HomeMy WebLinkAbout2016-05-17 Finance Committee Summary MinutesSpecial Meeting
Tuesday, May 17, 2016
Chairperson Filseth called the meeting to order at 6:04 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California.
Present: Filseth (Chair), Holman arrived at 6:54 P.M., Schmid, Wolbach
Absent:
Oral Communications
(inaudible)
Action Items
Staff Responses to Committee Questions From Budget Hearing Meetings.
Kiely Nose, Budget Manager: Great, thank you Chair. So, as usual, we’ll click through some wrap up from the prior meeting, and then move right along to the rest of the agenda. So at
your places, actually, you have a memo. We divided it into two sections this time. The first time are actual recommended changes to the Proposed Budget or to motions that you guys have
already made. The second section is just additional information that was either requested or has come up and we’re trying to give you some more background. So to walk you guys through
the At-Places Memo, additional information about the tree-trimming cycle was asked for, so we put in a table that explains that the contract value is for a seven-year, 10-year and 15-year
cycle. At the last Finance Committee meeting you guys made a motion to add, it was $135,000 to the parking lot. When Staff went back and analyzed the contract costs, the actual change
between a 10-year and a 15-year cycle would be $170,000, so one of our recommendations is to revise that motion. The second item is to add a new project to the electric capital fund
for facility relocation for Caltrain modernization, so there’s an attachment to this memo that outlines all the project details, just like in the capital budget. The third item is an
adjustment to the Art in Public Places which we will take up as part of Item Three today. There are recommended adjustments to the numbers. We found a formula error that was done in
the proposed. The rest of the information in here are not action items. It’s just updated information on the Planning and Transportation Commission (PTC) findings from today’s meeting,
and then additional discussion about reclassifications, and so we called out the example of the Zero Waste Coordinator to Environmental Specialist, to go through the details of the calculation.
Then we also added in some information about the unfunded liability and salary growth, and so every 1 percent of salary growth, what that means in terms of your unfunded liability change.
So those are just for your reference.
Lalo Perez, Chief Financial Officer: We don’t need to take any action from you until we get to the capital for the two capital projects, and assuming, because you put it in the parking
lot, that you’ll be fine with us just adjusting the amount, because you will eventually be making the final evaluation on Monday, doing the wrap up on the final figure that you would
want.
Chair Filseth: (inaudible)
Mr. Perez: You did, but it was 135 at that point, because that’s the amount we had given you, and since then Public Works Staff had gone back and revisited the numbers, and it’s 170,
so…
Chair Filseth: (inaudible)
Mr. Perez: If you want to, otherwise, the spirit of the Motion, is understood and we would just update the amount to 170. Okay.
Chair Filseth: (inaudible)
Council Member Schmid: Yeah, I just want to thank you for responding to the questions we had and giving us details. That’s very helpful.
Mr. Perez: You bet.
Ms. Nose: So then, just a quick overview of where you guys are at, everything on the right-hand side are the items that we have in the parking lot thus far and we will revise that last
one, the tree-trimming services to 170 as we just discussed. So, unless you guys have any questions? Great.
NO ACTION TAKEN
3. Utilities Overview, Operating Budget. pp. 403-410
Electric Fund
Operating Budget pp. 411-424
Capital Budget pp. 343-434
Kiely Nose, Budget Manager: So then first up will actually be Utilities.
Lalo Perez, Chief Financial Officer: Excuse me, Ed, before we start, can we suggest to the Chair and the Committee that we do the same thing as we did with Public Works, take it fund-by-fund,
so we’ll do operating and capital for each of the funds, then make a tentative approval motion in between each presentation. Thank you.
Ed Shikada, Interim Utilities Director: It’s got to be working. Oh dear, I’m sorry, I feel like a kid with a new car, with the clicker here, although maybe it’s an old car. Thank you.
Chair, members of the Committee, Ed Shikada, again wearing my hat as Interim Utilities Director. I’ll give just a quick overview, although we have quite a bit of information so I’ll
go rapidly through the slides that we do have, so that we’ll have plenty of time, perhaps, just to use the slides primarily as reference points for your Questions and Answers (Q&A).
Just in terms of the department overview for Utilities, notable in terms of the divisions that you see on your slide there, that we are organized and integrated across the utilities,
so rather than having individual divisions necessarily focused on whether it be electrical, water, gas, wastewater and fiber, we are integrated primarily across all of the utilities,
which does provide both good opportunities, best opportunities for staff development, as well as opportunities for innovation, as we’ll talk about some of the cost-cutting initiatives
that we are pursuing as a few examples. In terms of the accomplishments over the last year, whether it be drought response, the City’s renewable portfolio standard increasing from 26
percent to 50, as the case may be, our home energy efficiency initiatives and electrification that I’ll get into more detail, and the ongoing rehabilitation of our infrastructure. Those
are all high activity areas that I’ll describe in a little more detail. In terms of our upcoming initiatives for Fiscal Year 2017, our Capital Improvement Programs total roughly $44
million across all funds, representing about 15 percent of our total budget. Much of that is replacement of our existing infrastructure, our sustainability programs in energy efficiency
and conservation include our community solar programs as well as, as noted just a moment ago, an increase in our renewable portfolio standard, as well as innovative programs for conservation,
such as the Georgetown University Energy Prize. In addition, our technology work includes, as I know you talked and will continue to be discussing, our enterprise resource planning and
customer information system, which are steps toward our smart grid implementation, and finally, on electrification and our workforce and strategic plan works as some particular areas
of focus that help us and our staff focus on the next phases for our utilities. Okay, in terms of our staffing proposals, this isn’t in your packet, because it’s not in mine, this talks
about our staffing, primarily add, drops, reclassifications. No additions in terms of the total head count. Jumping to our Electric Fund, again, just to give you a quick overview of
all of our utilities, major element in our upcoming year being our, notably the rate increase that we’re showing at 11 percent, has not increased since 2009, so it does represent a requirement
to replenish our reserves, largely drawn down due to commodity purchases due to the drought. In terms of the renewable portfolio standard, as noted earlier, looking to increase to 57
percent by the end of the Calendar Year 2017. In terms of our Capital Improvement Program, customer connections, including our fiber to the premises, support work, pole replacements,
being a significant component of the expected work plan for the year totaling about $5 million. In addition, the Veterans Affairs (VA) Hospital support infrastructure, totaling about
$3 million. So those two alone make up the lion’s share of the customer connection CIP identified here. In addition, the system improvements, the 230 Kv electrical intertie ongoing work
with Stanford Linear Accelerator Center (SLAC) and Stanford University. We’re approaching a key decision point in the ongoing discussion with Stanford. Do you want to stop? Stop at each
one of them, okay. Do you want to jump to questions on either the overview, operating or electrical?
Chair Filseth: Cory?
Council Member Wolbach: I don’t think, actually, I have any questions right now, but I might have some as we continue to go through Utilities, we might have to loop back a little bit.
Council Member Schmid: (Inaudible)
Chair Filseth: I think both the Operating and Capital for the Electric Fund, right?
Council Member Schmid: Yeah, I do have a couple of questions, just to make sure I understand what we’re voting on, what’s going. They are all on the Capital Budget, on Page 374, electric
pole replacement $5 million. The text makes it pretty clear that this is a part of the Google Fiber role out. Is that right? I don’t recall us…
Dave Yuan, Engineering Manager for Utilities: Yeah, this is kind of in anticipation of the roll out, if there is one. So this is…
Council Member Schmid: The Council has not had any confirmation or communication on, from Google?
Mr. Yuan: Right, we have not. We will be bringing that to Council, hopefully, in June, the end of June for approval.
Council Member Schmid: So you’re asking us to approve $5 million in expenditures on something that Council has not really addressed or approved?
Mr. Yuan: The idea was this is contingent on us having that agreement with Google Fiber or another third party for the build out. So this is only contingent if there is an agreement
in place. It’s just kind of a place holder.
Council Member Schmid: But it does push us down the road, so when the agreement comes to Council, they can say, “oh, it’s in the Budget.”
Mr. Shikada: I think, as David noted, the expectation is that we’ll hopefully be ready with the report to the Council next month, and so there is a timing perhaps issue in terms of having
the capacity and our ability to plan the staff work plan in order to be ready for it. So I think, ultimately, this all comes to a decision point in June for the Council.
Council Member Schmid: Will the Google Fiber report come to Council before Council votes on the Budget?
Mr. Shikada: I think we’re planning the 13th for some of the major elements associated with the Encroachment Agreement and Master License Agreement.
Council Member Schmid: And the Cooperation Agreement of joint cable?
Mr. Shikada: That’s a component that’s also being worked on.
Mr. Yuan: I also want to note, most of this cost will be reimbursed from Google or the third party who decides to come, to build in the City. This will not be all just City’s expense.
Council Member Schmid: Yeah, I guess that was my follow up question. How much reimbursement does the City get for this?
Mr. Yuan: Well, it would depend on if there is a co-build or not agreement. If there is no co-build, then the third party will be on the hook for most of it. If there is a co-build,
then we will have to agree on the terms of how much the City will share.
Council Member Schmid: But that would have to be, I guess, part of the agreement.
Mr. Yuan: Correct.
Council Member Schmid: But the cost, what we’re approving here is the cost, so this is…
Mr. Shikada: We’re also approving a $4 million reimbursement, so it’s a $4 million reimbursement and $5 million in cost, so right now we’re estimating roughly 80 percent will be reimbursed.
Council Member Schmid: But we know that the total cost from what they are asking will be about $5 million?
Mr. Yuan: For the upcoming year. So what we’re expecting is we’ll have to replace either 10 to 20 percent of the poles, so that could cost anywhere from $5 to $15, we don’t know the
exact cost yet, but this is a three-year buildout, so this is just for that one year we’re anticipating. And these are just estimated figures. We will probably come back to you at another
time when we get more accurate figures.
Council Member Schmid: Oh, okay.
Chair Filseth: If I understand what Greg just asked, it’s really about, sort of about the timing and the chance that it’s not happening. So if we budget it now, but then it comes to
Council and Council turns it down, then we don’t spend it, right? If, what’s the alternative, if we don’t approve it now, what’s the alternative path if we haven’t budgeted it and (inaudible)
does that mean it’s like a meteor adjustment if the Councils approves it or, what’s the other option?
Mr. Perez: The other option would be that you take it off the board and then it means that Staff would have to bring it back at a subsequent Council meeting to create the Capital Improvement
Program (CIP) or add to the CIP. So it increases the timing of the turnaround, so the thinking was that this could help move quickly and position us in a good position to respond to
a Google potential agreement, so just to remind the Committee that, while you may approve the budget, it’s still a two-step process that we can’t do anything until we come back to you
with any contract related to this CIP, so there is another stop or checkpoint that we need to get your approval, even if you were to approve this budget.
Chair Filseth: Okay, so is it our judgement that the first path is better than the second path, or do you want to do the second? I mean, what do you think?
Council Member Schmid: I’m willing to approve it with the understanding that it’s going to take a Council approval before any dollars…
Chair Filseth: Do you have any more questions.
Council Member Schmid: Okay, a similar question on the VA Hospital, on Page 406, we are laying out again, it happens to be $5 million capital, $3 million this year, $2 million next year,
and it’s to improve the, I guess, consistency of electrical supply to the VA Hospital. Now, as with the Google, who pays for this? Is this a joint project with the VA and Palo Alto,
or is it the electric utility who as servicing a customer, would provide the backup? Who is responsible for what?
Mr. Yuan: Again, for this one we estimated about 80 percent of the project will be funded by the VA Hospital and the City would fund possibly 20 percent and that’s for the infrastructure
alone on our side. It’s for the reliability for the neighboring customers. So whatever we build for VA Hospital directly, will be on their budget. They would reimburse us for that.
Council Member Schmid: Okay, but they are likely to reimburse something like, what 50, 60 percent?
Mr. Yuan: Yes, we’re expecting actually something higher, 80 percent.
Council Member Schmid: Good, and we’re getting benefits because the neighboring customers with have a more…
Mr. Yuan: Right, we’re also improving the reliability of that substation.
Council Member Schmid: Yeah, I guess it would be helpful to be able to see the potential revenue flow associated with it.
Ms. Nose: So, if you look on Page 407, you actually will find the funding sources associated with the project, so you’ll see there is funding from the Electric Fund itself of a million,
as well as four million from revenue from other agencies, and those are those reimbursement payments.
Council Member Schmid: Okay, good. Thank you. Let’s see, one other question, on Page 389, we are moving ahead with the Smart Grid and, I guess we have done studies and assessments, but
all of a sudden, the funding jumps to $670,000 in ’17, one million in ’18 and 11 million in ’19. No, I guess those are the funding sources, but construction does the same.
Mr. Yuan: Right, to go back a little bit, so back in 2011 we did an assessment on the Smart Grid, and at that time the consultant recommended that we wait, hold off, just because the
technology wasn’t mature yet and the costs were too high. So what we plan on doing in Fiscal Year (FY) ’17 is get another assessment, have another consultant come in and reassess our
situation now and see what they recommend and create a business plan. So that’s what we will be bringing forward to you. And then the other numbers in the outer years are really just
place holders.
Council Member Schmid: Yeah, now again, has this gone through the Utilities Advisory Commission (UAC) and they have approved it? Has it come to Council and has Council approved the Smart
Grid?
Mr. Yuan: Not yet.
Council Member Schmid: So again, we’re setting up a budget which would allow them to do so.
Mr. Yuan: So we only asked for a budget for FY’17, so we need some funding to hire a consultant to help us with the study and some of the pilot projects we’re anticipating on doing.
Council Member Schmid: Yeah, so what we’re really approving then are the studies which will provide the material in which the UAC and the Council can make a judgement.
Mr. Yuan: Right.
Council Member Schmid: I guess that raises an issue of what are we doing with the five-year CIP total? Is that just for our information, or are we approving the concept of a five-year?
Mr. Yuan: it also helps us for setting our rates for the five-year projections, so if we anticipate these coming down, we’ll make adjustments in the upcoming years.
Ms. Nose: So, kind of taking a step back, not just Utilities in total, kind of how we look at the Budget is, when you’re looking at the Capital Budget, yes it’s a five-year CIP, but
it is a plan, so that five years, the outer four years is just a plan and we revisit that on an annual basis, make adjustments, move things between or amongst, up, back, delete, add
as appropriate on an annual basis. Realistically, what’s happening from an appropriations standpoint is you’re actually only appropriating the funding for ’17, so you’re approving a
budget for fiscal year ’17, but you’re approving a plan for the five years, which we revisit annually.
Council Member Schmid: Yeah, I think our approval of it for next year’s Finance Committee and next year’s Council is, “Oh, we’re in the middle of this, we’re moving along on this program.”
So we are giving a sort of push, a credibility to what’s going on. So we should look at the five-year program, but it is not the, what we’re finally approving, which is the 2017 Budget.
Okay, thank you. Those are my questions.
Chair Filseth: So I had a couple. One of them is really basic, okay. So if I read this correctly, then electric utility revenue is $153 million this year? On Page 416. You know what
I’m going to ask and it’s like, kindergarten question here. In the Operating Budget, 416. I’m sorry, the, I guess I’m at 417.
Mr. Yuan: So Page 416, 417?
Chair Filseth: 417, yeah. Total revenue is $153.2 million. And on Page 416, total expenses $170.5 million. Where does the difference come from?
Mr. Yuan: Yeah, so we’re still drawing down from the reserves.
Chair Filseth: So that’s the draw down from reserves, $17 million draw down from reserves. Thank you. And that, in fact, is the $17 million draw down?
Mr. Yuan: Yes.
Chair Filseth: Thank you. Wow, that was easy. I also wanted to ask another question on Page 417, which is, if you look at the line Other Revenue, up near the top, it goes from $7.8 million
to $15.5 million.
Mr. Yuan: So that’s drawn from the customer connection projects, the Google Fiber and also the VA Hospital, so those two alone was like $6 million.
Chair Filseth: Okay, so that’s what Greg asked about. Okay. Finally, I wanted to ask, so rents and leases on Page 416, what is that?
Mr. Perez: What we do is the General Fund owns the land and wherever the Electric Fund needs space, then the general fund rents that space to the Enterprise Fund, so you’ll see it in
each fund, except the water treatment plant.
Chair Filseth: Okay, and so, and that’s the whole line or most of it is leases to the General Fund?
Mr. Perez: There’s a small amount, I’m trying to think if there’s more than one, the Utilities Department leases space at Elwood Court, on East Bayshore, and so there is the lease for
that. I don’t think there are any leases that I can think of, off the top of my head,
Chair Filseth: Okay, I was just curious. I mean, it seems like over the last three years it jumps around a lot, whereas, if it was between the Utilities and the City, it seems like it
should be fairly steady and predictable. Why is it so volatile?
Mr. Perez: What we do every couple of years, we do an update to the appraised valuation and then based on a percentage of that…
Chair Filseth: So that’s why there is a 30 percent jump from ’15 to ’16?
Mr. Perez: No, I think up from there, if my memory is correct we did a reassessment as to how much space was being utilized, and it had gone up since the last time we had looked and
it had been several years since we looked at that, so we worked closely with the Staff in Utilities and validated the calculations we made.
Mr. Yuan: I think we did do an assessment also that year, the appraisal.
Mr. Perez: Yes, but a lot of it was triggered by the combination. Right.
Mr. Yuan: And in FY’17 we’re just doing the Consumer Price Index (CPI) increase, I think.
Chair Schmid: Greg’s going to have a comment.
Council Member Schmid: I will note that last night at midnight we had 30 speakers saying, “house rentals are going up eight, nine, 10, 12 percent per year”, and yet our rentals are going
up 2 percent a year.
Chair Filseth: Well, if you look over three years, though, it is 11 percent per year. If you look over the whole line. And finally, there is a line here CIP, let’s see, CIP, nope, I
got it. I think that’s all. Okay. I have no more questions. Cory, do you have some?
Council Member Wolbach: We’re still going to go through fiber optics, gas, wastewater? Yeah, I don’t have any questions on electric at the tip of my tongue, so I’ll hold my questions
for now.
(inaudible)
Council Member Schmid: I guess my understanding is just, you know, the qualification on what we are doing. We’re voting the 2017 Budget recommendations and some of the larger items are
being reimbursed. So I would be happy to move tentative approval of…
Mr. Perez: Chair Filseth and Council Member Schmid, would you please refer back to the At-Places Memo and also consider adding the CIP for the facility relocation for the Caltrain modernization
project that we are asking to add to this fund.
Chair Filseth: Oh, that’s not in electric, that’s in the general…
Mr. Perez: It’s the Electric Fund.
Chair Filseth: Really?
Council Member Schmid: Top of page two.
Chair Filseth: That’s this one, right facility relocation?
Mr. Perez: Correct.
Council Member Schmid: Could you point us to the distribution reserve line in the budget.
Mr. Perez: That would be Page 102, no?
Mr. Yuan: It should be under supply operations, but I think I meant to say distribution operations.
Council Member Schmid: On which page?
Mr. Yuan: Page 102.
Council Member Schmid: Of the operating?
Mr. Yuan: Of the operating, yes. Projected ending balance for FY’17 is $24.5 million.
Chair Filseth: So if I understand what this is, it’s, let me see if I understand this correctly. We’ve got some power and maybe fiber lines, right, and if Caltrain electrifies, our lines
have to be moved out of the way, right, and so, but they don’t want to pay for that.
Mr. Yuan: I think we’re still in discussion.
Chair Filseth: Sorry?
Mr. Yuan: We’re still in discussion what we would pay for and what we should be moving. But this will at least let us do the design work and preliminary work.
Chair Filseth: So the $150,000 is for design, and the $2.5 million is to actually do it.
Mr. Yuan: When we have an agreement.
Chair Filseth: I think we’ve got to do that.
Council Member Schmid: Now I’m concerned because of the earlier comment that we are drawing down our reserves by, is it $17.3 million?
