HomeMy WebLinkAbout2016-09-20 Finance Committee Summary MinutesSpecial Meeting
Tuesday, September 20, 2016
Chairperson Filseth called the meeting to order at 7:02 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California.
Present: Filseth (Chair), Holman, Schmid, Wolbach
Absent:
Oral Communications
Chair Filseth: First order of business is oral communications and members of the public may speak to any item not on the agenda. Are there any members of the public? No members of the
public. Let’s proceed with Action Items.
Action Items
Adoption of an Ordinance Updating and Standardizing the Procedure for Collection of Impact Fees by Amending Palo Alto Municipal Code (Code) Title 16 (Building Regulations), Chapters
16.45 (Transportation Impact Fee for New Nonresidential Development in the Stanford Research Park/El Camino Real CS Zone), 16.46 (Approval of Projects With Impacts on Traffic in the
San Antonio/West Bayshore Area), 16.47 (Approval of Projects With Impacts on Housing), 16.57 (In-Lieu Parking Fee for new Nonresidential Development in the Commercial Downtown (CD) Zoning
District), 16.58 (Development Impact Fees), 16.59 (Citywide Transportation Impact Fee), 16.60 (Charleston Arastradero Corridor Pedestrian and Bicyclist Safety Impact Fee), 16.61 (Public
Art for Private Developments), 16.64 (Development Fee and In-Lieu Payment Administration), and Title 21 (Subdivisions and Other Divisions of Land), Chapter 21.50 (Parkland Dedication
or Fees In-Lieu Thereof), and Finding the Action Exempt From Review Under the California Environmental Quality Act.
Chair Filseth: Mr. Perez?
Lalo Perez, Chief Financial Officer: I’m actually going to turn it over to Sherry Nikzat to go ahead and start.
Sherry Nikzat, Senior Management Analyst: Okay. Members of the Committee, my name is Sherry Nikzat, I’m with Planning and Community Environment Department. We’re coming to you tonight
requesting recommendation for amendment to the Municipal Code which will update and standardize the collection of impact fees. Generally speaking, impact fees have been adopted by Council
as the need has arisen and the new municipal code, I don’t know why I’m have trouble saying that tonight, the new municipal code has been introduced at the time when the impact fees
were introduced. The unintended consequence has been an overly complicated process to administer these funds. So we are coming to you tonight, we have several objectives. The purpose
of the recommended changes we are going to bring to you are to provide uniformity amongst rate calculations, to provide uniformity amongst the fees for inflationary adjustments and I’ll
touch a little bit on that. Right now the uniformity amongst rate calculations, some are based on the date of entitlement, some are based on other dates. Uniformity amongst the fees
for inflationary adjustment, some are Consumer Price Index (CPI), some are other factors at different times. We want to improve the administration of these funds and create uniform payment
timing so they are all due at similar times, and to clarify some ambiguous language, like we have had some language about community versus parks fees, and implement uniform protest procedures
per the Mitigation Fee Act. As mentioned earlier, impact fees were often established with their own code, which may have made sense at the time, but they sometimes included requirements
for certain City positions to update fees, report on funds or have the ability to issue citations. Some of those titles, we know, have changed, the positions have changed, and so part
of what we are doing is asking you to recommend tonight to kind of update the code so it makes sense in the way we do business today. There are also some out-of-date payment locations
in the code. I think we have one code that says, “Payer Fees and Transportation Division”. That just isn’t really where we collect funds. So Staff is recommending changes to the code,
I’m sorry, I’ll stand behind here, Staff is recommending changes to the code that will standardize the inflation process and index across the funds as much as possible, fees as much
as possible, standardize the due dates of fee payments, update or remove position titles where it’s appropriate, implement some of the Parking Fund audit recommendations to make it easier
to administer, to correct these unintended errors in the code and to add the protest information. (crosstalk). There we go. So the next steps would be asking the Finance Committee for
their recommendations and if recommended we would like to continue to Council and conduct a public hearing, and then the new adjustments to these fees would be effective July 2017 with
the fee schedule updates. And with that we are open to questions.
Chair Filseth: So why don’t we first take questions from the public, if there are any, and then do both comments and questions at the same time from Committee. We’re on Action Item 1,
are there any comments from the public on Action Item 1? As there are no comments, let’s do Council comments and questions. Council Member Wolbach.
Council Member Wolbach: I was just looking for maybe a little bit more narrative about how we got through this process to this point. You know, is anyone from any of the community be
most directly impacted by this, where they involved in conversation, was it Staff-led, how long have you guys been working on this. I just want to get a sense of what’s gone into the
project so far.
Ms. Nikzat: We’ve actually been working on this for quite some time and at the same time then the Parking Fund audit kind of came parallel and they just happened to happen the same time,
and what we were trying to do was make it easier to administer these funds by putting them in – we have been trying to program them to our Accela Permitting System so that, you know,
it just goes smoothly. Right now it’s a rather complicated process. So we started that project some time ago, but as we started doing the programming of Accela we realized how very complicated
the programming was and realized that, you know, if we want to be effective at this, and we want to, you know, have copies that are kept in Accela and be able to track them, trying,
and correct me if I’m wrong, we started looking at some of these and saying, you know, this would be a lot easier for the public to understand and for us to administer if they were lined
up, because right now it’s hard for somebody to understand why one fee has one, the rates are calculated based on one date and another has another date. Does that answer the question?
Council Member Wolbach: Yeah, I mean, also for those who would be, you know, providing or paying these fees, have you done any communication with them or are you really just informally
hearing their thoughts about this or have you guys heard complaints over the years that this is partially responding to, or is this really more about making the process easier for you
internally?
Ms. Nikzat: It is really more about making the process easier internally and making sure it is auditable very clearly and cleanly. We don’t really expect it to affect the budget because
we’re not changing the amounts of the fees, we’re just lining up the processes. Every year, for instance, we update them. Not every fee, but many of the fees have different processes
for that, so kind of lining them up. We haven’t heard complaints about it, but we want to make sure that we can explain them to people if they do have questions and that it’s something
the average person can clearly understand.
Council Member Wolbach: Great, thank you.
Chair Filseth: Council Member Schmid, any questions?
Council Member Schmid: Well, one question. It looks very straightforward, just cleaning up the Code, looking at this, audit it, and it looks very straightforward. But I have mucked around
a little bit on downtown parking and came across some striking information. In 1986 there was a Land Use and Transportation Study on the basis of what we’re doing, and they talked about
in-lieu fees, and it said the in-lieu provision is to be enforced only at such times as there are designated surplus spaces in new parking structures. The payment of an in-lieu parking
is never permitted in the absence of available public parking supply. The actual in-lieu fee was done in a 1995 Ordinance and that Ordinance noted, “The Planning Director shall ensure
that any development on-site which shall not result in a net reduction in parking spaces provided”. Now, is that part of our in-lieu fee and is it enforced?
Cara Silver, Senior Assistant City Attorney: Cara Silver, Senior Assistant City Attorney. One thing we did want to distinguish when, as we’re rolling out this particular clean-up Ordinance,
is that when we started going through the Code to really codify these clean-up items, we noticed that there is going to be further need to do some substantive revisions to the fee structure.
So we started to do some of that and then it became a more complex project and we really wanted to just proceed with these clean-up items first. So I recognize that there are a series
of policy decisions that need to be made in connection with the Transportation Impact Fee, and frankly, with some of your other fees, but this effort does not attempt to get into those
policy discussions.
Council Member Schmid: Okay, but I do note as a Council Member that every so often that issue comes to Council and I guess before the next one comes up, I hope there is a clarification.
You tend to imply that that still is sitting in Code, that statement?
Ms. Silver: Yes.
Council Member Schmid: Okay, thank you.
Chair Filseth: Council Member Holman.
Council Member Holman: So, thanks for the question Greg. So we do have fees and we have penalties and we’ve talked about both. When are the penalties scheduled to come, because we have
especially one project that has been talked about a lot and continues to be talked a lot for instance. When are the impact, excuse me, the penalty fees coming forward?
Ms. Silver: Those are coming in October, I believe, and I’m not sure if they come directly to the City Council or if they come first to Finance Committee, but I know there is an October
item on the Penalty Schedule and we are recommending two increased penalties to address, in part, the issue that you’re referring to.
Council Member Holman: Okay. And then I guess because the Ordinance, and I only had time to like scan it and I do apologize for that, but the Ordinance, help me understand, like does
the Ordinance address really if someone doesn’t pay the fee yet, or they’re like, I’ll get you the fee within blah, blah, blah, that we, you know, don’t have it for you yet but will
have it for you by Tuesday but give us the demolition permit today? So what kind of, it sounds like a silly question, but I’m not, it’s not a silly question because there are relationships
and so I want to know, what is the rigidity of this and the enforcement that Staff will say, we have the money in hand before you get your, let’s say, building permit.
