HomeMy WebLinkAbout2016-02-16 Finance Committee Summary MinutesRegular Meeting
Tuesday, February 16, 2016
Chairperson Filseth called the meeting to order at 7:12 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California.
Present: Filseth (Chair), Holman, Schmid, Wolbach
Absent:
Oral Communications
Chair Filseth: Good evening and welcome to the Finance Committee (Committee) for February 16, 2016. So we have on the Action Items tonight recommendation for the Hecate Energy contract,
continuation of the CLEAN (Clean Local Energy Accessible Now) program, Nexus Impact Fees for housing and one head count for the Development Services Department. First, Oral Communications.
Are there any members of the public who would like to speak? Thank you very much. First up is the Hecate Energy project. You have the floor.
Agenda Items
1. Utilities Advisory Commission Recommendation That the City Council Adopt a Resolution to Approve a Power Purchase Agreement With Hecate Energy Palo Alto LLC for up to 75,000 Megawatt-hours
per Year of Energy Over a Maximum of 40 Years for a Total not to Exceed Amount of $101 Million.
Jane Ratchye, Assistant Director for Utilities Resource Management: I am Jane Ratchye, Assistant Director of Utilities, and I would like to introduce Jim Stack, who is Senior Resources
Planner who will make his presentation on the Hecate contract.
James Stack, Senior Resources Planner for Utilities: Thank you. Good evening Chairman Filseth and Committee Members. I am Jim Stack. I am here to talk to you tonight about two different
initiatives that are part of the City’s broader sustainability efforts. The first is a new long-term solar contract, and the second, of course, is the (inaudible) program. In order
to meet the City’s and the State’s very aggressive environmental sustainability goals around renewable energy, last spring Staff issued a new request for proposals for new renewable
energy projects, so I am here to talk to you about the contract that came out of that effort. I will start by giving you an overview of the RFP (Request for Proposal) process itself,
then I will go into some details about the project we selected and the terms we negotiated in the contracts, I will talk about some of the risks that are inherent in long-term contracts
like this one and some of the measures we negotiate into the contract to mitigate those risks. I will show you how that project will fit into our electric supply portfolio and I will
give you the overall recommendation. On this slide we have a graph we like to show a lot showing the volumes of energy, renewable energy that we have procured year-by-year, starting
back in 2003 and going on into the future in 2038. The units here are Gigawatt Hours per year (GWH) and for reference, the City’s total electric load is just under 1,000 gigawatt hours
per year. Our long-term hydro, large hydro resources in an average year provide about half of the energy, so in order to get to a fully carbon-neutral supply portfolio or a 50 percent
RPS (Renewable Portfolio Standard) portfolio, we have to have about 500 gigawatt hours per year of renewable energy. Where we are in this graph is right where the solar contracts in
orange are starting to ramp up. Just in the last six months we have had two of our solar contracts come on line and in the next nine months or so we are expecting the other three to
come on line as well. Once those go on line, by next year we should be well over our 50 percent RPS level, which is great. However, in 2021 one of our Legacy contracts, an old wind
contract we executed back in about 2005 is set to expire and that is a pretty large contract. Once that one goes away we will be back right around the 50 percent RPS level and then
we have some more contracts expiring a few years later. So we are thinking ahead about how to replace that energy to maintain our carbon-neutral and RPS levels and we decided to issue
an RFP in 2015 to replace that contract in 2021 and thinking around doing the RFP so early, it was largely driven around the Investment Tax Credit (ITC), which is a Federal policy and
at the time we issued the RFP the ITC was going to be 30 percent, it would provide the developers of renewal solar projects with a tax credit equal to 30 percent of the total cost of
the project, as long as the project was fulfilled by the end of 2016, and then for projects coming on line after 2016, it would drop down to 10 percent. The thinking was that if we
could get a project under contract now which we build by the end of 2016, they could take advantage of that 30 percent tax credit and give us a relatively low price, even while selling
energy to somebody else for a few years and beginning delivery to us in 2021. That was the thinking around the timing of the RFP, doing it last year for a 2021 start date. We issued
an RFP looking for projects that could deliver between three and eight percent of the City’s needs on an annual basis starting in 2021. We received 41 proposals. About 80 percent of
those were solar and most of the most competitive ones were solar as well. We evaluated those largely based on the price of the project or the value that they provide to the City and
to evaluate different types of projects on an equal basis we used something called the Green Premium, which compares the cost of the renewal projects with the cost of the comparable
non-renewable type of resource, but we also looked at the projects in terms of their viability, their likelihood of getting built, and some of the factors that go into that score are
listed there on the slide. This next graph shows the different types of proposals we received and the Green Premiums of those proposals. As I mentioned the most attractive ones tended
to be solar. There was a wide range of solar proposals, but most of the top ten proposals we received were in the solar category, including the lowest price there, which is circled
in red. That is actually the proposal that we selected out of the RFP and so I will jump into describing that project. This slide shows you some of the key highlights of the contract,
the project that we selected is known as the Wilsona Solar Project. The contract counter party is Hecate Energy Palo Alto LLC because the project is developed by a company called Hecate
Energy based in Nashville. The key number on this slide here to focus on is the price, which is 3.676¢/kWh (Kilowatts per Hour). Just for reference, that is almost 50 percent lower
than the cost of our other solar contracts, which we executed just a couple of years ago and we thought were quite well priced at that point too, so that is an extremely low price.
It is lower than the price of any other solar contract that I have seen published anywhere in the United States. The contract is 26 Megawatts (MW), which will provide about 7.5 percent
of the City’s total load on an annual basis. The contract term is 25 years plus three additional five year extension options that the City can exercise and has sole discretion. The
start date is June of 2021, which is right when the wind contract expires. It is supposed to be built in Los Angeles County near Palmdale. The project will have resource adequacy attributes
at the fully deliverable projects, so we can count it towards our resource adequacy requirements. The project is relatively early in its development state, because they are not planning
to build it until 2020 or 2021, so at this point the company has acquired site control for the land they plan to build it on, but they haven’t yet begun any of the permitting or interconnection
processes. Then one other feature of the contract I wanted to mention, which is kind of attractive, is the ability for us to request the developer add an energy storage facility on
the site of the project at any point in time in the future. That may become attractive if we eventually receive a mandate to do energy storage or we find that storage costs come down
and it is in our economic interests to do that. This could be a good site for that. This slide discusses some of the risks that are inherent in long-term contracts like this one.
The first one to mention is counter-party credit risk, which is the risk that the counter-party we are dealing with simply goes bankrupt or disappears, and to mitigate that, this contract
is a PPA (Power Purchase Agreement) structure, so we only pay for the energy after we receive it, so we put no money down upfront, we bear none of the development risks. If the project
goes under, we don’t lose any money. The risk that the project does not get developed is that eventually we will have to go out and buy other supplies of energy that are needed to replace
it, and those could be more expensive in the future. So to mitigate that development risk, the contract requires that the developer provide a deposit assurance in the amount of $5.2
million and if the project doesn’t get built, or if it comes on line much later than proposed, we get to keep that money, so it provides some insurance there. There is also the risk
of poor performance, so after the project is completed if the project is not maintained well or if components fail and it produces much less energy than expected, the developer has to
provide an additional $2.6 million assurance that we can hang on to. We can draw upon that for damages if the energy production is lower than anticipated. The last risk mentioned here
on the slide is that we could have buyer’s remorse and future projects could be more attractive to us, but that is a risk of doing a long-term contract like this. There is not much
to do about that. This next slide shows what the electric supply portfolio will look like with this contract added to it. It is a version of the slide I showed you earlier, but in
the lightly shaded orange bars at the top of the slide, starting in 2021 you can see how the project would add to our renewable energy portfolio and it would allow us to stay above the
50 percent RPS level and the carbon-neutral level through 2028 or so. We would be pretty well set in terms of our overall renewable energy portfolio goals and requirements for the next
dozen years if we left this contract in and if it comes to fruition. On this previous slide, you can see that for several years here, after the contract begins producing energy, our
total renewable energy supplies are above the carbon-neutral level and what that means is we would have a little bit of surplus energy to deal with, more renewable energy and hydro supplies
than we actually have load. I just wanted to point this situation out. This situation would only arise if hydro conditions are roughly average or better and if all of the renewable
energy projects that we contract for actually come on like and are developed according to what we expect and produce as much energy as we expect. So if this situation arises, we have
a good amount of hydro and a lot of the renewable energy and we have more energy than we need, the surplus energy we could sell on the spot market or we could sell on a forward basis
and lock in a price for it. The Renewable Energy Credits (REC), the REC’s that come with renewable energy itself, we could either maintain those and keep those ourselves and bank those
for later use, or we could sell those with the energy on the spot market or forward market, so this is a relatively easy situation to deal with. That situation would exist until 2029,
when some of our additional contracts start to expire. This next slide shows the impact of hydro conditions on our supply portfolio, the dotted line at around 1,000 shows how much load
we have and the stack bars show our overall supplies in a dry year, an average year and a wet year. This is with the Wilsona Solar contract included in this lightly shaded area just
below the hydro lines or the hydro bars. You can see here that in a dry year, even with this contract in our portfolio, we would still have to go out and purchase additional energy
on the open market and additional REC’s to go with that energy. In an average year or in a wet year we would have a good amount of energy to sell on the open market and we would receive
the revenue from that. This next table shows a summary of our renewable energy contracts that we have executed so far and the amount of energy they provide and the total Green Premiums
associated with those projects. So all together, all of our committed contracts will get us to a 50 percent RPS level in 2022, after the wind contract mentioned earlier expires and
they would entail a total Green Premium of about $2.2 million, which equates to a rate impact of 0.24¢/kWh. We do have a Council-imposed limit of 0.5¢/kWh for the rate impact of all
of our renewable energy projects. With the Wilsona Solar contract included in the mix, that gets us to an RPS level of about 58 percent, and because the price of the Wilsona contract
is so low, it is actually lower than our projection for the cost of regular brown power, nonrenewable power, over the long term so it actually had a negative Green Premium, so the total
with Wilsona Solar included drops our overall Green Premium down to 0.12¢/kWh. That is the overall green impact of our renewable assets. I mentioned earlier the Investment Tax Credit.
This is one of the drivers for the timing of this RFP. I mentioned that we issued the RFP last spring and at the time the Investment Tax Credit was scheduled to drop from 30 percent
down to 10 percent at the end of 2016. About two months ago, at the end of December, 2015, Congress rather unexpectedly passed a fairly long-term extension of the ITC, so the current
policy of the ITC will remain at the 30 percent level through the end of 2019, and then will drop down to 26 the next year and 22 the following year, before going down to the 10 percent
level. That sort of changed the world for renewable energy pretty dramatically and, given that Hecate was originally proposing to build this project in 2021, this policy change that
came about at the end of the year right as we were wrapping up negotiations, it sort of represents a bit of a boon to them, so we naturally requested that they reduce the contract price
in response to that and they, of course, declined that request. They told us they had banked on the ITC (inaudible) until the project start to be built, so we did make that request,
but with no success. So given that a couple of things have changed since we issued the RFP, the first being the extension of the ITC and the second being the passage of SB (Senate Bill)
350, which is the State’s new 50 percent RPS legislation that came about last fall, there is a new landscape for renewables, and given this contract is not scheduled to start and begin
delivering to us until the middle of 2021, this creates the option for the City to reject the contract and go back to the drawing board in a few years and issue another RFP and take
the chance that maybe the renewable energy prices will have come down even further by that point, that is a bit of a gamble. Prices could be higher, prices could be lower at that point,
so the other utilities in the State will be out looking for contracts as well to meet their 50 percent RPS requirements, but we did want to highlight that as a possibility the City could
take. In summary, this contract is an exceptionally low price, lower than any of our previous contracts, lower than any other solar contract I have ever seen published in the country,
and has relatively little down-side risk, given that the developer will be giving us $5.2 million as a security that we get to hand onto if the project doesn’t come to fruition because
the price is too low or something happens with the site or the development process. If the project does not come to fruition, we have plenty of time to issue another RFP to replace
it in a few years. On the other hand, the extension of the ITC creates the possibility of just rejecting it right now and doing another RFP in the future; however, the UAC (Utilities
Advisory Commission) and Staff recommend approving the contact with Hecate as well as delegating to the City Manager the authority to execute the contract and the extension options,
waive the Investment Grade Crediting Rating requirement of the Muni. (Municipal) Code, which is fairly typical for our renewable energy contracts, and waive the anti-speculation provision
of the Risk Management Policy as it might apply to this PPA. That is about it. The next step will be to take the contract to Council, of course, next month and then keep our eye on
it as it progresses.
Chair Filseth: Thank you very much. Questions?
Council Member Wolbach: I guess my one concern is that this is too good to be true. I think that we probably are all haunted by a very different kind of contract which was the Mitchell
Park Library contract, where there was one bid, as I understand, I was not on the Council at the time, but I understand there was one bid that was way cheaper than everyone else’s. That’s
the one we went with and it turned out to be a huge disaster. So, as excited as I am about this, I guess that is my one reason for a little bit of hesitation and it sounds like we have
pretty good insurance to get out. Also, looking at Recommendation Number 4, is this in laymen’s terms essentially saying, “Times are bad for hydro, so we are going to change our rules
for now so we can get more solar”. Is that maybe too harsh of a summary?
Mr. Stack: I think that is certainly part of the consideration that hydro has not been performing up to average …
Council Member Wolbach: Given the drought, that makes sense.
Mr. Stack: It has been pretty typical over the last several years, and there is also the fact that it is pretty easy to deal with the situation of a surplus. We kind of encounter that
situation on a month-to-month basis, now in the spring we get a lot of hydro coming in as the snow pack melts.
Ms. Ratchye: The anti-speculation part of the Energy Risk Management Policy says that you can’t buy more than you need, and in this case that kind of looks like what we are doing in
an average hydro year, and so that is what we are asking you to waive for this. We also had that same provision waived for the last solar contract we had, that pushed us above the kind
of like the line that you saw, I don’t know if you have that slide up, or the earlier one. So from 2017 for the next several years it was the same type of deal. The reality is we don’t
know what the hydro is and, in fact, we were worried now that instead of 50 percent it is perhaps more like 45 percent or something …
Council Member Wolbach: So to follow up then, basically we are talking about buying more than we need on paper because we might not be getting as much as we need in reality.
Ms. Ratchye: Right, it is the uncertainty of the hydro production.
Council Member Wolbach: Thanks for clarifying that.
Chair Filseth: Other questions?
Council Member Holman: Yeah, you explained that to my question, so thank you. You explained the question about anti-speculation provision. The Investment Grade Credit Rating, why would
we waive that?
Mr. Stack: That is pretty standard to do for these renewable energy companies. Most developers in the industry are pretty small companies that don’t have a very large balance sheet,
so they get funding from the banks. They get a lot of funding from the banks to build the projects, but they themselves are not Investment Grade. They are small, they have relatively
low cost to actually go out and do the looking for a site and do the permitting and all that sort of thing. They don’t have tens of millions of dollars behind them.
Ms. Ratchye: I think in the Muni. Code we have a requirement that they have to be Investment Grade and I believe that every single renewable PPA that has been approved has waived that
provision, because these companies are too small to have a rating in general. I think except, perhaps, even (inaudible) wind contract is the only one.
Mr. Stack: And because we are only paying for the energy after we receive it, so there is not a lot of risk that we will lose money on the deal.
Council Member Holman: So given that, and this is a speculative question, given that solar prices keep going down and down, that you said this is the lowest that you have seen published
out there, at what rate are solar rates going down, and if you took that and extrapolated it out 10 years, what do you think the rate might be, understanding it is speculative?
Mr. Stack: That is a good question. I would love to know what prices will be in a few years.