Mr. Yuan: Yes.
Council Member Schmid: So you want to make that, what would the number be?
Ms. Nose: So the only draw down would occur in Fiscal Year ’17, so it would be the $150,000. The additional $2 million, two point some odd million in the out years, Fiscal Year ’18,
would touch reserves in Fiscal Year ’18. The thing to remember is the Electric Fund is going through the rate changes, and so one of the reasons for the rate increase is to ensure they
have adequate reserve levels on an on-going basis, so projects such as these have been factored into that five-year planning process to help identify what those five-year rates should
be.
Council Member Schmid: Yeah, I’m just a little concerned as we are going through a transition, drawing heavily on reserves, and the Finance Committee’s only action is, oh, let’s increase
that draw down. There’s no substitute where you can save money somewhere else because this is critical.
Mr. Shikada: Well, at this point I think it’s reflected in both the description in the write up as well as this discussion. This is pretty early in the project, but we do see it coming
forward. In fact, we’ll be talking to the Council’s Rail Committee about this next week as the Caltrain Electrification Project is becoming more active, so we do feel it is prudent for
us to start planning the resources. We are, as David pointed out, in discussions with Caltrain on who has the obligation to cover costs, so it’s an ongoing topic of discussion that we
wouldn’t presume the outcome of at this point.
Mr. Yuan: I also want to note, later this evening we’re going to be bringing the electric forecast to you, the rate adjustments, some of the cost drivers.
Chair Filseth: So, in the unlikely event that Caltrain actually doesn’t meet their schedules to the letter, then is it reasonably likely that the $2.5 million for 2018 actually doesn’t
hit us till 2019 or maybe 2020?
Mr. Shikada: Correct.
Chair Filseth: So the $150,000 for this year, is it a big problem if we don’t do it this year, if we do it next year? I mean, it’s not that much money. I’m just asking. I want to understand
the problem. I mean, let’s say we put it off till next year. Do we find ourselves behind the eight ball?
Mr. Shikada: Just to be clear, when we talk about FY’17, this would effectively be the upcoming fiscal year and since the project is proceeding in its own design, it’s our understanding
that Caltrain is proceeding and is, out to bid on a design build contract, that it’s important for us to be ready for it during the upcoming fiscal year.
Chair Filseth: So now is the right time to do it?
Mr. Shikada: I’m sorry?
Chair Filseth: So, actually, it is the right time to do it.
Mr. Shikada: Yes, at least for this first phase in terms of design, while recognizing that we have some time before we would need to go to construction.
Chair Filseth: Care to amend you motion?
Council Member Schmid: Yeah, I would propose to add to the motion approval of $150,000.
Chair Filseth: Second.
Council Member Schmid: Just note that you put us in a tough position with a 9 percent rate increase and $17 million reserve draw, but let’s move ahead.
MOTION: Council Member Schmid moved, seconded by Chair Filseth to tentatively approve the Electric Fund Operating and Capital Budget and to also include the addition of $150,000 for
the Facility Relocation for Caltrain Modernization Project in the final recommended FY 2017-2021 CIP with corresponding decreases in the Distribution Reserve in the Electric Fund.
Council Member Wolbach: Yeah, actually maybe I should have asked this before we got to motions. I just want to step back a little bit and make sure I’m clear about how Utilities is organized.
Is water, gas, wastewater a separate division from electricity, or is engineering separate from operations or is it both, there are two axes?
Mr. Shikada: It’s really the later, so we have Engineering Division, Operations Division. Within engineering, there is both electrical and water, gas, wastewater disciplines.
Council Member Wolbach: Interesting. So I guess what’s tricky is that the funds don’t line up with the divisions. So, if we’re talking about the budget for a division, that’s, it’s really
hard to see that because it’s really broken up into the different funds. That’s part of the challenge, just thinking about this, conceptualizing it, raising questions or concerns about,
you know, it might not be a fund, it might be a division that I might want to ask more questions about, so, I guess I’ll still hold my questions for now.
Mr. Shikada: To your point, the same would certainly apply for administration, because administration within the department as well as City-wide really cuts across each one of the individual
funds.
Council Member Wolbach: Right, okay.
Chair Filseth: It’s not actually material, but are you actually a full bore matrix organization, where everybody has two bosses?
Mr. Shikada: No.
Council Member Wolbach: Okay, thanks.
Chair Filseth: Care to restate your motion, Council Member Schmid?
Council Member Schmid: (inaudible) tentative approval of the Electrical Budget for the Electrical Fund, both Operating and Capital with an amendment adding $150,000 for the Capital Improvement
Project for the Caltrain modernization.
MOTION RESTATED: Council Member Schmid moved, seconded by Chair Filseth to tentatively approve the Electric Fund Operating and Capital Budget and to also include the addition of $150,000
for the Facility Relocation for Caltrain Modernization Project in the final recommended FY 2017-2021 CIP with corresponding decreases in the Distribution Reserve in the Electric Fund.
Chair Filseth: Any comment? All in favor? Motion passes. Thank you very much.
MOTION PASSED: 3-0 Holman absent
Fiber Optics Fund
Operating Budget pp. 425-431
Capital Budget pp. 435-454
Mr. Shikada: Let’s see. Let’s move on to Fiber Fund and in fact, we just have one slide, so just hit a couple of highlights here. In terms of upcoming fiscal year initiatives, primarily
focused on the rebuild and starting with the inventory, or we refer to it as an audit of the existing system. We’re working toward improving the performance, as well as, the performance
of the network as well as prepare for potential future expansion, including, as was noted earlier, potential co-build with Google Fiber. So starting with the inventory or auditing of
the existing system, that’s a key next step for us. In addition, we’re proceeding with work to prepare for a request for proposal on wireless network expansion, primarily for Public
Safety and Utilities use in high-traffic commercial zones, particularly downtown and California Avenue. Noted here, the rate increase of 3.2 percent, which really is focused on the pre-2006
EDF-1 Rate. These were the first customers that were participating in leasing our fiber. And, finally, in terms of the CIP, as noted here, the fiber optic system rebuild at less than
$2 million dollars in order to ensure that our system is prepared for potential expansion, upgrading of the facilities from what was originally constructed as existing spare infrastructure
into new underground substructures, including the boxes, conduits and the like. So with that I’ll turn it back to the Committee for discussion specific to fiber.
Chair Filseth: Thanks very much. Questions and comments? Council Member Schmid.
Council Member Schmid: Just one comment. It is getting late in the game. I guess we already mentioned Google and weighed in on that, but a story. I was in Durham, North Carolina a couple
of weeks ago and walking through a residential neighborhood and noticed at the side of every road I walked on there was either a trench or little flags or recently replaced paving, and
I said, “What’s going on?” They said, “Well, AT&T is laying fiber to every home in the neighborhood.” So I guess Palo Alto might have been unique when they started the Fiber Program,
but I guess we have to be careful we don’t fall behind.
Chair Filseth: (inaudible)
Council Member Schmid: I would make a motion to tentatively approve the fiber optic fund budget.
Chair Filseth: Second.
MOTION: Council Member Schmid moved, seconded by Chair Filseth to tentatively approve the Fiber Optics Fund Operating and Capital Budget.
Chair Filseth: Comments on motion? All in favor? Motion carries.
MOTION PASSED: 3-0 Holman absent
Gas Fund
Operating Budget pp. 432-443
Capital Budget pp. 445-490
Mr. Shikada: Alright, with that we’ll move to the Gas Fund. Note the pages here for your Operating Capital Budget and, again, let’s see, we have a couple of slides here I just want to
touch on. Our upcoming initiatives for Fiscal Year 2017, first the Palo Alto Green Gas has been discussed with the UAC, actually, it’s coming up for discussion with the Utilities Advisory
Commission. Our goal is to have 20 percent of our customers working toward the renewable gas and, in particular, initially using offsets and this item will be discussed by the UAC in
June and to Council thereafter. Cross Bore Project, I know, has been the topic of some discussion over the last couple of years. This one, in particular, I think in experience in identifying
that 50 percent of the laterals that were initially identified for inspection involved some type of further work, certainly created or encountered some complications in terms of the
ability to proceed with the project as was originally scoped, so that’s another item that will be coming back to the Utility Advisory Commission for further discussion and then to the
Council in late summer. In terms of the gas rate increase, noting the 8 percent increase proposed due largely to reductions in actual consumption with this past winter season being unusually
warm and as a result, reduction in consumption leading to the recommendations for the increase. Jumping to the capital, largely system replacements, main replacements, noting just a
couple of key locations not here on your slide, but University Avenue in downtown, so these would be significant projects that we’ll be undertaking over the course of the next year.
That’s it for the overview on gas.
Chair Filseth: Comments and questions from Committee? Council Member Schmid.
Council Member Schmid: In the Operating Budget I note on Page 435 a surprising number on retiree medical. Now last week we went through a number of General Fund budgets and the retiree
medical was down in each of them because there was a transfer of a liability within the general fund, but here you’re showing an increase of 44 percent and if I could just jump ahead
to the wastewater, the retiree medical goes up 70 percent. That’s on Page 447. So, what’s going on between the General Fund and the Utility funds? That doesn’t seem to make sense, unless
there’s a lot of retirees taking place during the last year.
Council Member Holman arrived at 6:54 P.M.
Mr. Perez: Let us pull our spreadsheets and answer that back in a minute. If you have other questions.
Council Member Schmid: Okay, I have a couple of questions on the Capital Budget. On Page 460 of the Capital Budget the gas line replacement number was $6 million in 2015, $7.6 in 2016
and falls to $4.2 in 2017 and thereafter. Is there something, are we more confident in our gas mains, have we completed fixing a problem? Why the big change.
Mr. Yuan: In 2016 (inaudible) project, so if you go back to the page before, 459, it’s a combination of ’19, ’20 and ’21, and also ’22, so we’re doing a catch up on some of the past
budgets.
Council Member Schmid: So both the 2015 and 2016 was sort of catching up with past and moving down to $4.2 million per year is a steady state, so we’re not dropping anything. It’s really
getting back to normal? And we are confident that the $4 million is the right number for the long term?
Mr. Yuan: Yes.
Council Member Schmid: Okay, one other question, on gas replacement, there’s a series of them from 470, 472, 474 and each one of them says that this project, project 23, 24, 25, 26,
will target replacing mains and services located in business districts. Why are we targeting funding over the next five years for business districts rather than mains around town?
Tomm Marshall, Assistant Director of Utilities Operations: Tomm Marshall, Assistant Director of Utilities. So the focus on gas mains is in relation to, we just got through completing
the acrylonitrile-butadiene-styrene (ABS) replacements and we’re moving on to polyvinyl chloride (PVC) replacements on our system, so we have to do a distribution management plan that
we have to file with the Department of Energy. So we do an assessment of risks on the system. So one of the areas that we looked at was business districts and the risks that pose from
gas lines in business districts. So when we rank it, it ranks higher on the list and we have a number of PVC mains in business districts, so the next five years we’re focusing on replacing
those PVC lines in the business districts.
Council Member Schmid: I assume the business district has more intensive connections.
Mr. Marshall: Correct.
Council Member Schmid: So you have different lines compared to residential neighborhoods.
Mr. Marshall: Right, you’re going to have bigger lines and you have higher usage in the business districts, so it poses a larger risk if you have a main rupture in a business district,
and also, there’s more people around. You know, you have restaurants and buildings and so it ends up a higher risk category because of being in highly populated areas.
Council Member Schmid: But these projects, as you pointed out, do go on for five years, and we’re not increasing the risk in other parts of town by (crosstalk).
Mr. Marshall: That’s correct. I mean, we have to do a risk assessment and we have to file that with the Department of Energy, so that’s what we’ve done. As we get into this, we’re replacing
essentially the oldest mains we have out there and, like I said, we got done with a very large portion, which are the ABS mains that are now, all of them are pretty much removed and
now we’re moving on to these PVC mains, which is another gas main that we’re going to have to go through and replace in our system as it reaches the end of its useful life.
Council Member Schmid: Yeah, I guess I do recall that one of the only real gas explosions in town was at a school, and certainly, that was maybe 30 years ago, 40 years ago. You know,
if there are vulnerable sites elsewhere around town, that we are alert and…
Mr. Marshall: Yeah, and we are aware of those and we do look at those school sites and other things separately. In the description we’re talking about business districts, because that’s
what shows up, but we do do them around schools and things and are high on our priority list also.
Council Member Schmid: Great, thanks Tomm.
Chair Filseth: Council Member Wolbach.
Council Member Wolbach: So a couple of questions. You mentioned it. What’s going on with cross boring? I don’t need a full detailed, you know, report on it, but I wanted to have a little
bit more information about what the status of that is, so I can make an informed decision about the budgeting here.
Dean Batchelor, Assistant Director of Utilities Engineering: Dean Batchelor, Assistant Director of Utilities. So what we’re going to be doing is we’re going to go to the UAC with a report
that’s going to ask for an increase of replacing and looking at some of the laterals that we have in place that we weren’t able to do before prior. It’s about a $1.1 million that we’re
asking for, and then once we go to the UAC, we’ll be coming to the Council with a report asking for those funds to be done, so we’re going to be looking for a contractor that’s going
to be going out and hammering and cleaning some of these laterals. One of the problems, or one of the things that we learned from this last contract that we had in place, is that the
laterals were having roots and debris inside, so when we did the camera launches prior with the old contractor, they weren’t able to go all the way up into the home itself, because we
need to go from where the main location, or where the cleanout is, all the way through the house, so we can take a look and see where the gas line is located at. Did it go inside the
property at that period of time? So we couldn’t provide that type of service and the contract that we learned from was, we didn’t call that work to be out at that period of time. So
as Ed mentioned earlier, about 50 percent of the laterals we couldn’t get through. We need to clean them. We need to work on them. So that’s that these additional funds will be asked
for. Like I said, there will be a report going to Council later, July somewhere.
Council Member Wolbach: I’m sorry, when might we see that coming to Council, approximately?
(crosstalk)
Mr. Shikada: August.
Mr. Batchelor: August.
Council Member Wolbach: Okay, late Summer, early Fall hopefully.
Mr. Shikada: Yes. With the implications I think in a nutshell that this is a long-term effort. The first phase reached the conclusion that simply doing the inspections was not going
to be sufficient to address the issue, couldn’t clearly identify problem locations, so now this larger scope that does include some replacement, rehabilitation being included as part
of this next challenge.
Council Member Wolbach: Okay, I appreciate that we’re not losing sight of this project. Thank you for that. My next question is, let me make sure I have the right page here, I think
it’s on Page 442 of operating. Yeah, here we go, so it’s on Page 442 of operating, and it’s also, of course on 404 where it shows the flow chart of staff. Item Three under Budget Adjustments,
if I’m not mistaken, this is essentially the creation of a new sort of blended role, as I understand, where we’re taking a heavy equipment operator and installer repairer and merging
those two roles together to be a new blended role. Is that correct?
Mr. Shikada: That is correct.
Council Member Wolbach: Okay, can you tell me a little bit more about why this is necessary and why this is planned.
Mr. Shikada: Tomm or John? John Abendschein, reporting for our Operations Division.
John Abendschein, Acting Water, Gas, Wastewater Operations Manager: What we’re looking to do here is start a program where we can have a combined position that will be able to do both
pipefitting work and operate a backhoe. We run mixed crews and we have one heavy equipment operator assigned to each crew. If we were able to train a couple of heavy equipment operators
to do pipefitting work and a couple of pipefitters to operate heavy equipment, it would add flexibility. So if one of our operators is out on vacation, it doesn’t shut down an entire
crew, or, you know, if we have additional work, additional pipefitting work, we can flex one of the heavy equipment operators over. It’s a proposed program. We’re still working on it.
This will allow us to implement it, but it’s kind of a pilot and we’ll see if we’re able to make it work.
Chair Filseth: Can I ask a question about that?
Council Member Wolbach: I had a couple of more questions about it, but if you want to jump in, go for it.
Chair Filseth: Is this the one the Service Employees International Union (SEIU) is complaining about?
Mr. Shikada: In fact, yes. Suzanne Mason.
Suzanne Mason, Assistant City Manager: I just wanted to make a comment that there are union implications to a number of the recommendations that are included in the Budget, and Human
Resources has been communicating in this case with the SEIU on setting up a meeting, and we’re required to meet per our labor obligations on any changes to our working conditions or
wages, hours, working conditions, so I want you to know that will be required and that meeting is being planned right now.
Council Member Wolbach: Okay, so I guess the next question is on this, were there any other options looked at in order to achieve the flexibility. It seems a little bit odd if one person
goes on vacation and everything has to shut down. I mean, can’t we plan, you know, when one person is going to take a vacation or another, at least try to coordinate like that, just
to make best use of the people on staff?
Mr. Abendschein: With one heavy equipment operator assigned to each crew, there’s no, vacation planning doesn’t help you in that situation. There’s only one operator assigned to each
crew. We don’t have an extra operator.
(crosstalk)
Mr. Abendschein: I guess that’s not entirely true. We do have one operator who has some flexibility to move away from their work. They can only move away once or twice a week, and so
you still have some limitations the rest of the week.
Council Member Wolbach: Okay, and you also mentioned here, something about job development opportunities. Can you tell is any more about, as part of the explanation for why we’re making
this change? One was the flexibility that you just discussed, the other was the job development opportunities. Could you elaborate on that please.
Mr. Abendschein: Yes, so this also provides some ability… One of the things that we’re looking at is trying to make sure that heavy equipment operators who are looking to move up and
take a leadership role are able to gain the pipefitting skills that are really needed to guide and teach the apprentice and lower-level pipefitters on the crews, because you do have
a mixed crew. So this provides a pathway for that as well.
Council Member Wolbach: Okay. And I just want to make sure that if we were, you know, if we did have someone who was cross trained in these two, that wouldn’t mean that we would eliminate
two roles to have one person doing both separate roles at the same time, it would just be, if one person is gone, somebody else could fill in. You would still have these two distinct
roles. I’m thinking about the safety issues involved in that. You know, two important and distinct roles, if one was eliminated. I just want to make sure that’s not the purpose of this.
Mr. Yuan: We’re not proposing to eliminate the other single roles. We would still have install repairers, we still would have heavy equipment operators, but we would also have this new
hybrid position, a combo.
Council Member Wolbach: Gotcha, okay. I guess this is actually kind of a larger question for the department, which is, what do, you know, just thinking about the staffing for the department,
we’re looking at four for this role and it’s obviously a huge part of our budget. What vacancies are there kind of throughout the organization and throughout the department look like,
and what budget implications might those have?
Mr. Shikada: I’m sorry, I was trying to get prepared for the answer and lost track of your question. What was it, vacancy levels in the department?
Council Member Wolbach: So if you can just give us a sense of vacancies, you know, unfilled positions and what that means for opportunities for people to move up within the organization,
and what it means for trying to bring people in?
Mr. Shikada: Sure, In general terms our vacancy level department wide is about 10 percent, within the electric it is about 15 percent. There are a couple of strategies, one of which
is perhaps to address the needs of today really, filling those vacancies being a top priority. We also have an ongoing succession planning program, and in fact, I’ll ask Dave to elaborate
on that in a minute. It has been identified through organizational assessments over the last couple of years and the need to develop career paths for our staff. So we actually have a
department-wide team that has been working on providing an overall program. In addition, I would note that we are just restarting a leadership supervision academy for the department,
which is ultimately to be rolled out City wide, but given the acute needs within the Utilities Department, we’re leading the reinitiation of that training program. So those types of
opportunities are very important for us, both near term as well as long term. So with that, Dave, could you speak to the succession planning efforts.
Mr. Yuan: Sure. So a couple of programs have been used that have been successful is like over strength positions, so when we know someone that’s retiring or planning to retire, we backfill
that person with someone else so they can have the hand’s on training with the incumbent. So usually these over strength positions are like maybe a year or less, six months to a year,
and it’s usually funded through vacancy savings. Another thing we’re trying to formulize right now is a rotation program, where employees will have the opportunity to move into a different
position and learn those skills. They would have to apply for it and go through, make sure they meet the minimum qualifications. So that’s something we’re still working on and trying
to roll out.