Ms. Silver: Actually my understanding of the genesis of this, and this really is from Sherry’s group, is that that’s exactly what we want to do, is that, you know, right now Accela is
not programmed in a way that we can actually delay issuance of a building permit because a fee hasn’t been paid, and so when Sherry’s group started looking at this and trying to program
Accela to do this, we recognized that actually the Code needed to be amended to clarify the timing of the payment of the fee, so hopefully, once we get this Code amendment in place,
the programming piece is proceeding on a parallel track, we will be able to integrate those two and we will have much better, you know, quality control on that issue.
Ms. Nikzat: If I might add, I wasn’t smiling because it was silly at all. I was smiling because you were saying exactly what we had been thinking, and the whole purpose as Cara said,
the whole thing that kind of started this is we have the Accela Permitting System, but the fees have been operating separate and aside and apart. We are trying to put them together so
the fee has to be paid and it’s right there in the system for people to see before the permit is issued. So it’s a check and balance that we’re striving for and that’s part of trying
to make it easier to administer.
Council Member Holman: So I’m going to ask another slice and dice question, which is, and I’m not in favor of this, but the practice that’s been developed by Staff over the last, what,
couple of years or so, is when somebody has a project, demolition permits not residential, not residential but demolition permits are granted before the building permit is, and so when
is the fee going to be collected? I personally frankly just have to say, I don’t think we ought to be granting demolition permits before building permits are granted, but we’re doing
that. So for now, or any time in the future if that happens to be the sequence or continues to be the sequence, when are fees collected?
Ms. Nikzat: Please correct me if I’m wrong on this Cara, but the Code reads that the issuance of the first building permit, and if it’s phased, the first phase, the fees would be collected
for that phase, so it’s the issuance of the building permit right now.
Council Member Holman: So that doesn’t address the demolition permits at all then.
Ms. Nikzat: Yeah, I don’t think the old Code talked about that either. Well, in the case where there was no building permit, it would be a Change of Use Permit is what would trigger
it and still does.
Council Member Holman: So can we raise to the Council then the question about demolition permits as compared to building permits? It seems like we should.
Ms. Silver: Right, again, you know, these are all integrated issues I recognize, but you know, we are trying to just bring this piece forward separately. Actually, Director Getelman
and I are working on a separate Ordinance that will address the building permit / demolition permit issue. That’s another set of clean-up Ordinance changes that we’re working on, so
I think that’s a better place to raise that issue. Currently, right now where you can get a demolition permit before a building permit, it would make sense to pay impact fees if you
don’t know what you’re building.
Council Member Holman: Well, they know what they’re building, it’s just they haven’t gotten the final permits. They have, I would say a pretty darn good idea of what they’re building,
because…
Ed Shikada, Assistant City Manager: It’s still subject to the City’s approval, right.
Ms. Nikzat: The fees depend on what exactly you’re doing.
Council Member Holman: I have one other question, and I think I know the answer to this, but I want to throw it out there anyway, looking to the City Attorney there. So, especially with
parking in-lieu fees, I mean some of these fees are less popular than others, so let’s just pick on one that’s not that popular, Parking In-lieu Fees, and the same thing would be with
Housing In-lieu Fees, the moment we collect them they’re inadequate, so can we, could an escalating factor on the Impact Fees at all or in any amount, any percentage, any anticipated,
you know where I’m going, into the fee that’s being collected?
Ms. Silver: I will say according to the New York Times article this weekend, we have the highest in-lieu parking fees in the nation, but…
Council Member Holman: We also have one of the highest real estate costs…
Ms. Silver: So, you know, you can’t build in an undetermined escalator. We have built in an inflation adjustor, but that only applies (inaudible).
Council Member Holman: So there’s no way to address that matter that you can creatively come up with?
Ms. Silver: Right, right. Not that I’m aware of.
Council Member Holman: Okay, I think those are my questions.
Chair Filseth: That’s funny, because I thought the whole thing by and large, seemed perfectly logical and cut and dried and sensible, but the one place I gravitated to was exactly the
same place you did, which is the Parking In-lieu Fees, and maybe this is sort of the same question asked from a different angle, but it looks to me like this number of $30,250 per 250
square feet is sort of hard cut into the Code. What does that, so if I put up a new building and it’s got 250 square feet in it, so I would pay $30,250, what does that money go to, where
does it go? What’s it used for? It’s earmarked for something, right?
Mr. Perez: The parking in-lieu specifically?
Chair Filseth: Yes.
Mr. Perez: So right now it’s being set aside, and with the Council on hold, proceeding with the building of a garage.
Chair Filseth: So it’s allocated towards a garage, because obviously, there are no more parking spaces today so it’s, we’re hanging onto it for when we build a garage, correct? If I
understand the code, what it says here we’re going to get out a couple of years then we’re going to look at what it actually costs to build a garage, and then we’re going to adjust this
number based on what it really costs. Did I understand that right?
Mr. Perez: Because it was set by the cost of the prior two garages.
Chair Filseth: Right.
Mr. Perez: So any additions to that would be part of the formula and the calculation.
Chair Filseth: So then we’re going to get out a few years, and maybe the numbers just aren’t big enough to matter right? And we’re going to get out three years or something like that
and we’re going to build a garage and we going, you know what, the right number if $40,000 per 250 square feet for example, so we’re not going to go back and say, well you paid us $30,000
a couple of years ago, but now we want, you have to pay us another $10,000. We’re not going to do that, right? Which is sort of the question you asked, I think, which is, should it be
adjusted by construction…
Council Member Holman: Anticipated construction dates.
Chair Filseth: Anticipated construction dates, right. Did you guys, I mean, did you guys look at that issue at all?
Mr. Perez: Not for this process because for this process we were looking at more of the administrative side versus the policy decisions themselves. In regard to some policy, we could
say that that would be what escalator and the timing, those are probably the policies that we’re looking at. It’s more of a, trying to make it more understandable and easier to establish
and administer.
Ms. Nikzat: But they do all have some sort of annual inflationary adjustment.
Mr. Perez: But it’s not in line…
Chair Filseth: But the code says, “$30,250” right?
Ms. Nikzat: Also the annual adjustment.
Chair Filseth: Does it say that in here and I missed it?
Ms. Silver: It’s currently $60,000. This is the old Code language that was adopted in the 80’s.
Chair Filseth: Okay.
Ms. Nikzat: And upped every year.
Mr. Perez: It’s based on the last review, the review with the auditors, $67,000 something.
Council Member Holman: I have another question.
Chair Filseth: Okay. I just wanted to understand that. So they’re really doing…(crosstalk)
Chair Filseth: Council Member Wolbach do you have a question?
Council Member Wolbach: It’s not necessarily, Council Member Holman did as well.
Council Member Holman: I think you were first.
Council Member Wolbach: Okay, I’m not sure this is the right time to go deep into this conversation, but since we’re having it, I think it would be really inappropriate whether we were
talking about a commercial developer or somebody remodeling their home or whoever, I think it would be very inappropriate to charge them depending on when we think we are going to spend
their money. I think that would be morally wrong and probably illegal, so I hope we don’t go down that path. Somebody’s paying a fee to the City and we say we’re going to use this fee
10 years from now, you have to charge us based on kind of bang for the buck we’re going to get in 10 years. I mean, that’s up to us when we spend the money that they give us. That’s
not something we should punish them for if we’re slow, you know, in turning that around into whatever we’re using it for and I would apply that philosophy across the board for anybody
who is paying any fee to the City for whatever purpose we’re spending it on. I just want to put that out there and when we’re ready for Motions, I’ll be happy to move this on for recommendations.
Council Member Holman: So just, I appreciate the sentiment, but at the same time an impact fee is to cover the cost of providing, you know, something that mitigates the impact, so I
don’t think it’s irrational to think that, you know, there might be an escalating factor charge based on when we anticipate, so it’s not an argument though, because it sounds like it’s
illegal. I have…
Chair Filseth: If you provide your own parking space, then you don’t have to pay the fee, right?
Council Member Holman: That’s exactly right, which we should be encouraging. But the calculation of the parking in-lieu fee, it’s construction costs, construction costs of the most recent
parking structure, that’s what it’s based on, and if a new parking garage is constructed, then a new Ordinance allows for that cost to be amended plus the cost of long funding. The problem
is that the last parking garage we built was, what, 12 years ago, 14 years ago?
Mr. Perez: Yeah, that’s about right.
Council Member Holman: So why would we use 14-year-ago pricing…
Chair Filseth: Well, it’s adjusted.
Council Member Holman: Is it adjusted? I’m just reading this one paragraph here.
Ms. Nikzat: It’s adjusted annually by the change in construction costs in the San Francisco Bay area.
