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HomeMy WebLinkAbout2023-05-09 Finance Committee Summary MinutesFINANCE COMMITTEE SUMMARY MINUTES Page 1 of 35 Special Meeting May 9, 2023 The Finance Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 9:00 a.m. Present in Person: Burt (Chair), Lythcott-Haims, Stone Present Remotely: None Absent: None Public Comment None Action Items 1. Infrastructure and Environment: Capital Improvement Program, Capital Fund Projects a) Capital Improvement Fund b) Cubberley Property Infrastructure Fund Budget Manager Paul Harper stated there was $2.25M unspent in the Council Priorities Reserve and $125,000 remaining in Council Contingency. Revenues tentatively added included the Measure K housing fund, surplus major tax revenue, vacancy savings and increasing the gas equity transfer to 18%, which totaled $8.5M if you included the unspent Priorities Reserve and $4M ongoing. There were $3.4M in expenditures and $2.6M ongoing. If you allocated everything, there was $5.1M in funding remaining and $1.4M ongoing. Senior Management Analyst Naomi Hsu presented the proposed budget for the General Capital Improvement Fund and Cubberley Fund. Although this was a five-year General Capital Improvement Plan, we only approve the first year (2024) when we adopt the budget. The higher expenses in 2024 were due to reappropriations from 2023. There were reappropriations of revenues as well. A $12.3M base transfer was budgeted for FY 2024 and expected to reach pre-pandemic level by 2026. Transfers from Transient Occupancy Tax (TOT) revenue rebounded in 2022 and has continued to grow with $12.4M anticipated for 2024. SUMMARY MINUTES Page 2 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 In 2025, 2026, and 2027, the Infrastructure Reserve balance drops below the recommended $3M target because the five-year program would address a maintenance backlog. There were escalated costs due to deferred maintenance and setting aside a reserve for debt service in case there were revenue fluctuations in the future. The set-aside began at $2.2M in 2022 and would increase to $7.4M by 2027. Staff programmed projects according to Council priorities, staff capacity, external funding sources and the need for catch-up and keep-up. In future plans, we may need to consider some potentially necessary projects that are currently not included in the CIP, including a new fire training center, citywide radio replacements and improvements to Cypress Lane alley. The General Capital Improvement Fund had 91 projects. There was a list of the 16 new projects on Page XX of the Capital Book. Some of the larger projects included rail grade separation, Foothills Nature Preserve restroom replacement, turf replacements in parks with playing fields, Homekey interim housing shelter, Rinconada Pool family changing room, cardiac monitor replacement and electrification of City facilities. Major changes included the following: $8M additional construction costs for the Newell Road Bridge replacement with $2M offset from State revenues. $5.2M additional construction costs for Fire Station 5 replacement offset by State earmarked funds. $4.6M added to the Churchill Avenue-Alma Street rail crossing safety improvement project offset by funds from Caltrans. $1.6M added to the animal shelter renovation project for additional capital projects is in negotiation with Pets In Need. $700,000 added to the Municipal Service Center for lighting, mechanical and electrical improvement projects. $800,000 added for the Civic Center electrical upgrade and EV charger installation project. Increases were due to inflated costs of equipment and labor. The Cubberley Fund higher expenses in 2024 were due to reappropriations from 2023. For revenue, Cubberley received a $1.9M General Fund transfer annually and would receive reimbursement from Palo Alto Unified School District in Fiscal Years 2024, 2026, 2027, and 2028 for roof replacement. The City tried to maintain a fund balance of $3M to $4M per year for potential Cubberley needs, which the proposed CIP achieved. Cubberley had six capital projects in the five-year plan, four in Buildings & Facilities and two in Parks & Open Space. Of those, the two new projects were the Cubberley Gym HVAC replacement and Cubberley turf replacement. Funding for the Cubberley Field restroom installation project increased by $700,000 because of expansion of the design from a two-stall to a four-stall building as well as pump station and green infrastructure costs. Funding for the Cubberley Community Center Wing I replacement shifted from 2027 to 2028. Council Member Lythcott-Haims requested clarification on the statement that the proposed five-year plan does not fully fund several major known projects. Budget Manager Harper explained there were projects that needed funding but they had not scoped them yet. Public Works Assistant Director Holly Boyd remarked that the five-year plan did not