Council Member Wolbach: Okay, I guess, I want to make sure… I heard some reassuring comments today and I heard that, because we did have the comment from SEIU, so I’m glad to hear that
we’re talking with them about their concerns, just to make sure those are addressed. Obviously I think we’re all worried about the staffing for the organization as a whole. You know,
we’ve obviously had problems in a number of departments on worker retention. Because of the importance of utilities as service for the community, safety issues, etc., I think it is a
particularly acute area and I want to make sure that the budget that we’re being asked to tentatively approve tonight is adequate and properly targeted to address those concerns.
Mr. Shikada: Thank you. We appreciate that.
(inaudible)
Council Member Holman: I’m coming in in the middle of this so I don’t know what’s been asked and what’s not, so I’ll rely on the judgement of you all.
Chair Filseth: I wanted to ask on Page 435, down at the bottom there is a category called Equity Transfer, which has $1 million in it to increase from last year. What is an equity transfer,
what is that?
Mr. Perez: Sure, basically it’s a return on investment, so over 114, 20 years off the top of my head here, the City General Fund seeded the creation of the Electric Fund, in this case
the Gas Fund, both of them. So we have used a consultant to help us come up with a methodology that basically uses the assets for capital and a percentage of that is derived to have
a return on that investment that the general fund made. It is a methodology that has been used that is similar to Pacific Gas and Electric (PG&E) and so it provides the funding for General
Fund activities as a result of this, so we were the seed funders, we were the venture capitalists, if you will, of our gas and electric, and this is the return for that investment.
Chair Filseth: So is that, so that’s a return to the General Fund and that’s, the magnitude of that is defined by the State relative to how much PG&E has return on equity is? Is that
the thing that is?
Mr. Perez: Yeah, we tied it to the PG&E rate of return to have some comparable methodology. The study was done, I want to say about 2010. That was the last time it was revised and put
in place and every year we run through the calculation and the methodology and I believe there was an adjustment in this period.
Mr. Yuan: Right, there was a half-million dollar adjustment in FY’16 Mid-year. I think the capital assets was undervalued when they did the budget back in 2016, so the adjustment is
really half-a-million year over year. And the reason why these numbers are going up, it’s because also we’re doing a lot of infrastructure replacement, so as we do more the capital assets
value goes up.
Chair Filseth: Okay. Yeah, I noticed it’s quite different, I mean, it’s a big jump on this fund but it wasn’t on the electric fund for example, so…
Mr. Yuan: So it’s a catch up, but also because of the increased CIP work we’re doing.
Chair Filseth: Okay. And, so this is another case where the net revenues were lower than the next expenses, so there is a draw down from the reserve associated with this one as well?
If I read it right.
Ms. Nose: That’s correct. So actually, if we flip to the Enterprise Fund section of the Operating book, so Page 102, I think is where it starts, you’ll actually see a summary overall
of the Utility Fund reserves, the various reserve levels and then the recommended draws on reserves.
Council Member Schmid: What page is that?
Chair Filseth: 102 it looks like.
Ms. Nose: It starts on 102, runs through 104.
Mr. Yuan: I just want to note that last column of the table, we also have a guideline of a minimum and maximum range, so still within the range even though we’re drawing down from the
reserves.
Chair Filseth: That was all I had.
Mr. Perez: We have an answer to Council Member Schmid’s question.
Ms. Nose: So you guys had brought up earlier the discussion of the retiree medical and looking at very discretely that line increment of change. Looking at the details, there is a difference
in how the figure was reported between Fiscal Year ’16 and Fiscal Year ’17, although this one is different than what we have discussed before. As the organization has continued to refine
the capital budget process, we have to integrate the Capital Budget and the Operating Budget, and so with the Fiscal Year ’17 number shows the true actual retiree medical payment for
the Gas Fund. The Fiscal Year ’16 number backed out the Capital Improvement Program (CIP) cost center or CIP division, so to speak, of those costs and reported it in that capital improvement
line item down below in those expense categories, because it would be the retiree medical component of the capital funded positions, so depending on how you wish to kind of skin the
numbers, or slice the numbers, it is a retiree medical payment; however, it is also part of your Capital Improvement Program Budget. So in order to give you guys a more accurate reflection
as we’ve been getting into further discussions about the details of the salary growth, the retiree medical growth, all that kind of stuff, we were trying to align the figures to give
that more holistic approach as opposed to segregating the capital salary and benefit components. So that’s why you’re seeing some differences.
Mr. Perez: Just to remind you, on the Enterprise Fund, the capital program is within the funds itself, unlike the General Fund, it’s a separate item, so that’s what Kiely is referring
to as within the same fund.
Chair Filseth: Okay. Further questions and comments on gas?
(inaudible)
Council Member Wolbach: Actually, before I make a motion (inaudible) going back to this… Before I make a motion just one more question. This blended role that we were talking about earlier,
when do you think that the discussions with SEIU will commence or be concluded, if you have any sense?
Ms. Mason: They’re being scheduled before the final budget is brought to the City Council, and it’s not just that position, it’s any position reclassification changes included in the
Budget. There’s a memo that’s going out setting up, establishing the meeting with the intent that it be completed prior to, I believe your June 13 review of the Budget.
Council Member Wolbach: So that means that if there are any suggested changes or any controversies coming out of those meetings, even if we’ve already tentatively approved it here, that
would still come back to Council and be brought to our attention at the time of the full Council discussion?
Ms. Mason: Right. I just want to reiterate this. Oftentimes a budget will propose something and it may require that we meet and confer with the labor union, and we can’t proceed until
we have completed that process, so even if it’s in the budget, it may not go forward if we can’t effectively complete the process, and you may remember last year the Residential Preferential
Parking (RPP) process, we went through a meet-and-confer process and we ended up going through fact finding before we could implement the RPP program even though the City Council had
approved that and funds had been included in the budget. So I just want to share with you that there are two separate processes. One is to set up the funding and the structure, the other
is to work through the labor issues in a legally compliant manner.
Council Member Wolbach: I appreciate that. Okay, with that clarification I’ll move the Staff recommendation for tentative approval of the Staff-recommended Gas Fund.
Council Member Schmid: Second.
MOTION: Council Member Wolbach moved, seconded by Council Member Schmid to tentatively approve the Gas Fund Operating and Capital Budget.
Chair Filseth: Care to speak to your motion.
Council Member Wolbach: Nope.
Chair Filseth: I’ll speak briefly to it, which is I don’t think it’s the role of the Finance Committee to get into a work roles negotiation between the City and the labor unions. All
in favor.
Council Member Holman: I’ll abstain, since I wasn’t here for most of the discussion.
Chair Filseth: Motion carries with three in favor, one abstention.
MOTION PASSED: 3-0 Holman abstained
Wastewater Collection Fund
Operating Budget pp. 444-453
Capital Budget pp. 519-550
Mr. Shikada: Okay, two funds to go.
Chair Filseth: It’s 20 after 7:00. Lalo, your suggestion was we keep going through the Utilities, that you think we’ll get to the CIP, the Capital? Do you still want to do that?
Mr. Perez: Yes. If we hit a road bump, then maybe we could reconsider.
Chair Filseth: Okay, sounds good.
Mr. Shikada: Okay, two funds left are wastewater and water. We’ll briefly touch on the Wastewater Collection Fund. Noted here effectively our initiative for the year is focused on rehabilitation
and maintenance of our existing system in order to reduce Single Story Overlays (SSO’s). Not the SSO’s the Council is used to hearing about. In this case it is sanitary sewer overflows,
so reduce the number of sanitary sewer overflows through maintenance and preventative actions, reduce it by 5 percent per regulatory agency goals. We do show a rate increase here of
9 percent for the wastewater system, largely driven by treatment costs. Our regional wastewater water quality control plant, ongoing both operations as well as capital investments in
order to improve and upgrade its facilities. On the capital side, ongoing Sanitary Sewer Replacement Program, notable project in the upcoming year, Oregon Expressway from West Bayshore
to Middlefield in the upcoming year. With that, open for questions on the wastewater fund.
Chair Filseth: Thank you. Committee questions and comments? Council Member Schmid.
Council Member Schmid: Just a brief question. On, back on Page 446 of the Operating Budget, there are measures of service and a description and in the description make the point very
clearly that the main sewer lines have to be cleaned every 30 months, and that there is a focus on being up-to-date in doing that, but it says in almost an afterthought, that only 17
percent of City-owned laterals are checked using CCTB and the questions is, why, with modern technology, are we not getting pictures of the laterals while we are cleaning the mains?
It seems as those two tasks could be coordinated in some effective way.
Mr. Abendschein: Jonathan Abendschein, Acting Water, Gas, Wastewater Operations Manager. We’ve actually looked at this in the past. This ended up being part of what we did with the Cross
Bore Program several years back. We actually tried to inspect every lateral. Some of the problems that we’ve run into are that it can sometimes be difficult. I mean, the equipment you
use to do that is called a lateral launch camera and we have had trouble sometimes with those actually climbing the slope of certain laterals and sometimes if they require maintenance
or there is a problem with the lateral, the camera doesn’t work. Our priority right now is actually focusing more on actually performing the maintenance and replacement of the laterals,
rather than cameraing them. We have enough maintenance to keep us busy. Inspection will be our second priority and so...
Council Member Schmid: Yeah, I just naively would ask the question, when you’re cleaning the main sewer line, does it push out debris into the laterals?
Mr. Abendschein: No it doesn’t. Our cleaning methods bring the debris downstream, where it’s either collected or it washes down to the treatment plant.
Council Member Schmid: Okay, so bottom line, the technology is not there really to combine the two efforts.
Mr. Abendschein: Not to combine the two. It would have to be a separate operation. Like I said, the main itself is actually a higher priority than inspection right now.
Council Member Schmid: Yeah, but you continue to do 17 percent per year?
Mr. Abendschein: Yeah, and we are always looking for ways to improve our productivity to increase that number and increase the amount of inspection we’re doing. We have a number of things
that we’re working on that we hope will pay off in the next couple of years.
Council Member Schmid: Great. Thank you.
Chair Filseth: (inaudible) I’m going to ask. On the top of Page 447, there’s Operations and Maintenance. It goes from $11.5 million to $13.4 million. That’s like a 16 percent jump. Why
is that, because it doesn’t seem like it increased a lot in the previous years, so why is there a jump this year?
Mr. Yuan: Part of that line item includes treatment costs, so that’s a $1.2 million increase, is included in that line.
Chair Filseth: Oh, got it. That’s most of it. Okay. Let’s see, we already asked about retiree medical. On Page 448 at the top, Utility Purchase is one of the expenses. What is that?
Mr. Yuan: (inaudible)
Chair Filseth: That is the treatment… Okay. Alright, that was all I had.
Council Member Schmid: Karen?
Chair Filseth: Well, let’s see. We’re missing somebody that may have questions.
Council Member Schmid: Do you want to take a break, or should I make a motion?
Chair Filseth: Why don’t you make a motion.
Council Member Schmid: I move approval of the Wastewater Collection Fund, tentative.
Council Member Holman: Second.
MOTION: Council Member Schmid moved, seconded by Council Member Holman to tentatively approve the Wastewater Collection Fund Operating and Capital Budget.
Chair Filseth: All in favor? Motion carries with three in favor and one absent.
MOTION PASSED: 3-0 Wolbach absent
Water Fund
Operating Budget pp. 454-466
Capital Budget pp. 581-626
Mr. Shikada: Alright, thank you Council Members. And your final Enterprise Fund here, the Water Fund, just a couple of items of note. First in terms of the upcoming business plan to
evaluate recycled water opportunities, as recently as last night, Council talking about water, overall management of our supply, the upcoming work to look more specifically at the role
of recycled water being in our upcoming (inaudible). Also the upgrades for reservoirs that, as we have completed and continue to complete reconstruction, rehabilitation of our concrete
water tank, that that will be a significant undertaking for the upcoming year and let’s see, in terms of water rate increase, note the 6 percent increase largely driven by commodity
costs associated with San Francisco Public Utilities Commission (SFPUC) infrastructure upgrades that they are leading. On the capital side, simply note ongoing water main replacements
with University Avenue also being a significant project in the upcoming year. With that, I think I’ll turn it back to you for questions.
Chair Filseth: Questions and comments on Water Fund. Council Member Schmid.
Council Member Schmid: On Page 536, is that right? No, it must be 586. Yeah, I guess I want to go back to last night where we voted five-year projections on our Water Management Plan
and the projection said there would be no new service connections. So a night later we’re coming back and saying, “Oh, we want $876,000 for new service connections, customer connections.”
The text says this is for both new customers and expansion of old customers. Now that seems to imply that the water utility is preparing and looking for an expansive future and how can
we vote a water management plan that has zero new service connections?
Mr. Yuan: The $876,000 is actually the reimbursement from the customer. The expense is actually under WS80013, which is $690,000. So the reason it is higher than the expense is usually
there is a capacity charge included when they do a new development or placement, and that’s included with the connection charge.
Council Member Schmid: Yeah, but somewhere in the text it says this is for new services and expansion of existing services.
Mr. Marshall: Tomm Marshall, Assistant Director. So when it’s saying new services, typically that’s for a new home or existing homes torn down, and when that happens, they have to put
a new service in because of the fire requirements for residential homes now, so we have to upgrade from a one inch to a two inch, but they typically call that a new customer, we call
it, but it’s really just a replacement of an existing service with the larger size. The only time there would be any new water service is if a brand new development goes in, something
like the Stanford Project that’s going in now, and I don’t think there’s a lot on the books right now for new services out there.
Mr. Shikada: Also just to, perhaps, add on, based on last night’s discussion, I think the figure we were referring to is net total number of customers, so to the extent, as Tomm just
pointed out, it’s either an existing customer or replacement of an existing customer, then that would be within that figure. We did have a chance to speak a bit today among staff as
to trying to reconcile those figures and we do believe that it may largely be related to the multi-family, which would not increase the number of customer connections or accounts, which
is really the figure that we were referring to, but we’re still working on finalizing that confirmation.
Council Member Schmid: I guess I’m struggling with the issue of how much water is flowing through the system and we know there are 150 new dwelling units on average per year added in
the City, and we know that there are, what, 250 new jobs added per year, and each of those uses water, so it seems that if the water management plan was using the fact that there was
no new, net new connections to say there would be no new net demand for water, and it seemed, this number seems to not quite agree. Okay, I just wanted to make that connection.
(inaudible)
Council Member Schmid: Let’s see, on Page 458 of the Operating Budget, you are asking for water main replacement $6.3 million, but under the workload measures, under percent of miles
of water mains replaced, it says, well zero or one percent. Those numbers are very small historically. Is there something dramatically new going on in 2017 that leads to the large number,
$6.3 million for water main replacements.
Mr. Yuan: I think those figures just reflect the timing of the project. So when they’re in design phase it’s zero percentage. Once the construction is completed, that’s when we actually
note the percentage done.
Council Member Schmid: So would the $6.3 replacement be equivalent to, what, a little under one percent of the total?
Mr. Yuan: Roughly about one percent.
Council Member Schmid: Okay. Let’s see, I guess there are 2.5 new positions being created, 2.9 full-time. Can you talk a little bit about why the utility, during a time where they’re
conserving and the water use is going down, is increasing staff?
Mr. Yuan: So overall headcount we’re not actually increasing or decreasing. This is a reallocation of staff from other utilities. Because of the drought and the Water Recycling Plant,
we have reshifted some of the staff’s responsibilities to the Water Fund, so we’re moving from either electric or gas or wastewater to the Water Fund. So it’s just a reallocation of
Full Time Equivalents (FTE’s) percentages.
Council Member Schmid: Yeah, I guess where is the connection where gas fund person could move over to water fund.
Mr. Yuan: I think that’s more from the resource management side, so instead of some of the long-term planning, they are doing more of the drought initiatives. The focus is on that area,
and also the recycling plant.
Council Member Schmid: Oh, so the long-term drought has drawn more of the professional staff.
Mr. Yuan: Right, and next year you might see a shift back, depending on the situation, the conditions, and their duties.
Council Member Schmid: Okay, that’s helpful. Thank you.
Council Member Holman: I think just one question, which, I know we have a new reservoir, we relined, if you want to call it that, another reservoir recently. What do we still need to
do on seismic work for our reservoirs?
Mr. Batchelor: Dean Batchelor, Assistant Director of Utilities. So we actually have two more reservoirs we’re actually working on. In last year’s budget we were able to look at relining
and putting a concrete shock creek on the outside and doing only two of those because we ended having to replace flooring and also the ceiling portions, so now we’re actually in the
process where we need to replace two more. They’re pretty much at the end of life at this period of time.
Council Member Holman: Where are those?
Mr. Batchelor: That’s Dahl and Monto Bello.
Council Member Holman: I’m sorry.
Mr. Batchelor: Dahl and Monto Bello. So they’re up in the hills. They are a one million gallon tank and a 1.5 million gallon tank that we are looking to rehab again at this time.
Council Member Holman: I could (inaudible) a little bit on the one that was problematic. Did that get resolved? I will just say, did that get resolved because there was some question
about who was responsible for what work? Wasn’t that the one last year?
Mr. Batchelor: No, I think that might have been, was the Anderson Pacific? Oh, El Camino.
Council Member Holman: It wasn’t El Camino.
Mr. Batchelor: I don’t know. I would have to look into that and see which one that is.
Council Member Holman: Okay, thank you.
Chair Filseth: I sort of had one, so I noticed that in the adjustments it looks like there are nine reclassifications. Is that right, did I read that right? I’m on Page 464 and 465.
Did I count that right?
Ms. Mason: They’re the same ones you were looking at in the other funds. They just support both funds, so the explanation is repeated and so you have the similar consolidations that
we just spoke of.
Mr. Perez: If you look at Slide Seven of your packet, we list that there are 11 reclassifications, the cost is $177,000.
Chair Filseth: I was looking at that actually. Sorry, please go ahead.
Mr. Perez: Then we spread it among the four funds.
Chair Filseth: So, on 464 and 465, this is for multiple funds, not just water?
Mr. Perez: It’s their proportional share of the… So they look at the positions and figure out how much work is going to be allocated to the fund and then they assign it accordingly.
So this could vary from year to year, depending on the activities.
Chair Filseth: So total staff in the Water Fund is 48, right, so nine out of 48 is 19 percent. Is that an accurate picture or am I… Do we still have apples and oranges here?
Ms. Nose: I didn’t catch that. Can you repeat that for me.
Chair Filseth: It looked to me like 19 percent of the department is being reclassified, but are you saying that’s actually not correct because they are sort of apples and oranges here?
Mr. Yuan: Yeah, we’re only reallocating about 2.9 FTE’s. If you look on Page 462, regular FTE’s and there hourly as well.
Chair Filseth: Okay.
Mr. Yuan: So the net of that nine you see is 2.9 total.
Chair Filseth: Okay. Thanks.
Council Member Schmid: Move tentative approval of the Water Fund.
Council Member Wolbach: Second.
MOTION: Council Member Schmid moved, seconded by Council Member Wolbach to tentatively approve the Water Fund Operating and Capital Budget.
Chair Filseth: Care to speak to your motion or second?
Council Member Schmid: No.
Chair Filseth: All in favor? Motion passes. Thank you very much.
MOTION PASSED: 4-0
2. General Fund Capital.
Buildings and Facilities, Capital Budget pp. 95-176
Mr. Perez: We’ll need to shuffle staff here for a second.
Chair Filseth: Okay, back to you folks.
Kiely Nose, Budget Manager: So we’re going to move on to the General Capital Fund, so this is item, I think, three on the agenda and we have Brad here with us.