Council Member Holman: Okay, that makes me feel better. It’s just not how I read this.
Ms. Nikzat: Yeah, there’s another section that has to do with how all the fees are adjusted. Sorry it’s not all connected.
Council Member Holman: Yeah, I caught that there was an escalating factor, but this seemed to kind of fly in the face of that.
Chair Filseth: Let’s think for a second how much we’re talking about. Just looking at commercial, 50,000 square feet a year and you say we’re at $67,000 or something like that, so 30,000
we’re at $126 a square foot, so that means we’re at $250 a square foot or something like that, so 50,000 square feet times $250 is, we’re off by 10 percent. I guess how much money, it’s
not that much is it. If it’s a couple $100,000 or something like that, right? The order of magnitude if we’re off.
Council Member Holman: That’s why he’s the Chair.
Chair Filseth: Usually wrong but… Alright, so I don’t have any more questions. Further comments and questions on this?
Council Member Holman: That’s it.
Chair Filseth: Council Member Wolbach did you want to make a Motion?
Council Member Wolbach: I would be happy to move this out for recommendation.
Chair Filseth: I’ll second.
MOTION: Council Member Wolbach moved, seconded by Chair Filseth to recommend the City Council adopt the draft Ordinance which implements the 2015 Parking Funds Audit recommendations
and updates and standardizes collection of impact fees by amending Palo Alto Municipal Code (PAMC) Titles 16, 18 and 21.
Chair Filseth: Care to speak to your Motion?
Council Member Wolbach: Thanking Staff for working with us and I look forward to those other items that were eluded to come forward at another time.
Chair Filseth: That sounds great. All in favor? You have a comment? Sorry.
Council Member Schmid: Yeah, I wonder if we could, at the end of the meeting, add on to our Finance Committee items discussion of some of these issues that were brought up about the
rest of the Parking Code, to look at it so we could have a discussion in the Finance Committee, just to add that?
Chair Filseth: Would it be alright for doing that for discussion at a future agenda or should we do it now?
Mr. Perez: I think it would be appropriate at the end and then we’ll take that back to the City Manager and discussion with the Mayor and return.
Council Member Schmid: I just wanted to bring that up.
Chair Filseth: Further comments? All in favor. Motion carries unanimously. Thank you very much.
MOTION PASSED: 4-0
2. Staff and Utilities Advisory Commission Recommend That the Finance Committee Recommend the City Council Approve the Proposed Low Carbon Fuel Standard Credit Program, Including the
Use of Revenues From the Sale of Low Carbon Fuel Standard Credits.
Chair Filseth: We will proceed to the Staff and Utilities Advisory Commission (UAC) recommendation regarding disposition or use of revenue from low carbon fuel credits.
Ed Shikada, Assistant City Manager: Low Carbon Fuel Standard Credits.
Chair Filseth: Cap and Trade Credits.
Ed Shikada: Well, not exactly.
(crosstalk, background noise)
Ed Shikada: This is actually credits generated by the sale of natural gas within our jurisdiction. No, got it wrong. Okay, try again. Credits generated by…
(crosstalk, background noise)
Mr. Shikada: Go ahead.
Jane Ratchye, Assistant Director of Utilities: I’m Jane Ratchye, Assistant Director of Utilities. I have Hiromi Kelty with me who helped develop this program. So I’m just going to quickly
go through the slides and try to get to your questions. I’m actually a substitute presenter tonight. The program manager is actually at a meeting elsewhere. So first we will go over
what is the low carbon fuel standard, what is this regulation. This is actually, should be good news and a happy story here and, hopefully, noncontroversial. This is kind of free money
to us and the decision here is a policy on how to spend these revenues that we get. So I’ll explain what the regulations, the value of the credits generated and we’re generating them
both for Electric Vehicles (EV’s), and for compressed natural gas (CNG) vehicles,. And then I’m going to go over what we’re asking, what we will be asking Council to approve, the program
on how we spend the revenues. You’ve seen some of this before at the Council, the Council approved a template for selling our low carbon fuel standard credits already, so that we can
monetize these credits that we do receive, and then we will go into the timeline. So there is a State goal to reduce the carbon intensity of transportation fuels by 10 percent by 2020
and this is a program that the California Area Resources Board developed to try to achieve that goal. So transportation fuel companies are required to try to reduce the carbon intensity
somehow of their fuel, and they are going to do it either by trying to get more efficient processes to extract and refine the fossil fuel, they are going to try to make the actual fuel
they deliver have less carbon intensity by mixing in something that has a lower carbon intensity to it, or they will buy these low carbon fuel standard credits from somebody like us.
So these are allocated to us at no cost or to providers of low carbon intense fuels. Compressed natural gas is a low carbon intensity fuel and so is electricity. So we get a certain
amount of these credits and they are granted to us based on how many electric vehicles are in Palo Alto, and we know that because the Department of Motor Vehicles (DMV) tells us how
many there are. It doesn’t tell us where they are exactly, but we know how many there are, and so we have agreed with CARB, California Area Resources Board of a formula. For each EV
in town you get a certain number of credits and also we get additional credits for electricity that is delivered at EV charging stations that the City owns. So that’s based on how many
kilowatt hours are delivered of our energy. Unfortunately, we only get to use the California average carbon intensity of the electricity. They wouldn’t let us get even more credits because
we’re carbon neutral on electricity. We tried that.
Chair Filseth: Actually, I wanted to ask that. It doesn’t matter even if we were generating our electricity from coal, it would be the same number of…
Ms. Ratchye: Yes, yeah.
Chair Filseth: So they are really crediting EV’s not renewable energy.
Ms. Ratchye: Right. Yeah, we made an argument there and it didn’t go. Also, so the value of it is how many credits we have and what the market value of the credits are and the market
value, I’ll show a chart here later, has been very volatile. But just a few facts and figures, so as of March 2016 we had 1300 EV’s registered in Palo Alto. We project that that number
is going to increase a lot in the future. So right now the value of the credits is, we think, this number of half a million dollars might actually be a bit high for 2016, just because
the value of the credits have actually dropped lately, so we may not get that much money. But with additional EV’s in town we do expect this to be a substantial revenue source, so that’s
why we need a policy how can we spend it. But we can’t spend it on anything we want. The regulations are very clear on how you can spend it and I guess I don’t have that in the presentation,
but it has to be effectively to the benefit of EV owners, that’s the primary consideration for the EV credits. For the CNG vehicles it’s effectively the same thing, to the benefit of
them.
Chair Filseth: Nobody just wants to give them a rebate.
Ms. Ratchye: What?
Chair Filseth: Nobody wants to just give them a rebate.
Ms. Ratchye: That’s what Pacific Gas and Electric (PG&E) is doing and that is an option. It’s very easy, it’s very direct, it definitely benefits the EV owners. PG&E has something like,
give them $500 at one time amount. But we kind of felt we have this money, we can maybe kind of give an incentive for new people to get new EV’s and try to expand the EV’s in town, so
we didn’t propose that. But I will get to that a little bit later. So this chart shows, the blue bars shows what the volume of the transactions in this market have been, so it’s you
know, the volume has picked up a bit. The bars are two different sort of market measurements of where these, the value of these (inaudible) low carbon fuel standard credits have been.
