe that our suggested course is the best option for saving
the Roth Building and laying the foundation for the Museum this community so strongly
desires.
Attachment A
Palo Alto Museum Capital Funding
Total cost of rehabilitation project $12.3M
Soft costs architecture, permits, etc. PAID* ($1.8M)
Total current construction budget $10.5M
Museum Cash on hand ($ 0.5M)
Museum Pledges outstanding ($ 0.92M)
TDRs (Museum generated)($ 3.103M) (incl interest)
TDRs (other)($ 0.667M)
County grant ($0.1M requires public use)($ 0.3M)
City repair, restoration rear wall ($ 1.0M)
Library impact fees ($ 0.3M)
Total available for rehabilitation construction ($ 6.79M)
Gap to fully fund rehabilitation $ 3.71M
County grant to fund Arnautoff fresco restoration ($0.1M)* The Palo Alto Museum has paid all up-front costs
Birge Clark
Attachment A
Attachment B
Palo Alto Museum: OPERATIONS BUDGET: 7-Year Forecast & Milestones Revised 8.24.2020
1 2 3 4 5 6 7
CONSTRUCTION INSTALL & OPEN MUSEUM MUSEUM FULLY OPERATIONAL AND GROWING
Roth Building Rehabilitation: (two
year estimate; separate budget)
•Prepare for short- and long-term
exhibits and educational
programs (planning, researching,
hiring).
•Continue developing community
partnerships and programs.
•Establish mechanisms for
membership, planned giving and
other fundraising options
available to an open museum.
Open the museum: public
access to:
•Opening exhibits
•Guy Miller Archives
•Quarterly community
programs (min.)
•Education and school
outreach programs
•Community meeting/
program spaces (board
room, community room,
education space)
•Coffee cart
•Museum shop kiosk
•Heritage Park restroom
Expand museum services.
•Permanent exhibit launches.
•Add electronic and immersive
media to exhibit spaces.
•Collections accessible.
•Café open.
•Museum store expanded.
•Community programs expand,
often in collaboration with other
organizations.
Campaign goals completed.
•Changing galleries (2) debut new
exhibits every year.
•Permanent exhibits refreshed every 3-
5 years going forward.
1 2 3 4 5 6 7
REVENUE $998,750 $1,701,250 $4,302,250 $2,951,880 $2,475,024 $2,094,447 $2,067,636
EXPENSES $412,472 $1,239,156 $2,933,656 $2,409,998 $1,759,632 $1,539,050 $1,446,711
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
PAHM 7-Year Operations Budget Projection
Attachment C
Palo Alto Museum: OPERATIONS BUDGET: 7-Year Forecast & Milestones Revised 8.24.2020
Budget Detail by Category Year 1 2 3 4 5 6 7
(Construction budget separate - not included here) CONSTRUCTION INSTALL &
OPEN MUSEUM MUSEUM FULLY OPERATIONAL AND GROWING v2.3 (abbreviated) 8.25.2020 Cold Shell Completion
REVENUE $ 998,750 $ 1,701,250 $ 4,302,2501 2 $ 2,951,880 $ 2,475,024 $ 2,094,447 $ 2,067,636
EA
R
N
E
D
Mission: Special exhibit admission fees3, memberships, public program fees, school
and education program fees, history book sales proceeds (net) 20,500 31,000 36,000 58,500 69,495 77,750 89,750
Space Use Fees & Other: Café and museum shop (% of vendor income), event
rentals (net), other tenant space (3,509 sf @ $6/sq ft)4, interest, fundraising event
(net), endowment income (draw 4% of capital)
18,250 20,250 197,250 316,510 530,808 643,144 755,522
CONTRIBUTED: donations, corporate gifts, sponsorships, grants, museum-only pledges
fulfilled 960,000 1,650,000 4,150,0005 2,710,000 2,110,000 1,660,000 1,560,000
EXPENSES $ 412,472 $ 1,239,156 $ 2,933,656 $ 2,409,998 $ 1,759,632 $ 1,539,050 $1,446,711
PE
R
S
O
N
N
E
L
Employee Expenses: exec. director, development director, assistant director,
curator of exhibits & collections, collections & exhibits asst., development asst.,
bookkeeper. Includes employee wages, costs & benefits.
229,282 425,510 553,309 624,128 646,866 676,491 700,336
Professional Fees/Independent Contractors: Construction Liaison. Exhibit
content writer, editor, exhibit designer, exhibit technician, graphic designer,
development/ board training consultant, CPA/audit services, legal, IT support, web
design, virtual museum
73,000 234,375 121,675 95,833 95,999 96,173 96,355
NO
N
-PE
R
S
O
N
N
E
L
Mission Delivery: exhibition supplies - printing, cases, paint, tools, supplies, gallery
maintenance, acquisitions, conservation, collections supplies, archival materials,
catalogs, brochures, signage, translation, transportation
11,450 475,450 1,985,300 1,498,950 809,865 544,772 411,609
Administration/Governance: insurance, telephone/internet, copier contract,
office supplies, hardware, software subscriptions, printing, furniture, fixtures &
equipment allowance (1-time), org. dues, stock sale fees, filing fees, credit card
processing fees, postage, offside collections storage rental, etc.