Brad Eggleston, Assistant Director of Public Works: Good evening Chair and Finance Committee. Brad Eggleston, Assistant Director of Public Works. Kiely and I will be kind of tag teaming
this presentation, but I’ll start off. Before we begin describing the projects programmed over the next five years in the CIP, I’d like to quickly highlight some of the significant accomplishments
in the current fiscal year. So this year has seen the completion of several long-awaited projects, most importantly, I think, the El Camino Park Restoration Project, but also the Rinconada
Pool locker room and also the first phase of improvements to traffic signals at Embarcadero Road and Town and Country. In addition, in the last month, the Traffic Circles Improvement
Project that rebuilt and landscaped five existing traffic circles was completed. We reached a key milestone on the Public Safety Building Project with the selection of two California
Avenue parking lots for the Public Safety Building and the new California Avenue area parking garage, and then lastly, significant progress has been made this year on design work for
new bicycle boulevards and enhanced bikeways to implement the bike and pedestrian transportation plan with Council approval of seven concept plans for those. Council also approved the
concept plans for the Charleston/Arastadero Corridor Project which was a big accomplishment in the CIP. Now all of those projects are able to move towards final design and construction.
Another area of accomplishment is the continued improvement in condition of the City streets that we have been talking about for several years. So the Fiscal Year ’17 allocation of $6.8
million is more than triple the amount that was allocated before the City set its goal of dramatically improving street conditions, and with the enhanced level of funding, we’re now
expecting to reach that original Fiscal Year ’20/’21 goal of an average pavement condition index for a Pavement Condition Index (PCI) score of 85, which represents very good to excellent
conditions two years earlier, in Fiscal Year 2019. Our current PCI score of 82 is now the highest of all the 16 Santa Clara County jurisdictions and I think with next year’s progress
we’ll be coming close to taking the lead with San Mateo County as well. As we approach the 2019 goal, the five-year CIP now reflects a reduction to a $3.8 million annual budget beginning
in Fiscal Year 2020. We’ve used our street condition modeling software, Street Saver, to model the conditions and so our estimate is that this is the level of funding that will allow
us to maintain the 85 PCI average once we’ve attained it. Now I’ll turn it over to Kiely.
Ms. Nose: Okay, so we’ll go through some of the numbers here briefly. To start, in totality the Fiscal Year ’17-’21 CIP has 211 projects, so that’s all funds and you can see that makeup
amongst the capital improvement funds, the enterprise funds and the internal service funds. Tonight we’re focusing on those capital improvement funds, which is your General CIP Fund
as well as the Cubberley Fund. So looking at the five-year plan for that specific subset, the five-year plan is a $269 million plan and you can see that the largest component of that
is Building and Facilities, which is about 45 percent and the second component would be Traffic and Transportation investment of 23 percent or $61 million. Now there’s been a lot of
discussion over the course of these budget hearings of our investment in infrastructure, and so you can kind of see that as we look over the last three years at the five capital improvement
programs and this, again, lends to the comments earlier of, we look at this on an annual basis. So even though there are five years in here, things change, priorities are adjusted and
so every year we come back and relook and propose a new investment. So compared to Fiscal Year 2016/2020 CIP, which was a total of $251.6 million, this year’s CIP plan is about seven
percent higher for $269 million. Okay, looking at, let’s just focus on Fiscal Year ’17, there are 79 projects in Fiscal Year ’17. Again, the majority of them are Building and Facilities.
Once we look at the count of projects as opposed to the dollar value of projects, you’ll see Parks and Open Space is the second largest percentage trailed by Traffic and Transportation.
So of the total projects in our CIP, $71.9 million is budgeted or recommended to be budgeted for Fiscal Year 2017 with the three major pieces of Building and Facilities, Parks and Open
Spaces as well as Traffic and Transportation, you can see that streets and sidewalks component dwindling just as Brad had mentioned, as we reduce and meet that PCI goal about halfway
through this CIP. So what’s funding that $71.9 million? The biggest component is your infrastructure reserve, which is about $23 million or 32 percent of the sources for your Fiscal
Year ’17 budget. The big component of this is a carry forward of 2,016 projects that are incomplete and are moving forward, being reappropriated or anticipated to be re-appropriated
to Fiscal Year ’17 to continue activities associated with them. The next component would be your general fund transfer. So this transfer of $21 million, or 29 percent of your sources
has a base transfer of $13 million. The other $8 million is the Transient Occupancy Tax (TOT) components, so that would be the 2 percent additional as well as the new hotels. So how
are your revenues and expenses and infrastructure reserve doing? So let’s focus on the blue line and the red line. The blue line is your infrastructure reserves, so you can see the values
of 11.6 going down to $3 million in Fiscal Year ’19 and back up to $8 million in Fiscal Year ’20/’21. Our goal is never to get below the red line, which is the $3 million mark, given
the volatility of construction costs, anything unforeseen, we try not to dip below there. And you’re seeing the kind of cash flow as we go through and you’ll notice that in Fiscal Year
’19 the big investment is the Public Safety Building. I will turn it over to Brad again.
Mr. Eggleston: We’ll talk a little bit about the City Council Infrastructure Plan. That plan was the highest priority in our development of the proposed five-year CIP. As you know, and
see listed here, the $129 million plan provides funding for several numerous high-profile projects, including the Public Safety Building, the two new fire stations, bike bridge funding,
parking garages, Charleston/Arastadero Corridor and a couple of others. These projects are all accounted for within the capital improvement fund beginning last year and they’re spread
throughout all five years of the CIP. A new addition to this year’s capital budget is that we have incorporated a $30 million infrastructure contingency reserve that you see on the bottom
of this slide. That brings the total available funding for the Infrastructure Plan to $159 million, although that, as a reserve, has not been allocated into individual projects at this
time. And then before moving on to the new projects that are included in the Capital Improvement Program, I wanted to talk briefly about the implementation of the Council Infrastructure
Plan. We had a study session with the Council back in December of last year where we talked about the status of the plan and based on our review of the resources needed to successfully
implement the plan and the feedback we got from Council at that time, early this year we released a request for proposals for a program management services to assist with the plan implementation
and we selected Nova Partners as the firm to help us with that. You may be familiar with Nova. They have been very effective in assisting the City with construction management and some
of the planning before construction on a number of successful projects that we’ve listed here, the most recent of those being Rinconada Library and the El Camino Park restoration construction.
So our plan is to bring a program management contract with Nova to Council for approval in mid-June. A little more on that, the proposed contract with Nova will have a cost of about
$4 million and that would be over a three-year period and it will include assistance with the overall management and tracking of the $129 million program, including assistance with tracking
budgets and schedules for all of the projects, procuring and managing design consultants for the projects, doing design and constructability reviews to help us keep within budget and
then also assisting and reporting the status of the infrastructure plan implementation to the Council and to the public. It’s also going to include construction management services for
some of the upcoming Planning Department transportation projects that are going to have construction coming very soon and where they need that help. It would be structured so at the
City’s discretion we could add construction management services when the other large infrastructure plan projects reach the construction phase. The bottom of the slide there, the overall
goal of why we’re doing this, we want to ensure that we have on board the support and expertise that we need to have a successful and transparent implementation of the infrastructure
plan, paying particular attention to maintaining our scope, schedule and budget as we implement the projects. So on to new projects, this slide outlines the most significant of the new
projects proposed in the CIP that have funding actually in Fiscal Year ’17, so I’ll kind of bounce around with them a little bit, but funding for the Bayland’s Boardwalk Improvement
Project and for the City Hall’s four and five remodel work was actually transferred to the Capital Improvement Fund as part of the Fiscal Year 2015 budget closeout and is now being put
into the actual projects. The addition of the railroad grade separation and downtown mobility and safety improvements projects help to address Council priorities related to mobility.
The Mitchell Park Adobe Creek Bridge and the Bayland’s flood protection levy improvement projects are ones that help to address current and also future health and safety concerns and
the Civic Center electrical upgrades and Electric Vehicle (EV) charger installation project will allow the City to accept grant funding that we can use to install new electric vehicle
chargers, I think about 43 of them in City parking garages, including the Civic Center garage. It’s also important to note that some of the potential impacts that aren’t accounted for
in the proposed Capital Budget that we’re looking at, so we wanted to point those out. These things include expected increased costs for the golf course reconstruction project which
is currently out to bid and we will have those bids before long, the purchase of the Post Office, and then downtown parking-related projects that are proposed in the budget to be funded
with future revenues from the University Avenue parking fund. The parking fund as it stands cannot currently support those expenditures and to support them, increases to parking fees
would be required.
Chair Filseth: Can I ask a quick question, as long as we’re on this slide? Did I hear you correctly, in this budget we’ve got, it shows $10 million for golf course reconstruction, so
you’re talking about in addition to the $10 million, is that what that means?
Mr. Eggleston: That’s correct.
Chair Filseth: Okay, thank you.
Mr. Eggleston: And then to touch on some of the Infrastructure Blue Ribbon Committee (IBRC) terminology that we’ve been talking about in the capital budget, this slide illustrates the
progress that we’re continuing to make in addressing the catch-up backlog of projects that was identified in December 2011 by the Infrastructure Blue Ribbon Commission or IBRC, the proposed
capital budget continues addressing the scheduled keep up needs that we had worked to put together, while also addressing a few additional catch-up projects, and the net result is that
since the IBRC’s report in 2011, the catch-up backlog has been reduced, as you see here, from $41.2 million and that $22.4 million figure is actually incorrect. If you look, 22 plus
21 is not 41, so the correct figure that should be here is that we’ve reduced that backlog to $19.7 million. So we’ve reduced it by more than half, which is a real accomplishment. Then
addressing another key IBRC recommendation that we’ve been discussing, and interdepartmental team is working now on the implementation phase of the new Infrastructure Management System,
or IMS, that is going to be used to plan for, track and report on capital maintenance of the City’s general fund infrastructure, and with the work we’re doing now, the IMS will be in
place this year and should be ready for us to use it for preparing next year’s capital budget. Then, last slide, touching on the Cubberley Property Infrastructure Fund, in Fiscal Year
2016 this fund was created as a result of the revision of the lease agreement with the Palo Alto Unified School District, about $1.8 million is now being transferred each year from the
General Fund to this Infrastructure Fund for general maintenance and for improvements to the Cubberley facility until such time as the Cubberley Master Plan has been completed. So in
this 2017 Budget and five-year capital CIP, $4.5 million is budgeted with $2.5 million of that being in Fiscal Year 2017. You can see those listed here and I won’t go through them in
detail, but there’s some additional funding for the masterplan that will begin this year. There’s a new project to add a permanent restroom facility at the Cubberley playing field. We’ve
established a reserve fund for some future improvements. We’re continuing with roofing work. And then the other new project that’s been added, this Cubberley’s repair project is meant
to address some of the more minor short-term things we can do to work on safety and aesthetic-type issues at Cubberley. That concludes our presentation and we’ll be happy to take your
questions and comments.
Chair Filseth: Let’s see. Lalo, we’ve been sort of going through these, at least with the Utilities, we went through sort of clause at a time. How do you want to do the capital? Do you
want to do Buildings and Facilities and Parks and Open Space and so forth, or do you want to do it all at once?
Lalo Perez, Chief Financial Officer: Since it’s all General Fund, with the small piece of the Cubberley not being the direct General Fund, I think we can cover them all at once. We were
just trying to break out where they were, in case you wanted them segmented for questions, but we can take it as a whole.
Chair Filseth: Okay. (inaudible)
Council Member Holman: I have a number of questions, so from my perspective it would be easier to do them by section, just to keep… Yeah, okay.
Chair Filseth: Let’s see, you don’t want to go through these one at a time, do you, because there’s like a huge number of them. You know, we’ll be here till midnight if we do that, because
we’ll all want to talk about each one, won’t we.
Mr. Perez: Yeah, I think we tried to give you the new projects. Obviously there’s some changes to some of the existing projects and we probably should have a discussion about your, the
IMP, the plan and any challenges that we face, at some point we should have that discussion. If you want to start with an overview discussion of that, that would be fine, whichever way
you would like.
Chair Filseth: Well, why don’t we start and let’s see how we get after the first couple of these. Want to do that? Council Member Holman, you said you had a number of these. Let’s start
with Buildings and Facilities.
Council Member Holman: I do, and some of them are just simple ones and I think we all should say thank you, because obviously accomplishments are huge and we’re appreciative of that.
So, thank you for that. So a simple question, it’s kind of after the fact too, but on 101, the Bayland’s flood protection levy improvements, it just mentions Architectural Review Board,
Planning and Transportation. I just want to make sure Parks and Recreation (Rec) had their hands on this.
Mr. Eggleston: Certainly, we’ll add that to the adopted budget.
Council Member Holman: Thank you. Do you want me to just go through the questions I have, or does anybody else…
Chair Filseth: Why don’t we start with yours and maybe we’ll chime in. I wonder if maybe we’ll chime in on each one, so if you bring up one and maybe we should comment on it, as opposed
to you ask your questions and somebody else asks the same one ten minutes later.
Council Member Holman: That sounds reasonable. Page 107, two things, one is at the very bottom it says, project specific to have a possible exemption from California Environmental Quality
Act (CEQA), Lucy Stern Community Center. It might not be exempt from CEQA, it’s an historic building. But then, and this goes to 2019, but it’s Municipal Service Center (MSC) Building
B. For a long time we’ve talked about replacing that building, so there are certain things in here that talk about MSC improvements, but we’ve talked about replacing it, we’ve talked
about, and there has been a study that showed like how much space they really need, so I guess I’m a little concerned about continuing to plow money into a facility that we may be replacing.
Can you update us?
Mr. Eggleston: Well, a couple of years ago there were plans in the works for doing that study of the entire Bayshore Corridor and looking at potentially rebuilding or repurposing for
auto dealerships or that sort of thing, the MSC. Since then, we no longer have that study funded and the plan has been to move forward with some of the long-deferred improvements to
the MSC, so in this CIP and also in the CIP last year, in addition to this work at the MSC, there’s also a project for lighting and electrical and mechanical upgrades to the buildings,
and there’s also a project for roof replacements on all three buildings.
Council Member Holman: Perhaps Council Member Schmid will remember, because he’s been around even longer than I on the Council, but I certainly remember the auto dealership and potential
relocation and such, but I thought it started prior to that and it was just a consideration of there being a replacement building. Perhaps I’m wrong, it goes back a ways, but what you’re
saying is there’s no consideration now of replacing this building?
Mr. Eggleston: There are not current plans for doing that. Back in the time that the IBRC was doing its work and the Infrastructure Committee was meeting and coming up with the Council
Infrastructure Plan, we had a place-holder project, something on the order maybe of $90 million to rebuild the entire MSC and it was decided to not try to pursue that, and that’s why
the strategy now is to essentially do the work to continue the life of these buildings.
Council Member Holman: I think most of us thought $90 million was not a number we liked either.
Council Member Schmid: Yeah, if I could just jump in, my understanding was that was to take a look at the whole compendium of buildings from the Animal Shelter through the Municipal
Services Center, around Embarcadero and Mings’ Hotel and the auto dealerships, and there was some notion of making a deal and a trade for the auto dealerships would move out to a more
prominent place, and give us enough money to rebuild the Municipal Services Center somewhere else. I think we’ve moved beyond that. Ming’s and the auto dealers have gone off on their
own. I guess the animal shelter building…
Mr. Eggleston: I would just add, that was essentially the scope of the study that was to be done.
Mr. Perez: So from the auto dealer issue, the pressure that the dealer, one specific dealer had is no longer there, so they’re continuing to operate the way the model is, and we’re still
reviewing the Animal Shelter facility and that’s something that Staff is going to come back to you with an update later.
Chair Filseth: There’s another item here on the MSC, but I gather that on this one, actually a fairly small percentage is in the MSC, is that right? It looks like card access doors.
Mr. Eggleston: Well, it’s one of the three MSC buildings.
Chair Filseth: Okay.
Council Member Holman: Okay, my next one is, and there are three of these, if I remember correctly, in here too. It’s like City Hall, floor three remodel and (inaudible) I’m not necessarily
opposed to these, but I am a little sticker shocked. For instance, this one is $440,000 and I know you guys don’t have to take this, but we have to face the heat for how much money is
being spent on refurbing City Hall. So I’m just a little concerned about, I’m sure you got estimates. I hope you got more than one estimate, I imagine you did, but it’s a lot, $440,000
for third floor remodel.
Mr. Eggleston: Well, this is a Staff-generated estimate, so it’s based on a layout. It’s based on working with the department to look to see what updates and changes they’re wanting
to make and then coming up with an engineer’s estimate of the cost of the work.
Council Member Holman: How many square feet are we looking at?
Mr. Eggleston: It’s a remodel of the entire floor. Each City Hall floor is on the order of 6,000 square feet, I don’t have the exact number in front of me.
(inaudible)
Council Member Holman: (crosstalk) It’s 115, I’m sorry.
Mr. Eggleston: It also includes furniture, furnishings.
Council Member Holman: What’s that per square foot? You’re quick with the math.
(inaudible)
Chair Filseth: That would be $73 a square foot.
Council Member Holman: Okay, we’ll see if anybody else has comments on that. They’re not all in, well they are in order, so City Hall floor four (crosstalk) is the next sheet and it’s
$350,000 and the floor five is $400,000, so maybe we can take all three of those at the same time with questions.
Chair Filseth: Yeah, I was going to ask, and I would actually add there’s a fourth item here which is the one after it, which is garage lighting, replacement with light emitting diode
(LED) lighting downstairs, which is $225,000. I mean, there’s a couple of ways we could look at it. I mean, we could ask, “Gee, what could you do for $200 instead of $400.” I mean, we
could do that. The other thing we could ask is, you know, “Could you do two of the floors this year and the other two next year,” for example. I mean, so, a comment on that kind of dialog?
Mr. Eggleston: Well, I would say these are very preliminary budgetary numbers, but they are commensurate with the costs we’ve seen on the remodels that have been done to other floors,
so in proceeding with the work and the Staff time that we’re going to spend on the design and construction, we would kind of like to do the full project. The one other thing I’d add
is that while we’ve shown them here as individual projects, our intent is to try to implement them in a coordinated fashion where, hopefully, we would use one designer and then almost
definitely we would try to bid them out as one sequential project, so that we get the benefits and efficiencies of doing a larger project. So that’s kind of what we would lose if we
were to break them into multiple years.
Council Member Holman: And where are the design costs captured?
Mr. Eggleston: The design costs are part of this funding. It says construction. I’m not sure why that is, that’s not accurate. That funding should be a mix of the design and construction.
Chair Filseth: Yeah, I hope the rest of the Committee is going to weigh in on this. Let me finish my comment first and then pass it. I think the function of the parking lot this year
is sort of not to say are we going to do this or not do this, but to answer the questions, “What if we wanted to not go into debt this year?” I mean, it’s more complicated than that,
but what if we wanted to not go into debt? What would that look like? You know, what would we have to give up in order to do that? So as we look at these projects, that’s sort of what’s
going through my mind is that, you know, it’s not that we do it or don’t do it, it’s more like we sort of stick it in the list of help us figure out, what do we have to do not to go
into debt? Council Member Schmid.
Council Member Schmid: We’re talking about what, a million and a half dollars for City Hall, and we have been doing piecemeal upgrades starting in the basement, this floor, the mezzanine,
the eighth floor and others, and my feeling is, we’re talking about a building that’s what, 45 years old. We are maintaining its workability and rebuilding it so we’ll have another 30,
40 years. The feedback I’ve gotten from the places that have been redesigned is space is much more usable and more effective for the technology-oriented city we’re trying to be, and
I think the numbers for me look well in line with the benefits that we should get from it. So I guess don’t see this as being a problem in getting the ground floor redesign.