Council Member Holman: It is a crystal ball question, so …
Mr. Stack: I would way, to answer that question, as well as Council Member Wolbach’s question about it being too good to be true, this proposal was significantly lower than the price
of other proposals we received. I think other proposers, when they gave us their bids, were bidding a bit more conservatively and this proposal, they are projecting that costs will
continue to be driven down further and further and further for the cost of panels and other components, the cost of financing the projects. I am not sure how much lower they can get.
Ms. Ratchye: Jim, isn’t it true that most of the proposals that we received intended to build the project by the end of 2016, and then try to sell the first five years of generation
to somebody else, and then we would take it from 2021 on? This proposer intended to build it close to 2021 and projected that the costs would continue to fall, so the other ones were
kind of using more current solar prices for their bids.
Council Member Holman: Speaking on speculations, right.
Chair Filseth: Can I ask a question for that. I saw this before at the Utility Advisory Commission, so I went and asked some of my friends, “What is the state-of-the-art for solar pricing
in the USA today”, and it sort of seemed liked between four cents and five cents per kilowatt hour. Is that accurate?
Mr. Stack: That is pretty accurate. I would say for California it is probably five to 5.5 cents and for Texas and other markets it is around 4-5 cents.
Chair Filseth: Okay, so we are better, but not half.
Ms. Ratchye: But this doesn’t start until 2021.
Chair Filseth: Sure, I understand. So the other question I was going to ask is, “It is 3.676¢/kWh in Los Angeles, but we pay for transmission costs as well, right, so ballpark …
Mr. Stack: We do, although we are going to pay for transmission costs for every megawatt hour that gets delivered to the City.
Chair Filseth: I understand, but …
Mr. Stack: Our long-term projection for transmission costs are around 2.5¢/kWh.
Chair Filseth: Okay. So then if this went from 3.5¢/kWh plus 2.5¢/kWh for transmission costs, which is 6¢/kWh, so if the 3.5¢/kWh went to 2.5¢/kWh then our cost would actually go from
6¢/kWh to 5¢/kWh, so it would mean the transmission costs wouldn’t decrease as much as the solar costs? Is that accurate?
Mr. Stack: Yeah.
Chair Filseth: So, let me think about this. If it’s 2.5 cents and 6 cents, if it is 3.6 cents now, if it falls in half to 1.8 cents, then 1.8 center plus the 2.5¢/kWh is 4.3 cents,
so we go from 6cents to 4.3 cents, which is 25-30percent decrease. So that would be the answer. What if the solar costs continue to drop? If they drop in half, then our costs would
drop 25 to 30 percent, not in half, right?
Mr. Stack: We are getting to the point where transmission costs …
Chair Filseth: Start to dominate.
Mr. Stack: Yeah.
Chair Filseth: I want to ask another question. If you go to slide 10, our demand is 1,000 gigawatt hours a year I think you said.
Mr. Stack: Yeah, roughly.
Council Member Schmid: So that adds up to 550 or something like that. What is the rest?
Mr. Stack: The rest is the large hydro resources.
Chair Filseth: Got it, which is different from small hydro.
Mr. Stack: On this slide I am only showing the renewable energy, the RPS-eligible resources, which include all the renewables plus small hydro. The large hydro is not eligible under
the State’s rules.
Chair Filseth: So I wanted to ask, as some of the other things like landfill, gas and so forth go away and we are increasingly using solar and wind, which are mostly in the daytime,
do we reach a point where we actually have to start worrying about storage, or is this chart as written we don’t have to do that?
Mr. Stack: That is definitely something that we are thinking about quite a bit. I think everybody in the industry is wondering, is it possible to get to 50 percent or higher levels
of renewable penetration, if it is wind and solar, without doing significant amounts of storage. Storage costs are coming down quite a bit too, so we could get to the point where that
is not the end of the world. There is also the fact that the ISO (Independent System Operator), the Independent System Operator of the California grid is kind of expanding into a kind
of west-wide grid, so we may have situations where we can (crosstalk).
Chair Filseth: Self store or self-balances.
Mr. Stack: Yeah, geographic balancing.
Chair Filseth: But the short answer is that at this point in time we don’t know.
Mr. Stack: That’s right.
Chair Filseth: Okay. Greg.
Council Member Schmid: Yeah, I just want to say congratulations, because (crosstalk). It is long-term in nature, it is a revolutionary price, it gets in at a time before all the other
energy providers in California need to meet their higher limits, so the likelihood the long-term prices will start going back up. This locks us in for a long time, it takes the place
of some of our earlier things that are now running out of steam. I think the two waivers we are asking for are very reasonable and fit in very well. The only danger, risk, is if they
don’t deliver on what they say, but we have plenty of time to adjust and we would have some money to help us adjust. I just have one comment on the Green Premium. I always wondered
why the cost of the Green Premium keeps going down. On Page 14 of your Report has the answer to that. The Green Premium is locked in on the day the contract is signed, so we signed
many contracts in previous years with a much higher rate. If you actually ask the question, “What does the current user of electricity pay, versus the market”, we would be well over
the 5¢/kWh, 0.5¢/kWh, so it is a little funny to say we are not yet costing the rate payer money because we are, but as prices are falling, I guess that is the right time to jump in
and lock these in because when prices go back up, this then becomes more and more valuable. So maybe it is appropriate to tell that other side of how much the rate payer is actually
paying for RPP’s (Residential Preferential Parking), but with that it is time for a Motion.
Chair Filseth: Not quite yet. We have another question over here.
Council Member Holman: I have one more question, which is performance risk, liquidated damages, uncapped to be assessed for nonperformance and I’ll just stick with that. At what point
would we know that they are not going to be able to deliver. In other words, are they giving Performance Reports and update schedules? Is that a requirement they are doing so? So,
in other words, we are not caught, I’ll make this extreme, we are not going to be caught on the eve of 2021 with having to scramble because we don’t have a provider that is going to
perform? So what is the schedule of required reporting?
Mr. Stack: Sure, that is a good question. With most of our contracts, we ask for monthly reports about their development progress. I think for this one we are not going to request
on a monthly basis for a few years, but they do have to give us reports on their progress and we have several different milestones they have to meet in the contract. They have to complete
their permitting, get an interconnection agreement signed and get financing from the bank for the project and then start construction of the project. These are the major milestones
they have to meet and there are dates attached to those deadlines in the contract. We are tracking that so we do have some advanced notice if they don’t get that permitting done by
a certain date required we will know about that and we will start to talk to them about that if they don’t meet those deadlines. If they fail to start construction of the project by
the required date, then we do have the ability to terminate the contract.
Council Member Holman: Do you remember what that date is?
Mr. Stack: It is typically, for solar contracts the construction start date is usually six to nine months before the commercial operation’s deadline, so sometime in 2020.
Council Member Holman: It doesn’t seem like that gives us a whole lot of lead time to go out again to procure other sources.
Mr. Stack: That is when we would be able to terminate the contract, but I think we would be able to see in advance of that if they are not able to get financing, for example, we would
have a pretty good idea. That might be well before 2020 when they start to do that. If they start to fail to meet the other milestones, we would have a little bit more advance notice
about that.
Council Member Holman: So the two things that are the most critical it would seem to me, are the financing and permitting, and I don’t know in this kind of realm, what the timeliness
is of those. In other words, if they get permits are those permits good for five years, are they good for two years. What is it? So is there any reason to think that the location
of this would be a dicey permitting situation, the locale, and when would their permitting be able to take place? So we would at least have kind of a good idea?
Mr. Stack: I don’t know exactly when they will start the permitting process. I’m guessing not for another year or two, but when we presented this to the UAC a gentleman from Hecate
was actually here. Their COO (Chief Operating Officer) came and spoke to the Commission and they asked a question about, “Is this a good site, are there any potential endangered species
at the site that could cause significant problems?” They said, “No, they have examined the site pretty carefully and it is a pretty advantaged site”. I think it is disturbed agricultural
land or former agricultural land, so it has pretty well been developed already. There is not a whole lot of environmental risk associated with it.
Council Member Holman: So no visual or scenic issues?
Mr. Stack: No.
Council Member Holman: Okay, thank you.
Chair Filseth: Okay, Motions.
Council Member Schmid: I will enthusiastically move that we agree to send this with our recommendation to the Council for Staff recommendations on slides we have obtained. Council Member
Holman: I’ll second it. MOTION: Council Member Schmid moved, seconded by Council Member Holman to recommend the City Council adopt a Resolution to:
Approve a Power Purchase Agreement (PPA) with Hecate Energy Palo Alto LLC (Wilson Solar) for up to 75,000 Megawatt-hours (MWh) per year of energy for up to forty years at a total cost
not to exceed $101 million; and
Delegate to the City Manager or his designee, the authority to execute on behalf of the City the PPA with HEPA, the three contract term extension options available to the City under
the PPA, and any documents necessary to administer the agreements that are consistent with the Palo Alto Municipal Code and City Council approved policies; and
Waive the application of the investment-grade credit rating requirement of Section 2.30.340(d) of the Palo Alto Municipal Code; and
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 this PPA.
Chair Filseth: Care to speak to your Motion?
Council Member Schmid: No, as I said, I think this is really terrific and this is a good long-term thing and (inaudible) the criteria used at each step to make sure that this is a good
long-term investment.
Chair Filseth: Speak to your second.
Council Member Holman: Just thank you and can we talk about infrastructure?
Chair Filseth: All right. All in favor. Motion passes.
MOTION PASSED: 4-0
Chair Filseth: Good stuff. Nicely done folks, very promising.
Mr. Stack: Thank you.
2. Utilities Advisory Commission Recommendation that the City Council Adopt a Resolution to Continue the Palo Alto Clean Local Energy Accessible Now (CLEAN) Program at the Current Contract
Price of $0.165 per kilowatt-hour for Local Solar Resources and at the Avoided Cost Level ($0.081 to $0.082 per kilowatt-hour) for Local Non-solar Eligible Renewable Resources.
Jane Ratchye, Assistant Director for Utilities Resource Management: I’d like to introduce Jim Stack. He will be making the next presentation.
Chair Filseth: We are at 10 minutes to 8:00, so we have an hour and 10 minutes to go, so it sounds good.
James Stack, Senior Resources Planner for Utilities: Okay, shifting gears from LA County to Palo Alto, I wanted to talk to you tonight about the Palo Alto Clean Local Energy Accessible
Now, the CLEAN (Clean Local Energy Accessible Now) Program. I will give you some of the history and background of the program, talk to you about some of the other previous annual updates
to the program, give you a brief Status Report on where we are now with the program, and then talk to you about the price of renewable energy, which you have seen just a little hint
of that earlier, and give you our recommendation. The CLEAN Program is just shy of four year’s old now. It started in March of 2012, the Council adopted the program. The initial rate
was 14¢/kWh (kilowatts per hour). It was limited to solar energy resources and had a four megawatt (MW) participation cap. Initially there were no takers that first year, so in December
of 2012 Council reviewed the program and decided to increase the contract rate from 14 to 16.5 cents. The 14-cent rate was set to be relatively close to the avoided cost or the actual
value to the City of the energy as we estimated at the time, when renewable prices were a little bit higher. When Council approved the 16.5-cent rate, they found that there were some
additional nonmonetary benefits to local solar generation that justified the higher rate. They also decreased the participation cap to two megawatts at that point. They came back about
a year later, February 2014, Council updated the program again, increasing the cap to three megawatts and maintaining the 16.5-cent rate. Through that point there were still no takers
for the program. Last year we came back to update the program again. About a year ago we came to the Committee (Finance Committee) and we asked the Committee to expand the program
from just solar resources to all renewable energy resources in the City. We recommended setting the price for the non-solar resources to be equal to their avoided costs of 9.3 cents
for a 20 or 25-year contract and the Committee recommended reducing the solar contract price from 16.6 cents down to the avoided costs for solar energy, which at the time was 10.3 or
10.4¢/kWh. We took that recommendation to Council in May of last year. Council approved the expansion of the program to the non-solar renewables at the avoided cost level; however,
Council decided to maintain the contract price at 16.5 cents and part of the justification for that decision was based on the fact that Public Works was at the time negotiating a lease
of the rooftop space of some of our downtown garages and California Avenue garages to a company that had proposed to lease that garage space and turn it into solar facilities and pay
the City about $150,000 in revenue for that leased space and they would submit those projects to the CLEAN Program, so Council decided that the leased revenue would be directed towards
the Electric Fund in order to offset the additional cost of the 16.5-cent contract rate. At this point that is where we are with that 16.5-cent rate for solar and a 9.3 or 9.4-cent
rate for non-solar resources. I can tell you, unlike in years past, we actually have some applications now for the program. We have, I believe, a total of five applications. Our first
one was Unitarian Universalist Church in Palo Alto with a relatively small project of 110 kilowatts or 0.1 megawatts, and then the parking garage rooftop lease project that I mentioned,
the lease was recently approved by Council and the company developing that project, I think it is called Camuna Energy, they recently submitted applications for, I think, four different
garages. Four separate applications for those projects which are going to total about 1.3 megawatts altogether when they are built. So we now have five projects, or five applications
in the pipeline which will take off about half of the total space in the three megawatt program cap. Now, switching gears to the issue of the value of the energy to the City, I mentioned
when the program started in 2012 the price was 14 cents and that was close to the avoided cost, which we estimated at the time, based on solar prices and our estimates for the cost of
transmission and capacity was 13.5 cents. Since that time, as you know, solar prices have continued to come down and so right now, based on the results of our RFP (Request for Proposal)
where we took the top, I think, five or so proposals we received, the best proposals, lowest cost proposals, we estimated the renewable energy price plus the cost of transmission and
capacity to total up to 8.9 cents for a 20-year term for local solar energy. That’s what we estimate the value to be. So if the contract price is maintained at the 16.5-cent level,
that will result in an annual excess cost or a rate impact of $380,000, 0.3 percent impact for a three megawatt cap. On the non-solar side, we don’t have any prospects yet for non-solar
participation in the program, but similar to solar, the price has come down since last year based on the results of our recent RFP, so we now estimate the avoided costs of non-solar
energy to be 8.1 cents for 20 years or 8.2 cents for 25 years, I believe. Since we are proposing to maintain the CLEAN contract price at the avoided cost level, there will be no rate
impact associated with participation from non-solar resources in the program. On this next slide, we just wanted to break down the different cost components of the avoided cost. So
the bars on the left are for solar and the ones on the right are for non-solar. These are all the different components that make up the 16.5-cent rate for solar or the 8.1-cent rate
for non-solar. You can see it is composed of energy, the renewable energy value, local capacity and avoided transmission and transmission distribution system losses for both of them.
Then on the solar side, there are some additional benefits that have been found by Council, including local economic development and then our reduced need for building new transportation
transmission facilities in the State, providing shade to cars and buildings in town and the potential to provide grid resilience in emergencies, if the facilities are prepared with storage.
That takes me to the recommendation, UAC (Utilities Advisory Commission) and Staff recommend maintaining CLEAN contract price at 16.5¢/kWh for local solar resources and maintaining
the contract price at the avoided cost level for non-solar resources, which would be 8.1¢/kWh for 20 years or 8.2¢/kWh for 25 years and maintaining the three megawatt caps for both types
of resources.
Chair Filseth: Good. Questions?
Council Member Holman: I don’t really have a question, but I do have a comment. It is a request and this is for, so you don’t think I am picking on Utilities, this is for any Staff
Report that comes to the Council, I have noticed that we used to, and it has kind of slipped away, that when there is a recommendation that is coming forward like this is Staff and Utilities
Advisory Commission request the Finance Committee recommend, it’s always good, advisable and transparent if the vote is included in that very beginning of the Staff Report. So, for
instance, this was a 3-0 vote with one person abstaining and three absent. So, whether it is Planning or ASD (Administrative Services Department) or whatever, having that vote recommendation
right up front, it makes it very clear to anybody who is taking a quick glance at this what the recommendation really is and how strong it is. So it is a request actually.