48,140 52,803 130,458 31,463 32,621 33,736 34,912
Fundraising/Development & Outreach: printing, supplies, marketing 49,800 45,518 46,264 47,074 48,459 49,626 50,814
Facility/Maintenance6: tech/handyman, janitorial, security, landscape
maintenance, repair, elevator, general supplies, lighting maintenance supplies,
property & general liability insurance, utilities.
800 5,500 93,550 109,140 122,070 134,127 148,146
NET7 $ 586,278 $ 462,094 $ 1,368,594 $ 541,882 $ 715,392 $ 555,397 $ 620,924
1 $2M budget makes PAM eligible for larger grantors, such as the Hearst Fdtn.
2 2M+ revenue triggers audit (Cal Nonprofit Integrity Act)
3 Regular Museum admission is free, per our agreement
4 No charge for City space use - 2,842 sq. ft @ $6/sq ft = $17,000 annual value of donated space
5 Peery Family Fund pledge of $2M redeemed once Museum opens
6 Facilities numbers need updating with City assistance
7 Net surplus moved into savings/reserves/endowment or donor-designated funds, per policies established by the board of directors
FINANCE COMMITTEE
ACTION MINUTES
Page 1 of 3
Special Meeting
November 17, 2020
The Finance Committee of the City of Palo Alto met on this date via virtual
teleconference at 6:00 P.M.
Present: DuBois, Kniss, Tanaka
Agenda Items
1.Discussion With the Palo Alto History Museum and Recommended
Direction to the City Council Regarding Options for the Rehabilitation
and Future use of the Roth Building Including: Funding, Construction
Phasing, and Financial Support Requested by the Museum.
MOTION: Vice Mayor DuBois moved, seconded by Council Member xx to
recommend the City Council ask Staff to identify funding for the full
rehabilitation of the Roth Building and to bring this item to Council.
MOTION FAILED DUE TO LACK OF A SECOND
MOTION: Council Member Kniss moved, seconded by Vice Mayor DuBois to
recommend the City Council direct Staff to identify funding for a “cold shell”
construction project ($6.5 million) including use of “Available Financial
Sources” as identified in Table 1, with additional funding needs to be identified by the City ranging between $500,000 - $1.0 million and return to
the City Council with both additional funding and a lease or lease option
agreement with the Palo Alto Museum for a finite period. Some funding, such
as Palo Alto Museum (PAM) donor funds, necessitate using PAM approved
plans, and to identify other potential funding options.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to have Staff work with museum staff to suggest
a length of time for the museum to have enforceable lease terms, subject to
conditions.
MOTION AS AMENDED RESTATED: Council Member Kniss moved,
seconded by Vice Mayor DuBois to recommend the City Council direct Staff
to:
ATTACHMENT B
ACTION MINUTES
Page 2 of 3
Sp. Finance Committee Meeting
Action Minutes: 11/17/2020
1. Identify funding for a “cold shell” construction project ($6.5 million)
including use of “Available Financial Sources” as identified in Table 1, with additional funding needs to be identified by the City ranging
between $500,000 - $1.0 million;
2. Return to the City Council with both additional funding and a lease
or lease option agreement with the Palo Alto Museum (PAM) for a
finite period; some funding, such as PAM donor funds, necessitate using PAM approved plans, and to identify other potential funding
options; and
3. Direct Staff work with museum staff to suggest a length of time for
the museum to have enforceable lease terms, subject to conditions.
MOTION AS AMENDED PASSED: 3-0
Council took a break at 8:21 P.M. and returned at 8:30 P.M.
2. Finance Committee Recommends the City Council Approve
Amendment Number 1 to Contract Number C19171565 With Brown
and Caldwell for Professional Design Services on the Secondary
Treatment Process Upgrade Capital Improvement Project (WQ-19001)
at the Regional Water Quality Control Plant to add Services, Increase
Compensation by $1,500,745 for a new Maximum Compensation
Not-to-Exceed $4,424,101, and to Extend the Contract Term Through
September 30, 2025.
MOTION: Chair Tanaka moved, seconded by Council Member Kniss to
recommend the City Council:
1. Approve and authorize the City Manager, or his designee, to
execute Amendment No. 1 to Contract No. C19171565 with Brown
and Caldwell to increase the contract amount by $1,500,745 to provide design engineering services beyond the original scope of
the contract for the design of the Secondary Treatment Process
Upgrades Project (CIP WQ-19001);
2. Extend the term through September 30, 2025;
3. Have the revised total contract amount not exceed $4,424,101,
including $4,021,911 for basic services and $402,191 for additional
services;
4. Direct Staff perform a commercial comparison of rates; and
ACTION MINUTES
Page 3 of 3
Sp. Finance Committee Meeting
Action Minutes: 11/17/2020
5. Direct Staff compare the Operating Share versus the Capital Share
versus the Maximum Flow Capacity.
MOTION PASSED: 2-0 DuBois absent
Adjournment: The meeting was adjourned at 9:14 P.M.