Council Member Wolbach: I’m a little bit of two minds on this. I was leaning in the direction that you were starting to head on maybe this goes to the parking lot. I think I’ve been
persuaded by Council Member Schmid’s comments. I think the important thing here is, just with any major project, very high level of concern for the community and for us, I think all
on Council, is just making sure that the timeline and especially cost stay in relative line with what’s anticipated at the outset when we give the green light. I think, for me that’s
the big concern, is that the numbers we’re looking at here end up being the numbers. If that’s how they stay, I think the benefits to staff effectiveness, the effective use of the space
and the, you know, the quality of life for our employees makes it probably worthwhile. I’m not really inclined to send it to the parking lot bit I’ll listen if there are any more thoughts.
Council Member Holman: So for me, I’m sensitive to… Where’s that talking coming from that’s in the background? It just keeps coming. If somebody could take care of that. Sorry, it’s
a little bit of an annoyance. I’m sensitive to Council Member Schmid’s comments and work environment is important and a positive and well-designed work environment can actually increase
productivity, so I’m certainly not opposed to that. It’s as, as Council Member Wolbach said, it’s just big numbers and I’m also a little sensitive to how much backlash we got for other
City Hall improvements that were made in the last couple of years, year and a half, two years, so let me sit on those while we go through the rest of this.
Chair Filseth: I thought, the argument, I’m sensitive to the issue that Greg brought up. The argument going through my mind is, do I want to have a chance to weigh this against Human
Services Resource Allocation Process (HSRAP) funding versus burning down the reserves versus tree trimming, do I want to have a chance to put those in priority order. So that’s the issue
that’s sort of going through my mind. And I’m sensitive to the argument that, well if we push one or two out to next year, it’s going to cost twice as much. Well, that’s a problem too,
so that’s sort of what I’m grappling with now.
Council Member Holman: Thank you John. The Parking Garage LED lighting, it looks like that’s kind of a wash. Now we do have those members of the community that are sensitive to transfers
from the parking permit fund, so has there been any meeting of the minds on, for instance, this transfer. I haven’t heard it questioned, but there is some sensitivity.
Mr. Eggleston: This was actually a project that was approved in last year’s CIP and I believe that the transfer has already occurred, so I’m not aware of any issues.
Mr. Perez: There are issues with the wayfinding project, the $600,000.
Council Member Holman: Yes. Electrical upgrade and EV, which is pages 122, 123, we are all supportive of, I mean, it’s another big ticket item. So a couple of questions about this. Revenue
from other agencies. What other agency is that?
Mr. Eggleston: That’s the Bay Area Air Quality Management District. If I could add a little more about this project, the piece of it that’s the electrical upgrade was already scheduled
in the five-year plan for a later year, either Fiscal Year ’18 or ’19 and what we’re proposing here was to move it up so that we could leverage grants that we’re expecting to get from
the Air Quality District and be able to have the electrical infrastructure in place to add EV chargers to the Civic Center garage. Other than the $350,000 cost for the upgrades, we’re
anticipating that almost all the rest of the $300,000 would be reimbursed through the grants.
Council Member Holman: So is there a reason, though, we wouldn’t move this out to next year when we have the grants in hand?
Mr. Eggleston: We expect to have the grants in hand this coming year, now. The smaller of two that we’ve applied for has already been approved and we’ve been told by the Air Quality
District Staff that they will be recommending approval of the second.
Council Member Holman: So it won’t be 2018 when we get the $220, it will be 2017?
Mr. Eggleston: They have a repayment clause essentially where there’s, I forget, if it’s a one or two year time period under the format of the grant before they make the rest of the
repayment.
Council Member Holman: And the grant application was for the switch gear and motor controls and did it also include the EV?
Mr. Eggleston: The grant application is solely for the EV chargers. The other pieces are what had been scheduled already for the future year in the CIP.
Council Member Holman: Okay, anybody else on that? Maybe a little bit of more explanation on 128, 129, Facility Interior Finishes Replacement, it’s a half a million dollars.
Mr. Eggleston: The half a million dollars that’s shown there for the coming fiscal year is mostly reappropriations of funds that were already budgeted in previous years. This project
has an ongoing funding amount that varies, usually between $150,000 and $200,000 per year. So these are funds that have been budgeted and not yet spent.
Council Member Holman: Okay, I would note though that some of the, for instance, third floor is reference here quite a bit. The improvements to the third floor are not reflective of
some costs that are captured in this item, like carpet, right?
Mr. Eggleston: Right, so the third floor remodel project that we were just discussing had been approved in the Budget last year as a component of this project, but since we were also
talking about doing work on the fourth and fifth floors, we decided to pull that out and not have it be part of this project, but instead let it stand on its own so that we would show
all three of those projects. So in the discussion here what you’re seeing is just the fact that we’ve essentially pulled back $440,000 that had already been appropriated into this project,
to propose it in that independent project.
Council Member Holman: Okay, again, just a comment, 144, 145, just again, Lucy Stern Building Mechanical and Electrical Upgrades. I don’t really have a comment there. Here’s another
of the MSC projects, and another of the MSC projects.
(inaudible)
Council Member Holman: Go ahead.
Chair Filseth: As long as we’re on these pages. MSC project on Page 148, $1.4 million. What if we took a third of that and moved it to 2018, would that be a huge hardship?
Mr. Eggleston: I’m sorry, I couldn’t hear the question.
Chair Filseth: The MSC project on Page 148, it’s $1.4 million. What if a third of that were pushed out to 2018? Is that a huge hardship?
Mr. Eggleston: I don’t think any one-year delay in a portion of that project would have significant infrastructure type results. The issue we could have is that it’s starting to be designed
and to be designed as one project. We’re hoping it would go out to bid as a single project. So the only issue we could have is that if we managed to finish design in this coming fiscal
year and wanted to go out to bid, we might not have all the funding available.
Chair Filseth: What if you did design this year and construction next year? I’m sorry, go ahead.
Council Member Schmid: It would seem to make sense to talk about that and the next one as well, municipal roofing replacement of $1.9 million. You can’t do electrical improvements and
lighting just before you put a roof on.
(crosstalk)
Mr. Eggleston: I think with either of these, if we had design in one year and construction in the next, it would not be an issue.
Council Member Holman: Can I add one piece of the puzzle here too, I did have a note here which is, transfer from Utilities Administration Fund, transfer from vehicle replacement and
maintenance, that’s on 151 and on 149 it’s transfer from vehicle replacement and maintenance and vehicle replacement fund. They seem like strange sources of funding for these kinds of
projects.
Mr. Perez: That’s a good point and that’s what I was going to point out. If we look at 149, you see that the capital improvement or the General Fund is paying roughly half of the project
costs in ’17, $773,546 on the top, so the way that it’s allocated is based on the tenants. You recall earlier when we talked about rent, so whoever is the tenant pays for the improvement
costs, their proportionate share based on the space that they’re using.
Council Member Holman: Well, that makes perfectly good sense. I just don’t understand why it’s coming from vehicle replacement and maintenance funds.
Mr. Perez: We have the shop out there and the staff and their equipment, and so they benefit from the improvements.
Council Member Holman: So the maintenance and repairs are done at that site.
Mr. Perez: For all the locations, correct.
Council Member Holman: Okay, that helps. Thank you.
Council Member Schmid: So, Eric, your idea of parking lot, it’s a parking lot then for each of these funds, not necessarily for the General Fund?
Mr. Perez: That’s correct. So what I’m trying to figure out where you were going is if the concern is the work or the funding source, so you want to look at the funding source if your
concern is about reducing or maintaining some level of cost control on the General Fund side, then you want to look at the funding sources to determine where that’s coming from.
Chair Filseth: Does that work?
Mr. Perez: I’m sorry.
Chair Filseth: Does that actually work?
Mr. Perez: We actually do those transfers from those funds to accumulate the total project.
(inaudible)
Mr. Perez: We do it based on the proportional share of their expense. It’s not just a free for all.
Chair Filseth: So the high-level question I want to ask is, given that a big chunk of the funding for infrastructure comes out of the General Fund, if we were to split a project like
this into design in 2017 and construction in 2018, then in this 2017 budget do we save money out of the general fund?
Mr. Perez: Yes, so for this particular project on the MSC, if you were to do some change, it’s roughly the 50 percent ratio for the general fund side.
Chair Filseth: Got it. So then, I was leery of touching anything having to do with roots, but if you were to do that, a combination on 148 and 150 is like $3.4 million, so if a quarter
of that were design, for example.
Mr. Perez: For example, on the MSC lighting on 149, the design is 366. Roughly 50 percent of that belongs to the General Fund.
Chair Filseth: 50 percent of, in construction, 50 percent of that belongs to the General Fund as well? Right, so we would save in the General Fund, 50 percent of the construction if,
for 2017, if we moved it to 2018.
Mr. Perez: You would be deferring it so it would be a deferral, and then we would have to see how construction costs escalate or not.
Chair Filseth: Escalates, that’s true. Okay.
Council Member Holman: Do we have any leaking issues at the MSC currently? I mean something being near the end of its life doesn’t mean it’s leaking, so are there any leaking issues
or simple patches.
Mr. Eggleston: I’m not aware of any current issues. I think there have been over the years and they’re repaired on a spot by spot basis when that sort of thing occurs.
Chair Filseth: I’m tempted to put the construction on both of these into the parking lot when it comes time for motions. It doesn’t mean we’re not going to do them, it just means they’re
going to go into the priority hopper. (inaudible) the 148 and 150, MSC Lighting, Mechanical and Electrical Improvements and also A, B and C Roof Replacement.
Ms. Nose: Can I just ask a clarifying question. When you guys are saying that you want to put these in the parking lot or the implications of deferring the project, is there, are you
guys trying to see if we need to reprioritize projects within the Capital Fund or are we looking at reducing, potentially, that $21 million transfer from the General Fund to lower our
draw on general fund reserves, or maybe both?
Chair Filseth: I think we’re talking about reducing, may be both. I was going to say, certainly reducing the draw from the General Fund.
Ms. Nose: Got it.
Chair Filseth: And then the other one (inaudible).
Council Member Holman: Okay, Lalo, could you remind me on the Downtown Parking Garage, 154, 155, there’s a transfer from the Stanford University Medical Center Fund of $9 million, and
I look to our long-term Council member too, to help remind me on this. That must surely be one of the allowable uses or identified uses for that fund, but I just want to, when I was
reading this I could not remember.
Mr. Perez: Yes, it is. We had several projects that we could have put it under, but this fits within the allowable expenses of the Development Agreement.
Council Member Holman: Because it was for infrastructure, correct?
Mr. Perez: Correct.
Council Member Holman: Okay.
Chair Filseth: Council Member Schmid. Comment?
Council Member Schmid: Yeah, the California Avenue parking garage is an important and a big one, and it is timely, but what I do not see here is a major contribution by the parking district,
the parkers, the developers. There is the in-lieu fees that have been collected, but for California Avenue (Cal Ave) they’re very small and it seems to me, you know, this is for the
general use of businesses in the Cal Ave area and there should be a clear mandate of them participating in the funding. I don’t believe we’ve reached an agreement with them.
Mr. Perez: The funding mechanism that we proposed to you is that we would use, we would do the garage and the Public Safety Building and would finance it with certificates of participation
and the debt service would be paid with the revenue that’s been earmarked, I’ll call it, from the TOT tax increase from 12 to 14 percent and from the new hotels. So those revenues are
going to be accounted for and transferred. For ’17 they’re $8 million earmarked for these type of projects for these two in mind, and we recommend to you that we use 70 percent of that
to do the debt financing, and the reason is, as we discussed before, if there is a downturn in the economy, we want to make sure that we have the ability to make those payments, so I
guess one way to look at it is that these revenues coming from the hotel tax are the drivers of the debt service payment.
Council Member Schmid: Yeah, and I guess you’ve already made the case that we have likely underestimated by a substantial amount the cost of the items on the infrastructure, and here
is one which is most clearly identifiable as the responsibility of the businesses in the area and those businesses are increasing in size and scale and there should be some direct way
of tapping them on the shoulder and saying, this is an essential ingredient to your participating in an expanding economy, and this is our one chance as a Council to identify that. So
of all the items here under debate, I would think this would be the one that…
Chair Filseth: So what would you suggest doing?
Council Member Schmid: Well, you talk about parking lot. I think the funding of this in the parking lot for a Business-Based Tax makes a lot of sense. It’s Page 152.
Chair Filseth: So essentially what we’d be doing is, does that essentially mean we delay the Cal Ave parking garage for a year pending a resolution (inaudible) the funding issue.
Council Member Schmid: Well, initiate a discussion about the funding issue so it does not come out of the General Fund Stabilization Reserve. The next page talks about the downtown parking
garage and the same thing would apply there, so it is time to have a discussion.
Council Member Holman: I don’t think we can prioritize, I should say, I don’t know how we would prioritize the downtown one over the California Avenue one, because the California Avenue
merchants and such have been waiting for a very long time for a garage.
Council Member Schmid: Yes, and that is prioritized because this is on the 2018 Budget, construction of the downtown is on the 2019.
Mr. Eggleston: Can I add a point, when there’s a moment?
Council Member Holman: Yeah, I was just wondering if it was the Chair’s question about scheduling, yes.
Mr. Eggleston: I just wanted to speak a little bit to the Cal Ave garage. You know, both of these garages are part of that Council infrastructure plan that had the funding and expenditures.
On the Cal Ave garage, in particular, because of the site selection for one of those two Cal Ave surface parking lots for the Public Safety Building and the adjacent one for this garage,
with the Public Safety Building being the top priority in the Infrastructure Plan, and the fact that we won’t actually be able to break ground to construct it until the Cal Ave garage
is completed, this one with respect to schedule is really kind of our top priority of everything right now as we move forward.
Council Member Holman: And there are a lot of people who would be glad to hear that. There is also, and I don’t know where this is going to go, but there’s also the desire, at least,
for more parking spaces in the garage, but you probably know that.
Mr. Perez: I guess what we’re saying is we believe that you already approved the plan and gave us direction as a policy, so I guess if you wanted to revisit that, that’s the discussion
you’re having. From our perspective, Council gave us the direction to go forward with this.
Chair Filseth: This is complicated. You know, I hate to delay any part of the Infrastructure Plan because we went the voters, you know, they passed a tax increase with the expectation
that this is how we’re going to use it, so I hate to delay that. I don’t know if I’m thinking about this right, but help me think about this. If we say, okay, we’re going to push this
out while we negotiate with some of the private interests over this and, therefore, we don’t burn down the reserve as much, the general fund reserve as much, aren’t we essentially taking
some of the TOT revenue and using it for other General Fund purposes in this year, different from the Infrastructure Plan? Is that what we’re doing?
Mr. Perez: No, we are marking those funds and allocating them just for the infrastructure plan. We’re segregating them within the reserve itself.
Chair Filseth: Okay, so then we’re really not saving any money in the General Fund by not doing this, because we have to put it somewhere and we have to recognize it and we can’t say,
oh, we didn’t spend that money, or if we did it’s an accounting trick, right?
Mr. Perez: Technically you could, just to be clear, but from your policy direction and your direction to us, you told us, make sure this happens, make sure you segregate the dollars
and, you know, what we’ve been saying to you, and I think Council Member Schmid is correct, we’re saying alert, the costs are going to be probably higher. We may not have all the funding
that we think we should have. So we could go for… At some point we may have to change the list, trying to be real with you. It’s a five-year plan. We don’t always know where things are
going to go, but our recommendation to you would be based on the direction you gave us that we’re going to continue to segregate those funds and put them to the priority of your list.
Chair Filseth: I think that would be essential, so then, what we would be gaining by doing what Greg suggests, it doesn’t help us with sort of the projected deficit for 2017, but you
know, it’s potentially relevant to a negotiation with the private interests, which is, “Guys, you know, the longer you guys drag this out, the longer it’s going to be until a parking
garage.” I mean, is that an accurate statement?
Council Member Schmid: One way to think about it is go ahead with the building of the garage, which is funded through a bond or a Certificate of Participation (COP) issue and say, we
can get the revenue to pay off that COP, either through TOT and general fund taxation, permit parking or the business district absorbing some of that so that parking remains available
to low-income workers and visitors and so on. So there is a range of options in which the bonds could be repaid, so we could go ahead with our plan of let’s give the funding to get the
garage built, but let’s start the discussion now of how they will be repaid.
Chair Filseth: That makes sense to me. Cory do you have something? Do you want to weigh in on this?
Council Member Wolbach: Yeah, I really do concur that the business community should pay its fair share of major expenses in the community. My understanding is that they’re doing that
in this case through the TOT and that was the point of the TOT. There was certainly some, I definitely recall, I think we all do, some consternation from the business community about
the TOT. They were not enthusiastic supporters, at least initially. I can’t remember if they ended coming around at the end. The point of the TOT and the reason we all supported it,
those of us who were in the community at the time and those who were on Council at the time, before Chair Filseth or I joined the Council, was because this was a method of essentially
having the business community, specifically hoteliers and their guests pay for our infrastructure, so I just want to make sure we don’t lose sight of that history. You know, that was
how we got to having the funds for IBRC implementation. Unless I’m mistaken, that’s my memory of how we came about deciding on the TOT and how we got the funding to do this.
Mr. Perez: Right, it wasn’t in the ballot measure language itself, but it was discussed that it would be used for infrastructure.
Council Member Wolbach: And also, as was mentioned by Staff, this needs to happen so we can do the Public Safety Building on the adjacent lot and I, for one, certainly don’t want to
delay the Public Safety Building, and I also don’t want to delay the construction of a parking garage near Cal Ave or anything that could delay that, especially as we were talking about
doing RPP in the area in the neighborhoods nearby, which means the cars are going to need to go somewhere, so I’m very reticent to impose any delays on that process.
Chair Filseth: I think what I’m hearing is not a lot of passion to do something with the garages, other than proceed. I think that’s where we’re getting to, but you asked an interesting
question, which is, given that these things are going to be more expensive than we thought, should we be talking to the business district about sort of how those costs get allocated,
particularly the incremental costs. You know, you’ve got $30 million set aside, so how do was parcel that up? Okay, next.
(inaudible)
Council Member Holman: So yeah, so then I think we’ve already done the downtown parking garage in the same discussion, so if we go on to the new Public Safety Building, I have one question
which is, land acquisition, $10 million, that’s on Page 157. Land acquisition?
Mr. Eggleston: That’s a good catch. We should have taken that out of here. That was put into the budget before we had a site selection on City property for the Public Safety Building.
(Inaudible)
Mr. Eggleston: It’s still part of the budget for the project and we’re anticipating that we’ll need all of it and probably more, but it should no longer be shown here as land acquisition.
Council Member Holman: So you mean that the expenditure schedule still would be, it would need that $50,177 million but it doesn’t need, but $10 million of that wouldn’t be land acquisition.
Is that what you’re saying?
Mr. Eggleston: It would all be construction.
Council Member Holman: So move the 10 up to the 40?
Mr. Eggleston: That’s correct.
Council Member Holman: Okay. I want $10 million added to my account.
Council Member Wolbach: Actually this is something that applies to a lot of these projects, and the question is, as far as how we go about planning for and approving funding for a lot
of infrastructure projects, do we generally set aside or include in our budget allocations for large infrastructure projects, do we include a 10 percent or any additional basically wiggle
room, for contingency in case costs escalate. Do we do anything like that, as par for the course?
Mr. Eggleston: We typically do include contingencies. We typically don’t though, include cost escalation contingencies. Maybe we should. Usually what we do is, it’s early on, we haven’t
brought in an architect or design consultant. We’re coming up with some kind of in-house engineering estimate that might really be based on dollars per square foot and then adding on
percentages for soft costs like design, construction management, those sorts of things. And then what we’ll do when it’s very early, since we don’t have a design, we’ll just add say
a 20 percent contingency to all of that. But in reality what tends to happen is once you begin design and begin learning about all the unknown things.
Council Member Wolbach: It can use up that contingency?
Mr. Eggleston: You use up that contingency, and if you were really trying to account for other increases, like the economy changing and construction costs increasing, it’s not enough.
Council Member Wolbach: Gotcha, thanks. I always think about things like these.