When we began this we signed up for this program in early 2014 and we were looking at a price around $50 a credit and then we saw them go way up. In fact, I was looking here in the report
it says the prevailing price is $116 a credit. Well it has gone down since August. It is now $80 so the amount we get is going to be variable. So this, just to show you the program we’re
proposing has different options and it has sort of delegates to the City Manager exactly for that year how the money would be spent, so the policy is, you can spend it in these areas
and the City Manager will determine, okay, well this is how much money we actually got and there is interest in this part and not that part and this is how the money will be spent, how
we will try to spend the money this year. So we looked at a lot of different options, including some things that look reasonable for now, some things that are maybe not great at the
moment, but we still included them in the program and we may want to implement those in the future. Let me go through the, kind of the reverse of this slide. The ones that we’re looking
at for the near term in the initial year of the program will be rebates for the installation of EV, that’s Electric Vehicle Supply Equipment. That’s basically chargers. And the other
idea was to try to, for people with electric vehicles, when they, because we have a tiered rate structure, they’re adding new electric load often will be bumped into the second tier,
all the energy that they use to charge their car will be in the second tier. So is there a way for us to use this money to provide a discount or subsidy somehow for the electric costs
associated with charging their EV’s. So that’s one idea. We have a pilot Time of Use Rate Program and we could expand that. A lot of the EV owners are on that Time of Use Rate Program
and we may be able to use these funds to further discount off peak price and use the money that way. Of course, our rates have to be compliant with Prop 26 and based on the cost of service,
but we can, these are additional funds beyond that that can be used to provide that subsidy. Also, there is another, if EV owners are willing to share with us information about how their
EV’s are being used and perhaps we can communicate with them and tell them, please charge now or don’t charge now, and we can optimize and maybe use that for a demand-response program
in the future or somehow a grid interactive type of information. We sort of provide incentive for people to share that data with us. And finally, and this is a component of the regulation,
they want us to spend money or to provide education and outreach programs around EV’s, and so there is work to be done in that area to try to make sure people understand everything about
EV’s and their value and their cost and how easy it is to connect in Palo Alto. Other ideas that we have discarded for the first year of the program that but are part of the policy and
may be implemented in the future are to discount development center permit fees. That turned out to be just administratively difficult, so we’re not proposing that at the moment. Providing
cash rebates, that’s a very, there is some administrative headache with that. Finding exactly the guy and who owns it and are they a utility customer, is it only utility bill and we
cut them a check. Also, it felt like it was not, it’s probably not, the guy didn’t buy an EV because he was expecting to get a $500 check from the utility, so that probably didn’t really
influence his decision to buy an EV. So that, and that idea of the cash rebate did not get very good support at all from the UAC. They thought the money could be better spent on these
other programs that we proposed. The other idea is providing free charging at the public EV charging stations and we actually think that’s not a very good idea because it kind of makes,
people will just use the free chargers for free and they will clog them up and they aren’t available, and what our point is, is to try to have chargers available for people and actually
by charging money to charge, that actually makes a lot more chargers available to people and that’s what we want. We want people to feel like when the get an EV there’s going to be a
spot where they can charge them when they need to. So we kind of picked the bottom ones there. And I just have a couple of slides to show you, some projections about where we see EV
charging right now and in the future. This shows that, how many EV chargers we expect or how many EV’s we expect for the people who live in town and the people who commute into town.
Basically the point of this slide is we see EV charging and EV ownership, both by residents and commuters growing over time substantially. This is a picture of, the City does own some
level 2 and sort of fast charger. You can see the blue line in the top chart shows how many of these chargers the City owns over the past several years, so we don’t own that many. It
looks like we have six, and you can see the red line shows how many EV’s charge daily per charger. So that’s just kind of statistics for you. Then the bottom is how much total electricity
is dispensed through the City-owned chargers. Again, that is how, that is one way we get additional of these Low Carbon Fuel Standard (LCFS) credits. So we, based on what we think we
will get in terms of just revenue from selling these LCFS credits, we, our initial program is, and there is a lot more detail in the Staff report, this is sort of a summary, that we
would provide first of all rebates for people putting in chargers and up to three rebates or three chargers per address, and we’re really trying to target multifamily dwellings and sort
of the underserved area first. We think those are more difficult.
Hiromi Kelty, Program Administrator: So I can talk about the program a little bit. So it’s actually a maximum of six chargers per service address because what we’re finding is there
are all these new types of chargers where it has one pillar with like octopus arms and those are a lot cheaper to install, so we would like to see as many chargers as possible. But with
EV charging in public places, it’s not the cost of the charger itself. Those you can buy, a single one you can buy for $5,000 to maybe $2,000. It’s the infrastructure work, so with our
program we have it divided into two, actually. One for multifamily residences, like Jane said, and those would target apartments, townhouses, condominiums, mixed-use buildings and commercial
buildings. Then the second part of the program would be for the school district, the public sector and nonprofit organizations, and we have two separate sets of requirements that we
think would be a good idea. For the commercial side we’re saying rebates of up to $3,000 with a maximum of six chargers, and we’ll pay up to 75 percent of the total project. So we’re
imagining we’ll be paying mainly for infrastructure costs, but at the end we want proof that they actually used, that they actually put all the conduits and everything in for an EV charger,
so we have to at least be able to see one charger there at the end. Because some of these projects, they’re going to spend over $10,000 just laying all the conduit to make their buildings
EV ready. And we have a various set of rules, for example, like in an apartment building it can’t be any parking space dedicated to one person, it has to be for a shared parking location.
This is something talking to a lot of the facility managers and the property managers of apartments and condominiums, they are really struggling with this because there is a huge demand
from their residents asking for EV charging. The EV charging companies are coming up with a lot of great options on how to charge a fair rate, so each person will pay for the electricity
they use, but they are not paying for their neighbor charging their car. So there are a lot of systems that are coming out. We are hoping most people will put in Level 2 chargers. Like
Jane said, those are the faster ones. The Level 3 are the super chargers, like what the Tesla supercharging stations have. Level 2 tends to be the ones that are faster, so you could
charge a car in maybe four hours and they use like a dryer, so 220 volt, 240 volt outlet, so it’s, for each of these places the big thing is where are they going to install this. So
we’ve also decided we will do a pre-inspection and a post-inspection for each site before approving any rebates. Then for the schools and other nonprofit organizations and the public
sector, we’re thinking rebates of up to $5,000 per Electric Vehicle Supply Equipment (EVSE) installed with a maximum of six EVSE’s and in this case the rebates can cover up to 100 percent
of the total installation cost. The reason for this is, for example, at the schools the biggest cost is going to be the trenching because, if you think of the school parking lot or a
church parking lot, there isn’t electricity right in those larger parking spaces, whereas at an apartment complex, electricity is pretty close to a pole. So a lot of the cost is going
to be getting that infrastructure in place.
Ms. Ratchye: So I think a lot of these details she is talking about are in Attachment B of the Staff report. I don’t know how much more detail you want or are interested in going through
these. I kind of already explained just lightly before, generally what these five areas are, so let me just move on. Also, remember, we do have the compressed natural gas station that
is used by schools and other people with CNG vehicles, including the City, so we do get some credits for that. The value for this is a lot less than the credits for the EV’s. This is
only maybe $30,000 a year, but we do have a proposed policy for using those funds as well, and there are some improvements that the City is looking at to upgrade that CNG station and
that would be the first area we would like to devote those funds to. Then, if there is extra money after that, we were looking at potentially making that a carbon-neutral gas supply
for that CNG and then if there is any extra money after, actually reducing the rate that is charged for the CNG to make it even more beneficial for CNG driver. So basically this is what
we’re recommending that you approve the program. We expect this to come back to Council in November and we would like to start this program in 2017.
Chair Filseth: Thank you very much. At this point why don’t we see if there are any questions from the public. If there are no public questions, let’s move on to Council question and
comments. I think, why don’t we ask a round of questions first, because I have one and you have one, but comments is going to sort of (Inaudible). Council Member Holman.
Council Member Holman: So I have a couple, three questions. So three percent now, six to eight percent by 2020, the number of EV’s in our district, and 30 to 60 percent by 2030. That’s
a big range.
Ms. Ratchye: A lot of that is driven by if we’re going to try to meet this 80 percent by 2030 goal, it’s got to be focused on mobility, because that’s the biggest part of estimations
by far.
Chair Filseth: That’s a need-driven number as opposed to (inaudible) number.
Ms. Ratchye: Well, it doesn’t really affect the policy in front of you anyway.
Council Member Holman: Just curiosity.
Mr. Shikada: But it is intended to facilitate the growth.
Ms. Ratchye: It’s a huge…
Mr. Shikada: Major market shift.
Council Member Holman: You sort of have access (in audible) like part of the projections…
Ms. Kelty: That we’ll all have at least one EV.
Council Member Holman: By 2030.
Ms. Kelty: No, um, you know, I think one of the things is the price and as prices for EV’s come down, and I recently saw an email saying that there was a lease for like the Chevy Spark,
$29 a month, which I looked into for my daughter. I mean, it’s a no-brainer, so I think like Jane said (crosstalk). I do think people will implement them, not just Palo Alto residents,
but those commuting into Palo Alto, I think will say, you know, if I can charge at work I can go with a car that doesn’t have a 200 mile range. I do think more people will be driving
EV’s.
Council Member Holman: So another question which is related, but not the same, you said that, when was it the rate was $116 and now it’s $80?
Ms. Ratchye: I think, yeah, when we wrote this (crosstalk) I think it was July or June.
Council Member Holman: And it’s already gone to $80.
Ms. Ratchye: You can see the volatility of that.
Council Member Holman: Yeah, so I guess the question is, is it volatile or is it going down? I mean, how do we…
Ms. Ratchye: You know, we don’t know. I don’t know if it’s a trend going down and it’s going to go way down. We didn’t see that it was going to rise when we started and we saw that they
were worth $50, we thought well let’s still joint the program. And then it went up a lot and we thought wow.
Council Member Schmid: When did we join?
Ms. Ratchye: We joined the program in early 2014. So I don’t know if it’s going to go back up or if it’s going to continue falling or if it’s setting at $80. I don’t know.
Council Member Holman: So is the evaluation of the program going to be, like how frequent, because you know, we’re looking at spending money and there is this volatility or trend.