include design or construction costs for the fire training tower. When Public Safety moves out of the Police Wing, there was a plan to perform a City Hall planning study but the final design and construction SUMMARY MINUTES Page 3 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 were not included in this budget. There was a list of other known unknowns on Pages XIII and XIX of the transmittal letter. Chair Burt commented that a full-scale rebuild of Cubberley was dependent on resolving the land issue. A major revenue source could be debt financing as well as new income but the Council and the community have not moved forward on such a major endeavor. Vice Mayor Stone asked if the Comprehensive Conservation Plan for Foothills Nature Preserve included fire mitigation measures. Community Services Assistant Director Darren Anderson replied that the scope was not fully developed. Primarily, it would focus on habitat restoration and wildlife management but it was open for adding other items. Vice Mayor Stone thought that we replaced playing fields last year when the turf was in disrepair. Assistant Director Anderson explained that they replaced infill that failed prematurely. They now proposed a full replacement including the base, which is the rock underneath the field. Director Eggleston added that the same infill failed prematurely at El Camino Park. At the time, it was the best infill we could get but was rated inappropriately for our weather. When it got hot, the solarization started to break it down, turn clumpy and melt. The manufacturer supplied us with replacement material. Assistant Director Boyd was not sure if the $0.4M for this year and $1.5M over the five-year CIP for streetlight improvements complied with the dark skies S/CAP recommendation. Most of this project’s streetlight replacements were base repairs for poles that had fallen due to accidents. Director Eggleston had not compared our current standards with the dark sky initiative but our streetlights directed light downward. Residents occasionally complain that streets were too dark and that the City needed to change its standards for streetlights. Vice Mayor Stone asked if this project replaced the beautiful antique streetlights because Page 250 included the streetlights on Guinda. Assistant Director Boyd replied that the Utilities Department does maintenance on streetlights for Public Works. They try to maintain and restore the antique streetlights. If we have to replace them, we do so with a similar style. Page 250 was our streetlight condition assessment for the entire streetlight system and recommended phased replacement schedule. Vice Mayor Stone noted we would install approximately 43 new Level 2 EV charging stations at City parking garages. The City contracted with Tesla, ChargePoint and PowerFlex. He was curious if any municipality created their own EV stations. Director Eggleston responded that we allot space to Tesla for the Bryant Street Garage superchargers. The City owned chargers at other City facilities and garages. We may have a contract for PowerFlex or ChargePoint to maintain the chargers but the City installed, owned and operated them. Installation of the 43 charging stations that Vice Mayor Stone referred to were installed concurrent with the installation of solar facilities on top of four of the City parking garages. Our rate was 23 cents per kilowatt-hour, which probably needed reconsideration because they had not updated it in SUMMARY MINUTES Page 4 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 several years. Staff structured the fee to cover the cost of electricity, overhead cost with PowerFlex and ChargePoint, maintenance of the chargers and to collect funds to replace the chargers at the end of their lives. Vice Mayor Stone thought it was a great City policy of not charging an overstay fee after the car finished charging. Vice Mayor Stone noted the report on the Downtown parking garage stated the project would evaluate the feasibility of including retail and stacked parking as part of the new structure. He thought the prior Council direction was to pursue affordable housing opportunities at those sites but housing was not included on Page 134. Director Eggleston replied that the text in that project was out of date and should have included affordable housing. They did an RFI recently and staff planned to present proposals to Council that included affordable housing. He did not recall if there was a potential retail component. On Page 148 related to University Avenue parking improvements, Vice Mayor Stone was concerned about repaving parking lots that they may convert to parking structures with affordable housing. Assistant Director Boyd responded that staff was evaluating the RFI responses and would schedule interviews later this month. For 2026, 2027, and 2028, staff would make sure they do not repave any parking lots that could potentially have a new housing/parking