Chair Filseth: So back on the fund, on Karen’s $10 million here. In addition, on the whole infrastructure project I think I see there is sort of the original tally of $126 million, and
then there’s a $30 million non-contingency pool for that as well. So if you back out the $10 million, does that really mean what we have is a $40 million non-contingency pool? I mean,
if we don’t get to reduce the contingency pool by $10 million, right?
Mr. Eggleston: It doesn’t. So it is a mistake on our part to show it this way, but when we came to you in December with the Public Safety Building site selection, and we talked about
our estimated costs for the total project, which by the way, included the garage and the Public Safety Building, those figures we were showing you were the base of that was using the
full $57 million Public Safety Building budget.
Chair Filseth: Okay. (inaudible), sorry. Please proceed.
Council Member Holman: Thank you for your indulgence here. I know this is ongoing, but 166, 167, roofing replacement. So some numbers I’m just a little staggered by. So Fiscal Year 2017,
Rinconada Pool and Rinconada Park restroom snack bar, $385,000 in 2017.
Mr. Eggleston: As I look at these figures, I can’t separate to see if that 2017 figure may include reappropriations from the prior year. Kiely is checking for that, and I don’t have
the individual cost estimates, but they are based on square footage of the facilities, so (crosstalk) just thinking of the size of those facilities, it seems a little high. I suspect
we have reappropriations in there.
Council Member Holman: Well, and compare that with 2020 Lucy Stern Community Center, which we are all familiar with, that is 2020 and that is not even $100,000 more, so I’m having a
hard time rationalizing and justifying $391,000. So is there a way that you could get back to us on that.
Mr. Perez: Kiely is looking. So if you could keep going, we’ll get you an answer.
Council Member Holman: Okay, you’ll come back to us with that? Anybody else have that concern? Okay, University Avenue parking improvements. I think there might be some comments here
from colleagues.
(inaudible)
Council Member Holman: I’ve had the mic a lot, you guys go.
Chair Filseth: You’re on a tear, go ahead.
Council Member Holman: Okay, striping and signing, electrical and there’s more stuff in here about this too, but electrical system upgrades, improved lighting, blah, blah, blah, $450,000.
I’m sorry, it is 172, 173.
Mr. Eggleston: So the question is about the $447,000 dollar amount?
(inaudible)
Council Member Holman: I want to make sure too, this is unrelated to the wayfinding? This is unrelated to that, correct?
Mr. Eggleston: This is unrelated and Kiely is looking this up too. It’s almost certain that part of that includes a reappropriation. And to your question about the roofing replacement
CIP.
Council Member Holman: About what, I’m sorry.
Mr. Eggleston: Going back for a second to the roofing replacement, out of that $384,000 you referenced that’s shown for the Fiscal year 2017 Budget, $183,000 is reappropriations from
the prior year. Which means that the amount that was planned for the Rinconada Pool facilities, reroofing is more like $200,000 including staff costs.
Council Member Holman: I’m not quite clear why we have $385,000 here.
Ms. Nose: So what happened, I want to say it was actually in last fiscal year is we changed the Municipal Code so that instead of capital projects automatically rolling over from year-to-year,
we require Staff to come back to Council to reappropriate those funds, so if there’s a delay in a project, if there’s a change in the scope, anything like that, in order to move funds
between fiscal year, we actually have to take action with you as a Council through the budget process or a memo or something like that, and so in these estimates the best way to kind
of see where reappropriations are, so those just normal business practices that are going to change between June 30 and July 1 is to look at the difference between your ’16 Budget and
your ’16 estimate, and when there is a really big gap between those numbers, of course I’ll look it up and confirm for you guys, but when you see a really big gap in those numbers, you’ll
see there has been a change in what was anticipated in your Fiscal Year ’16 activity, and in order to complete what was approved as part of Fiscal Year ’16 we need to move the money
between the fiscal years, so your Fiscal Year ’17 Budget is compounded. There is nearly $30 million worth of reappropriations in this fund alone between Fiscal Year ’16 to Fiscal Year
’17. So like Brad had said, on page 167, that $385,000, $183,000 of that is moving Fiscal Year ’16 activity funding to Fiscal Year ’17, in addition to the Fiscal Year ’17 funding for
the Rinconada Pool and restrooms and whatnot.
Council Member Holman: So does that mean that 2016 projects came in under budget or weren’t completed or…
Ms. Nose: If they were under budget and completed, we would come to you and pull the actual project budget down. That’s one of the things we do at mid-year. What this means is that the
projects are not complete. We are not able to say they are 100 percent done, return the money to the Infrastructure Reserve (IR). This means we’re still an ongoing activity, either contract
invoices aren’t done, contracts have been delayed for any number of reasons, basically, but ultimately Staff’s not able to say this project is complete and they’re moving it between
the years.
Chair Filseth: So does that mean if you go down to Rinconada Pool, like there’s demolition (demo) there and there’s guys with hammers and nails, building stuff, as we speak?
Ms. Nose: I don’t know about that.
Mr. Eggleston: No, because that’s a planned work for Fiscal Year ’17. Sorry, I don’t have the schedule in front of me, so I suspect what has probably happened here is if we went and
looked at last year’s budget, we had some things planned for Fiscal Year 2016, and we haven’t gotten to them yet, although I’m not sure, so therefore, the funding is getting reappropriated
to the next fiscal year so we can still do that work, but in these recurring CIP’s there wouldn’t always be a description of that.
Council Member Holman: I think what would be helpful is, so I wouldn’t be asking these pesky questions, is if there is a carryover, which makes sense now, if there was a note under Fiscal
Year ’17 that says, “Rinconada Pool and Rinconada Park restroom snack bar” if it said “carryover projects from 2016”, then I won’t be pestering you.
Chair Filseth: Because the real question that I think you’re asking is, okay, so if we push this off to next year, can we save some money in the General Fund this year? It sounds to
me like the answer is, it’s minimal, so tell me if this is the right thought process, $187,000 is reappropriated from last year but it’s supposed to be supplemented with $200,000 from
this year. So if we kicked it out to 2018 we might save half of the $200,000, so $100,000. Is that the right thought process?
Ms. Nose: Only if you would follow up with a corresponding reduction to the $21 million transfer from the General Fund here and then know that you would, say your base transfer is $13
million and we’re talking about $200,000, knowing that in Fiscal Year ’18 you would still have to transfer the $13 million plus the additional $200,000 we pulled this year.
Chair Filseth: That’s right, you’re pushing it out to 2018. The can’s going down the road, no question about it.
Council Member Holman: Okay, so back to 172, 173, the University Avenue parking improvements. I guess one of my questions, and this bleeds into another project somewhere down the way
too. Yeah, I guess I underlined and circled some stuff here but I don’t really have particular questions about it. Maybe someone else does.
Chair Filseth: You know, the question I was going to ask on this one was, again, I mean I gather this is mostly resurfacing and restriping, right, of at least in 2017, it’s lots O and
F in 2017 and K and C in 2018, right. So, if we did some of that, like let’s say we delayed lot F until next year, can we reduce the transfer from the general fund by some amount this
year?
Mr. Perez: We would have to see how much is new from ’17, because I know that the $82,676 is for the parking district, so I have to imagine that’s paying for O and F, so we would have
to see what the $365 is… If it’s a reappropriation (crosstalk) So it is just money that was appropriated.
Chair Filseth: Oh, by the way, since we got down this path, back on the City Hall, third, fourth and fifth floor renovations, is the design work already done and it’s just construction
that needs to be done?
Mr. Eggleston: No the design work has not begun, other than some internal Staff work, but the whole design has not begun.
Mr. Perez: Since you asked the question, if I may add a comment, the third floor, I think it was $440,000 off the top of my head, that was already transferred from the Utilities Department,
because that’s where they reside, so it’s not a General Fund. And then the fourth and fifth floors, the funding is from the ’15 surplus that you approved us to carve that out to fund
these two projects. So they’re not new transfers, it’s money that’s been allocated from those two sources.
Council Member Holman: Okay, the next stop on this ride is Ventura Building Improvements, 174. So surely something is, I’m either not catching something or something is mislabeled, because
Fiscal Year 2017 expenditures are $690,000 and if you look on 175 the design is $600,000 and the construction is $89,000 and there’s nothing else, well there’s another construction of
$40,600, so it looks like we’re spending $58.5 plus 148.5 plus 600,000 for design, but all we’re spending on construction is $90,000 and then nothing, budget was $90 and I misspoke there,
excuse me for that. I shouldn’t have repeated 58 and 148, but 90 and 89, and then in 2018 it 4600, so I don’t understand why the design cost is $600,000 but the construction costs are
really little.
Mr. Eggleston: That’s not accurate. The total cost for design and construction for this project, I think, is on the order of $700 to $750,000. These figures include staff salaries and
benefits, so without going into our software program, it’s hard to tease that out. So this shouldn’t be shown under design in that way.
Council Member Holman: So you’ll correct that before it goes to Council? Maybe you could return to us with what the numbers really are, actually. Okay, Parks and Open Space.
Chair Filseth: Should we do a motion on Buildings and Facilities?
Council Member Holman: Sure.
Chair Filseth: Nobody’s jumping up, I’ll take a crack at one. Move to tentatively approve the Buildings and Facilities Capital Budget with the exception that for the MSC projects on
Pages 148 and 150, that we allocate funding for the design to be done in 2017, but construction to be done in 2018, goes in the parking lot. Let me put that differently. Move to tentatively
approve the Buildings and Facilities budget with the construction costs of the MSC projects on Pages 148 and 150 going to the parking lot. Did I say that right?
Council Member Holman: I’ll second.
MOTION: Chair Filseth moved, seconded by Council Member Holman to tentatively approve the Buildings and Facilities Capital Budget, and to place in the parking lot the construction costs
for the Municipal Service Center Lighting, Mechanical and Electrical Improvements and the Municipal Service Center A,B and C Roof Replacement.
Chair Filseth: I don’t think I need to speak to my motion. Do you care to speak to your second? Comments?
Council Member Schmid: Yeah, if we put some of the funding or take some of the funding out of construction in 2017, does anything happen to all those transfers of funds from the Utilities
and other Departments?
Ms. Nose: Yes, they would all need to be realigned to match with the year that the activity is occurring.
Council Member Schmid: So we would not get funding from them during that year?
Ms. Nose: That is correct. You would get the component of it for the design piece, not the construction piece.
Council Member Schmid: Yeah. Is that your intention?
Chair Filseth: My intention is to try to save something from the General Fund, try to reduce the General Fund transfer, right, if we choose to do it, hopefully, without breaking a lot
of glass elsewhere in the process.
Council Member Schmid: Well, the other funds would probably be happy not to.
Chair Filseth: That’s right, the other funds save something too for this year? Again, there is a finite amount of money here. I mean, if you can’t afford a new car this year, you wait
till next year. That’s from somebody who never buys new cars, but anyway. Okay, all in favor? Motion passes with three in favor, one against. I think that’s right?
Council Member Wolbach: Opposed.
Chair Filseth: Opposed.
MOTION PASSED: 3-1 Wolbach no
Parks and Open Space, Capital Budget pp. 177-242
Chair Filseth: Parks and Open Space.
Council Member Holman: Want me to keep going?
Chair Filseth: Yeah, please. This is working good, if you can keep going this is working good.
Council Member Wolbach: I just want to point out that it’s already 9:00 PM and we were scheduled to conclude this whole group by 8:15 PM.
Chair Filseth: You’d think there were a bunch of City Council people up here.
Council Member Holman: I’m certainly aware of that, but I thought it was an ambitious agenda.
Chair Filseth: On thing, the one caveat though, I think we’re going to lose Greg at some point, right? You have a stop at 9:30 PM.
Council Member Holman: So Greg, if you’re going to be checking out at 9:30 PM is there something you want to address here?
Council Member Schmid: (inaudible)
Council Member Holman: Okay, we’ll try.
Chair Filseth: Why not try Parks and Open Space.
Council Member Holman: Okay, Art in public places, one quick question I hope, is the City, I’m sorry, 178 and 179, the City puts $50,000 a year in that. The funding for the rest of it
says Capital Improvement Fund, but we get money from, we have our 1 percent and then now it’s increased so is it really Capital Improvement Fund?
Ms. Nose: Correct. So per the Public Arts Policy, based on the calculation, the actual allocation based on the projects that are being proposed does come from essentially the IR. Am
I answering your question correctly?
Council Member Holman: So the money for art in public places, that goes into the Infrastructure Reserve Fund, the 1 percent and the 2 percent?
Ms. Nose: No, it comes from that balance, so in order to fund this project, say you had $1 million infrastructure reserve, based on the compliment of projects in a given fiscal year,
we would reduce that $10 million to allocate towards this public art project, based on the policy, the formula, the projects being proposed.
Council Member Holman: And none of this money comes from projects that decide not to do their art on their project, but want to put money into the fund?
Ms. Nose: This project doesn’t represent private development funding. These are the City projects. Am I…
Council Member Holman: Okay, so then where is the money identified then that comes from private projects that don’t want to do an art project, or maybe we haven’t had any of those?
Robert De Geus, Director of Community Services: Good evening Council members. Robb De Geus, Director of Community Services. So there is a separate fund, and you don’t see it here in
the CIP for the one percent for private development. That’s tracked in a separate cost center that was created specifically for the one percent for private construction. And understand,
the amount of money that’s being generated from that program is about $230,000 since the inception of the one percent for private development. It’s not included in this CIP here. There
is the $50,000 a year that goes to the public art program and the one percent for public construction projects.
Council Member Holman: Okay, we we’ll track the other separately, so I won’t dig into that right now.
Chair Filseth: Actually, can I interrupt (inaudible) ask a question because we can come back to it later. I forgot that I wanted to put the, propose putting the LED garage lighting in
City Hall in the parking lot. But you said something, you said it’s a wash or something like that. Can you explain what that meant.
Mr. Eggleston: Well, the funding for it is coming from the Parking Fund.
Chair Filseth: It is, okay. In that case I’ll pass on that. Sorry go ahead.
Council Member Holman: Okay, a quick comment on the…
Council Member Schmid: A quick question on the art, I guess it’s significant that the art, public art program last year spent $186,000 and this year there’s an adjusted number, maybe
$380,000. That’s a big increase, a big one-year increase. Is there a special group, committee looking at this huge increase in expenditure and how to make an impact?
Mr. De Geus: Good evening, Rob De Geus again. Council Member Schmid, that would be the Public Art Commission really manages this fund and works with Alise Demozo, the Manager of the
Public Art Program, and they’re constantly looking for new public art to put in Palo Alto. They are especially looking in South Palo Alto as I understand, but to answer your question,
it’s the Public Art Commission.
Council Member Schmid: Yeah, I guess it’s such a significant number that shows up here that I guess we’d look for something special.
Chair Filseth: Let me ask the bottom line question, I think, that you’re pointing to is, is it within the realm of possibility that we could say, “Take half of that and put it in 2018?”
I see Kiely shaking her head.
Ms. Nose: Not if you’re going to follow the ordinance.
Mr. Perez: Yeah, these are earmarked funds, so it doesn’t really help you. We do have a correction on this project that we put on the At-Places Memo in the middle of Page Two. We’re
adjusting the numbers because we had an error. Council Member Holman, we talked about the memo before your arrival, so if you look at your places, there’s a memo there and there’s an
adjustment on the figures for this particular project that we would like to, whenever you make your motion, to incorporate this change.
Council Member Holman: And you’re again referring to the art in public places?
Mr. Perez: I’m sorry?
Council Member Holman: The correction if for art in public places?
Mr. Perez: That’s correct.
Council Member Holman: Benches, signage, walkways, perimeter landscaping, 184, 185. The only thing I note there is that Parks and Recreation review is not incorporated there, or referenced
there, which it should certainly be, and also Buckeye Creek hydrology study, it seems that some public, there ought to be some opportunity for the public to comment, and so it seems
like Parks and Recreation would be the place for that to happen, but it’s not referenced here. If Staff’s okay with those? Okay, thank you.
Council Member Holman: Bixby Park completion. I’m going to refer to Greg Schmid on this one.
Council Member Schmid: (inaudible)
Council Member Holman: You’re okay with that? Okay.
Council Member Schmid: If I could make a comment on Page 182, the Baylands’ emergency access levy of spending this year to fix it, earlier in the Buildings and Facilities there was a
levy from San Francisquito South of a study for $1 million because that connects this levy, which is being fixed up, and Mountain View which is spending millions of dollars building
their levy. There is a hole between those two and I would assume that the million dollar study is to look at San Francisquito South. That’s on Page 100. Is that correct?
Mr. Eggleston: The question is, is the million dollar design effort that we’re going to do along with the Joint Powers Authority (JPA) includes everything south of San Francisquito to
the Mountain View border, is that your question?
Council Member Schmid: That’s right.
Mr. Eggleston: Yes, the answer is yes.
Council Member Schmid: Okay, I just want to make sure that gap is looked at.
Council Member Holman: Okay, Cameron Park improvements, Page 196, 197. What I noted that these are renovate safety and accessibility features, and this will make Council Member Filseth
happy, Chair Filseth happy, but I see that those aren’t planned on being, that work isn’t planned until 2020, but it does say, “Renovate Safety and Accessibility Features.” So it’s a
safety question, not a budget question. It’s when we allocate the funds to improve safety.
Daren Anderson, Division Manager Open Space, Parks and Golf: It’s not an eminent safety issue. It’s that a playground has reached the end of its life, and typically when you reach the
end of playground life, you want to address it with installing the newest equipment, which is safer than the old stuff. So there is no eminent threat from the existing playground that
needs to remedied immediately.
Council Member Holman: Okay, then just a quick comment that I’ll make is, in passing here, is, as we’re looking to redo any of our parks that we might think about at Parks and Recreation
Commission and with Staff, any feasible incorporation of some of the accessibility tools, means, whatever, that Magical Bridge Playground incorporated?
Ms. Nose: Just really quickly to interrupt, on the comment or question about being pushed out to Fiscal Year 2020, 2021. Part of that is Parks is undergoing a Parks Master Plan and so
we anticipate that all capital projects will be reassessed and refined once we have that plan in hand. So that’s part of what you’re seeing in this plan.
Council Member Holman: Okay, and Robb and Daren, you have the question about Magical Bridge Playground amenities? Okay. 204, 205 the golf course. Are those numbers up-to-date?
Mr. Eggleston: The numbers are not up-to-date. So there are a couple of different things going on. It’s really, one main thing. We’ve got an updated estimate on the construction cost
for the golf course just a couple of weeks ago, so that has not made it into here. Then the other thing is, I think I mentioned, we’re actually out to bid on the project right now and
we’ll have bids back, I forget the date, I think May 24, so very soon we’ll have updated information and know whether the bids are in line with our updated estimate, in which case we’ll
need to add additional funding to be able to award the construction contract, or maybe higher or lower than that.
Chair Filseth: What’s your confidence level we’re actually going to do this. We’re actually going to get to this this year?
Mr. Eggleston: Higher than it has been for many years.
Chair Filseth: Don’t you have sort of a small numbers kind of thing when you do that.
Council Member Schmid: Page 1204 does say, “Expected Completion Fall of 2017.” Is there any revision of that?
Mr. Eggleston: Not at this time.
Council Member Schmid: That’s still a possibility.
Mr. Eggleston: Yeah, so there’s, I believe the date is May 23rd, there will be an item with the Finance Committee to talk about updated information about the golf course. Unfortunately,
that’s the day before we actually get the bids, but this schedule here is predicated on us being able to award this contract, start the project this summer, in which case we would be
scheduled to finish in fall 2017.
Council Member Schmid: Good, okay.
Council Member Holman: Quick question, 208, 209, Hoover Park improvements, going back to the comments earlier. Here, though, we’re spending $50,000, not a big number, but we’re spending
that in 2017, so that doesn’t seem to comport with the Parks master plan comment earlier.