Chair Filseth: Thank you. I have a question. So essentially what we are saying is that for the solar piece of this, not the non-solar renewables, but the solar piece of this, we are
going to pay 16.5¢/kWh hour for local solar. We just approved a contract to buy utility-grade solar at 3.676¢/kWh, right, plus transmission cost and so forth, so if I understand what
you said, the table here is that assuming the avoided cost is 8.9¢/kWh, did I get that right, which would actually be less with the Hecate contract, then if all 3 megawatts under CLEAN
with the feed-in tariff, the excess cost to the City would be $380,000 a year, if we were using all 3megawatts now? You said the five applications in the pipeline would account for
half of that, so that is 1.5 megawatts roughly that’s what it would come out to? So if we were to say that, “we will proceed with those five applications, but further ones after that
we reduce it to the avoided costs”, then essentially we would save $190,000 a year. Is that right?
Mr. Stack: That’s about right.
Ms. Ratchye: I just wanted to mention that the people who have already applied have the rate under the current contract.
Chair Filseth: I understand. So the people – I hope I said this the right way – is that the people that have already applied we wouldn’t touch, right, but new applicants who haven’t
applied yet, if we said, “We will continue to do it, but we want to pay the avoided cost”, then that would save the City $190,000 a year. Is that accurate?
Ms. Ratchye: Yes.
Chair Filseth: Comments, Motion?
Council Member Schmid: Is that a Motion?
Chair Filseth: We were just in questions for the moment. If there are no further questions, we can proceed to Motions.
Council Member Schmid: Yes, I think it is time.
LEAVE INMOTION: Chair Filseth moved, seconded by Council Member Schmid to recommend the City Council adopt a Resolution to:
Maintain the Palo Alto CLEAN contract price of 16.5 cents per kilowatt-hour (kWh) for local solar resources that have already submitted applications to the CLEAN program and reduce the
CLEAN contract price for future local solar resources to their current avoided cost: 8.9 cents /kWh for a 20-year contract term and 9.0 cents/kWh for a 25-year contract term, and continue
with a program limit of 3 megawatts (MW); and
Reduce the Palo Alto CLEAN contract price for local non-solar eligible renewable resources equal to their current avoided cost: 8.1 cents/kWh for a 20-year contract term and 8.2 cents/kWh
for a 25-year contract term, and continue with a separate program limit of 3 MW.
Chair Filseth: I will speed to my Motion, this did come up last year, but in the meantime the price of solar has dropped, the amount of energy we are talking through about this is a
tiny, tiny fraction of what is used in the City, so the use of resilience is very small and it is just hard to see in a year in which we think may be a lean year for the City, that we
should be paying the City should be paying 16.5¢/kWh when we can buy it elsewhere for 3.676¢/kWh. Do you care to speak to your second?
Council Member Schmid: Just following an earlier discussion, it is hard to vote for something that is offering four times the energy price, it’s only to large companies which has been
very hesitant to pick it up. It is a long-term commitment at that rate which seems out of line with where the market is and where it is going. It is very hard to justify, so…
Chair Filseth: Other comments?
Council Member Wolbach: I guess I am a little bit torn on this one. I hadn’t been envisioning that Motion coming in tonight, but it is an interesting one. I guess I would like to hear
maybe the maker and seconder speak to how they feel the reasons why Council essentially undid recommendations from UAC last year. What has really changed for us in the last year. Basically,
as I understand, if I remember correctly, we reversed UAC’s direction and it sounds like this Motion would take us back to that 2015 UAC direction, so I guess I would just like to hear
maybe a bit more of your thinking about why we would now make that kind of go full circle to that point.
Chair Filseth: Maybe I’ll speak to that and then you can.
Mr. Stack: Just to correct the record on last year’s events. I think Staff and the UAC recommended the 16.5-cent rate continue for solar last year. The Finance Committee reversed that
and recommended the avoided cost level and then the Council reversed that and went back to the 16.5-cent (crosstalk).
Council Member Wolbach: So now I see. Thank you for correcting me, the Finance Committee last year. Thank you for the clarification. The Finance Committee last year. So why should
the Finance Committee this year take a different path?
Chair Filseth: Excellent question. In my mind there are really two differences from last year. One is the price, the market price of solar continues to decline, okay. To go from 5.5
cents to 3.676 cents is a significant decline, so the price of solar, utility-grade solar continues to decline, that’s one. The second is, last year the City ran a surplus, right?
This year it looks increasingly likely that is not going to happen. We find ourselves scrambling to try to find a variety of kinds of projects, that it is not obvious where the money
is going to come from to do that. I think we are in a little bit of belt-tightening this year what we were not in last year and I think it makes sense to look at all programs on the
table in that context.
Council Member Schmid: I was struck by the difference from the UAC. Last year there was a unanimous vote with all the members participating, saying this was a good thing. This year,
there is more detailed minutes, so you can capture what went on, there were only three members voting and they voted unanimously, but there was one abstention from someone who was not
happy, and one of the three supporters pointed out that there was a technical issue that even with solar in the City there was a problem with the grid, that solar connection would likely
not work, so the skepticism that came out of the UAC Report plus what we just discussed earlier tonight, we have a long-term contract at 3.5 cents. It is hard to justify.
Chair Filseth: Let me add one more thing to my comments too, which is $190,000 a year over a period of decades, you could finance, what, $6 million worth of infrastructure projects and
other kinds of things like that, so that is the comparison we are doing.
Council Member Wolbach: So basically to come full circle on my own correction, what we are doing is essentially following in the footsteps of this Committee last year? That’s if we
go with this Motion with the carve-out for those proposals which are already in the pipeline?
Chair Filseth: And the Council could decide if it goes through.
Council Member Wolbach: And this would go on the Consent Calendar if it is passed unanimously correct?
Chair Filseth: Correct.
Council Member Wolbach: I’ll support the Motion.
Chair Filseth: All in favor? Motion passed unanimously.
MOTION PASSED: 4-0
3. Commercial and Residential Impact Fee Nexus Studies and Recommend Affordable Housing Impact Fees.
Chair Filseth: Thank you very much. Thank you to everybody and this Committee for your timeliness. We are now half-way through the Agenda. By the way, have I made a mistake here?
Should we be calling for public comment for each Item as it comes up?
Jessica Brettle, Assistant City Clerk: We have not received anything for other Items. We do have two for Item 3. I will make sure (crosstalk).
Chair Filseth: I’m glad I thought of that. Thank you very much. In that case we move to Item Number 3 and public comments. The first speaker will be Pat Sausedo. Did I say that right?
Pat Sausedo: Yes you did. I am unfamiliar, where do you want…
LEAVECouncil Member Holman: Do you want me to (inaudible) the presentation?
Chair Filseth: I’m sorry. I may have the cart before the horse. Normally the Staff does the presentation and then we have the speakers?
Chair Filseth: I’m sorry. Can we do that, let’s do that. You have the floor. Welcome.
Hillary Gitelman, Planning and Community Environment Director: Chair Filseth, Council Members, I am Hillary Gitelman, the Planning Director and I am joined by one member of our Staff,
Eloiza, and our consultant, Sujata. I am going to let them both introduce themselves.
Sujata Srivastava, Principal from Strategic Economics: I am Sujata Srivastava with Strategic Economics.
Chair Filseth: Thanks for coming.
Eloiza Murillo-Garcia, Senior Planner: I am Eloiza Murillo-Garcia. I am Senior Planner.
Ms. Gitelman: We also have support from Cara Silver of the City Attorney’s Office. We are replete with support. We do have a brief power-point presentation that I hope is going to
set the framework, and we have also a handout that I hope you have received. After we hear the presentation and the public comments, we are looking forward to your questions, comments
and, hopefully, a recommendation to move forward to the next steps with this project. So Eloiza is going to start us off.
Ms. Murillo-Garcia: Thank you. I am briefly going to talk about the commercial and residential Nexus Study. The presentation will be very brief, but it will follow this structure.
I will give you a quick background and then talk about the commercial Nexus Study methodology as well as the residential Nexus Study methodology. Then we will discuss the consultant
recommendations and then the next steps. The background of this is it is an affordable housing fee program and the objectives are to address the impact that new development has on affordable
housing demand. Another objective is to generate funds for affordable housing. The City does have City Affordable Housing Funds. There are five different funds that make up what we
call the City Affordable Housing Fund and those funds consist of the CDBG (Community Development Block Grant) Program, the Housing Impact Fee Fund and the Commercial Impact Fee Fund,
as well as the BMR (Below Market Rate) Emergency Fund and the Home Investment Partnership Fund Program. I will just give you a really quick overview of the commercial Nexus Study methodology.
The commercial Nexus Study looked at revenues and the analysis used rental data for the Palo Alto market for existing retail and office building. For hotels the consultant team interviewed
hotel managers of hotel properties in Palo Alto to determine average daily rates and occupancy. The methodology also included estimates for direct costs such as site work, building
costs and parking, as well as indirect costs, including financing and developer overhead and profit. The study also looked at land costs. The consultant team analyzed recent sales
transactions in Santa Clara County and reviewed third-party property appraisals and finally, the other part of the methodology was looking up the return on cost thresholds. Using that
methodology the consultant team was able to come up with a maximum justified fee and that fee was $177 for hotels, $177 per square foot for hotel development, and $264 per square foot
for office, medical and R&D (Retail and Development). This maximum justified fee is a maximum fee that could be imposed on new development based on the Nexus Study; however, another
part of this Nexus Study also includes a feasibility analysis, so the maximum feasible fee was found to be $30 per square foot for hotel development and $60 a square foot for office,
medical and research and development. This maximum feasible fee is the maximum fee that can be charged based on the financial feasibility of the fee levels. The study also looked at
what our neighboring jurisdictions are charging and what fees they are imposing and they vary widely. For example, Mountain View charges $2.50 per square foot for hotels and Cupertino
charges $10 a square foot for hotels. For office and R&D Menlo Park charges $15 a square foot and (inaudible) and San Francisco range from $16 to $24 a square foot. For the residential
Nexus Study, there was a similar type of methodology. The consultant team looked at revenues and that revenue assumptions were based on a review of local and regional data including
information on the type of development that was recently constructed or is planned or proposed in Palo Alto. They also looked at current sales prices and rental rates of recently built
residential development in Palo Alto and neighboring cities. Another part was the development costs, which are the direct construction costs as well as the indirect costs, such as the
financing and developer overhead and profit. They also looked at land value. The consultant team analyzed recent sales transactions in southern San Mateo County and northern Santa
Clara County and reviewed third-party property increases. Similar to the commercial study, in doing the analysis the consultant’s study came up with the maximum justified fee, which
was $111 per square foot for a single-family detached product type, $90 a square foot for a single family attached product type, $75 a square foot for condominiums, and $105 a square
foot for apartments. Feasibility analysis was also conducted. For the residential study the maximum feasible fee was actually the same as the maximum justified fee for most of the
four types except for apartments and in that case the maximum feasible fee was $85 a square foot. Again, for the residential, the consultants looked at neighboring jurisdictions and
the fees that they are imposing and, again, they also varied widely. For example, Daly City, charges $14 a square foot for a single-family detached and Cupertino and Daly City as well
charged $25 a square foot for apartments. This next slide gives you an overview of our existing fees that we have for commercial development. Our existing fees are currently $19.85
per square foot for office, R&D, hotel and retail, restaurant and other. The recommended fees are, again, $35 a square foot for office, $30 a square foot for hotel and the recommendation
is to retain the $19.85 per square foot for retail, restaurant and other. The reason for this is that this prototype was not studied as part of the Nexus Study, so the recommendation
is to maintain the same fee. For the residential fees, again this is also a summary of the City’s existing fees as well as the recommended fees. The City fees are currently 7.5 to
10percent of sales price for market-rate single-family detached, market-rate single-family attached and condo and the City currently does not charge fees for market-rate rental housing
due to the Palmer decision, Palmer/Sixth Street Properties L.P. versus the City of Los Angeles where the California Court of Appeal held that local inclusionary requirements applied
to rental housing and In-lieu Fees based on certain requirements violate the Costa-Hawkins Act, a State law governing rent control. The recommended fees, as you can see, are $95 a square
foot for single-family detached, and $50 a square foot for the rest of the product types. Our next steps are to ask for your feedback and questions and then we will prepare an Implementation
Ordinance which we will take to the Planning and Transportation Commission (P&TC) for review, and finally, we will go the City Council for review.
Chair Filseth: Okay. Before we do that, let me make sure I understand what you are asking us to do, which is a discussion but you are not asking us for a Motion or to define something?
What would you like us to …
Ms. Murillo-Garcia: I think it is up to the Committee whether you want to adopt a Motion and providing us with your recommendation on the fees. We don’t have an Ordinance drafted yet.
Our thought was to get your input, either informally as comments or in the form of a Motion, then Draft an Ordinance, because it is amending Title XVIII, it will have to go to the Planning
Commission, get a recommendation and then go to Council.
Chair Filseth: Let me make sure I do this right. At some point we are going to have questions from the Committee and then we are going to have comments and Motions. Should we do the
public comment before the questions or after the questions?
Female: Typically it is first.
Chair Filseth: Very good. So I have public comments …
Chair Member Holman: It’s at your discretion though. (crosstalk)
Chair Filseth: Very well. I will follow tradition. We have three speakers, Pat Sausedo, Dennis Martin and Herb Borock. Ms. Sausedo if I can get you back a second time here.
Pat Sausedo: Yes, Committee, I am Pat Sausedo, Executive Director of NAIOP Silicone Valley, the commercial real estate industry for the Silicon Valley region representing over 160 commercial
real estate companies here in Silicon Valley. Upon review of the Nexus Study, one of the significant concerns that NAIOP (National Association of Office and Industrial Parks) has this
evening is the projections contained within the Vernazza Study that show a maximum justifiable fee of $264 a square foot for office and R&D and that it could be justified from the numerical
calculation standpoint. Recognizing that $264 a square foot on a 100,000 square foot building, you’re looking at close to $26,500 million, a big number. The feasible fee is downgraded
to $60 a square foot, we are looking at close to $6 million for a 100,000 square foot building. Staff in their Report is recommending $35 a square foot, but if we adopt that we are
looking at easily close to $1.4 and $1.5 million for a 100,000 square foot building for this fee. While NAIOP Silicone Valley recognizes that new fees are being adopted by local jurisdictions
to replace Redevelopment Funds that previously helped finance the development of lower income housing, Impact Fees on commercial construction will ultimately, in the long term, add to
the cost of new construction investment within your City. The Staff Report provides a short list of commercial linkage fees or Impact Fees in other jurisdictions, but there is no reference
in this study or the Staff Report of the cities which are part of the Silicon Valley, San Jose, Milpitas, Fremont, Santa Clara, Foster City. They do not have commercial linkage fees.
Additionally, to include San Francisco, in our opinion, this is really an incorrect comparison. San Francisco is a very urbanist, high-rise, tower development city, whereas Palo Alto,
as most of Silicone Valley, is very suburban, low-rise. We just don’t build the same facilities for office and R&D in the suburban areas as you do in the core of San Francisco. NAIOP
encourages this Committee to keep in mind the overall impacts of the need for Silicon Valley and South Bay cities to continue to provide new office and R&D development opportunity to
maintain competiveness so that we maintain a strong economic and job growth opportunity throughout our region and in Palo Alto. With that in mind, we encourage you to consider not raising
your current fee of $19.85. Currently the only local community exceeding $20 a square foot is Mountain View. Palo Alto’s current fee will maintain the City’s economic competitiveness
from a linkage Impact Fee standpoint, and it will not encourage linkage fee increases throughout our South Bay Silicone Valley Region. If one city gets an extra $25 a square foot or
$50 a square foot, why don’t we all jump in and get it as well, which ultimately drives the Silicon Valley Region as being less competitive for business investment. Also, we would like
to encourage, and we will say this when it ultimately comes to Council, housing affordability is a significant serious issue and we need, as a community, to look at many resources and
work together with all of our agencies to try to find a multi-prong approach to address this serious and critical issue. Thank you very much.