project. Vice Mayor Stone commented on funding for athletic court resurfacing. He wanted the Parks and Recreation Commission (PRC) input on whether we need to reallocate some existing tennis courts to pickleball courts. We should not resurface tennis courts if a year later we make a decision to change them to pickleball courts. Director Anderson replied that the PRC was interested in evaluating the allocation between pickleball and tennis. The resurfacing of tennis courts in this CIP would not be a waste. The only thing that would change is the lining, which was similar to a paint job, much less expensive and easily fixed. Chair Burt remarked on the potential nexus between streetlights and EV chargers. He queried if we were able to upgrade lighting on existing poles versus pole replacement. Assistant Director Boyd answered yes, it was possible but most of the repairs were for poles that were cracked or leaning. Chair Burt saw streets that were highly lit in the areas directly under lights but the areas in between lights were dark. He asked about reflectors to disperse LED lighting downward over a greater direction as opposed to putting in more lights. Assistant Director Boyd responded that they put in a few reflectors and optimized lights when there were complaints or concerns but staff could look at that as part of the streetlight condition assessment. Chair Burt commented on emerging technologies to tap into the power in street poles in some U.S. cities and Europe. Most of our poles were 208, which enabled low-wattage Level 2 chargers in front of multifamily homes. Chair Burt remarked that we had focused on lighting streets but not lighting sidewalks. Pedestrian routes were widely used at night into our downtown. Sidewalk lighting was a safety SUMMARY MINUTES Page 5 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 matter but it was not part of our plan. Chief Transportation Official Philip Kamhi stated that it should be included in consideration of the Bicycle and Pedestrian Transportation Plan Update. Chair Burt said that the intention of the Cubberley Fund was for major repairs and capital needs. The fund was paying for custodial care and other things. He wanted clarification on the source and uses of funds. Budget Manager Harper replied that the only funding from the City was the former covenant not-to-develop funding. Chair Burt admonished that if they did not use the Cubberley Fund as per Council’s direction to staff in 2011 or 2012, there would be a funding gap. We need to keep the commitment made to the District at the time. The District agreed to the City no longer paying the covenant in exchange for the commitment that those dollars would go into the buildings. Chair Burt advised looking at the original terms of Council direction to see if it aligned with the way we were currently using the fund. Budget Manager Harper mentioned that over the past few years there were recommendations to move specific positions and funding related to facilities maintenance work for the Community Center that was approved as part of past budget sessions. Assistant City Manager Kiely Nose noted that if the Committee chose to move items back into the General Fund it would result in a shift in liabilities. She asked if the Committee was looking at this on a prospective or retrospective basis. Chair Burt replied it would be prospective, including this year. Chair Burt recalled we were awaiting updates on the Newell Bridge cost and it was unknown how much of the anticipated shortfall we could get from the State. He asked if we expected an increase in the local share required. Director Eggleston responded that the addition of $6M was conservative and roughly approximated what was needed if Caltrans moved the existing forward-in-time funding to match our construction schedule next year but with the assumption they do not approve our additional funding request and Valley Water does not provide the local match for construction. Assistant Director Boyd pointed out that the bottom of Page 241 under Funding Sources Schedule had $8,011,000 for Fiscal Year 2024 that included the $6M. Assistant Director Boyd stated that PL20000 was a Fiscal Year 2024 grant-funded project for Churchill-Alma Street railroad crossing safety improvements. Staff was issuing the notice of intent to award and it will come to Council before break to award this project. PL14000 is the Churchill Bikeway project at Churchill/El Camino, the Palo Alto School District Paly-El Camino intersection. The project design was nearly finished and would most likely start at the end of the year. In response to Chair Burt’s query if the bikeway was grant funded, staff answered no. Assistant Director Boyd added that PL20000 Alma/Churchill was grant funded but the Churchill bikeway was not. Chief Transportation Official Kamhi remarked that the grade separation had various funding sources. The Churchill-Alma railroad safety project was Federal