Mr. Eggleston: A minute ago when we were talking about the fact that we had moved funding for several projects to Fiscal Year 2021, I believe this is a project where we moved the construction
funding, but we did not move the salary and benefits portion of what had been 2017 funding.
Council Member Holman: Okay. Mitchell Park improvements on 212, same comment with all of the parks, about Magical Bridge and see what we can do, but a caveat on this is it talks about
replacement of playground equipment located along East Meadow Drive, repair, replacement of equipment and amenities throughout Mitchell Park. I don’t know specifically what that, knowing
what this is, but I just want to put out there that a few years ago, or actually several years ago at this point in time, there were, I think it was fourth graders from Fair Meadows
School who came and lobbied. Do you remember that, where you here then?
Mr. Eggleston: I wasn’t here, but I think you made this comment to us when we first proposed the project and we discussed it and added some information in this page about outreach to
the nearby schools that are provided input about the playground in the past?
Council Member Holman: Yeah, so I did see that, so it really is important because the kids love a lot of that equipment there. So, I’ll try to speed this up here. Going to Ramos Park,
again, 226, provides funding for safety and accessibility improvements, Fiscal Year 2017, $200,000. So, again, just looking for some kind of consistency in an approach related to the
Parks master plan. I don’t have anything else until we get to streets and sidewalks.
Chair Filseth: I guess your question on Ramos Park is basically, how bad a shape is it in and is it going to be a lot worse if it waits until 2018?
Mr. Eggleston: I’m sorry. We didn’t quite hear your question.
Chair Filseth: Ramos Park benches, drinking fountains, surfaces, how bad a shape is it in and is it going to be a lot worse if it waits until 2018?
Mr. Anderson: Daren Anderson with Open Space, Parks and Golf. There are elements of Ramos that need to be changed out sooner. We have funds in a separate CIP for amenities, so if that
drinking fountain fails in advance, we can go in and take care of those ones that are immediate needs in advance of this bigger CIP. But there is no large-scale element that’s going
to suffer prematurely. We’d be fine with outlying years.
Council Member Holman: And you’re not hearing negative comments from people who use Ramos Park, like “Geez, when are they going to fix this?”
Mr. Anderson: No.
Council Member Homan: Okay, alright, good to know. I’m good till we get to street and sidewalks.
Chair Filseth: Anyone else have anything on parks? Shall we make a motion?
Council Member Holman: Tentatively approve Parks and Open Space Capital Budget.
Chair Filseth: Do you want to put Ramos Park in 2018?
Council Member Holman: Yeah, with moving Ramos Park to 2018 with the, or to the parking lot.
Mr. Perez: Okay, and if you agree with us, if you could also add the At-Places Memo.
Council Member Holman: Yes, with the addition of the correction on the At-Places Memo.
Mr. Perez: Thank you.
Chair Filseth: Second.
MOTION: Council Member Holman moved, seconded by Chair Filseth to tentatively approve the Parks and Open Space Capital Budget including the addition of the corrected funding levels
for the Art in Public Spaces Capital Projects as outlined by Staff, and to place in the parking lot the Ramos Park Improvements.
Chair Filseth: All in favor? Motion passes. Thank you.
MOTION PASSED: 4-0
Streets and Sidewalks, Capital Budget pp. 243-262
Council Member Holman: Okay, Street and Sidewalks. My first one is, unless somebody has something before, Pages 254, 255, street light improvements and Lalo will probably be familiar
with this. It talks about replacing streetlight poles, pole foundations, luminaries and blah, blah, blah, and in some areas existing concrete or cast iron light poles are failing and
no longer serviceable, and this is both the commercial parts of town and some neighborhood, and I’ve never gotten real clear information about this. So there are parts of town that have
the old traditional light fixtures, poles, foundations, and there are some places in town where neighbors would scream bloody murder if those were removed, so the thing to do, and I
don’t know if it’s budgeted for or however you do this, but if there is any replacement of some of those neighborhoods and areas of downtown… People would like cringe if we replaced
the light fixtures on University Avenue for instance. Christmas Tree Lane is another part of town where people would cringe. There has been some replacement on Ramona Street Historic
District, which really very much detracts from that neighborhood. So this just seems like a blanket, we’re going to go replace anything that isn’t functioning well without any consideration
of design, context, blah, blah, blah. And I’ve never gotten a good response, or clear response on how this is being addressed, other than, we’re just going to replace things that aren’t
working.
Mr. Eggleston: Right.
Council Member Holman: Sorry to be so blunt on that, but it’s been a long frustration.
Mr. Eggleston: That’s okay. So my understanding is that it’s the Utilities Department who goes and actually does these replacements, but in the discussions I’ve had with them, there
has been a lot of talk about what to do to match the existing that’s in the neighborhoods, and I think probably we could add some language to make that more clear in this project, if
that’s a concern.
Council Member Holman: It is, and even if there’s repair versus replacement for, like the ones on University Avenue, Christmas Tree Lane, Ramona Street Historic District, blah, blah,
blah. So, if colleagues are okay with that? Okay, good.
Chair Filseth: Comment from Council Member Schmid.
Council Member Schmid: Yeah, let me just jump in on a couple. Page 256, Street Maintenance. This has been one of the first things that came out of the TOT and has been enormously successful.
I note that our pavement index is now leader in Santa Clara County and will soon be the leader in the Bay area, and I do note that the spending is projected to go down in 2017 by $4.5
million and then drop again in Fiscal Year ’20. Is that correct that we are downsizing our effort in that?
Mr. Eggleston: So I think you referenced a large drop from Fiscal Year ’16 to Fiscal Year 2017?
Council Member Schmid: Yes.
Mr. Eggleston: That’s because the Fiscal Year ’16 Budget included reappropriated funds, so over the last few years our budget has been fairly consistent at about $6.5 to $6.8 million
per year, although there may have been some reappropriation between years that ends up showing as a particular year looking higher. But essentially we’ve had this about $6.5 million
a year for three years, including Fiscal Year ’17, and then we’re starting to drop after that.
Council Member Schmid: Okay, I guess the question is, is this an item that may be in the parking lot if we needed an extra $500,000 for something, it might be appropriate to slow the
number of miles.
Mr. Eggleston: So I’ll just say from my point of view, as it’s my shop that’s doing this work, as we were working to try to make the CIP balance out, originally in Fiscal Year 2020 we
were still continuing the $5.1 million budget and we were not reducing the $3.8 million until Fiscal Year 2021, and we said we would give it our best shot to try to still meet the goal
using the Fiscal Year ’19 higher funding and then going to maintenance mode in 2020. So, I’d be nervous about trying to take more out of the project prior.
Council Member Schmid: I guess, though, at the parking lot we’re talking about making tough choices, and as the City Manager started the discussion, “Gee, we don’t have enough money
to do more than one RPP.” Is being able to do two RPP’s worth the difference between an 84 and an 83 on our index, of which we’re in the 98th percentile. So that’s my question on there
and maybe you can talk about that later. One other point I want to make. I do have to drop out. On Page 286, on the Traffic and Transportation side, there is a mid-town connector and
I think there is due to be a presentation to the Council on this in June. Is that right?
Mr. Mello: Good evening, Joshuah Mello, Chief Transportation Official. Yes, we have a presentation scheduled for June 20th. (crosstalk)
Council Member Schmid: Because this does say that there is spending on construction in 2016 and 2017 and it’s completed in 2017, so I don’t think there’s been any construction spending
as yet.
Mr. Mello: So that funding is actually part of the study funding and the reason there’s no funding shown past 2017 is this project has been merged into the bicycle and pedestrian plan
implementation CIP. There’s a notation to that effect on Page 286. And that’s happened with a couple of our projects.
Council Member Schmid: Okay, but there will be a Council discussion on June 20th?
Mr. Mello: Yes,
Council Member Schmid: Okay. That will take care of my questions. Thank you.
Chair Filseth: Are we getting close to a motion here or do we have a ways to go?
Mr. Shikada: Chair, members of the Committee, if I might ask for a time check, since I understand we’re going to lose Council Member Schmid, is the Committee’s endurance to keep pressing
on, and if so, to what time? We do have Staff here for a number of other items.
Chair Filseth: Lalo, what are our options if we continue?
Mr. Perez: Sorry, just to be clear, continue which part?
Chair Filseth: Well we have Staff here, we have a lot of Staff here. If we don’t do it all tonight, what are our options to revisit it?
Mr. Perez: We had, we would have to try to squeeze it all on Monday, I guess.
Council Member Holman: If I might add, just… I was just checking in with the Chair, your question is timely, and his opinion at least, and mine, I don’t know about Council Member Wolbach
since Council Member Schmid is leaving, is that we thought we could blow through Four, Five and Six pretty quickly.
Chair Filseth: Since we’ve seen those all already.
Council Member Schmid: Do you need those approvals?
Mr. Perez: We do. They’re part of the budget process.
Council Member Schmid: I’d be happy to stay 10 minutes (inaudible)
Chair Filseth: To do those three? (inaudible) Do we need you here to do them?
Council Member Schmid: No. (inaudible)
Council Member Wolbach: So I also think that Items Four, Five and Six can be dispatched with fairly quickly and I’m also hoping that the last couple of items on, components of Item Two
we can get through pretty quickly. So my hope is that we can be done by 10:30. That’s a little bit beyond what we were scheduled. We were scheduled to go to 10:00. I think it’s reasonable
to think we could be done by 10:30 if we’re disciplined, by 10:00 is probably not going to happen.
Chair Filseth: Or sooner. Yeah, I think… I hope we can impose on you to stay a little longer, because I don’t think we have a lot of good options if we don’t power through tonight.
Mr. Shikada: I’ll ask Staff to prepare to dispense with their presentations and be ready for questions, if that’s the Committee’s pleasure.
Chair Filseth: We can do that. Thanks Greg.
Council Member Holman: Thank you Greg. So I’ll make a Motion to tentatively approve the Streets and Sidewalks Capital Budget with…
Chair Filseth: Wait a second Greg. Go ahead. Greg, can we borrow you for a second. We’re going to make a motion here so can you, can we take one more minute?
Council Member Holman: Okay, motion is to tentatively approve Streets and Sidewalks Capital Budget with street lights on Pages 254, 255 to add the comments indicated earlier that language
would be added to the description “to preserve and repair at sensitive locations and settings”, and also put this one in the parking lot to see if we might distribute half of that funding
to 2018.
Mr. Perez: I’m sorry, which part was changing the funding?
Council Member Holman: Streetlights improvements, 254.
Chair Filseth: So what’s the right way to do this? The question is, can we push half of it into 2018, so is the right way to do it to put the whole thing in the parking lot or to put
half of it in the parking lot? Or does it matter?
Mr. Perez: I think most of it is a reappropriation, so we’re just going to push money from ’16 to ’18.
Chair Filseth: It’s mostly a reappropriation?
Council Member Schmid: Could I ask a question on that? If you specifically say, let’s do something with lighting or streets, are those people able to flexibly move into other activities
that are beneficial and efficient?
Mr. Perez: These are Electric Fund staffing, so the General Fund pays them for their work and material, so they would have to redistribute them accordingly.
Chair Filseth: It sounds like we’re not going to… Since the reappropriation sounds like it’s not going to have a lot of impact.
Mr. Perez: Correct, it’s not part of the $21 million new transfer.
Council Member Holman: Okay.
Mr. Eggleston: Can I make one comment. I’m sorry. It’s just that on the streetlights improvements, my memory is failing me a little bit, but I think we have a project coming up that’s
supposed to use a significant piece, maybe $150,000 of this funding in the near future, so on this particular one it might be a bit of a concern if we didn’t have the funding in Fiscal
Year ’17, we could be short funding for emergency repairs.
Council Member Holman: And when we put our heads together we didn’t notice it was reappropriations. Okay, so it’s just adding that language. Okay.
Chair Filseth: Second.
MOTION: Council Member Holman moved, seconded by Chair Filseth to tentatively approve the Streets and Sidewalks Capital Budget and add the following language to the description of the
Street Lights Improvement Project: “to preserve and repair at sensitive locations and settings.”
Chair Filseth: All in favor? Passes. Thank you very much. Thanks Greg.
MOTION PASSED: 4-0
Council Member Schmid left the meeting at 9:41 PM
Traffic and Transportation, Capital Budget pp. 263-30
Chair Filseth: I’ll chime in, but why don’t you, you can drive. Where are we? I don’t even know what page we’re on.
Council Member Holman: Okay, Page 272, Traffic and Transportation, page 272, Downtown Automated Parking Guidance Systems, access, controls and revenue collection equipment and there’s
nothing budgeted for 2017, it’s all 2018, so if we end up just punting on this one tonight, are we committing ourselves to like, that’s what we want to do in 2018? Hi Josh.
Mr. Mello: Hi. So the intent with this was to use revenue from, if and when the City elects to move forward with paid parking downtown, we would use the revenue from that to fund this
project. That’s why it’s not funded until 2018, because we’re currently doing our Downtown Parking Management Study, which will wrap up later this year. And then we assumed about a year
of planning and design work.
Chair Filseth: But if we don’t fund it, we don’t have to do it next year? We’re not locking in to spending that money next year? It will come up again next year.
Council Member Holman: And while you’re standing there, could I ask another question. Paid parking, are you talking about meters?
Mr. Mello: Yeah. Some type of fee collection equipment, could be meters, could be electronic, could be pay-by-phone. That’s what we’re currently studying with the downtown parking management
study.
Council Member Holman: So, I’m not aware that the Council has actually weighed in on whether we want to do meters or what we want to do, so I don’t know how much time we want to spend
prior to that.
Ms. Nose: So to that exact point, that’s one of the reasons why we actually recommended to put this project out in Fiscal Year ’18, because in order to fund it we not only need to look
at how we would generate the money, but then, you know, actually get those structures in place to generate the money and then actually execute the project.
Council Member Holman: Okay. Thank you. I think the mobility and safety improvements I think are okay. The Downtown Parking Management Study implementation, that’s, I’m noticing that’s
also 2018, so we don’t really need to talk about that much now, but it was a little bit hard to discern the difference between the prior item and this one. Downtown parking wayfinding.
Chair Filseth: The Council already voted on that, right?
Council Member Holman: Downtown parking, yeah, I asked at the very first when we began this, like even if the Council has voted on something, that if we wanted to make changes there
was a recommendation that affected the budget that we could do that. That’s what I understood from Lalo.
Chair Filseth: Isn’t that picture, isn’t the picture on this page the way that Chop wants to do it, but (inaudible) didn’t want to do it?
Mr. Perez: Yeah, this one, I apologize Council Member Holman, but I’m not sure if you saw the presentation, maybe you did, but these two projects, the one you just mentioned, the downtown
automated and the Downtown Parking Management Study, are the two projects that we’re saying the impacts are not included, so they’re still, we have to get policy decision, directions
and the funding plan, so it’s one that’s just a placeholder.
Council Member Holman: Even for this one, even though it has $632,000 indicated to spend this year? Page 279.
Mr. Perez: Now you’re moving to the downtown parking wayfinding, so that one does have a transfer of $600,000 from the University parking permit fund, and this is one that Mr. Keenan
stated that the Parking Committee was not pleased with the size of the expense for this project.
Council Member Holman: I think he also had some issues about the legality of it, so I don’t know if that’s ever been resolved.
Mr. Perez: Our attorney is no longer in the front row.
Mr. Shikada: I could speak to that. I am not your attorney, but that said, Molly and I have talked extensively about this (crosstalk). For clarification, the funding source here is the
permit issuance, not the Parking Assessment District. I know there can be some confusion between the two, but the City has looked at the ability to use the permit revenues for the purpose
of this project.
Mr. Perez: You have a lot of discretion on this. This is a fee. You could increase the fees from $460 to $800 and use them for any General Fund purpose.
Chair Filseth: We could use this for anything, right?
Mr. Perez: Right. The strategy the Staff has recommended to Council and that Council has obviously supported the Parking Committee Group is to try to focus in on the downtown parking
area. But it’s not by law, it’s by just policy. So to Ed’s point, on the assessment district, what we collect from the assessment district has to be used for the debt service of the
parking garages and that is very clear. There is law here, you’re the trustees of that. There’s no such body for the parking fees for the University. You don’t have a trustee role, it’s
a general fund monies that you as a Council oversee like any other General Fund money.
Mr. Mello: And in regard to this specific project, the downtown parking wayfinding, we did receive guidance from Council to proceed with design and construction of this wayfinding system,
and that’s currently the tack we’re taking.
Council Member Holman: I was referring back to a comment that was an early question that I asked Lalo about, moving funds around even if Council had previously given direction, because
of da, da, da. So my question is, that $600,000, could it be applied to like say next year, could it be applied to funding for downtown automated parking guidance systems?
(crosstalk)
Mr. Perez: The answer is yes. You have the discretion. There’s $1.2 million in this fund as a balance, so you have more money there, obviously you don’t have enough to take care of all
the projects, because they’re significantly higher as we stated, but you have that ability to repurpose the funds, short of any policy direction you already provided.
Council Member Holman: Okay, thank you.
Chair Filseth: Do you want to put this in the parking lot?
Council Member Holman: Yes. Okay, then Packet Page or Binder Page 284, 285, if I can recall my questions here. Oh, yeah.
Chair Filseth: Just real quick before you go on. We’re sort of tearing through this fast, which is appropriate, but Cory, just stop us, right, if you want to weigh in, just stop us.
We don’t want to tromp over you.
Council Member Holman: Okay, this is the 101 Bicycle Overpass Project. I’m assuming, Council Member Wolbach, you’ll yell or throw something at us. So I guess I was a little, okay 2017,
$338,000, ’18, $331,000 and then construction not until 2019, and then the description talks about completion of CEQA and National Environmental Policy Act (NEPA) documents and designs
anticipated to begin in spring of 2016. I thought for the prior designs, I mean, one of the big long delays, which is like almost a couple of years is because we were going through the
CEQA and NEPA evaluations before we could begin that design competition, so I guess, why are we doing this again, it seems like?
Mr. Eggleston: We were, at that time preparing a lot of reports that are required by Caltrans for the NEPA process, but because we never had an actual design those could not be completed,
and we always still had the full kind of process once there was a selected design in place, ahead of us.
Council Member Holman: Yeah, this is one, because we have, you know, far be it from me to want to spend more money faster, but this has been a long-awaited project and we do have basically
$6.5 million in the funding, so is there anything not possible to anticipate, moving this to 2018 instead of 2019?
Mr. Eggleston: We’re going to discuss this in more detail actually with the full Council on Monday evening. It’s on your Action Item Agenda because we’re going to bring the design contract
and an aspect of that is the schedule, but essentially we have a very detailed schedule that is updated and actually extends somewhat even beyond this timeframe.
Council Member Holman: Extends beyond this timeframe?
Mr. Eggleston: By a few months.
Council Member Holman: Okay, I haven’t gotten to that packet item yet, so I haven’t read it yet. Packet Page 292, 293, RPP. I was a bit taken aback in looking at this, because we’ve
got, you know 26, we’ve got $370,000 let’s say, 27, $330,000, 2018, $31,000, 2019 nothing, 2020 nothing.
Ms. Nose: So as we were developing this budget in all honestly we did go round and round a little bit on this. What you’re seeing is the two RPP’s that you guys recently approved and
rather than anticipating what was going to happen over the course of the five-year CIP, we left it without any figures until we had further direction on if we want to establish four
or one or whatnot, given the discussion of scaling as we increase the number of RPP’s and what that means. So realistically, your Fiscal Year ’17 funding is just for the two that you
guys recently approved, the implementation costs of them. And the staffing costs in Fiscal Year ’18 are just the residual trail out.