Ms. Ratchye: We will spend the money after we monetize it, so we’ll get the credits, we’ll sell the credits, and then we will know how much money we have. Then the next year we will
sell the next year’s credits. Now we haven’t spent anything so we have all the credits from when we joined the program in 2014. So we have some money to spend right now.
Council Member Holman: So it will be sort of like, it will be sort of like a regular utility rebate in a way, just to use the term rebate generally loosely here. So people are going
to understand the volatility it’s a trend downwards, then, you know, people won’t be married to…
Ms. Ratchye: We might have to restrict it at some point and say, you know, we only have… I don’t know if we want to reduce the rebate from $3,000 to something less if we have less money,
or just say, you really need $3,000 and so we’re only going to have one per address or something like that. But we’ll find a way to, you know, implement it. So each year we’ll know how
much we have and we’ll have to modify the program to meet that budget.
Mr. Shikada: I think to you point to Council Members that the volatility of the pricing suggests this is not a funding source we would want to create more of an ongoing expectation.
That the money will be there because of…
Ms. Ratchye: There’s a chance this entire program might end. That’s a clear possibility these days when, this has come up recently actually that they might say, well this LCFS Program,
we’re done with it. We were anticipating that it would go through 2020 and it may not even do that.
Council Member Holman: That’s why I was sort of equating it to a utility rebate. Sort of like, you know, we’re out of money for your washer and dryer upgrade, so just wondering if it’s
kind of …
Ms. Kelty: So for our other rebates that Utilities offers, there is the recognition that as long as funds last and I think that would be the case with this.
Council Member Holman: Okay.
Chair Filseth: Questions? Council Member Wolbach.
Council Member Wolbach: I have a couple of questions. Let’s see, on Slide 8, the chart at the top shows the number of Level 2 EV chargers that our City owned in blue, correct?
Ms. Ratchye: Yes, just six now.
Council Member Wolbach: So that’s 30.
Ms. Kelty: 30 on the right-hand side.
Council Member Wolbach: And I said a couple of questions. One, I can’t remember what our plans are to expand that over the next few years. It was neat to see the projections from the
prior pages. I was kind of hoping to see a projection on that. Is that still a policy decision that is really going to come to Council?
Mr. Shikada: To a certain extent. On Monday the Council will be discussing the EV chargers, sorry, solar in City garages. As part of that project there is in conjunction with our private
partner, the plan to add 80 additional chargers in the four garages.
Council Member Wolbach: So we’re going from 30 to 110, cool. And the previous line of questioning may have answered my next question, which is, do we want to dedicate some of these funds
to that or towards even more expansion, but given this money is not very dependable, it sounds like we don’t want to count on it in order to plan financing infrastructure improvements,
including EV chargers. Is that kind of what Staff was thinking, that it would be risky to count on this as funding coming in, and so we don’t want to plan to use this for, of the proposals
presented here by Staff, helping fund construction of more City-owned EV chargers is not one of the options, correct?
Ms. Kelty: I just want to say, like Jane said, there are funds from 2014, ’15 and ’16, and I think the prices are coming back up again after they dropped quite a bit from that $116 price
and…
Ms. Ratchye: I think the question is, will the funds be used for City-owned.
Council Member Wolbach: Yeah, so let’s start with that.
Ms. Ratchye: If you look at our Attachment B, which is the program, what we’re trying to target with this program is the multifamily, the mixed use, commercial building garages and parking
areas. We don’t really say we’re going to give this money to ourselves, the City, so we’re trying to increase EV charging available where it’s kind of been an underserved area now, is
the first goal to try to get it beyond. And we are expecting, hopefully, these new chargers that will come along with the solar on the four garages too, so we aren’t, there’s nothing
really in here that doesn’t allow us to do that, but that is, wasn’t the first place that we were going to concentrate.
Council Member Wolbach: Okay, and then you said up to six chargers per address, correct? Would that include your larger, you know, places with a lot of parking, such as big grocery stores,
Town and Country or Charleston shopping or Midtown or, you know around Cal Ave, I guess that’s more City owned, or Stanford Shopping Center, where you have a large big parking lot and
lots of people driving there on private property, would the cap still be six?
Ms. Ratchye: For now I think we’re thinking six per address.
Council Member Wolbach: Is that just because we don’t want a single employer to tap out…
Ms. Kelty: We want to spread it out across the City as much as possible. Stanford Shopping Center, or let’s say Tesla says we want to put in a bunch of chargers…
Council Member Wolbach: They could drain the whole (inaudible).
Ms. Kelty: We can’t say no, but, right.
Council Member Wolbach: If we didn’t have the cap.
Ms. Kelty: We want to spread it out as much as possible.
Council Member Wolbach: We don’t want anyone to monopolize the funds. That makes sense.
Mr. Shikada: I think also part of the rationale here is, as Jane pointed out, the untapped market or perhaps another way of saying this is, it’s the seed market that we see as key to
the future growth of the EV say volume within Palo Alto. So the area in particular of multi families, multifamily developments, because of the duration of the parking, but also being
consistent with the ability to charge versus let’s say a grocery store, where the stay would be relatively short as one of the key growth areas to meet our Sustainability Plan of Action
goals.
Council Member Wolbach: And then on Slide 10, it looks like compressed natural gas vehicles, I don’t know if it was the shorthand used for the ballpoint, I wasn’t really clear on the
first ballpoint on your item 1, is that expanding the number of compressed natural gas vehicles?
Mr. Ratchye: Right. The point of it is to make it available to more CNG owners, CNG vehicle owners.
Council Member Wolbach: So is the goal to make the clean natural gas station available to more natural gas vehicle owners, or is the goal to expand the number of compressed natural gas
vehicle owners?
Ms. Ratchye: Well that is the goal, probably both.
Council Member Wolbach: Okay. I actually have kind of mixed feelings. I didn’t have a chance to go in depth through the UAC comments about this. I don’t know if it was discussed there.
I don’t think I’m alone in having kind of mixed feelings about whether we really want to encourage more compressed natural gas vehicles in Palo Alto, or if we should really put more
of our focus on EV’s.
Ms. Ratchye: Right, but with the funds, with the revenue from the LCFS credits that you get from dispensing compressed natural gas, it has to go to the compressed natural gas owners,
or to encourage those or to reduce their cost. You can’t take the revenues from that and use it for EV’s. We’re going to get, the value of this is much, much smaller. It was $30,000.
Maybe with the falling value of the credits, it’s maybe like only $20,000 to $25,000. So it’s not a whole lot anyway.
Council Member Wolbach: So basically we shouldn’t worry about it too much.
Mr. Shikada: It’s not going to have a big impact on the market.
Council Member Wolbach: Okay, I’ll leave that one alone then. Thank you. That’s it for my questions, Chair.
Chair Filseth: Council Member Schmid, questions?
Council Member Schmid: Well, a couple of questions, some just to understand. We are selling these credits to someone who does not then have to reduce greenhouse gas?
Ms. Ratchye: Right, this is the cheapest way for them to do it.
Council Member Schmid: Right, so it’s the cheapest way, but does it mean our savings that we are achieving by buying electric vehicles doesn’t happen in the State, at no net effect on
the State?
Ms. Ratchye: Well, they still have to pay, right, so they don’t get these for free, so they’re trying to make a decision, should we increase the efficiency, can we, at what cost, or
should we just buy these credits, and maybe that’s another reason that the value of the credits has gone down. Maybe people are finding that they can do other things more cheaply than
the credit, but at some point, I mean the fact that they have to buy this for $80 or $100 or whatever it is, rather than zero, adds a cost to the (crosstalk) high carbon intensity.
Council Member Schmid: So does one cent, one-tenth of a cent change in the gas price have an impact on greenhouse gasses?
Ms. Ratchye: Well, if it, if that one-tenth of one cent is used to encourage EV’s or CNG’s or low carbon intensity fuels, that’s the whole point of this program, so you know, if you
question that you question the intent of the entire program.
Council Member Schmid: Well, yeah.
Ms. Ratchye: I mean it’s basically, it’s kind of like Cap and Trade in its own way (crosstalk).
Council Member Schmid: … to buy out and maintaining a bad practice, not necessarily a (inaudible). Okay, just a background question. Let me ask questions on your recommended program
areas. You have seven times the amount going to large rental properties or non-single family homes as going to individuals, so it’s a big bias towards these groups.
Ms. Ratchye: And you’re looking at Page 5 of the Report, the chart there?
Council Member Schmid: Yes, that’s what I’m looking at. Tell me a little bit how this works in apartment buildings. Suppose you have an apartment with ten units and you have ten parking
places and all of the parking places are open and you have five of them having electric vehicles and they all come back from a long commute at 7:00 P.M. at night. Who gets the charger
that you just put in?