Section 130 funded, which was similar to a grant. Chair Burt pointed out that Churchill east of Alma was highly used by school bikers and he recalled we had an improvement planned in that section. Assistant Director Boyd will look into that. At least they would address Churchill to Emerson and Emerson to but she was not sure if it was part of this Alma project or the resurfacing project. Chair Burt wanted to know whether the SUMMARY MINUTES Page 6 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 resurfacing project included any safety improvements. He encouraged staff to go to Churchill east of Alma and observe it at the time Paly gets out. It was chaotic and highly dangerous. Changes to striping or other measures that could occur at the time we repave east of Alma could address this safety hazard of students biking on Alma into oncoming traffic. The Fiscal Year 2023 paving project started a couple weeks ago and Assistant Director Boyd will follow up with Chair Burt on what striping the Transportation Department approved. Chair Burt noted we had over $4M budgeted for FY 2024 Churchill grade separation. He was glad to see there was intention to move forward. He asked staff to summarize what they expected the $4.1M would accomplish this fiscal year. Chief Transportation Official Kamhi noted that VTA had a biannual process, so by programming funding we were keeping the opportunity open for advancing the project into the next phase of design. Doing so might allow us to leverage federal funds for these projects. The VTA board approved our Measure B funding allocations, including for grade separations. Chair Burt requested a more detailed update to the Rail Committee in an upcoming meeting explaining the difference between what was in our budget and what was our schedule for planned expenditures during the year. Chair Burt asked about the $2.7M animal shelter expenditure. Assistant Director Boyd replied it was a placeholder. In the future, Chair Burt wanted staff to clarify which items in the budget they planned to accomplish and which were funding placeholders they did not expect to expend during the year. Director Eggleston stated there were multiple staff vacancies in Assistant Director Boyd’s team and others, so projects they intended to work on did not move forward because they did not have enough staff capacity. Assistant City Manager Nose said that each project identified the expected timeline. If an FY 2024 project was expected to start in Q1 of Calendar Year 2024 or the final quarter, projects that were less critical for health and safety would likely get pushed if something happened in the first half of the year. For PE18000, the new parking garage was almost $800,000. Chair Burt wanted to know how we would use those funds Assistant Director Boyd explained those were for projects after construction was finished, including sealing cracks after the first couple of years, potentially some EV charger relocation and a trash enclosure. Assistant Director Boyd pointed out that although the Fire Station 4 replacement had the bulk of the funds in this fiscal year, the expected construction timeline was this year and next year. Director Eggleston stated that the practice was to show the entire amount encumbered in one year. He believed we initially split this project over two years for purposes of balancing the Capital Fund. Assistant Director Boyd said that we received the State earmarked $5.2M with a requirement that we award a construction contract by June 30, 2024. We will have an expedited design and permitting process to meet the deadline. Director Eggleston commented that the design and ARB review process on these projects often takes multiple years. If we allowed that to happen on this project, we were highly likely to lose $5.2M in State funding. SUMMARY MINUTES Page 7 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Staff had a Study Session earlier this year with Planning. A community meeting demonstrated general support of the proposed design. Staff anticipated going to the ARB in July and they will make the timeline clear to them. Assistant Director Boyd stated that bids for the combined Boulware Park project were due in a couple weeks. The original project was to renovate Boulware Park. There was a CIP to purchase the AT&T property. A couple years ago, we combined the projects in the budget. We encumbered it for the potential construction project. Council Member Lythcott-Haims commented that Newell and Pope-Chaucer seemed to create the same volume of concern but she did not understand why the budget had far fewer dollars for Pope-Chaucer. She wanted to know where the funding was coming from to complete whatever they needed to do for Pope-Chaucer and the projected timeframe. Director Eggleston replied that Pope-Chaucer, Newell, some channel widening and other top-of-bank improvements were part of the Reach 2 project, which is everything upstream of Highway 