Chair Filseth: Thank you. Next speaker, is Dennis Martin here?
Dennis Martin: Good evening Committee. I am Dennis Martin speaking on behalf of the Building and Industry Association (BIA). BIA Bay Area represents residential builders of for sale
and rental projects throughout the Bay Area and Northern California. First let me state that no outreach has been done to the building industry on this issue and so we have had zero
input to this Report. BIA requests that the Committee tonight rejects Staff recommendations for fee levels, direct that Staff return with a Report that recommends fees no higher or
marginally higher than neighboring jurisdictions, engage in a robust (inaudible) outreach process, eliminate San Francisco or any other irresponsible comparison from this Report, work
with the BIA to develop recommendations to incentivize the building of affordable units within a market-rate project. That’s the best way to get those units built. This is, as really
anyone can see, a very convoluted process here to quantify induced impacts and that results in unreliable data and a completely infeasible mitigation regime. It does not prove causation
in BIA’s estimation and is not common practice in establishing Nexus findings in accordance with the fee mitigation (inaudible). So just as disturbing a process as the Nexus Study are
the Staff recommendations of $50 per square foot for multi-family ownership and rental housing, just exactly the kind of housing that Palo Alto needs to mitigate its own impacts of a
3:1 (inaudible) housing imbalance. Let me read from the Report, “The recommended fees were selected in order for the fee to be more compatible with the existing fees in other local
jurisdictions”. Well that is patently false because the recommended fees are two to three times higher than local jurisdictions. But even at the recommended levels, the City’s fees
will be higher than all of its neighboring jurisdictions with the exception of San Francisco, which Ms. Sausedo pointed out, is an inappropriate comparison. These recommended fee levels,
as I say, are two to three times higher than local jurisdictions and this is really where our concerns lie, because these fees are being adopted in Silicon Valley, we understand that.
We ask that the cities behave responsibly and adopt fees that do not incur a spiral of fee escalation throughout the region.
Chair Filseth: About 30 seconds sir.
Mr. Martin: So we are asking that you take a look at our requests and our recommendations, engage in a (inaudible) process, send this back for work because it is not fair. Thank you
very much.
Chair Filseth: Thank you very much. And the final speaker will be Herb Borock.
Herb Borock: Good evening Committee members. I believe that Staff is looking for some kind of direction and I believe the direction that Staff needs, not just from the Committee but
from the Council as a whole, is to present a Staff Report that doesn’t invite some of the comments that you just had, such as no outreach, or not providing adequate data to support the
recommendations. There are all sorts of ways to end up with no result or a bad result, but what the Committee and the Council should expect is for recommendations and supporting documentation
that enables you to make good recommendations on a timely basis. On the issue of retail, in the residential parking program, you set that up with the acknowledgement that retail has
a higher percentage of lower income employees and employees needing affordable housing, yet here no effort is made to even establish what the retail rate is. There has also been anecdotal
evidence that office uses have taken over retail spots and have been allowed to do that somehow by Staff. By having that lower rate, that also would provide incentive for doing that.
In regard to some of the data in the Report, I have only had a chance to look at a couple of tables, so I haven’t read the supporting Report, but for example at Packet Page 252 the
affordable housing information is from pro forma statements from one project that never happened, which is the Maybell project as I understand, and the other is from what is called the
Almond Garden Apartments. The number of units looks like (inaudible) but one would want the actual data when the project has been built as to what it actually is, so this is something
that can be pointed to by the two previous speakers and saying, “Well you have pro forma data rather than actual data”. On Packet Page 265 a figure labeled as “Recent Commercial Vacant
Land”. (crosstalk) and you can see that they are residential zoned land there, not commercial land for many of those, including one address in Palo Alto on Garden Street. In terms
of the recommended fees for residential, there should be a comparison and there may already be in the language supporting these fees comparing the square footage with the square footage
fee made from calculating the 7.5 percent to 10 percent number. Thank you.
Chair Filseth: Thank you. So with no further speakers …
Ms. Gitelman: If I could just respond. Hillary Gitelman again. First of all I just wanted to acknowledge the commenters. I thought all of them made interesting points that we would
be happy to respond to as we start getting into your own questions. I think it is important that Eloiza started the presentation with the overall objectives of this fee program. We
all know that we are in a real housing crisis in this region and the purpose of this program is to address the impacts on affordable housing that these land use types have and to generate
funds for affordable housing, so that’s why we are doing this. I just have to disagree with Herb, there is data to support the recommendations. I think the speakers have asked questions
about whether you agree with the recommendations and we would be interested to know what the Committee’s thoughts are on comparable cities. Do you think San Francisco has a comparable
housing market to our situation, or do you think we should be comparing ourselves to maybe some other city closer by, both on the residential and the commercial side. That would really
be helpful to us. And then, of course, we are happy to talk further with the speakers and have further conversations with them if there is any way that we can meet in the middle on
these things. We took considerable effort and I think Sujata can speak more to this three-step process. You know the maximum total (inaudible) fee, the maximum we think would be economically
feasible and then walking that back to something that we think is more on par with what is being charged by other jurisdictions in the region and considering what we currently charge
in a range of other policy issues, so we would love your thoughts on that and any specific questions you have I think the team at the table here is eager to listen.
Chair Filseth: Thank you very much. Questions? Council Member Schmid.
Council Member Schmid: Let me start at the beginning, Page 1.
Chair Filseth: I can find that one.
Council Member Schmid: I had trouble with Page 1.
Ms. Gitelman: Of the Staff Report?
Council Member Schmid: Yes, of the Staff Report. It says, “existing and proposed affordable housing fees”. Now my question goes back to the Housing Element. It is part of our Comp.
(Comprehensive) Plan and we will be discussing it in a couple of weeks, so it is an important underlying principle of our Comp. Plan. Now on Page 78 of the Housing Element, this was
approved in November 2014, there was inserted the sentence “There is a concern that the commercial developers are not paying an equitable share of funds for affordable housing.” When
the Staff Report came to Council that sentence was identified as something that was suggested and inserted as an important part of the Housing Element. The reason for that is, again,
on Page 78 of the Housing Element, they show the Housing Funds collected from 2009 to 2014 and Residential Housing Fund collected $14 million, Commercial Fund collected $11.7 million.
That did not include the BMR units included in many commercial things, so the ratio was probably close to 2:1, and that sentence says we should have a Nexus Study saying, “Is commercial
paying their equitable share”. I took the numbers on Page 1 and if you just run them out, if I was a property owner, had 10,000 square feet of FAR I could build, if I was going to build
a commercial property on that I would be charged $35 a square foot, $35,000 for the 10,000 square feet. If I was going to build housing on that, I would be charged $500,000, 42 percent
more. Now that doesn’t seem to deal with the issue raised in our Housing Element. Commercial properties are not paying their fair share. Should they be adjusted? So I look and see
they are not adjusted. A developer of property would be crazy not to say, “Oh, I’m going to build a commercial building on it.” And yet what we have in Palo Alto is a ratio of jobs
to employed residents of 3:1. A couple of speakers got up and said, “Oh, why don’t we get the same fee as our neighbors”. None of our neighbors have that kind of ratio. “Well, San
Francisco is different.” Yeah, they have a smaller jobs-to-employed resident ratio than we do. We should do more than San Francisco, not less.
Chair Filseth: Point of order here. We’re in questions, right?
Chair Member Schmid: Well I’m asking, where, if you’re going to be consistent with the Housing Element, how could this be the result?
Ms. Gitelman: If I could start the response and then Sujata will help out here with how we got to the numbers. (crosstalk) First of all, with regard to that page in the Housing Element,
I recall the conversation and we were looking at the amount of fees generated over time, so obviously the amount of fees collected in both categories, commercial and residential, has
to do with the type and amount of development that happened over that time period.
Council Member Schmid: And over that time period there is twice as much commercial development as residential.
Ms. Gitelman: Just an observation about that table, what we are engaged in here is trying to implement one of the programs in the Housing Element which called on the City to complete
this Housing Nexus Fee and update its fees, both for residential and for commercial, so I feel like we are a year late, we are a year behind what we promised when we adopted the Housing
Element in terms of bringing forward this Nexus Study, but we wanted to do a good job and bring you something that we thought was defensible. So Sujata can talk about how we ended up
with fees for commercial that are lower than residential. It has not to do with the comparison between the two, but with the methodology that Eloiza explained for each one independently.
Ms. Srivastava, Principal from Strategic Economics: Sure, just to elaborate on that, a lot of it has to do with the fact that on a per-square-foot basis, residential values are so high
and although office and R&D also command high rents, it is still not at the level of what you are able to achieve with apartments and condos, and even with single-family homes in this
community, so the math, just when you play out the math, you end up with a much higher yield on residential than commercial, so across the board when you look at these different Impact
Fees and linkage fees, you will consistently see that the Housing Impact Fees on residential tend to be significantly higher than the commercial and it is really just a function of how
those feasibility results play out.
Chair Filseth: So then if I can ask, Greg’s question is, I think I heard him say, “If you have a choice of building housing or building an office building, you pay a lot less in fees
if you build an office building”. Is that correct?
Ms. Srivastava: On a per square foot basis I think that would be correct, because if you are looking at a $35 per square foot fee and you’re comparing it to a $50 per square foot fee,
that is correct. It is because the cost of development is different (crosstalk.)
Chair Filseth: Obviously there are lots of factors, but the bottom line is, he is right?
Ms. Srivastava: On the percent, yeah. What did you want to ask?
Marian Wolfe, Principal from Vernazza Wolfe Associates: I just want to say that when we talk about how much fees are being paid, just look at the overall fee package, which is not on
this table. Because we have that information in the Report and you can look at it. Also the methodology calculating the fees is done very differently.
Ms. Srivastava: There are other fees that commercial development, and you can look at the Report for a more detailed listing, but there are certain fees like Traffic Impact Fees, that
commercial developments often pay higher rate on because their impacts are proportionately higher, so when you factor all the existing costs and fees into it, including, I think, that
new ARC (Annual Required Contribution) Impact Fee which also, I think, only applies to commercial developments, so we looked at the entire package, as Marian mentioned, of fees to be
able to understand what the viability would be.
Ms. Wolfe: I just wanted to say, it’s up to you guys what you want to adopt. All we’re giving you is the legal framework as a max and then you do your policy work.
Chair Filseth: I understand. Thank you. Do you have other questions?
Council Member Schmid: Could I just make a point about the calculating of commercial fees, most of the calculation was done based on regional data, either national or regional data,
so you’re expenditure data is taken regionally, your workers in local communities is taken on a regional data. Palo Alto’s numbers are very, very different from that if you calculate
it on the basis of Palo Alto and its unique 3:1 ratio you would come up with very, very different fees. So you’re calculating the fees where you can compare Mountain View, Sunnyvale
and San Carlos have these fees on a Nexus basis, but they don’t work for Palo Alto.
Chair Filseth: Council Member Wolbach do you have a question?
Council Member Wolbach: So I want to be clear, we’re doing just questions now?
Chair Filseth: Questions now. I think we could spend a lot of time having comments and discussions but I’m hoping we can do questions first.
Council Member Wolbach: Okay, so question. This is in our Packet as a separate Page or separate printout, table four, so Page 10 to 11, the Report, or Page 188 to 189 Packet, I wasn’t
clear what the columns are. What am I – it seemed like this was a really important table, and the tables and the columns weren’t labeled.
Ms. Srivastava: Something got lost.
Council Member Wolbach: That was a little bit challenging.
Ms. Srivastava: So it’s the different building types across the rows. (crosstalk.)
Council Member Wolbach: So could you tell me what those are and we will fill them in.
Ms. Srivastava: Sure, the first one is single-family detached, the second is single-family attached or townhouse, the third is condominiums and the fourth is apartments.
Council Member Wolbach: So this is just residential? (crosstalk.)
Ms. Srivastava: Rentals, yes, thank you.
Council Member Wolbach: Okay. And I was looking for parallels typical for the commercial side, where was that?
Ms. Srivastava: Sure, let’s see. On Page 80 of the Linkage Fee Report …
Council Member Wolbach: So it wasn’t in the Staff Report? Okay.
Ms. Srivastava: Did you have that in the Staff Report?
Chair Filseth: Yes it is. It is Page 271 in the Packet.
Council Member Wolbach: 271, so it is in the (inaudible.)
Chair Filseth: (inaudible) scenario, Palo Alto fee scenarios, hotel, office, R&D.
Council Member Wolbach: There we go. Thank you. Okay. I guess that’s it for my questions for now.
Chair Filseth: Council Member Holman do you have any questions?
Council Member Holman: I do. Is there somewhere that I haven’t found, is there a culmination of just what you have referenced, like all the Impact Fees that a commercial property would
pay versus a residential, single-family home residential?
Ms. Srivastava: I don’t think that we have it itemized, I’m sorry.
Council Member Holman: And of course the reason that those fees would be paid is because they would mitigate an impact, so it would make sense that a commercial, tell me if I’m wrong
here, wouldn’t it make sense for a commercial property to pay Traffic Impact Fees, for instance, because they are having an impact to an extent that say, for instance, a single-family
home would not be having.
Ms. Srivastava: Yes, that’s right.
Council Member Holman: Okay. So does that chart exist?
Ms. Srivastava: I don’t have an itemized list, but what we do have is a table that shows the total fees that would be applicable to different types of development, based on your existing
fees and it is in the Report.
Ms. Wolfe: In the Residential Study it is table 7-11, but our Page numbers are a little different than yours.
Ms. Srivastava: Yeah, it is actually right, it is the page right before the page that Council Member Wolbach just referenced, and it’s called Figure 6-8.
Chair Filseth: Packet Page 270?
Ms. Srivastava: I don’t have the same Page numbers that you all have, unfortunately. It’s this one.
Council Member Holman: So my other question is, some of the other cities (crosstalk) it talks about how some cities don’t charge Impact Fees for the first 5,000 square feet and they
charge 50percent for the first 25,000 square feet, if I remember correctly, and so this doesn’t make any reference to and neither does this, to what is being proposed that I found.
Is there a recommendation for that kind of approach or not?
Ms. Srivastava: No there is no recommendation for that type of approach.
Council Member Holman: Okay.
Cara Silver, Senior Assistant City Attorney: That is something that could be added into an Ordinance if that is a policy direction.
Council Member Holman: Okay. This is probably a question for Cara, thank you for being here, the Impact Fees for retail, restaurant and other, whatever other is, can it be a different
– I understand once a building is built it is there, so it might get a little bit tricky, but just the basic question is, could there be a different level of Impact Fee for locally-owned
retail, locally-owned restaurants, could there be a different Impact Fee or some kind of condition of approving – you’re nodding yes.
Ms. Silver: I’m just listening.
Council Member Holman: Could that happen, as opposed to change.
Ms. Silver: Yes, so let’s see, first of all the Nexus Study that we have decided not to fully analyze the retail scenario, so we would have to do some additional analysis to come up
with a justified fee for any updates to retail. Once we know what that fee is, if you wanted to encourage local retail, then you could set a lower fee for lower retail with the understanding,
though, that the chain retail or formula retail could not subsidize the impacts of the local retail. That subsidization would have to be through the General Fund.
Council Member Holman: So my understanding of the last part of that comment, say it another way please.
Ms. Silver: Yes, so …
Council Member Holman: The chain couldn’t subsidize, so you couldn’t have two different levels, it sounds like.
Ms. Silver: You can. You can have two different levels and, what the Nexus Fee does is establish the overall impacts that are going to be borne by the City by this development, as a
result of the development, and so what the Nexus Study does is collect a portion of those impacts from private development. The remainder of the impacts will be borne by the City or
other sources, and so that is what we refer to as a subsidy, so the General Fund would subsidize the incremental amount. So if you wanted to adjust that so the General Fund is subsidizing
more of the impact of local retail, that would be fine.