Ms. Kelty: That is the tricky part and that is something that when I talked to property managers, is one that I think each community is going to have to figure out. For example schools,
the same thing, the teacher that commutes and they really need to charge to get home. If you look downstairs at our parking garage, those chargers are rarely ever empty and what I’ve
seen my colleagues do is, everyone knows who has an EV and there is a buddy system where after their three hours is up for charging, they call their colleague or whoever and says, okay,
I’m done, and then they’ll switch.
Council Member Schmid: Okay, that’s at work where you have eight hours and colleagues. When you’re in the apartment after a long day at work and commuting, does it mean someone goes
down there at 1:00 A.M. in the morning?
Mr. Shikada: (Crosstalk).
Ms. Ratchye: I mean it’s going an issue I think the landlord and the tenants are going to have to work out and if there is a problem like that that persists, I would hope the landlord
would have some sort of incentive to build more chargers.
Council Member Wolbach: We’re not going to solve that one here tonight.
Council Member Schmid: Right, but the issue is that it’s hard to create incentives for EV’s if you don’t know if you’ll be able to take care of it when you get home, because that’s always
the worry. Okay, let me just go to the economics of the deal. Instead of going to the EV buyer, the individual who has laid out the money, who can come from any part of the City, it’s
going instead to apartment owners as an infrastructure issue because they aren’t getting the subsidy on their infrastructure, and it’s a rental property, not an owner property, so it
doesn’t go to the residents, it goes to the owner, property owner. So why do we have seven times the subsidy to property owners than to those who are actually buying the EV’s. That would
seem to me to argue a real case, let’s get it to the people who just laid out money to buy an EV. Why give it to property owners to enhance their infrastructure at no cost?
Mr. Shikada: It really reflects the ability to then leverage that into future purchases. Again to incent the market the availability for other users. For a single family it really wouldn’t
be available to anyone else.
Council Member Schmid: Yeah, that goes back then to if I’m one of ten, can you guarantee me that I can do it before 2:00 AM.
Mr. Shikada: A future policy discussion for the Council will be the charging rates and how to design a rate that creates an incentive to get off the charger after a certain number of
hours.
Council Member Schmid: Yeah, but it would seem to me the incentive, the individual incentive would be much stronger if we just write a check. You buy an EV, we send you check.
Mr. Shikada: If you could depend on that check, and again recognizing the volatility of the rebate or the funding source as we were just describing, if you were immediately making, let’s
say in the next several weeks or even months, a decision to buy an EV based upon the existence of this program, then perhaps it has that impact, but if you’re looking at it as more of
a, let’s say, you’re planning a future buy, this program may not be here, so I think the investment, or the City’s, the utilities’ decision to make it available at a multifamily dwelling
or development makes it more likely it would be available for some future user who hasn’t either moved in or hasn’t purchased the EV.
Council Member Schmid: Okay, but the dynamic of the market right now is every person that has a car does repurchase and that repurchase date is ever moving closer, so if you had the
clear incentive out there now it might be enough to tip the balance for a number of people and then you get more EV’s in town and that’s what we want.
Chair Filseth: A follow-up question Council Member Wolbach.
Council Member Wolbach: Just kind of picking up on that, I actually think that you raise, Council Member Schmid raises a couple interesting points that kind of relate to each other,
which is, one of the reasons why we want to incent the construction providence of additional chargers throughout the City is so that it’s more likely when you come home from work you’re
going to find a charger at home or when you go shopping, near where you’re going shopping you’ll find a charger there, or if you’re working in town and commuting from say our neighborhood
in Paloverde, you work in the Stanford Research Park and you commute over there, you’re more likely to find a charger there. And, you know, speaking from personal experience, one of
the reasons why I haven’t bought an EV myself yet is I’m waiting a couple of years until the charging infrastructure is more robust and I can more guarantee that I’ll be able to plug
my bike in when I get to my destination, so anecdotal one personal experience, but I think those two questions really do tie together. I actually think that the spread is pretty good
here, so…
Chair Filseth: I have a question. Do you have a question?
Council Member Holman: I have a curmudgeon questions.
Chair Filseth: I don’t see anywhere that it says curmudgeon.
Council Member Holman: Well, Yahweh used to say that I think like an auditor, so with that, so at this stage, you know, there is talk of…
Chair Filseth: This is a question, right?
Council Member Holman: Yes it is. Charging, you know, a tax on electric vehicles as a part of the registration fee because they don’t pay a gas tax anymore, but yet they use the roads,
so that’s the background for my curmudgeon question here. So right now, we have, to use the numbers in this presentation, 1,300 residential vehicles, and that 1,300 cars we’re allowing
the use of $12,000 worth of City electricity, if I’m understanding this correctly, so if that number of... Isn’t that right?
Ms. Ratchye: Let me see.
Council Member Holman: Electricity consumed by City-owned Smart EV chargers.
Ms. Ratchye: Those are just the electricity by the City-owned chargers, so a lot of the EV’s are being charged at people’s homes.
Council Member Holman: No, I understand. Yeah, so we’re on the same page. So this is, the City is basically subsidizing the $12,000 of electricity. Now currently, I told you this is
a curmudgeon question so bear with me, so that’s with 1300. If we’re looking to go to 2020 to have, you know, whatever the six percent would be (crosstalk), 2,600 so, you know, let’s
just say use that number, that’s double, that’s $24,000 worth, and you go up to 30,000, that’s ten times, so it’s $120,000 worth. And let’s just pretend for purposes of conversation,
because we don’t know, let’s just suppose that the value of the credits goes away totally, so the City is then subsidizing, I’ll just make up a number, $200,000 worth of electricity
to EV drivers. And that’s so…
Ms. Ratchye: I mean, that’s an issue that we would probably, we’re trying to solve separately with, have been trying to find a way to not have the City even chargers, have it be free,
but charge a fee. So that’s separate from this program. In fact, one of the ideas was, let’s imagine that we’re in the future, a couple years, and we are charging and not, as you say,
subsidizing and providing this energy for free. One of the ideas was, why don’t we make it free or cheaper and that was one of the ideas we said, no, that’s not a good idea. I just don’t
think the incentive is right, if you provide something for free people will go and just sort of sit because it’s free, and they’re there and they don’t necessarily really need it and
they don’t leave the space and the charger open for people who actually do need to charge their car. So you’re right, we’re subsidizing and providing this for free and I don’t know how
long that’s going to persist, but that’s not the plan to do that forever. (crosstalk) The plan is to stop doing that for the reasons you described.
Council Member Holman: And you don’t anticipate, you know, ATM’s used to be free and they started charging for it, but it’s like, (inaudible)
Mr. Shikada: It’s interesting, you know, some of the resident feedback we’ve gotten, maybe curmudgeon feedback, was the inability to get on a charger because others are sitting on there.
So we expect that by implementing a charge or fee for charging, again, to create the incentive to get off the charger.
Council Member Holman: I hope you appreciate the question and maybe it’s not so separate that it shouldn’t come to the Council. Anticipate the question at the Council. I won’t bring
it up again.
Ms. Ratchye: It’s a good question and it’s something we need to solve. (crosstalk).
Chair Filseth: So I have a couple of questions. The first one is, so this portfolio, we have so much towards this bucket and so much towards that bucket. How often does that get adjusted?
I mean, what’s the process by which that sort of gets changed over time?
Ms. Ratchye: The program that we’re asking you to recommend approval is Attachment A, and that includes sort of delegating to the City Manager how the program would be run with the available
dollars annually, so the City Manager would adjust these each year as we figure out how much we actually have. So it’s well this year we have $2 million, let’s do whatever and then the
next year we only have $500,000 or whatever. So that’s part of the program is that the City Manager will have authority to annually review the program. So what we’re kind of showing
here is not what you’re being asked to approve, but just the sort of initial proposal for the initial year of the program.
Chair Filseth: Got it. Okay. Because the reason I ask is the amount of money this year is pretty small. So how big of a mistake can we make, right. But on the other hand, if it grows
over time, then… If it doesn’t get cancelled like you said, right. If it grows and becomes in the millions of dollars then (inaudible). So my other question is, what is the intent of
the legislation? That is, what kind of guidance have we been given on how to utilize these funds. I mean, obviously, as you point out, we’re not allowed to take the compressed natural
gas and use it on EV’s. That’s a constraint.
Ms. Ratchye: The guidance is on Page 3 of the Report. Those are the regulations.
Chair Filseth: What’s your interpretation of the intent?
Ms. Ratchye: I think the intent is to try to reduce the carbon intensity of transportation fuels by 10 percent by 2020. This is a program to meet that objective.
Chair Filseth: I understand that, but they’re going to give us, I mean, they’re going to allow us to sell these credits. What’s they’re guidance on how we should use the money.