Council Member Holman: Okay, and then going to 298, transportation and parking improvements, miscellaneous, neighborhood traffic (inaudible) improvements, including neighborhood traffic
studies and parking improvements. I’m sure these are different, but very related to RPP, because one could certainly argue that having RPP is going to improve a lot of these conditions,
but I guess I’ll just make this comment. So going forward maybe the funding sources could be blended or something of that nature. I think that is, yeah, that’s all I have in this. I
just realized I forgot something going back. I made myself a note here but, it would have belonged under Buildings and Facilities, so my apologies for that. I made a note here and it
was actually in the presentation, Post Office was mentioned, funding for Avenidas, I didn’t see anything accounted for that, and what we should allocate. We can come back to that, but
I totally didn’t refer to my note here.
Mr. Perez: For the Post Office, we’re looking at coming to the Council late June, one of the last two meetings. We’re trying to get final determination and come to you on that, so that’s
the status on that. The Avenidas, Robb might need to help me on the date, but my recollection on the funding is you had given us direction to use $2.5 million from the community impact
fees, and then to find the other $2.5 million, if that’s what you are referring to, the City contributions.
Council Member Holman: That is what I’m referring to, but I didn’t find it in here anywhere.
Mr. Perez: We just are holding the funds within the Development Impact Fee for Community Services. We haven’t created anything until we get further along in the project.
Council Member Holman: Okay, I think we’ll want to make that note when we go to Council, about those, well we will already have been there for the budget, so I guess we’ll have to make
note of those two things. So I can approve Traffic and Transportation Capital Budget tentatively with putting, the downtown wayfinding project, okay, putting downtown parking and wayfinding
in the parking lot.
Chair Filseth: Second.
MOTION: Council Member Holman moved, seconded by Chair Filseth to tentatively approve the Traffic and Transportation Capital Budget, and to place in the parking lot the Downtown Parking
Wayfinding Project.
Chair Filseth: Question?
Council Member Wolbach: So tell me again on why we should put it in the parking lot? I’m just seeing the parking lot getting pretty full and I don’t know how much wayfinding we’re going
to have there.
Council Member Holman: Just looking to see if there are other places we might want to allocate that funding or part of it.
Council Member Wolbach: We need three votes to pass anything, right?
Mr. Perez: To put it in the parking lot you decided to carry last year’s, as long as two of you agree it goes in the parking lot, parking garage now.
Char Filseth: All in favor? Motion passed apparently.
MOTION PASSED: 2-1 Wolbach no, Schmid absent
Cubberley Infrastructure, Capital Budget pp. 305-324
Council Member Holman: Cubberley, we’re almost getting there.
Chair Filseth: I only had one thing on Cubberley, do you? Well you go.
Chair Filseth: The one question I had was, on Cubberley was, we’re going to put $1 million in reserve pending the completion of the Master Plan for Tennis Court Resurfacing and stuff
like that? Is there any particular reason we shouldn’t move that to 2018, given that the Master Plan isn’t completed?
Ms. Nose: In reality, the whole fund is a reserve, so they are sequestered regardless, whether we put it in a budgeted reserve or they sit in the fund balance.
Chair Filseth: Do the funds that go into the reserve come out of the General Fund or do they come from someplace else?
Ms. Nose: No, these are dedicated funding specifically for Cubberley.
Chair Filseth: That was my only question on Cubberley.
Council Member Holman: I’m good. My only comment, actually on Cubberley is on Page 313, again and it goes to there is so much, you know, sports field, that sort of thing here that it
needs to go to the Parks and Recreation Commission. Where’s Robb, agreeing. Okay.
Chair Filseth: Move to tentatively approve the Cubberley Community Master Plan, sorry. We really tromped over Cory. Yes please.
Council Member Wolbach: (inaudible)
Chair Filseth: Oh, I thought you had a comment. Move to tentatively approve the Cubberley Infrastructure Capital Budget.
Council Member Wolbach: Second.
Council Member Holman: With the addition that the Cubberley Community Center Master Plan would additionally go to the Parks and Recreation Commission.
Chair Filseth: So moved, so appended.
MOTION: Chair Filseth moved, seconded by Council Member Wolbach to tentatively approve the Cubberley Infrastructure Capital Budget and to recommend the Cubberley Infrastructure Master
Plan go to the Parks and Recreation Commission for Review.
Chair Filseth: All in favor? Motion carries.
MOTION PASSED: 3-0 Schmid absent
Ms. Nose: So before we move on, really quickly to I think clarify something that we got ourselves a little tangled in in public art, I think I understand your question now. Your question
was the developer private side of the public art as opposed to our internal policies, we have a separate fund for that, so in your Operating Budget under the special revenue funds, you’ll
actually see the Public Art Fund, and that’s where the private developer funding goes through, whereas the capital project that you see budgeted here is specifically for the projects
budgeted within the general CIP City capital projects, and that 1 percent there.
Council Member Holman: I’m sorry, so where would we see that other, I’m sorry?
Ms. Nose: If you look in your operating proposed on Page 115.
Council Member Holman: On page what?
Ms. Nose: On page 115. So you’ll be able to see the difference between the two.
Council Member Holman: Thank you.
4. Utilities Advisory Commission Recommendation That the Finance Committee Recommend the City Council Adopt: 1) Resolution Approving the Fiscal Year 2017 Electric Financial Plan and
Amending the Electric Utility Reserves Management Practices, and 2) Resolution Increasing Electric Rates by 11 Percent Effective July 1, 2016 by Amending the E-1, E-2, E-2-G, E-4, E-4-G,
E-4 TOU, E-7, E-7-G, E-7 TOU, E-14, and E-16 Rate Schedules, and Repealing Rate Schedules E-18 and E-18-G.
Chair Filseth: Next. Thanks very much folks, everybody that stayed for this. Thanks Brad.
Ed Shikada, Assistant City Manager: Well, let’s see, the next item I believe is Electric Rates and as noted earlier, why don’t we dispense with the presentation, unless the Committee
would like that, and get ready for questions. (inaudible) Eight sentences, let’s see what those eight sentences are.
Council Member Holman: He prepared the presentation, after all.
John Abendschein, Acting Water Operations Manager: Alright, good evening Finance Committee members. I’m Jonathan Abendschein. I’m talking to you as a rates analyst here. Just really
briefly summarizing the Staff report, we’re proposing to raise rates by 11 percent on July 1 and we’re projecting a 10 percent increase next year and then minimal or no rate increases
after that. The rate increases are due to increases in operational and CIP costs, which you discussed earlier tonight, and it’s also more largely resulting from increased transmission
and generation costs, as renewables come online and statewide transmission costs increase. We would have spread the rate increases over more years so they didn’t have as much of a single-year
rate impact, but the reserves have been drawn way down due to increased generation costs related to the low hydroelectric generation we have been seeing due to the drought. So since
this is our first rate increase since 2009, we performed a Cost Service Study to make sure costs were assessed fairly to all customer groups. The Cost of Service Study found that some
groups, such as the residential group, are going to need higher increases and others need lower increases. The Cost of Service Study (COSA) also examined rate design, and although we
tried to stay as close as possible to the existing rate designs to try to keep things simple, we are proposing four significant changes to ensure cost justification. First, we’re proposing
changing residential rates from three tiers to two, adding a minimum charge for all customer classes, eliminating the EA team municipal rate, as we have for all other utilities previously,
and then charging the general fund for street lighting services just as we charge other agencies to provide street lighting services. So that’s our proposal and all the other impacts
are discussed in a lot more detail in the Staff report and I’m available for questions.
(inaudible)
Chair Filseth: Move to tentatively approve.
Council Member Holman: I’ll second.
Chair Filseth: All in favor? I’m sorry, question?
Council Member Wolbach: Are we looking for a tentative approval here or actual approval.
Mr. Perez: Yes a recommendation to Council. This is not tentative on this one. So you’re good.
Council Member Wolbach: So let’s amend the motion to be recommendation to Council.
Chair Filseth: How would you like us to say it?
Mr. Perez: (inaudible) Staff and Utility Electric Commission recommend that the Finance Committee recommend to the Council approve adopted Resolution Attachment A for the electric utility
reserve management practices and approving the Fiscal Year 2017 Electric Financial Plan and adopt a resolution Attachment D amending the rate schedules E-1, E-2, E-2-G, E-4, E-4-G, E-4
TOU, E-7, E-7-G, E-7 TOU, E-14, E-16, E-18, E-18-G.
Chair Filseth: Repealing rate schedules E-18?
Mr. Perez: Yup.
Chair Filseth: So moved. We make Lalo do all the hard work here.
MOTION: Chair Filseth moved, seconded by Council Member Wolbach to recommend the City Council:
Adopt a resolution amending the Electric Utility Reserve Management Practices and approving the Fiscal Year (FY) 2017 Electric Financial Plan; and
Adopt a resolution amending Rate Schedules E-1 (Residential Electric Service), E-2 (Small Commercial Electric Service), E-2-G (Small Commercial Green Power Electric Service), E-4 (Medium
Commercial Electric Service), E-4-G (Medium Commercial Green Power Electric Service), E-4 TOU (Medium Commercial Time of Use Electric Service), E 7 (Large Commercial Electric Service),
E-7-G (Large Commercial Green Power Electric Service), E 7 TOU (Large Commercial Time of Use Electric Service), E-14 (Street Lights), and E-16 (Unmetered Electrical Service) and Repealing
Rate Schedules E-18 (Municipal Electric Service) and E-18-G (Municipal Green Power Electric Service).
Chair Filseth: Second?
Council Member Wolbach: Yeah, I’ll second. I just wanted to make sure it was clear we are repealing rate schedules E-18 and E-18-G.
Chair Filseth: All in favor? Motion passes.
MOTION PASSED: 3-0 Schmid absent
5. Utilities Advisory Commission Recommendation That the Finance Committee Recommend the City Council Adopt: (1) Resolution Approving the Fiscal Year 2017 Gas Utility Financial Plan;
and (2) Resolution Increasing Gas Rates by Amending Rate Schedules G-1 (Residential Gas Service), G-1-G (Residential Green Gas Service), G-2 (Residential Master-Metered and Commercial
Gas Service), G-2-G (Residential Master-Metered and Commercial Green Gas Service), G-3 (Large Commercial Gas Service), G-3-G (Large Commercial Green Gas Service), G-10 (Compressed Natural
Gas Service) and G-10-G (Compressed Natural Green Gas Service).
Ed Shikada, Assistant City Manager: Next up we have gas. Eric Keniston.
Eric Keniston, Senior Resource Planner for Utilities: Good evening Council Members. Eric Keniston, Acting utilities Resource Manager. So in gas we are proposing an eight percent rate
increase for gas rates. The last time we had a rate increase in gas was July 2012. If you remember back to last month, gas is in sort of a similar boat as water and wastewater, where
revenues are currently below expenses and we have a track to try to bring those back up. Rate stabilization reserves will be totally utilized by Fiscal Year (FY) 2017. One thing that
we have noted is that gas bills have been lower. They have been lower for the last few years. They continue to be low. We don’t know how much lower they will go. Hopefully, it gets cold
sometime, one of these winters. The other reasons for rate increases are continuing operations costs and we do have some additional costs related to cross bore expenses allocated within.
For future years increases of seven to nine percent. I believe that actually encapsulates most of the major points of gas, so if you have any questions, I would love to take them.
Council Member Wolbach: I was going to try a motion. I move that we recommend to Council adoption of a resolution approving the fiscal year 2017 gas utility financial plan and adopt
a resolution increasing gas rates by amending rate schedules G-1, G-1-G, G-2, G 2-G, G-3, G-3-G, G-10 and G-10-G
MOTION: Council Member Wolbach moved, seconded by Chair Filseth to recommend the City Council:
Adopt a resolution approving the fiscal year (FY) 2017 Gas Utility Financial Plan; and
Adopt a resolution increasing gas rates by amending Rate Schedules G-1 (Residential Gas Service), G-1-G (Residential Green Gas Service), G-2 (Residential Master-Metered and Commercial
Gas Service), G 2-G (Residential Master-Metered and Commercial Green Gas Service), G-3 (Large Commercial Gas Service), G-3-G (Large Commercial Green Gas Service), G-10 (Compressed Natural
Gas Service Service) and G- 10-G (Compressed Natural Green Gas Service)
(inaudible)
MOTION PASSED: 3-0 Schmid absent
6. Utilities Advisory Commission Recommendation That the Finance Committee Recommend the City Council Adopt a Resolution Adopting a Net Energy Metering Successor Rate E-EEC-1 (Export
Electricity Compensation), Establishing the Net Energy Metering Transition Policy, and Amending Rule and Regulation 2 (Definitions and Abbreviations) and 29 (Net Energy Metering and
Interconnection).
(inaudible)
Chair Filseth: Why don’t we go through the material and then we have a speaker to (crosstalk)
Aimee Bailey, Utilities Resource Manager: Okay, so this particular item is the net energy metering, or NEM for short, successor rate and transition policy. All of the solar systems installed
in Palo Alto are net metered solar systems and it’s a State mandated policy in the State Public Utilities code that electric utilities offer net metering up to a particular cap. Palo
Alto is approaching that cap. Our cap is nine and a half megawatts, and so what this successor rate is, is a rate for solar systems installed after that NEM cap is reached. The proposed
rate is specifically a two-part rate, so any energy delivered by the utility to the customer would be summed over the billing cycle and that prevailing retail rate would apply to that
particular sum of energy, and any energy that’s generated by the solar system that exceeds the on-site load and is exported to the grid, all of that exported energy would be summed over
the billing period, and that would be a separate line item on a customer’s bill, a credit of 7.485 cents per kilowatt hour times that exported energy. In addition to the proposed successor
rate, there are also a couple transition policy proposals specifically for our existing solar customers, those who have made the decision to invest in a solar system on their home, and
those two particular proposals are that those customers are eligible for net metering through a 20-year transition period from their date of interconnection. Then the second one is after
our NEM cap is reached, for those that are within the NEM cap, they are allowed to expand their systems up to 10 percent of the original system capacity. Those in combination are what
we’re requesting tonight.
Chair Filseth: Thank you. And we have a speaker from the public, David Coale. Welcome. You have three minutes.
David Coale: Thank you. As a solar installer and member of Carbon-Free Palo Alto, I’m supporting these changes the Staff has proposed for the net energy metering rates. While we’ll have
to wait a little bit to see when this actually gets implemented due to State legislation, I think Staff has done a good job in evaluating the true cost and benefits of solar while taking
into account Proposition (Prop) 27, which limits very much what Palo Alto can do with this rate structure. This will probably reduce somewhat the residential solar installations in the
City, but as noted in the Staff report, this will not likely affect the larger commercial installations. This proposal would help incentivize load shifting and storage for those people
that do install solar, and with the City’s electricity (inaudible) being carbon neutral, this true accounting is the next step in the evolution of solar integrated into the grid. There
are some details I think could be adjusted a little bit. The grandfathering clause is a good, fair way to account for the existing solar installations that homeowners have put in place
based on the fixed rates and rules when they made their decision to install solar. I think there are still some details to be worked out on what to do when someone adds more solar to
the existing system. Many of my clients get a couple of Electric Vehicles (EV’s) when they upgrade the system. Now they have an old system and they have a new system and under this rates
would be very complicated. I’m not sure how that would work out, but that could be remedied by changing the grandfathering time based on prorated old system over new system. So I think
that’s a detail that could work out well. Just to be clear, I would not support this outside in Puginee Territory, because they do not have carbon-free electricity, but I do support
this effort that Staff is doing within Palo Alto. Thank you very much.
(inaudible)
Council Member Wolbach: Quick question. The, I guess, slight hesitancy and questions we heard from the public just now about possible changes in the future, things still to be worked
on, any comment from Staff on that? If I heard that correctly from the audience?
Ms. Bailey: I’m sorry, your questions was?
Mr. Shikada: (inaudible)
Council Member Wolbach: Yeah, any reaction to the public comment?
Ms. Bailey: The proposal, at least that was brought forward to the Utilities Advisory Commission (UAC) that was reviewed by that Commission was to allow expansions up to 10 percent and
for a particular system based on the inner connection date, allow them to remain eligible for net metering for a 20-year time period. I believe what the public speaker is proposing would
be a modification to specifically the second two policies. It would kind of be combining basically the transition period of 20 years and making that as a function of a potential expansion.
So that is something that Staff could, we had not looked into it to now. That is something that Staff could look into and go through the necessary legal review. This is also a policy,
since we have not reached the NEM cap, I mean it is possible to potentially come back with those particular provisions at a later date, after further Staff analysis. Full disclosure,
this is actually my last week, so it would be my colleagues would be reviewing it.
Mr. Shikada: Which explains her being very circumspect in committing to future work.
Council Member Wolbach: I fully appreciate that you don’t want to lay extra work upon your successor. I’m sorry that the City will be losing your work.
Chair Filseth: It’s okay, we can find you.
Council Member Wolbach: I guess the next question is, can we pass this resolution tonight, and then still explore tweaks to the policy again in the future, or how locked in does this
make us if we propose this tonight to the full Council?
Mr. Shikada: I think it certainly provides the flexibility. I’d want to look a little closer as to how we wrote up that last bullet under the amendment to the rule. The prior slide,
if I might, does basically say that the transition to the successor rate needs to be, or a larger system expansion would need to be transitioned there, so the specifics of how that would
happen, I think, is the follow up work that we would be describing and we will want to follow up on.
Council Member Wolbach: Okay, that’s it for my questions. I’d be ready to make a motion, unless there’s… Okay, I’ll offer a motion then. Recommend that the City Council adopt a resolution
adopting a net energy metering successor rate EEEC-1, establishing the NEM transition policy and amending Utilities rule and regulation 2 and 29.
Chair Filseth: Second.
MOTION: Council Member Wolbach moved, seconded by Chair Filseth to recommend the City Council adopt a resolution Adopting a Net Energy Metering (NEM) Successor Rate, EEEC-1 (“Export
Electricity Compensation”, Attachment B); Establishing the NEM Transition Policy; and, Amending Utilities Rule and Regulation 2 (“Definitions and Abbreviations”, Attachment C-1) and
29 (“Net Energy Metering and Interconnection”, Attachment C-2).
Chair Filseth: All in favor? Motion carries.
MOTION PASSED: 3-0 Schmid absent
Chair Filseth: By the way, I noticed that we are paying 7.485 cents a kilowatt hour, and that is for private individuals. If you’re a corporation you get 16 and a half cents.
Future Meetings and Agendas
Mr. Perez: Future Agendas. So we’re down to the wire. Monday, 11:00. The Clerk’s Office told me they were going to provide some snacks and then they will have dinner for you, since you
have a 5:00 start for a Closed Session for labor, so in a way we have a hard stop for the Council meeting.
(inaudible)
Mr. Perez: No meeting on Thursday.
Council Member Wolbach: I want to confirm, did you say 11:00 on Monday?
Mr. Perez: Yes. I’ll just point out to the Clerk that my phone might be inaccurate, but I think that the Council calendars that we share is currently showing 1:00, so I just wanted to
make sure that’s up to date.
Chair Filseth: If that’s the case, then we need to fix it because it a public…
Female: No problem. I’ll go back tomorrow and make sure that it reflects the correct time. Thank you.
Council Member Wolbach: Thanks.
Mr. Perez: We had started it at 1:00, but then once the parking lot grew we moved it to 11:00 so…
Council Member Wolbach: We grew to a parking garage.
Mr. Perez: I think at that point we’ll start you off with where you’re at, the changes that we’ve recommended, and then the parking list. I will leave it to the Committee as to how you
want to proceed as to your prioritizing and your motions.
Council Member Holman: And if I might, I had sent a couple of questions, one of which you responded to and the other one I was inquiring about what Human Services Resource Allocation
Process (HSRAP) entities had.
Mr. Perez: So if you don’t mind, can we talk offline after the meeting, because I want to follow up on understanding it.
Chair Filseth: And with that we’re adjourned. Thank you very much to Staff for staying.
ADJOURNMENT: The meeting was adjourned at 10:16 P.M.
TRANSCRIPT
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Finance Committee Action Minutes
May 17, 2016
FINANCE COMMITTEE
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