Council Member Holman: So would it be determined that chain stores, for instance, would be subsidizing the local stores if there was a different rate, though, for – I’m sorry, maybe
I’m not – so if there was a different rate for local retail than chain retail, wouldn’t that be considered or look like subsidizing?
Ms. Silver: It wouldn’t be as long as, if the chain stores are still, they are just required to mitigate their impacts and as long as they are just mitigating their impacts and not mitigating
the impacts of the neighborhood retail, then there isn’t a legal problem with that.
Council Member Holman: I guess how do you differentiate the impacts.
Ms. Gitelman: Marian and I were just whispering about just a practical difficulty we would find with following the path you’re on, which is normally these fees are collected at the time
a project is developed and when a project comes in for permits to the City it usually just says “retail”. It doesn’t say who the retail tenant is going to be or what kind of kind of
retail the tenant is going to be, so just practically I think we would find it hard to differentiate different types of retail tenants and charge the developer who is building the project
with different amounts.
Council Member Holman: Understood.
Ms. Gitelman: Just to add to that, I think that is one of the reasons why size is usually something that is used as sort of a proxy for supporting small businesses.
Council Member Holman: I want to give you a chance to respond to a couple of comments that have been made by members of the public, and that is that you included San Francisco here in
“Office, R&D, Hotel” for instance. Do you want to respond, why did you include San Francisco?
Ms. Srivastava: We were looking at what the markets were for office rents and R&D rents where the like companies tend to locate, particularly for tech companies. They are not choosing
between Daly City and San Francisco, but they may be choosing between Palo Alto and San Francisco, so we were looking at the comparable real estate markets. For similar reasons, we also
looked at it on the housing side and in that way, although we understand that there are certain types of product types that are different for the two cities, the actual values of homes
on a per square foot basis are actually fairly similar, so that was the reason.
Council Member Holman: Okay, thank you.
Chair Filseth: Thank you. I have a couple of questions. First of all, I thought I read, and this is really recent, I thought I read that Mountain View raised the heck out of their affordable
Housing Impact Fees, like three weeks ago or something like that. Did I not get that right?
Ms. Gitelman: We can check. I haven’t really watched the news in the last three weeks. (crosstalk.)
Female: Yeah, but our Report is from October , I think, so we wouldn’t have captured that.
Chair Filseth: Can we check. I thought, I may have seen something. I wish I had followed up, I thought they had a big increase.
Ms. Murillo-Garcia: The spiral of fee escalation (crosstalk.)
Chair Filseth: The liar’s poker game has started already. You know, I’ve got 3 aces, well I have 4 aces. (Crosstalk) Let’s see, so the next thing I wanted to ask, so if I understood
the Staff Report right, in terms of how much money the City collects from these things, it looked like at the moment from commercial we are getting maybe half a million dollars a year
and from residential it was a really small number. Is that accurate? How much money do we make on this a year?
Ms. Murillo-Garcia: It really varies, but we looked at the last three fiscal years (FY) and on average for commercial we collected about $1.6 million per year.
Chair Filseth: $1.6 from 2013 to 2015 for commercial.
Ms. Murillo-Garcia: So fiscal year 2013, 2014 and 2015, so on average that is what was collected.
Chair Filseth: And then the residential number was much, much smaller than that?
Ms. Gitelman: Now that one’s a little trickier.
Ms. Srivastava: But that’s not an Impact Fee, right, that’s the In-lieu Fee which is a very different kind of fee that is charged for inclusionary units that are not provided on site.
Chair Filseth: But for the kinds of fees that we are talking about here, so market rate single-family attached, condo, so forth, the cumulative annual per year is $50,000 a year or $500,000
a year or $5 million a year? How much money are we talking about here?
Ms. Silver: Eloiza is looking that up. Google says that Mountain View raised their fees in December of 2014, $25 a square foot for office.
Chair Filseth: Okay, I must have misread that. It must have been something else.
Ms. Silver: I do know that there is a Santa Clara County-wide study happening that is similar to what we did for San Mateo County, so there are many jurisdictions that are either going
to implement new fees or update existing fees, so that may be part of what you saw.
Ms. Srivastava: If I could just weigh in on that question real briefly, in terms of Commercial Impact Fees, one of the reasons why we are not seeing a big payment of those is that most
of our commercial development has been redevelopment, and so it is only the Impact Fees based on the new and in terms of residential, the housing program favors provision of inclusionary
units, of BMR units themselves, and we try to encourage developers not to pay the fee, but instead to provide the units on site.
Chair Filseth: I see.
Council Member Schmid: But they are not valued and put in our data base?
Ms. Srivastava: They are not what?
Council Member Schmid: Valued and put in our data base?
Ms. Srivastava: I can’t speak to that.
Ms. Wolfe: I did a back of the envelope calculation while I was waiting for the CLEAN (Clean Local Energy Accessible Now) (inaudible) and in fact, when a developer sells a below-market-rate
unit, I don’t know if the sales program is still working here, it is a big hit. You can’t look at it (inaudible). I just did an example calculation and the prototype single-family was
about a 3,000 square foot unit, we assumed was selling for about what, about $3 million, and I figured out that the loss was closer to about half a million because of the difference
between what the sales price would have been and the affordable price, the 110 percent AMI (Area Median Income). There are different ways to look at this. If you look at the revenue
foregone in our inclusionary program it is a lot higher with these high priced houses.
Chair Filseth: We have to stay focused on the Impact Fees, right.
Ms. Wolfe: Yes. (crosstalk.)
Chair Filseth: First of all, thank you very much for all this stuff. It took me a really long time to figure this out, but I think I did, but I want to make sure that I did. So essentially
what we’re saying here is if I put up a big office building, there is a social cost to that in terms of affordable housing, there are many social costs, but we are looking at affordable
housing, right, of people whose jobs would be in that building and the City. So let’s say for the sake of argument, my building provides 100 jobs and maybe 20 of those jobs are held
by low income positions, and so if I wanted those people in those jobs to live in town, I would have to build a certain amount of housing, it would take a certain amount of housing,
maybe it is 10 housing units, and so we say, “okay, here is how we define the social cost”. The social cost is the increment of having those people be able to live in town and the way
we calculate that -- there are multiple ways you could calculate that – you could say, “Here is what the market price is and we could provide everybody a subsidy and here is the difference,
and so forth”. Instead, what we say is, “here is the construction cost of buying land and building 10 housing units, and here is how much the low-income worker would make, and there
is a delta between those two”. So if you construct it at zero profit, which no commercial developer would do, but as you pointed out, some of the nonprofits do, and they have a different
standard of how they build houses versus it doesn’t have vulcan ranges and stuff like that in it, that delta we define as the affordability gap, and we say, “Aha, the affordability gap
is the social cost of this building that I put up in terms of housing”. Is that right so far? Okay, and so the maximum, what is the term I’m looking for, the maximum justified fee is
the social cost, right, which is $264 per square foot for an office medical facility. So that is one calculation. Then we have this other calculation, which is the maximum feasible
fee, which is another complicated thing, as those of us who have been involved in CAP (Coordinated Area Plan) rates, right, we say, “The maximum feasible fee is, if Karen wants to put
up this building we are going to charge her some money as a fee to fund this affordable housing and go towards the affordability gap, and the maximum feasible fee is our calculation
that is the maximum that she can pay and still want to do the building.” So in this case for an office R&D building it is $60 square foot, so if we raise the fee to $61 a square foot,
Karen will say, ”I’m not going to build the building, I’m going to go to Mountain View”. Is all that correct? Okay, before we get into comments, I have one more question. It is a really,
really basic one. If somebody puts up a building that has a social cost of this much and they are only going to pay that much of that social cost – this is a 2-part question – one
is who pays the difference, and I think you sort of got into that a bit, and the second is, why should we do that? It seems to me there is an axiom under a lot of the stuff we do, which
is, we want to build stuff and provide lots more jobs in Palo Alto, but I think as a built-out City, that axiom has come into question in the last few years. So then my question is basically,
and it’s an open one, who pays the difference in the social cost? Is it the person who puts up the building and creates the cost, creates the problem, and why should we encourage that?
I don’t know if that question needs an answer now or whether it will (inaudible) into comments. Can we have comments? Council Member Wolbach.
Council Member Wolbach: I appreciate actually what you just said. I’m actually going to respond a little bit to that and also some of the comments that we have heard and some other
thoughts. A year ago we had, we started a discussion on the Council about what we were going to do to limit office growth. Not whether we were going to limit it, but how we were going
to do it. We decided leaning towards wanting to do that, and so the question was, “How are we going to do that.” We ended up focusing, at least in the past year on it, at least an experimental
program of capping them now with square footage of office space per year and you all will recall that I wasn’t initially very enthusiastic about that method of limiting office growth
in Palo Alto, but what I was enthusiastic about was studying Impact Fees, so this is the conversation I wanted to have. So I have come around more, at least on the pilot for the office
cap, but this is really where I thought we should have – I am glad we are now starting to have this conversation. This is where I thought we should have started that conversation and
I think might be a better long-term solution, while the cap may provide at least a temporary slowdown. This obviously takes more time to do. You have to do the Nexus Study, etcetera,
so it is a hard thing to implement right away. I am actually really excited that we are having this conversation. I’m excited that we have the data to support some of these numbers;
that we have done the studies so that we can legally justify some of these numbers. Whether we end up going with the …
Chair Filseth: I meant to ask Cara if there are going to be legal constraints on these fees and so forth, so maybe …
Council Member Wolbach: I’ll just ask right now then, we are legally permitted to impose fees up to the justified fee, correct? Not that we necessarily want to, but that’s what justified
means. It is legally justifiable based on the Nexus Study and that is why you do a Nexus Study.
Ms. Silver: There are a variety of factors that we look at, and so I think that from a legal standpoint we are focusing more on the fees – we would encourage you to focus more on the
feasible area. If you start to reach beyond feasibility, there are some legal concerns and we will probably brief you on that in a confidential memo at a later time, but clearly the
feasible column is something that is on solid legal ground.
Council Member Wolbach: Okay, just to make sure I heard that very clearly, and for Chair Filseth, that we have legal justification for the feasible column and beyond that we could make
an exploration of something moving towards the justified column. I very much, again, appreciate how you framed this. This is really about the social costs. This is about, we have
a problem caused by an overabundance of office development. Palo Alto has been very enthusiastic about office development for decades and now we suffer the consequences. We also have
the Traffic Impact Fees because traffic and parking, that is another social cost on Palo Alto caused by office development and so here we are facing – I tend to think of these as you
pointed out or alluded to – there are a number of potential social ills from too much office development. I, at least, speaking for myself and what I tend to hear from residents, is
that kind of the two biggest negative impacts are the traffic and the impact on the supply and demand equation for housing. So this is really important. This is a really, really critically
important conversation for Palo Alto long term. I think this has the potential to be an important part, not the whole solution certainly, but an important part of how we deal with some
of these big challenges. So that is just a big framing question. Again, thank you very much. I think you summed it up really well. This is about social cost and how you calculate
that, and then how you essentially make people pay their fair share, however you define that. So then it comes to us as this question, “What do we want to do as a matter of policy”?
I do think that the fees recommended here for commercial development are probably too low. I’m not sure if we will end up with a Motion tonight or not, but I do think that the commercial
fees should probably be higher, particularly for office and R&D. On the residential side, I am not as sure. I’m not positive. I kind of feel like those maybe should be lower. Essentially
this is a question of, “What do we want”? I think the community and the Council have been moving increasingly towards saying, “We want more housing done thoughtfully, but we don’t want
a whole lot more office space”. So, as was mentioned on Page 12 of the report, “Fee levels may also be adjusted to incentivize certain land uses”. We might want to make the fees for
residential lower and the fees for commercial higher. I’ll wrap up here. I appreciate your patience. We might really want to increase the fees on office in order to dis-incentivize
office development and incentivize residential, so that it pencils out not just a little bit, but a lot better for a developer to say, “I’m going to develop this or try to develop this
as housing as opposed to office”, so we can provide yet another lever to help address this long-standing and continually worsening problem of our increasing job to housing imbalance.
Chair Filseth: Let me comment real quickly on this. I think we are in line in our thinking about this. On the subject of residential, I didn’t spend a lot of time thinking about this
because my sense from this was it was a tiny amount of money anyways. The one thing I would suggest, that struck me as I thought about it, and you might think about it too, is if you
reduce the fees on market-rate residential, essentially you are taking the money away from affordable residential, so which way do you want the money to go? So that is my only comment.
Council Member Wolbach: This is why I said I am not sure about the residential. I am pretty sure that we should move towards at least the maximum feasible fees for office, medical and
R&D and I would be interested in exploring how to move beyond the feasible to the justifiable, at least having some more information about how that would work. That is a pretty tough
conversation for a lot of reasons. I would be interested in having more information about the feasibility of us doing that. On the residential side, I would like to see, I think a lot
of the residents would like to see, the fees not be so high on residential that you end up limiting residential development. There are already a number of things that limit residential
development. In Palo Alto there aren’t a lot of opportunities and the problem of the lack of supply is every level of income, whether it is high-income condos or whatever, there is a
problem at each level. I certainly don’t want to incentivize only large apartments and only luxury apartments, far from it. But here is a problem of lack of supply at all levels, including
middle levels for people who are say upper middle class who used to be able to live in Palo Alto just a few years ago, now are gentrified out of Palo Alto and move to, say, East Palo
Alto and forced gentrification there so that people who could formerly live in East Palo Alto now have to move to South San Jose or to Tracy and then it causes these concentric circles
of gentrification. I don’t want to lose sight of the fact that the problem of inadequate supply in the region and Palo Alto happens at all levels. I think this is really the critical
question going forward for the Staff and for the PTC and for the Council when it comes back. So think about how do we make sure that we do collect adequate funds without dis-incentivizing
residential development in the few places that it can happen, so that is a tricky question moving forward. I would echo what was said before by the consultant, that we actually, whether
we like it or not, we do have a lot in common with San Francisco right now. We have this huge jobs/housing imbalance, we have rapidly increasing costs for housing and commercial development,
and so it is certainly fair to include San Francisco in the chart of comparisons.
Chair Filseth: Thank you. Other comments. Council Member Schmid. Sorry I cut you off earlier on your questions. Please proceed.
Council Member Schmid: Let me just pursue the same line as Council Member Wolbach. We are responsible for Palo Alto so we have to think of Palo Alto. If you look at the citizen’s survey,
it is very clear over the last five years what is on the minds of Palo Alto - parking, traffic and density. We scored 30 to 40 points on satisfaction, the need of any other services
the City delivers. How does fees, commercial and residential, fit in that? I guess you would take 10,000 square feet, develop commercially that brings in 40 jobs. Develop it for housing,
you get about 10 workers, so the imbalance which is already 3:1, grows. Now Stanford came to the PTC last week and they said, “Oh, we have a new project. Let’s talk about all the benefits
that flow from it”. The biggest benefit that flows was on traffic and parking. They said, “Gee, if the students are living here rather than somewhere else, the number of trips goes down
dramatically. Vehicle miles traveled per graduate student drops from 40 to 1”. Now the ears perk up, “Gee, that’s a big difference that has an impact on the very issues that are central
to Palo Alto”. You get that jobs/housing balance adjusted a little bit, it deals with what our biggest problems are. Right now, if you take into account the BMR units as well as the
fees paid over the last five years, residents, new residential development is paying about twice as much as the commercial fees. Twice as much, in other words we are creating incentives
for people to build commercial property. We are saying, “We will give you more but it will cost you less.” It seems, just on Page 1 looking at it, what we want is an incentive where
housing pays dividends for Palo Alto’s biggest problems. Make the commercial fees twice as high as housing. That would benefit from Palo Alto’s biggest issue which is the 3:1 jobs to
employed residents. We don’t need to create incentives to bring more jobs here. We need to create incentives to build some kind of housing and here’s is an opportunity, it is one of
the few opportunities we have, and if you look at your property taxes, over the last eight years the commercial share of property taxes has fallen from 33 to 25 percent. It goes down
every year. That is not an incentive to build housing. It is incentive to build more commercial. Same here. As long as they are paying twice as much in Residential Impact Fees we are
creating incentives to build more businesses, more jobs here, and who is benefiting? So, I would think it would be a good idea for the Finance Committee to ask Staff to get that ratio,
to reverse the ratio of Impact Fees on residents and commercial. Instead of residents paying 2:1, have commercial pay 2:1. Then we can argue about what the right fee is. In terms of
incentives of dealing with Palo Alto’s problems, that is issue number one.