Ms. Ratchye: That’s on Page 3. So this is verbatim from the regulations and this is for the EV’s. “Use all credits to benefit current or future EV customers, educate the public”, so
that’s why we have that education piece in there, “of the benefits of EV transportation. Provide rate options that encourage off-peak charging or minimize adverse impacts to the electric
grid. Include an annual compliance report”. So we have an obligation because of getting these credits to report annually to the CARB how we did spend the revenue. So we’ll have to report
and in fact, one of the other parts of what we’re asking Council approval for includes a program reporting requirement. So that’s basically it, and it’s less sort of prescriptive for
the natural gas fee of goal revenue, but it’s effectively the same.
Chair Filseth: But it’s tiny and will shrink. Okay, I understand. Okay, with that, any comments? Are we already done with the comments? Council Member Wolbach.
Council Member Wolbach: I’d like to move the Staff recommendation.
Council Member Holman: Second.
MOTION: Council Member Wolbach moved, seconded by Council Member Holman to recommend the City Council approve the proposed Low Carbon Fuel Standard (LCFS) program, including the use
of revenues from the sale of LCFS credits.
Chair Filseth: So I have some comments. It seems to me…
Council Member Schmid: Is there a Motion on the floor?
Chair Filseth: There is a Motion on the floor.
Council Member Schmid: And it has been seconded?
Chair Filseth: It has been seconded.
Council Member Holman: Yes. But the maker didn’t get a chance to speak to his Motion.
Chair Filseth: Do you care to speak to your Motion?
Council Member Wolbach: I actually think we hashed out most of this. I am happy to hear the other comments from the Chair, but I think that Staff seems to have really done their homework,
understanding the context of EV use in Palo Alto, doing our best to try to project that for the future, understanding what we’re allowed to do under the regulations and trying to make
best use of that for us. So I think it’s a sound recommendation. If anyone has friendly amendments, I’d be open to them, but I think it’s largely heading in the right direction.
Chair Filseth: Council Member Holman, care to speak to your second?
Council Member Holman: I think Staff’s done a good job laying this out, curmudgeon factor aside. And I think you said it’s not like we’re risking a lot of money here.
Chair Filseth: Greg, want to comment on that?
Council Member Schmid: I’d like to hear your comments. I have no extra comments.
Chair Filseth: So it seems to me, given their guidance, that the high level use of this kind of funds kind of falls into three buckets that seem to be sensible to me. One is because
the intent is to proliferate EV usage, let’s just speak about the EV now, so one kind of investment we can make is to help the City offset the cost of investing in the EV infrastructure
to support that kind of mobility, right, which I think makes sense. There’s a second bucket which is to the benefit if existing EV owners, and there’s a third bucket which is to the
benefit of future EV owners, those people who haven’t bought one yet but might buy one in the future. And there’s a fourth bucket, actually, which is EV drivers that aren’t from Palo
Alto, because if I look at how the money, how we get it, it’s attached to the fact that there are EV drivers in Palo Alto so…
Council Member Schmid: Living in Palo Alto.
Chair Filseth: Living in Palo Alto, and it’s coming in because of that.
Ms. Ratchye: Or that’s dispensed by the City owned.
Chair Filseth: Or that’s dispensed by the City owned, correct, so the argument that it should go to existing EV owners, because they already made their decision, I’m troubled by that
argument, okay. At least that some of it shouldn’t go there, right. Because, let’s say Karen owns an EV, so we’re going to get $200, $232 right, this year because Karen bought an EV.
So if we take the $230 that’s coming in because of Karen and we give it to Greg to buy an EV, then we’re basically, it seems off to me, okay. It seems like a transfer, okay. I mean,
it’s not actually what that is, right, but it sort of seems that way. So it seems to me that Karen ought to get some of it. Now, City investing in EV infrastructure benefits everybody,
so that one’s easy. City providing incentives to future EV customers, that seems to be consistent with the intent of the program, right, and what they want to do. You know, governments
have the right to tax and distribute. Again, step aside for a second, and allow the caveat that the numbers here are so small that how much engineering does it make sense to do. But
then one other category is, people that don’t live in Palo Alto, right, but drive their EV’s in to charge. So to me that’s another reason why the City shouldn’t give out free electricity
at City-owned charging stations, because the vast majority of those are going to go to people who have commuted in. Because your data shows that 80 percent of EV charging is done by
people at their home, right, which is how I do it. I’ve had an EV for eight years and I think I’ve charged it less than four times at some other place. So it seems to me that those three
buckets ought to be, ought to guide our thinking in how to spend the money. So, for example, to offset the cost of installing EV charging facilities in apartment buildings, that sort
of makes sense to me, because they are going to be used by Palo Alto residents, because it’s people who are living there, it’s not people who drive from San Jose and so forth. And it
goes towards maybe existing EV owners, although if there’s not a charging station at your apartment building, maybe you probably don’t have an EV.
Council Member Wolbach: Or you may be in Greg’s situation where you got in tight with your neighbors.
Chair Filseth: …you have to que up at 3:00 A.M. in the morning or something. So none of this is to reject Council Member Wolbach’s Motion, which I’m going to support too, but I think
as we go forward we ought to be thinking about that. That some of it should go, I mean, having this funding City infrastructure stamp makes a lot of sense and a lot of it should go there.
I think some of it needs to go back to existing EV owners, so to the extent there are programs that benefit existing EV owners and future EV owners together, like reducing the cost of
charging at night, you know, and I saw that and I thought, boy that makes a lot of sense now but what about in 2024, when 35 percent of our electricity comes from solar and it only shows
up in the nighttime, you don’t want people to charge in the daytime, so that kind of makes sense. But if you went through that filter again, and it would line up with yours, that you
know, free electricity at City EV chargers probably doesn’t rank high on the prairie and the other thing that I’ve looked at this and I think it makes sense is that we should spend a
little bit on education and outreach, but I would hate to see us spending millions of dollars on education and outreach, because my sense is that people in Palo Alto, they’re not going
to be influenced too much by this stuff, right, so I mean, but they may be influenced by apartment buildings with chargers and so forth. So, yeah, so that would be my two bits on that.
Council Member Holman: I did have one question and really good comments, I want my $252. But I did have a question, 32, I’m sorry. But I did have one question I neglected to ask is,
are we talking about apartment buildings that are new construction or how feasible is it to retrofit?
Ms. Kelty: This is just retrofits, because the Building Code…
Council Member Holman: Just retrofits, okay.
Ms. Kelty: Yes, because Building Codes today say (crosstalk).
Council Member Holman: That’s right.
Ms. Kelty: So in that case they do not qualify for the rebate. This is just for existing buildings that do not have any…
Council Member Holman: I knew that. Thank you for the reminder. I knew that.
Chair Filseth: That goes to some of my comments, programs that benefit all EV owners are preferable to those that just benefit new ones, like paying to install chargers, because Karen
had to install a charger too, right, and she’s getting some of that credit because she installed a charger. Council Member Schmid.
Council Member Schmid: I thought Eric made some great points. The key qualifications I would add is that the early users of EV’s already have their reward for being smarter than others
and (crosstalk), the best way to build an infrastructure is to increase the number of EV users, therefore, I propose an amendment to the Motion that the majority, half the funds go to
rebates, at least half of the funds go to rebates to new buyers.
Ms. Ratchye: Rebates to new buyers?
Chair Filseth: New buyers only?
Council Member Wolbach: I will not accept that as a friendly amendment.
AMENDMENT: Council Member Schmid moved, seconded by Council Member XX to add to the Motion, “with at least half the revenues going toward rebates for new EV buyers.”
AMENDMENT FAILED DUE TO THE LACK OF A SECOND
Ms. Kelty: Just food for thought, there is also a request by early adopters that places in public spaces, like certain churches and buildings that put in EV chargers that are free to
the public that have been there for a while, that they should get something, and so there are a lot of groups that could potentially get some of the funds.
Ms. Ratchye: I had another comment on the giving to existing EV owners. We don’t know who these owners are and we know the number, but the administrative issue with trying to find out
who they are, whether they still own it, and then, you know, having them to come forward and register and how many of them are going to do that, and it turned out it was actually fairly
expensive to give the money away, and it didn’t feel like a very good use of the money. And then, if you did an annual amount, because we get the money annually based on the value of
what we sell it for, then you have to continue to check with them, do you still own that car, and you know, a lot of them don’t necessarily want you to know that they own it or where
they live and all that stuff, and they may not be a utility customer, so it’s a different type of relationship we would have with them, and it turned out to be, just thinking through
it, it felt like, wow, that is probably not worth it.
Chair Filseth: Thank you very much for that and I, you know, that makes perfect sense. I don’t mean to sort of argue that specifically literally the City should start sending out checks
to existing owners. I think we should weigh the administrative efficiency into all this stuff as well. Only that principal that, you know, the existing owners did what they did because
what they did and should be out of the equation. I find that problematic. I think we should design programs that benefit all EV owners. I didn’t mean to say sort of literally we should
send out checks. Council Member Wolbach.