101. Pope-Chaucer was not in this budget because the San Francisquito Creek Joint Powers Authority (JPA) was leading all the improvements except for Newell Road Bridge, which is the one project the City would administer and oversee. Chair Burt believed the primary funding for Pope-Chaucer came from Valley Water and State grants, not Federal. Director Eggleston stated they were seeking Army Corps of Engineers funding for these projects. Work on Newell was first, next was channel widening which may happen concurrently with Pope-Chaucer Bridge. In terms of bike safety and street crossings, Council Member Lythcott-Haims lived by the Gunn crossing and Charleston-Arastradero. There was no funding proposed for FY 2024. She asked if the project was completed or to be completed in FY 2023. Assistant Director Boyd responded that staff was finalizing work at the El Camino intersection. The project should be finished next month with the exception of paving the intersection. They are waiting for the sewer project to come through that intersection and then pave hopefully in September. Regarding bicycle safety for kids biking to Gunn, Council Member Lythcott-Haims stated there were two large streams of kids coming down Charleston-Arastradero and East Meadow across El Camino onto Maybell. Chief Transportation Official Kamhi commented that the Bicycle and Pedestrian Transportation Plan would look at the city’s bicycle and pedestrian network to inform us in developing a list of priorities for bicycle and pedestrian improvement projects. Council Member Lythcott-Haims wondered if the $2.7M placeholder for the animal shelter contemplated we would keep it with Pets In Need or that we would take it back over as a City function or if both scenarios were possible in that budgeted amount. Assistant Director Boyd responded that they based the amount on discussions with Pets In Need on a potential amendment to the agreement. Assistant City Manager Nose added that the study session on the in-house cost versus the Pets In Need’s cost had similarities but the operation’s decision was still outstanding. SUMMARY MINUTES Page 8 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Council Member Lythcott-Haims asked what scopes of projects for dog parks was possible with the $325,000 proposed funding allocation for this coming fiscal year. Director Anderson replied that some of it was carryover money from FY 2023 earmarked specifically for a project to expand the existing dog park at Mitchell Park and add a small park at the same site. He was in conversations with dog park stakeholders looking for an opportunity to add a dog park in north Palo Alto because we only have one there. Vice Mayor Stone understood that costs on the Roth Building have increased significantly due to inflation and because of the increased timeline from negotiating the lease and tenant work letter. He wondered if we were able to share some of those unexpected construction costs. Director Eggleston responded that the museum would finalize the costs and use their $3M HUD grant to cover those costs per the tenant work letter. If those costs exceed $3M, the City and Museum would work together to come up with a plan. He did not believe we budgeted for cost sharing within this fiscal year. Assistant City Manager Nose reiterated that the actual cost of the project was an outstanding item. When we negotiated the tenant work letter and these additional terms, the expectation was that about one-third of the HUD funds would be needed based on estimates, acknowledging that those estimates were outdated. If the Council and this Committee wished to allocate additional funds toward that project, then that would be an amendment to the proposal. Regarding EO05030, Chair Burt asked which traffic signals they automated, the status of the rollout plan and the benefits. Chief Transportation Official Kamhi replied that primarily they were repairing and replacing outdated or damaged signals. They had a vacancy in this role until this year when they hired a senior engineer to get this work going again. Staff could provide a list of locations that have advanced signals. We need to do a larger project for our server and computer that managed and maintained the traffic signal system because this system is past its useful life. Chair Burt pointed out that we were not facing the traffic problems we had up until 2020 and so that reduced the urgency. He asked staff to look for an appropriate occasion to provide an update. He did not realize these dollars were primarily for repairs rather than advancing the program. He thought it was for the next rollout. Chief Transportation Official Kamhi remarked that some areas had smart signals installed and they have done some signal optimization. They upgrade signals as they replace them. Replacing the central system for managing our traffic signals was included in this budget. Community Services Department Director Kristen O’Kane