Chair Filseth: Council Member Holman.
Council Member Holman: In this discussion even it seems kind of an oxymoron that we would charge a Housing Impact Fee for housing units that are being built, it seems like an oxymoron
for looking at Impact Fees.
Chair Filseth: It’s housing to housing is what we are trying to …
Council Member Holman: I would like to understand a little bit too the justification for maximum feasible and even the recommended fees for single-family detached, single-family attached
and condominiums. If I look at the chart, it doesn’t have a Page, table 4, if you look at Cupertino, Daly City (crosstalk) it’s before Page 189.
Council Member Wolbach: It’s also on the Pages of 188 and 189.
Council Member Holman: So, the other cities that are compared here except for one, have single-family dwellings lowest, single-family attached next highest and condominiums higher after
that, so why is Palo Alto just kind of the reverse of that? The other reason I raise it is because the housing we are more likely to get that would be subject to a fee is attached, townhomes.
That is the housing we are more likely to get. Single-family home Impact Fees not so much. I am trying to understand why the prognosis or the recommendations here are in reverse order
to what they are in the neighboring cities.
Ms. Wolfe: What you don’t see here …
Council Member Holman: Can you get a microphone in front of you.
Ms. Wolfe: What you don’t see here is the per-unit costs. So what happens is the way these fees are calculated, it’s based on increase in expenditures for goods and services in your
local community. If you have not too dissimilar household incomes, then you are going to be generating this similar demand for low-income housing indirectly. However, if you are in an
apartment that is only 1,000 square feet and then you create a per square foot cost, it will be higher for an apartment than would be a 2,000 square foot house with some similar expenditures.
So it has to do with a per square foot. What you really should be seeing here would be a per-unit fee, and that would allow that kind of understanding. It is just sometimes we are trying
to do things to allow easy comparison, but it’s apples and oranges. Some cities to it on a square foot basis and some do it on a unit basis.
Council Member Wolbach: And you should have that here, right?
Ms. Srivastava: So to add to that, I think one of the things that is unique about your single-family housing market is that it is a very luxury high-end single-family market, which may
not be true for some of the cities that are shown on this table.
Chair Filseth: I don’t know that it is luxury. It is just really expensive.
Ms. Srivastava: Okay, but we are just looking a new housing, so the new product types are pretty high-end, $3 million, 3,000 square foot homes is what we are modeling here. That may
not be true for some of the existing homes that are a little bit older. Yes, but point taken. I think that the values themselves in Palo Alto are part of why the recommendations are
higher for the lower density product types, because not only are their impacts higher, because they have a higher value, they are generating more trickle-down affects with low-incoming
housing, but it is also because it can be justified because of the financial feasibility results because those price points are so high.
Council Member Holman: So maybe we ought to look at a per square foot as opposed to a unit because we do have, unless we change policy, we do have townhomes and condos that get built
mostly that are definitely the larger units. (crosstalk.)
Chair Filseth: (inaudible) the consultant’s recommendation is per square foot.
Ms. Srivastava: We did provide them …
Council Member Holman: It is per square foot, but still it doesn’t – because we have $2 and $3 million condos and townhouses – so it still doesn’t seem to me that, so if you have a smaller
square footage you could pay less fee, if you have a townhouse or condo that gets built and it’s the same square footage as a single-family home, and sells in the $2 to $3 million range,
it doesn’t seem like its impact would be less, so why wouldn’t we charge the same fees?
Female: You could certainly switch to a per-unit, some jurisdictions charge fees on a per-unit basis rather than per square foot basis fee, so that they are able to charge a higher fee
for larger units and a small fee for small units and that is something you could do.
Chair Filseth: The fact is we are just not building a lot more single-family free-standing homes in Palo Alto.
Council Member Holman: It’s replacement mostly …
Chair Filseth: Does this apply if you were to rebuild your house.
Ms. Gitelman: If you are adding square footage?
Ms. Srivastava: Well, you would have to actually do a different type of calculation. This is for a new construction, but you could do something where you’re looking at the incremental
value if you had a teardown and a replacement, but this is not that. This is modeled on a small subdivision.
Ms. Wolfe: But you could do that. The difference, the delta, as you call it between the square footage before and what you now build. If you just doubled what had been there before,
then you would just do it on the 50 percent increase.
Council Member Schmid: If I could just make a comment, one of the problems with your methodology is it’s built upon expenditures. If you are just rebuilding or even expanding a 4-person
household, you still have 4 people with the same income so it didn’t have any impact on consumer expenditure.
Ms. Srivastava: That’s right. This methodology is really about the new residents that are in the community and as all Impact Fees are really tied to new development, that is all that
this is measuring.
Council Member Schmid: But we have virtually none in the single-family.
Chair Filseth: The single-family were put in condos.
Council Member Schmid: Right. The single-family ends up with the biggest amount of money.
Chair Filseth: There are so few of those that (crosstalk.)
Council Member Holman: The other thing I made note of here was Cara your earlier comment about redevelopment, that a lot of our redevelopment in the commercial sector is redevelopment
of existing sites that might go from a 5,000 square foot building to a 15,000 square foot building, so the incremental difference certainly has to get paid just to be clear on that.
I’m not quite sure where we are. I think philosophically we have the same intonations about this but, have at it.
Chair Filseth: Actually I wanted to ask one more question first. On the fee schedule, I meant to ask this before, if you look at condos, lets pick on condos, the existing fee is 7.5
to 10 percent of the sales price and we are proposing $50 a square foot, so typical 2-bedroom condo in town here is like 1,200 square feet or something like that and so the existing
fee would be $120,000. Is that right, that’s 10 percent of the sales price?
Ms. Wolfe: Eloiza did some sample calculations in the resource section. This is one point I want to clarify. You have a BMR program that only requires if it is not a 5acre property,
15 percent requirement, so this is not a per-unit of all the market rate units. It’s the inclusionary requirement that has this charge, so, in fact, it is smaller than you might think.
Chair Filseth: Okay, if I build a building with 20 condos in it, each of which is 1,200 square feet and sells for $1.2 million, how much do I have to pay in fees?
Ms. Wolfe: Under the new fee program?
Chair Filseth: Under the existing fee program.
Ms. Wolfe: It’s not a square foot. It’s based on the sale price. You would be owning three below market-rate units and so you would be paying three times whatever, the 7 percent of whatever
your – what is it – 7.5 percent of sales price, so you are only paying on 3 units.
Chair Filseth: Why am I paying on three? (crosstalk.)Chair Filseth: Oh, I see. You’re saying I have to …
Ms. Srivastava: So let’s say you have 20 units, each of them is worth $1 million, you have 15 percent inclusion there, so there are 3 units, so you would charge 7.5 percent of $1 million
on 3 units and that is what you would charge.
Chair Filseth: So $225,000.
Ms. Srivastava: Over a 20-unit project.
Chair Filseth: Over a 20-unit project which sells for $20 million.
Ms. Srivastava: So it’s much lower and I think that sort of goes a little bit to your point too that the In-lieu Fee revenues are set at a much lower rate than on a per-unit basis than
what this Impact Fee would be, because the Impact Fee is charged on all the market-rate units, not just on the inclusionary percentage.
Chair Filseth: I was confused by your table. It looked to me like it was a big price cut.
Ms. Srivastava: It’s difficult to look at because it’s not really a fair comparison I think. You would have to actually, it’s project-dependent, so each project would play out differently.
Chair Filseth: I thought I might try a Motion, unless somebody else wants to, which is that Finance Committee – thank you guys for doing this and bringing this before us – would like
Staff to take this feedback back and revise a proposal with the objective of increasing the affordable housing revenue significantly that comes from the commercial side, and particularly
the office, medical and R&D side and some ideas to consider would be having the commercial side contribute twice as much as the residential side.
Female: Can I interject? Commercial includes retail. Do you want to lump everybody together?
Chair Filseth: Sorry, office, medical and R&D, and I’m not even sure about hotel because we get lots of money from hotels in other areas, but office, medical and R&D. Alternatively,
I would suggest that the group look at, consider the idea of office, medical and R&D Impact Fee of $100 per square foot. Second.
Council Member Wolbach: Second. But I want to be clear.
MOTION: Chair Filseth moved, seconded by Council Member Wolbach that the Finance Committee directs Staff to revise the recommendation and bring back an Ordinance with the objective
of significantly increasing impact fees for commercial development in order to maximize affordable housing revenue. This includes the following considerations:
Set the Impact Fee per square foot for office, medical and R&D at twice the amount as residential; and
Consider the extent to which the City can set the Impact Fee for office, medical and R&D somewhere between the maximum feasible fee and maximum justified fee.
Chair Filseth: Thank you. Let me speak for second (crosstalk) very briefly. I think the goal of the Motion is to give some feedback to Staff as to continue thinking about this. This
is really complicated. It is very interesting reading, and some ideas to consider I think is what we are trying to do. Some general guidance as opposed to do this, this, this and this.
Council Member Wolbach.
Council Member Wolbach: First, I want to be clear about where this goes next. It goes to PTC next, correct?
Ms. Gitelman: Cara and I were just whispering about that. I think we would really like a little more clarity on this before we take it to the next step, so I was going to suggest maybe
we consider the issues you have raised tonight, have an opportunity to talk to the stakeholders who addressed the Committee earlier and put together a Draft Ordinance and bring it back
to this Committee before we go to the PTC and then the Council.
Chair Filseth: That’s a good idea.
Ms. Gitelman: Just to make it a little more of a complete package, respond (crosstalk) to some of the questions raised. We have taken a year at this already. I don’t want it to linger
for another year, but we could take a little more time to polish this up and come back.
Chair Filseth: When you go to the PTC and Council it should be out of brainstorm really.
Council Member Wolbach: I agree.
Council Member Holman: So to you think you could be back within say six weeks?
Ms. Gitelman: I don’t want to make a commitment right here.
Council Member Holman: I’m not saying, could we just get kind of a range of ideas? I don’t want it to be six months.
Ms. Gitelman: No, I don’t want it to be six months either. We will put our heads together after the meeting and figure out what we can do. It involves drafting of Ordinances, revising
of reports, preparing a Staff Report. It is not a negligible amount of work but we will come back as quickly as we can.
Council Member Wolbach: If I can speak a little bit more to the second, I wonder if you would accept a friendly Amendment to have Staff explore the maximum feasible fees for office,
medical and R&D with discussion or analysis as appropriate regarding fees between maximum feasible and maximum justified for office?
Chair Filseth: As an option, that is actually where I was trying to go.
Council Member Wolbach: Or maybe as another option.
Chair Filseth: That’s why I suggested $100, because it’s in between those two and …
Council Member Wolbach: I want to provide the options to Staff, but also, since they are going to be crafting something and bringing it back to us, it might be useful if we can give
them a little bit more clarity, rather than guessing, as they are only going to put together one Draft Ordinance.
Chair Filseth: I’m fine with that. So you say, “Explore fees between maximum feasible and maximum justified”.
Council Member Wolbach: Actually I would say maximize the – if you are putting together a Draft Ordinance – use the maximum feasible fee for office, medical and R&D, reduce the single-family…
Chair Filseth: Hang on, I want them to look above.
Council Member Wolbach: That too, but I would say basically that the floor would be the maximum feasible for office. You already mentioned in the Motion about maybe reducing the fees,
or at least inverting the ratios off commercial versus residential, so if you compare the two, office would be more, commercial would be higher fees, residential lower fees by comparison,
and then also, yes, exploring fees between maximum feasible and maximum justified so we can have better understanding of what that would entail.
Chair Filseth: I see. Council Member Schmid.
Council Member Schmid: I would vote for the Motion. I guess I am not excited about giving you a number. Say, “Oh raise the fee to $120 per square feet” because I am not sure what that
works out to be. (Crosstalk.)
Chair Filseth: Council Member Wolbach has suggested a range, right.
Council Member Wolbach: I’m fine with having Staff look at a range as opposed to specific number.
Council Member Schmid: But it would be somewhere in the hundreds of dollars. My main concern is that the ratio of commercial to residential shifts from where it is now. That the substantial
fee, because we know building housing helps Palo Alto’s biggest issue, and I wonder if I could just substitute or add a couple of words. Either a fee or inclusionary housing. So if
someone wanted to build an office building and say, “I will build housing as part of that”.
Chair Filseth: A material amount, not two corporate apartments for visiting executives.
Council Member Schmid: That’s right, some ration that would make a difference of the jobs they are adding, because I think as part of the project they could probably build for cheaper
than a very high fee, and we would have trouble with a very high fee because we would spend it all on property, so there is a benefit to having inclusionary in here.
Council Member Wolbach: I accept that too.
Ms. Gitelman: Can I make sure that I understand (crosstalk). Let me see if I understand. The Committee’s direction is to revise the recommendation to increase the fees for office, allowing
for the potential that an office developer may wish to construct units instead of paying the fee, in the revisions consider whether we can get to a ratio of twice as much for office
per square foot as for residential, consider the maximum feasible fee, rather than the current recommendation for office, and consider the extent to which we can go above the maximum
feasible fee to something between that and the maximum justified fee, bring back a Draft Ordinance, outreach to those who are present today and anyone else who may be interested, so
we come back to the Committee with a fuller sense of what all the issues are.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “to also include the option of either a fee or inclusionary housing, which will allow the
developer to construct units instead of paying the fee.”
Council Member Wolbach: That sounds great to me and …
Council Member Holman: The one part of this I am not comfortable with is two times office versus residential. I think a better balancing and higher than residential, but two times is,
I think, a little stiff and potentially problematic, so if we could have Staff look at this and see what they could do to better balance the Impact Fees where residential is not carrying
the higher load per project at least. Would you consider that as an Amendment?
Council Member Wolbach: How would you offer it?
Chair Filseth: As I think about it and, you’re the author of it right?
Council Member Holman: No you are.
Chair Filseth: I’d like to know what a scenario looks like that has that ratio, which is not the same as, I want to see an Ordinance with that in it. Even if the Ordinance comes back
and says 20 percent higher, I would still like to understand what a 2:1 scenario looks like too.
Council Member Schmid: My thinking is right now we want to build housing, which is what we need and you have this fee (crosstalk.)
Chair Filseth: (Crosstalk) all housing, I want to go affordable housing right?
Council Member Schmid: You say, “Because you are building housing you have to pay a fee for more housing”. When you look around and say, “Gee, our problem is we have all these commuters
that can’t live here, so why should I be penalized for building housing, why is my fee higher for that”? So either you can raise the commercial fees way up or you can drop the fees on
your housing because you want to incentivize housing and solve Palo Alto’s biggest problem.
Chair Filseth: The problem with dropping on housing is you’re (inaudible) housing, affordable housing versus market-rate housing. You want to be careful of having the unintended consequence
of moving money from affordable housing back to market-rate.
Council Member Schmid: The Legislative Analyst Office just came out with a report today and they said they have done a study of California cities and they say where you have regular
market housing you tend to create more affordable housing in communities even though they have higher.
Council Member Wolbach: Because you prevent the rings of gentrification.
Council Member Schmid: Yeah, there is more housing and so prices of the low-income they will go up.
Council Member Wolbach: Can I offer maybe a compromise here, which is, “Instead of the double number, just to say to have higher fees on commercial than residential in order to incentivize
residential development over commercial development?
Ms. Gitelman: Can you please differentiate between office and retail?