Council Member Wolbach: I like the whole concept inspired by the comments of my colleagues. The, kind of the fourth bucket of, that was identified by Chair Filseth, you know, helping
or providing some kind of service or spending in a way which benefits EV users who do not live in Palo Alto. I would actually not argue that we should eliminate or limit that bucket.
I actually think that is a tremendously important bucket, as it is exceedingly difficult for people to live in Palo Alto and it’s not likely to become easier for those people to become
Palo Alto residents any time soon, yet they do have to commute to Palo Alto for their jobs and given not just Palo Alto, but regional housing costs, sometimes those commutes are stretching
further and further away. In order for them to have a successful commute without severe range anxiety or really pushing beyond the range capabilities of EV’s, having a place for them
to charge when they get to their job or come to Palo Alto to spend their money and help our sales tax base, when they come to Palo Alto for them to have a place to charge, even, whether
it’s for a couple of hours while they are shopping here or having dinner downtown or when they’re at work here, before they go home to whatever community they live in, I think that is
important and pursues the goal of Palo Alto. Not just the State goal, which is to, you know, make it easier and thus encourage people to buy EV’s and to use EV’s, but also pursues our
goal of being a great City, as was mentioned earlier, the lion’s share, the big opportunity for us to reduce our net greenhouse gas is in transportation, and considering that we can’t
just think about the greenhouse gas impacts of Palo Alto residents, we have to think about the greenhouse gas impacts of Palo Alto, and that includes the car trips that we facilitate,
encourage, require by having people come to and from Palo Alto from other communities. I just wanted to emphasize, you know, it doesn’t sound like we’re going to have a debate about
it as motions tonight, but you know, if it does come to future decision making by City Manager or the Council, it sounds like there might be some, my preference would be to make sure
that group is not left out of the equation.
Chair Filseth: I actually think that’s a separate discussion, and maybe a valuable discussion in its own right. It’s really an issue to what extent do we, does the City of Palo Alto
want to invest in regional stuff, right. That is, you know, the City of Palo Alto, for example, could say, you know we’re going to take one percent of revenues and put it into regional
emissions reductions, right, and that’s going to be, we’re going to provide charging stations for people that drive in, we’re going to provide charging stations, we’re going to help
fund charging stations in San Jose, and Cupertino and other places too. It’s a regional action kind of thing, and I think that it’s potentially, it’s a worthwhile discussion, but I think
what you’re describing sort of fits on that axis, not specifically this one.
Council Member Wolbach: What I’m taking about…
Chair Filseth: Because you can make the same argument, you know, people who work in San Jose. I mean, maybe we should say, maybe we should subsidize park space in San Jose because they
live in San Jose, right, but they work in Palo Alto, you know. Do we have an obligation to help them with their life. You can make the argument. It seems to me the same kind of argument,
but like you said, it’s not material to the Motion tonight. I thought what to do about the discretion of the City Manager on an annual basis makes sense. Further comments. All those
in favor. Motion carries 4-0.
MOTION PASSED: 4-0
Chair Filseth: Thank you.
Council Member Schmid: If I could make a comment, I found it very helpful that the UAC minutes were more detailed than then traditionally have been. It makes a world of difference to
be able to see these rather perspectives and points of view.
Future Meetings and Agendas
Chair Filseth: Okay, with that the next item is Future Agendas.
Lalo Perez, Chief Financial Officer: So we have a limited number of meetings and I’ll give you an explanation as we go by the calendar here. There are some modifications that I’m going
to read that are not listed, so I apologize for that, but those happened after the printing of the current agenda. As you know it is a couple weeks in advance. The 10/4 meeting was cancelled
because Council is meeting that night now and so we were asked for that night for your use as a Council.
Council Member Holman: Why is that, I don’t remember.
Mr. Perez: The 30th is a religious holiday, if I remember correctly. The 18th then will be our next meeting and we do have agenda items. We are going to bring to you the CNG Portfolio
and we’re going to bring you, we have reappropriations. Just to remind you, these are items where Staff was not able to award a contract, but had a budget assigned to specific projects,
so we bring you a list of all the specific items that we want to be appropriated and you take a look and review and either give us approval or not. Then the first of November is not
listed there, and that’s just an omission. We do not have any items as of yet for that night, but we still have it open. Then we move on to the 15th of November and that is an important
night because we come to you with the year-end financials. So the external auditor comes here that night from MGO, David Bog, and our internal auditor and they present to you the findings
of the audit, and then Staff presents to you the CAFR (Comprehensive Annual Financial Report) and the year-end financials and our financial position and we will discuss that with you.
One change, I’m sorry.
Council Member Holman: Before you leave that one, is there any update on when we might get our copies of the final budgets?
Mr. Perez: Yes, we are shooting for the end of the month, which is coming up here pretty quickly. You know, the good news is we’re up to five instead of three now. We’ve hired two more
Staff members in the Office of Management and Budget (OMB) and that’s the reason for the delay, that we just don’t have full team, but we’re trying to get that out because we recognize
it’s an important document, and election year as well, so we’re trying to get that out as fast as we can. Thank you for the reminder. So Item Number 4 listed there on 11/15, we’re going
to move out and here’s the reason for moving it out. We’re going to move it out to the December 6 date. I think it will be important for us to really vet out some of these items that
we will present to you. Second, I think it will be important for you to understand where our financial position is and think about it and have some time to reflect, versus giving you
the numbers and then giving you 18 right away. You may have additional questions or suggestions or things that you may want to hear or see in regards to the 16th, so we’re going to do
that. Then the third reason, which is more to my timing, I want to have the latest numbers on property tax and sales tax, and I think those are key, so that’s probably number 1.
Chair Filseth: I need to ask you something on that.
Mr. Perez: So those are the drivers for moving that out.
Chair Filseth: In relation to that, I mean that’s usually about the time we start looking at long-range financial forecasts and so forth. How do you see that sort of…
Mr. Perez: Yeah, and just to remind the Committee, we were very transparent with you that due to the two…
Chair Filseth: Your gigantic staff.
Mr. Perez: Yeah, and the effort to try to give you the preliminary balancing out, we weren’t going to be able to do a full-blown long-range financial forecast. What we are going to do
is look out at a three-year window, and even though we may not produce the beautiful full layout, we are going to give you an update on what we think the next three years will be, because
we think that’s important as we’re laying out some of these options.
Council Member Schmid: So that would be in the December 6 meeting?
Mr. Perez: Yeah, that’s why we’re trying to see these key revenues come in, because as you recall, property taxes are due December 10. Most people are paying early so we will get a good
indication of how things…
Council Member Wolbach: You’re talking about Item 4 on (inaudible).
Mr. Perez: I’m sorry, yes I am.
Chair Filseth: Is there a meeting scheduled for December 18?
Mr. Perez: So right now you’re officially on vacation that week, so my comment to you is that Staff recognizes that there may be a need to have an additional meeting, so we could look
for something that works for Staff and the Committee if we need to have a second meeting in December.
Council Member Wolbach: What was the date you were talking about in December?
Mr. Perez: The first Tuesday, which is December 6.
Chair Filseth: It seems to me we had one before December 6.
Mr. Perez: December 6 is your regularly scheduled meeting, and the third Tuesday of the month, which is your second scheduled one lands on your holiday vacation.
Council Member Schmid: So possibly the 13th would be open?
Mr. Perez: We would have to look at dates. As we get closer, you know, we can work on that and look at that, but you might want to as a Committee start looking at that and looking at
dates and we can look as well.
Chair Filseth: Go ahead. Actually why don’t you finish. Greg asked a question earlier this evening about in-lieu parking.
Mr. Perez: Yeah, in terms of in-lieu parking, let me commit to this and I’ll go back and find out what we have. Cara whispered to me as she was leaving that some of these items are going
to the Planning and Transportation Commission (PTC) first so I can just give you an update as to where things are and let you know the timeline. If it’s going through PTC I don’t know
the timing, but I could see it challenging to meet some of these deadlines to come to this Committee, but let me verify that information. That’s all I have.
Chair Filseth: Are you okay with that?
Council Member Schmid: Yeah.
Council Member Holman: It doesn’t include when the penalties are going to come, or, I think Cara said she didn’t know if it was going to go to full Council or Finance first.
Mr. Perez: Yeah, I’ll follow up on that.
Chair Filseth: Very good. With nothing else further on the agenda, and unless anybody has anything else, let’s adjourn the meeting.
Adjournment: The meeting was adjourned at 8:46 P.M.
TRANSCRIPT
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Finance Committee Transcript
September 20, 2016
FINANCE COMMITTEE
TRANSCRIPT
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Finance Committee Transcript
September 20, 2016