Council Member Wolbach: I actually think it should be for all commercial, but I understand that is not going to be a popular position, so I am okay with differentiating between office
and other commercial.
Chair Filseth: You have greater than over there and a “2X” here. What do you think?
Council Member Schmid: It’s that greater, if you said substantial.
Council Member Wolbach: Yes, substantially enough, greater to providing incentive. That’s the point.
Council Member Schmid: So it could be 30 percent.
Council Member Wolbach: It could be 30 times. It’s about providing one more measure of incentive.
Council Member Holman: I want to support this, but I am also a little concerned about substantial. Does substantially greater give you some flexibility?
Ms. Gitelman: As I understood the Motion, we were going to consider all of these things, so we were going to do some additional analysis and bring back a recommendation.
Chair Filseth: That was my intent.
Ms. Gitelman: That we come back closer (crosstalk.)
Council Member Wolbach: There are still a few layers between this and passage.
Ms. Gitelman: We want to talk to the folks who would be affected by this. Remember, our goal is to actually generate money and address the impacts of both types of development, so I
think we want an opportunity to think about it. I thought the Motion was phrased in a way that we should consider these things and bring back a recommendation with a …
Council Member Holman: I just wanted to make sure we aren’t be so prescriptive that you are hamstrung.
Ms. Gitelman: Understood.
Council Member Holman: Is it possible to repeat the Motion? Is that possible? You’re going to have to at some point.
Ms. Gitelman: I think the Motion is to listen to stakeholders and bring back an Ordinance which revises the proposed office fee, consider in that context raising it substantially above
the residential fees. Also consider setting it at the maximum feasible rate and consider the extent to which it can be set between the maximum feasible and the maximum justified. Does
that sound right?
Chair Filseth: I realize the folks that came out to see this tonight, it was not what they expected, I understand that. (crosstalk) I think the central issue we have to grapple with
is what do we want here and if something bears a social cost that is not met, that can’t be the right direction to go. Surely the issue is we want the Impact Fees to cover the impact.
All those in favor? Motion passes.
MOTION AS AMENDED PASSED: 4-0
Council Member Holman: One request if I might, when you come back some of the tables could bear a little clarification in terms of understandability.
Chair Filseth: One other comment, by the way. Very, very (inaudible), on Page, I forgot where it was, says that a home price in Palo Alto has increased by 259 percent since 2010. I don’t
believe that’s true because I have what’s probably an average home in Palo Alto and it was not worth $900,000 in 2010, so I worry about using (inaudible) because it is only about eight
or nine years old to begin with so I am not sure about their data, especially early on.
Ms. Gitelman: The only (inaudible) that I have for you, we could clearly chase data on this for the rest of our natural lives and never really bring anything back to you.
Chair Filseth: That’s why it is not in the Motion.
Ms. Gitelman: Our assumption is that we are going to keep moving with the best available to the extent that you have questions or ideas about other sources and we could consider them,
but I would like to just keep rolling to work on this.
Chair Filseth: Thank you very much for hanging out with us. Thank you to our guests here tonight.
4. Approval of Amendment to Table of Organization by Adding 1.0 FTE Management Analyst in the Development Services Department.
Chair Filseth: Next order is number four, approval of an Amendment by adding a Management Analyst to Development Services Division. Are there any public speakers for this Item? Okay,
we are all back? Please proceed.
Suzanne Mason, Assistant City Manager: Chair Filseth, Council Members, you will recall last week at the Council meeting, the City Council direct Staff to bring a recommendation to increase
staffing in the Development Services Center by a Management Analyst and Council directed that we review this with you. Peter Pirnejad, which I always mispronounce regrets that he couldn’t
be here today. He had previously scheduled to be out of the office at this time, so Tommy and I worked with Peter and prepared our comments for you. I just want to give a little brief
background before I jump in here. Last fall the Development Services Department requested assistance from Human Resources. They were facing increasing workloads and really exceeding
Staff’s capacity in the Development Center and at the same time trying to transition the Business Registry Program over to ongoing support within the Development Services Center as well,
and so HR (Human Resources) worked with a contractor due to their vacancies on having an outside workload analysis and staffing study completed, which was completed in January. This
recommendation is the culmination of that review. I just wanted to give that background. I am going to give you an overview and then Tommy can answer questions because he has worked
very closely with Peter’s Staff as well, but as I explained, the increasing permitting and inspection demands were beginning to compromise customer service and Staff’s capacity and I
will review in a couple of minutes and you have a copy of pages from this year, our 2015’s Performance Report that document the increases we are talking about and I made copies of a
few pages from the Report that have to do with the Development Services and I will highlight some of those statistics. Also, at the same time the Business Registry Program was critically
in need of staffing and I had one typo here, but phase 2 of the program goes into effect on March 1st, 2016, which is the renewals of the initial registry, and Phase 3 needs to be well
underway with the goal of by August implementing Phase 3, which is integration with the Certificate of Occupancy Program. Staff had communicated previously with the Business Registry
Program that there would be need for additional resources and staffing to support the program. We went back and looked at the previous Council reports dating back as far as April 22,
2014 it was clarified that there would be revenue offset but there would be some need to Staff the program. Just to talk about some of the Development Center workload demands and the
increasing capacity documented in the workload report, there has been a 59 percent increase in permits approved over-the-counter in the last six years and there were only six years of
data for that measure at the time the report was done. Building permits issued have increased 25 percent in the last nine years; inspections have increased 160 percent in the last nine
years. Also, through the workload assessment that was conducted last fall, it was documented that 70 percent of the permits are being requested either in person or over the phone, and
in October, 2015 alone, just documenting the workload in this analysis that was done, there were 3,000 service requests coming into the Service Center and 40 percent of them were in
person and 60 percent of those were over the phone, which was really pushing Staff to the limits. Additionally, the documented need in the Business Registry Management it was documented
in the report that it really required staffing, and this is a little bit of a rehash of what I just communicated. It was previously communicated that it would require staffing, but it
would be revenue offset, that Phase 2 of the renewal process, which begins March 1st, 2016 required overseeing outreach, assisting the public with the renewal process, troubleshooting
technical issues and compliance, monitoring and enforcement. Then Phase 3 would integrate the Business Registry with the Certificate of Occupancy process and that needed to begin right
away, if we were going to make some of the Council’s goals. Moving on, in the Report it recommended a Management Analyst level be added as a mid-level management support and these were
the actual job duties that were outlined in the Report that the position would support. The Development Center, Permitting and Inspections, they would enhance the inspection scheduling
with technology solutions and an enhanced website, support inspection contracting, develop new permit program process and oversee the front office Staff and focus on training of that
Staff and maximizing their capacity. Then with regard to the Business Registry, with Phase 2 they would manage the outreach, oversee the renewal process, assist the community with the
process and monitor compliance. Phase 3 they would be integrating the Certificate of Occupancy Program by developing procedures, modifying the current Accela technology we use and implementing
the integrated process. So these were specifically called out as job duties for this dedicated position. Then, just to summarize, the position would really be dedicated 50/50, one to
the Development Service Center and then on the other half to the Business Registry Implementation and Enhancement. It would be a fully revenue-offset position through a combination
of fees for permitting which they are currently doing the analysis on right now, and the other half through the Business Registry fees. The annual cost of the position, including benefits,
is $164,000. Through the balance of this fiscal year it is $53,224, depending on our actual implementation. This was based on a March 1, 2016 implementation and we are now a bit delayed.
There is no need for a budget enhancement this year because the current budget authority could support that. Staff support really is critically needed for March 1, 2016 to really support
the process and existing Staff just cannot currently support the level of activity that is going on there now. I think Staff really did this right in trying to analyze the demands. As
we have increased workload demands, revenues increase and need to support those demands increased. We are here to answer any questions. Tommy definitely is much more familiar with the
Business Registry process than I am. That is the conclusion of our presentation.
Chair Filseth: Thanks very much. Questions.
Council Member Holman: I’ll start with one. The responsibilities of this person, we had this here. It is not clear, is this person going to be doing the integrates, the Business Registry
with the Use and Occupancy permits? Getting out of the shoeboxes and.
Thomas Fehrenbach, Economic Development Director: This person would be the Program Manager for the Business Registry as well as leading the effort which is really an interdepartmental
effort in order to integrate the U&O (Use and Occupancy Permit) with the Business Registry.
Council Member Holman: So this person would be leading that (crosstalk).
Mr. Fehrenbach: Exactly.
Council Member Holman: So the renewal process, it seems like a lot of the heavy lifting has been done. You’ve been in charge of a lot of the heavy lifting and I think you said that
at one point they were at 98 percent response.
Mr. Fehrenbach: I think it is closer to 93 percent.
Council Member Holman: 93 percent, okay. More doors to knock on, or toes to step on. So the renewal project, to just kind of get an idea of the level of staffing, the renewal process,
I understand there will be new businesses that come and other businesses that will go, but do you anticipate the renewal will be a whole lot easier than getting people to register to
begin with or not?
Mr. Fehrenbach: I do think there will be a number of challenges in terms of the renewal. It should be pointed out that this is our first renewal process and it included some key changes
to both the technology itself as well as some new exemptions and essentially a new infrastructure for communication built on the existing businesses along with those new businesses we
were able to discover, and those who have moved and are closed during this past year. Especially in this first renewal cycle we still anticipate a very high volume of customer interactions
that need to take place.
Council Member Holman: And, correct me if I am wrong here, but I think the rate of fee with the businesses was that this was to be a revenue neutral with them, so is this still calculated
on the mix between the Development Services support this person will provide, Business Registry is still revenue neutral to the Business Registry side of it?
Mr. Fehrenbach: Yes.
Council Member Holman: Okay.
Ms. Mason: One other thing that I probably should have gone into a little further is with regard to there is the whole processing of the renewal, which includes depositing the revenues,
monitoring revenues and following our City procedures with regard to those processes.
Council Member Holman: One more question about the Use and Occupancy, the Use and Occupancy, that is not going to be just for new businesses, it is going to be for the existing ones
too. That is all going to be collected at the same time, so we have an idea of who is out there?
Mr. Fehrenbach: That is the intention, correct.
Council Member Holman: Okay, thank you.
Chair Filseth: Question? Council Member Schmid?
Council Member Schmid: If I just look at the total the first year it comes out to about $240,000 per employee. You don’t have a way of tracking that over time, right? That sounds like
cost is going up. At our previous session we talked about fees, Impact Fees and costs. This is a direct cost on building …
Ms. Mason: And they are doing that analysis right now to make sure they are doing the full cost recovery as well.
Council Member Schmid: I guess I am concerned, the other side of it, are we discouraging house building, house fixing? Are the fees getting so high that people say, “Oh, I’m not going
to play around with my house”.
Council Member Holman: On Point of Order, that is not on the Agenda.
Ms. Mason: Those will come back to you. They are doing that the same Impact Fee analysis right now and they will be coming back to you and that can be analyzed and reviewed as part of
that analysis. I think the point here is that this position will be part of that support and issuance of the permit fees.
Chair Filseth: This position is primarily for the commercial, the Business Registry, right?
Ms. Mason: It’s 50/50. It’s going to support the front office counter with overseeing the Staff there, looking at opportunities to enhance our website, to enhance online permitting process,
to optimize that and our inspection process, and then 50 percent on the Business Registry.
Council Member Schmid: My concern is just we want to keep track of expenditures and adding full-time Staff with full overhead is one step toward expansion and I want to make sure we
are keeping our eye on being efficient and effective.
Ms. Mason: I hear exactly what you are saying. The only challenge is as the demands increase we have to Staff that demand, we are charging fees, we should make sure fees are fully recuperating
the costs, but we definitely need to be able to Staff the demand and respond. In October alone we were having 17 calls dropped a day in the Center, just because there wasn’t Staff that
could get to the calls quickly enough.
Council Member Schmid: The question is: is Council increasing the demand by laying on new requirements?
Male: Yes we are.
Ms. Mason: We wanted to make sure that we did a thorough analysis of the demand and I feel like the report that was done really documented the demands being put on Staff, the customer
service level we are providing, and I just want to say at the time we were doing this, we had a transition in HR, so I was filling in as a lead in much of that and really requested we
do this right and make sure we were clear on our needs in that operation, and so we are coming to you with that data.
Council Member Schmid: One last question, is Council doing its job or are we the ones increasing the demand?
Ms. Mason: It depends on how you look at it, right. You may be doing your job by increasing the demands. (crosstalk).
Council Member Wolbach: Any Motions?
Chair Filseth: I have a couple of questions. Council Member Wolbach do you have any questions? Okay. This position goes under Management, Professional, is that the right category?
Ms. Mason: Yes.
Chair Filseth: So the 2016 Operating Budget has Total Management Professional as 217.4 head counts. Do you know what the actual is? That’s budget, do you know what the actual is?
Lalo Perez, Chief Financial Officer and Director of Administrative Services: I don’t have the actual data in front of me, but I think we can run anywhere between 40 and 60 vacancies
out of the 1,040 budgeted.
Chair Filseth: So 40 to 60 is about one-fifth of that so you are only looking at five to 10 or something like that? This is in Peter’s group and Peter’s budget is for 41.7 people in
his group. You don’t happen to know offhand how many are actually there right now?
Mr. Perez: I don’t.
Ms. Mason: When the Report was done I knew because I was in the Report. They were just filling two of the front desk positions, refilling them. And that’s another thing, they have had
a really high turnover in those positions because of the excessive demands and so I don’t have that. I think we run about a 6-7 percent vacancy factor throughout the organization.
Council Member Schmid: So that means the cost of actual Staff is higher than (inaudible.)
Chair Filseth: I suppose that is right, 6-7 percent higher. Thank you for this. I think we all understand. I think Peter knows what he needs and we have faith. What I think is really
important is the Long-range Financial Forecast. It says that next year’s expenditures are going to be $187.1 million and the head count is going to be flat from 2016 to 2017. That was
one of the assumptions in the forecast. I think it is very important as we head into what may be a belt-tightening year that we stick to that, so I get the value of the need for this
kind of person, but the need isn’t the only thing, because it is possible to need something and not be able to afford it, so I think to the extent that – what I would really like to
say is as long as that department can stay at current head count this is fine, but the department shouldn’t grow, but it may be that actually it is more important to have this person
here than somewhere else, Community Services, I don’t want to make that call. I think the most important thing is that if this happens, if we say okay, then part of the caveat of that
is, we still need a flat head count of 217.4 people in Management Professional in 2017, and we have to hit the number of $187.1 million in expenses for next year.
Ms. Mason: Chair Filseth, can I address that?
Chair Filseth: Yes please.
Ms. Mason: I just want to share this, and I emphasize it, this is a revenue-offset program that is demand-based.
Chair Filseth: Yeah, I understand that, but let me interject. I get that, but a little bit of that is sort of this hand, that hand kind of stuff, because that revenue is already built
into the revenue expectation of 2017 of $186.9 million, right, so it still sort of…
Ms. Mason: No, no. As we build and we billed more permits that revenue is going to increase. We are also reassessing what the fees should be and making sure we are including all costs
of Staff, so it will fluctuate with the demand, so as you have increasing permitting, as you have increasing participation in the Business Registry Program, I do not anticipate that
is the long-range plan took that into account, and so it hasn’t (crosstalk.)
Chair Filseth: Really, you guys didn’t anticipate that we will be collecting money from the Business Registry on this? You must have.
Ms. Mason: No, I’m talking about increasing demand and so it should be revenue-neutral, that there is no impact to the General Fund. That being said, that doesn’t mean that we can’t
look for opportunities to reduce the size of staffing in this City, and we can look at opportunities for contracting, especially in General Fund operations, in operations that are good
candidates for contracting, such as right now we are reviewing our aquatics operation. Are there opportunities to contract out our aquatics programs that will enhance service to the
community and at the same time reduce our General Fund cost and probably reduces the number of FTE (Full Time Equivalent), so if we can begin to look at our operations in shifting, when
someone walks into our operations and wants service, we need to be able to service them and, hopefully, be able to collect fees and revenue to offset those costs, and then look for those
opportunities as we have done in street sweeping, implementation of the RPP (Residential Parking Permit) Program, and now as we look at other operations such as aquatics, golf, things
of that nature where we have those opportunities, and it is costing the General Fund money.
Chair Filseth: I understand that and I think that is right. I think the way this needs to work, and our job in Council and Committee is that, the core question is what happens when demand
for services exceeds our ability to pay for it. How do we grapple those things? I’m not saying it is happening in this case, but in general. I think at that point, Staff needs to come
back to City Council. You have been asking, “Are we loading on Staff more than you can do”. I think Staff needs to come back to City Council and say, “We can’t to that”. That is part
of the equation. If we do this, this other thing needs to drop off, so in terms of the other stuff, I think you guys are going the right thing, but to go back to high level, we have
a Long-range Forecast here that says, “This is going to be the expense world for next year and this is going to be the head count world next year”. I think we need to stay on that, so
to the extent that giving Peter this guy or gal here can do that, I think that is our role is to make sure that is how it works.
Ms. Mason: I think Staff tried. I just want to say this, when the Business Registry Program was being discussed, I think Staff tried to communicate that it would require resources to
support the program, and now we are looking at expanding the program, and so maybe it is a turning point, but again these are revenue offset, so it provides the ability to enhance our
service to the community by creating a Business Registry Program, providing the permits for building inspection and permitting.
Chair Filseth: I understand that argument, but I would argue that the thing that takes priority, at least in the Finance Committee, is that it is very, very important that the Operating
Budget, especially for next year, match the Long-range Financial Forecast, and one of the assumptions in the Long-range Forecast is a flat head count. I think we need to stick to that.
You wanted to add something?
Council Member Wolbach: Are we still on questions?
Chair Filseth: I think we got off questions, so if you have questions, please ask.
Council Member Wolbach: No, I have no questions. I was waiting for the comments round. I would like to make a Motion.
Chair Filseth: Please proceed.
Council Member Wolbach: I would like to move the Staff Recommendation.
Council Member Holman: I’ll second.
MOTION: Council Member Wolbach moved, seconded by Council Member Holman to recommend the City Council amend the Table of Organization by adding 1.0 Full Time Equivalent (FTE) Management
Analyst in the General Fund, Development Services Department.
Chair Filseth: Would you accept an Amendment to that?
Council Member Holman: Does he get to speak to the first?
Chair Filseth: Sorry, speak to your Motion.
Council Member Wolbach: I think it is vitally important that we are fiscally prudent, particularly that this Committee focus on the financial impacts, obviously of decisions. This program,
the Business Registry, is a very important program for the City. The Council has provided consistent direction in support of recognizing, being aware of the implication of cost and now
we are concerned and understand more of the details of that cost, along with additional interest in seeing better management and better service provided by the Development Center, providing
the Staff support necessary there, might in the end, create the possibility for greater efficiency which might free up people to focus on other programs and, at least, to provide the
services that residents and others coming to the City for services expect and so I want to make sure that we don’t, on this Committee today, turn back 180 degrees from the direction
that the Council and the City has been moving in establishing a Business Registry, providing the resources necessary for that to happen. There are a number of other potential applications
for the Business Registry which might be …
Chair Filseth: We all understand the value of the Business Registry. Please go on.
Council Member Wolbach: So this is the question, right? There are lots of things that we want and we can’t pay for all of them. I think it is clear that the Business Registry is a priority
so we need to provide the resources necessary for its functioning, and for that reason I want to make sure that we do provide the support. I think Staff has done an excellent job of
explaining the quality of service provided by Staff for this registry. Also, the Development Center and how in order to continue to provide that service and provide it better and to
meet the increasing demands from the full Council about Business Registry, they are going to require one more additional staffer, and so I will support Staff recommendation.
Chair Filseth: Do you care to speak to your second?
Council Member Holman: Quickly, I don’t want to repeat other things that have been said about the importance of the Business Registry and being able to meet request demands and it is
easier for me to support this Motion because the Business Registry component of this employee’s salary is going to be revenue-neutral through the Business Registry fees and the other
side of the salary will be at cost recovery through the Development Services component of the work. One quick question is, is that fully loaded?
Ms. Mason: Mm-hmm.
Council Member Holman: That’s fully loaded, so I think that is an important component of this to understand, and it’s not exactly clear in the Staff Report that it is totally loaded.
I thought I read that at one point in time, but when I went back and looked at it I didn’t see that.
Ms. Mason: It was the annual cost, including salary and benefits.
Council Member Holman: Yeah, it would be good to clarify that. So I am happy to support the Motion, and also a quick apology to Council Member Schmid. I thought the road you were going
down when I went Point of Order, I thought you were going down a road of looking and talking about fee schedules, and so that is why I was not wanting to go there because it isn’t agendized,
so apology if I was overstepping.
Chair Filseth: I am going to propose a friendly Amendment which you may or may not accept, which is to continue to support the Motion such that the Management Professional target head
count for 2017 remains at 217.4.
Council Member Holman: If I could again Point of Order, I am not sure that we can take that action, can we, if it’s not agendized, can we?
Ms. Mason: I wouldn’t feel comfortable making that commitment to you.
Council Member Wolbach: I won’t accept that anyway.
Ms. Mason: I just want to share the budget process is just beginning and it would really depend on Council direction, and I guess what you are recommending is that we cut another position
in the organization to create this position, and …
Chair Filseth: Well that is what a flat head count means, which is part of the basis of the Long-range Financial Plan.
Ms. Mason: Right. I just want to share this, as a manager in this organization, recommending a position that is cost-neutral because of demand of the community on use of our Development
Services and enhanced programming that the Council has asked for, it is very hard for me to make a commitment for neutral head count. As demand goes up, we have to Staff the demand and
as we add programs we have to Staff new programs. We definitely can commit to looking for opportunities to reducing our City staffing throughout the organization, but I, representing
the City Manager here tonight, I can’t make that commitment.
Council Member Schmid: If I could just, the 242 includes 6 percent unfilled positions, so we are not affecting that, we are just playing around that.
Council Member Wolbach: So as a Point of Order, I didn’t accept it, so are we moving on to an unfriendly Amendment?
Chair Filseth: I propose an unfriendly Amendment and I think Council Member Schmid’s point is correct, which is we have all these vacancies, right, so it is not a question of eliminating
one person, it is not filling a vacancy that is open.
Council Member Holman: Mr. Chair, I still have to go back to, I don’t believe this is agendized and I don’t think we can take action on something like this. I’m not insensitive to your
point, but that isn’t what is before us tonight and it seems to me the time to have that discussion is in the Budget discussions.
Ms. Mason: I just want to share on the vacancy level, we have rolling vacancies from time to time. When we are doing a recruitment you have three months of a vacancy, we take into account
the salary savings, and I know Lalo can speak to that. Departments are forced to reduce their budget to take into account for turnover and salary savings, so I share that. It is a very
high-demand labor market and I also share, we have experienced high turnover in operations like this where we have such high demand that people are cycling out, and so trying to create
a fair workload that is manageable is also part of sustaining in the long term, a workforce that stays.
Chair Filseth: Cleary, I see the value of that and I understand the dynamics.
Council Member Schmid: Let me propose a second with a slight alteration of yours. If you just add, as a Finance Committee comment, we would like to maintain the 214 professional and
managerial positions.
Chair Filseth: Can I do that?
Council Member Holman: Mm-hmm.
Chair Filseth: I’ll do that.
Council Member Holman: You can do it as a comment.
Mr. Perez: Let me just add something for the Committee accepting this, it is an important piece …
Chair Filseth: 217.4 is the number.
Mr. Perez: That the City Manager has, I am going by City Code or Charter, I can’t quite remember, has the requirement to submit a Proposed Budget to you and as Mr. Pirnejad will tell
you, it is his prerogative to bring to you what he thinks he needs and then it is your discretion as a Committee to accept, reject, redact, add to that budget, so I would suggest that
you leave it open as to the what the process is, and then you take action as you see fit through your Committee. What I can tell you is that we do, adding to what assistant City Manager
said, we are facing a lot of challenges and there are a lot of priorities, so I think we need to have a bigger discussion than an isolated one with just the management group.
Chair Filseth: Fair enough. I am happy with the comment by the way. I mean I support adding the position. I am happy with the comment that this is an unbudgeted position and it is important
that it fit into the context of the Long-range Financial Plan, which calls for a flat head count and a specific expenditure level for 2017.
Council Member Schmid: Okay, so I second that.
Chair Filseth: Actually, let me ask do you accept this as a friendly Amendment as …
Council Member Wolbach: I already declined.
Chair Filseth: All right. Unfriendly Amendment is to add a comment. All those in favor.
AMENDMENT: Chair Filseth moved, seconded by Council Member Schmid to add a comment to the Finance Committee recommendation that the target headcount for 2017 Management Professional
positions remain at 217.4.
AMENDMENT FAILED: 2-2 Holman, Wolbach no
Chair Filseth: Motion fails. Main Motion on the Staff Recommendation. All those in favor.
MOTION PASSED: 4-0
Chair Filseth: Let’s see, what is next. Thank you very much.
Future Meetings and Agendas
Lalo Perez, Chief Financial Officer and Director of Administrative Services: Future meetings and Agendas. I am passing to you an updated calendar because the calendar you get is dated
but it gets packed so early and so I wanted to make sure we had an updated calendar. Our next meeting is the first of March and we will have the comprehensive plan fiscal analysis before
you, the mid-year, the Utility Fund Financial Forecast and then the Library Bond Oversight Committee Report. I believe, if I remember correctly, Council Member Holman, you are okay with
6:00 o’clock on the first Tuesday of the month.
Council Member Holman: The first, just not the third.
Mr. Perez: Yes.
Chair Filseth: That’s right. We are going to do 6:00 o’clock on the first Tuesday, so that is 6:00 PM. Okay.
Mr. Perez: Yes. Just to get us all on the same page, it is a bit of a heavy Agenda, as you can see. I think pretty much everything there needs to happen, so we have to plow through,
if you don’t mind. Then on the 15, we have the pool vehicles. You may recall, both of you that were on the Finance, you wanted to have a discussion on that, so that is coming to you.
Chair Filseth: That’s at 7:00 PM correct?
Mr. Perez: I’m sorry, yes it is.
Council Member Holman: Do we actually have meetings on the Ides of March?
Mr. Perez: What did I say?
Council Member Holman: The 15th of March, 2016 the Ides of March.
Chair Filseth: Beware the Ides of March.
Mr. Perez: Oh, sorry.
Council Member Schmid: Cesar won’t come.
Council Member Holman: Maybe Cesar’s ghost.
Mr. Perez: So then we move to April 5th and that will be at 6:00 PM and that will have the CDBG (Community Development Block Grant) discussions, the annual requirement that we fulfill.
Then we have a new Item. As you may have noticed from your Council Agenda, the 7th of March which was a Council meeting was cancelled because there was a lack of quorum.
Council Member Holman: No, there were six members available.
Mr. Perez: Okay. The meeting was cancelled, that’s all I know, and so the Agenda Items were moved. That included the Long-range Financial Forecast, so that now it is going to the 14th
of April.
Council Member Schmid: The 14th of April?
Mr. Perez: I’m sorry, the 14th of March. That is the Long-range and the reason there is a correlation to this, because Mr. Bartel is not available, so what we have done is we now agendize
for the Committee a discussion where Mr. Bartel will come and talk to you, because you had additional questions about the unfunded pension liability, and then will go into more detail
on the potential funding options.
Council Member Schmid: So we can ask him how the unfunded liability goes up when the stock market falls.
Mr. Perez: Exactly. He is the perfect person to ask. So I think it will give you an opportunity to ask him more questions. My suggestion to you would be that if you have specific questions,
that you send them to Suzanne and myself so we can forward them to Mr. Bartel and he can be prepared to start addressing some of them, because some of them may require some prep work
on his part or his team, and so I highly recommend that for you. Then we move to the 19th of April and that is at 7:00, and that is the actual discussions on the water rate adjustments,
the wastewater Storm Drain, then CSD (Community Services Department) is going to update you on the JMZ (Junior Museum and Zoo) initiative for the construction of the new building. They
want to give you an update as to where their discussions with the friends are at that point. Then, we don’t have other meetings until May, 2016 and then May, 2016 is full of budget calendar.
Chair Filseth: So every day is a meeting.
Mr. Perez: Yeah, so we had asked that you check in with Chair Filseth to see if there were any conflicts, so please, I remind you to do that.
Chair Filseth: We had one. You had a conflict, right. Which day do you have a conflict?
Council Member Wolbach: I will double check it. I think I gave it to you last time.
Mr. Perez: Here’s the calendar if that helps you for May.
Council Member Wolbach: Yeah, the 12th. As I mentioned last week, I probably will not be available then.
Council Member Schmid: Do you know the date the budget will be presented to the Council.
Mr. Perez: Right now it is agendized tentatively for the 13th and 20th of June. As you may recall, we have a two-step process. (crosstalk) Oh, presented to the Council for the introduction,
the 25th, April 25th. I thought you were talking about the actual adoption.
Ms. Mason: I think the budget goes to Council (crosstalk).
Council Member Schmid: So we have about a week to 10 days before the Finance Committee.
Mr. Perez: Yes and keep in mind that it is segmented, so you don’t have to read the whole thing by the first meeting, so you will have a chance to catch up as you go forward.
Council Member Schmid: But it’s nice to have the Performance Report available.
Mr. Perez: Yes. So my recommendation is that, because there are so many pieces to this, that as long as you have a quorum you can continue and what we try to ensure is that everybody
on the Committee is here for the wrap-up, so if any of you miss anything, then that is your chance to catch up and regroup on those subjects.
Council Member Holman: Can I ask a question? About the CIP (Capital Improvement Plan), when is that going to Planning Commission then coming to Council? We have tried to get that a little
earlier. I think it has been happening, but when is that scheduled?
Mr. Perez: I need to double check because I don’t happen to have that date because I don’t believe it is quite set yet, so I need to get back to you at the next meeting.
Council Member Holman: Okay.
Council Member Wolbach: So was the 12th of April the only conflict we have or do I still need (crosstalk).
Chair Filseth: The 12th of April, is the only known conflict so far right?
Council Member Wolbach: Is there any way to reschedule that meeting?
Council Member Schmid: I think Lalo just said it is good to move ahead with three and that if you have questions there will be the wrap-up to cover anything we miss.
Mr. Perez: Because we have multiple departments and Staff and we would have to shift. It’s a Thursday, so it shifts the schedule and what happens then is you start moving your wrap-up
and you are moving your Council hearings later.
Chair Filseth: My recollection of this process last year, didn’t we actually schedule a couple of extra meetings in order to get all the stuff done, in order to get the wrap-up date?
Mr. Perez: Your recollection is correct, and we actually did them in the daytime, so if you wanted to do something like that, we could look into a daytime meeting if you wanted to.
Chair Filseth: As I understand the issue, it is important we try to hit the schedules.
Mr. Perez: The last update I have before, unless you have other questions, if you notice at the bottom of the page that I gave you with the information, there is an update on one of
the items, Number 15. Now that will be part of your Council meeting of April 18 as part of the Public (inaudible) Master Plan, so it will be covered in that area, and we are still working
on the others. That’s all I have.
Chair Filseth: With that we move to adjournment. Thank you very much for staying so late.
Council Member Schmid: That was a big meeting.
Chair Filseth: It was a long meeting. We are only the second one in and we missed to two-hour limit at only the second one.
ADJOURNMENT: The meeting was adjourned at 10:30 P.M.
TRANSCRIPT
Page 2 of 73
Finance Committee Transcript
February 16, 2016
FINANCE COMMITTEE
TRANSCRIPT
Page 1 of 73