looked up the Cubberley action from the February 2014 motion and it specifically said to eliminate the covenant not to develop and reallocate that funding toward investment in the Cubberley facilities for long neglected and ongoing maintenance. Chair Burt pointed out that would not cover routine custodial work. He asked to see a breakdown of how we were using those funds. Assistant City Manager Nose stated the change in use of the Cubberley fund occurred approximately in 2019. Public Comment: Ken Horowitz has been a Palo Alto resident for 40 years. The Cubberley Community Advisory Committee worked many hours to put together a report in 2013. His immediate concern about Cubberley was buildings had leaking roofs and pipes that had burst. SUMMARY MINUTES Page 9 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 The City owned 8 acres and rented about 26 acres of buildings, so he opined that the City was responsible. He thought we should remove the item related to gym repairs because it did not make sense to him to make repairs to something we do not own. MOTION: Council Member Lythcott-Haims moved, seconded by Chair Burt to tentatively approve the proposed capital improvement program, capital fund projects and add to the parking lot to look at Cubberley custodial as a separate expense. MOTION PASSED: 3-0 2. Infrastructure and Environment: Capital Improvement Program, Enterprise Fund Projects & Internal Service Fund Projects a) Information Technology i) Technology Fund b) Public Works i) Airport Fund ii) Stormwater Management Fund iii) Wastewater Treatment Fund iv) Vehicle Replacement and Maintenance Fund c) Utilities i) Electric Fund ii) Fiber Optics Fund iii) Gas Fund iv) Wastewater Collection Fund v) Water Fund IT Director Darren Numoto spoke about the Technology Fund. The four FY 2024 CIPs included the following: Enterprise Resource Planning Phase 2 to add new functionality and create efficiencies for all departments. Council Chambers redesign was on hold during the pandemic. With the adaptation of a hybrid environment, our requirements have changed greatly. We will design the Chambers in a more effective way for audio-visual and ADA compliance. In partnership with the Cities of Palo Alto, Mountain View, and Los Altos, we will conduct an RFP to upgrade the Computer-Aided Dispatch (CAD) software for our Public Safety Dispatch Center. Infrastructure management software will help Public Works manage capital improvement programs and asset management. A new project this year is the IT Data Center upgrade. Over the past years, we consolidated a lot of our infrastructure into a virtual cloud environment, which runs more effectively, saving money in electric and cooling. We drastically reduced our number of servers. To date, we reduced our racks of equipment by probably 75%. We reduced the footprint of our Data Center and the goal is to reclaim some of it for IT office space. SUMMARY MINUTES Page 10 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Public Works Director Brad Eggleston showed an overview of our Vehicle Replacement Fund and five-year CIP. The Fiscal Year 2024 amount was considerably higher than other years because it included reappropriations from existing annual projects where we had not made all the vehicle purchases yet. Over the past one to two years, the Vehicle Replacement Program had supply chain issues and lack of availability of many vehicles. A major focus in this program is the electrification of the fleet in alignment with our S/CAP goals. For Fiscal Year 2024, the vehicle replacement project proposed to add 18 passenger and light truck EVs to the fleet. Now, we have six or eight full-battery EVs in the fleet. Proposed in Tier 2 was the replacement of eight heavy-duty trucks and aerial vehicles with EVs instead of internal combustion. The cost is estimated at $800,000 for the General Fund and $2.6M overall for all funds including the General Fund. If the Finance Committee and Council approved the Tier 2 proposal, this would be our first all-electric vehicle replacement budget with the exception of four hybrid vehicles for the police department where we do not have all-electric options available. Director Eggleston spoke about Enterprise Fund projects. For Public Works, Enterprise Funds covered the Airport Fund, Stormwater Management Fund and Wastewater Treatment Fund. For the Airport Fund, we were almost at completion with the multiyear $36M investment in the airport apron. Finishing that project allows the capital program to turn its attention to other important but less costly projects. We are proceeding with the plan to rebuild most of the Regional Water Quality Control Plant while also beginning work on an update to the 2012 long- range facilities plan. Projects included in the five-year airport plan were to continue the planning process for the long-range facilities and sustainability plan, automated weather observation station, parking lot EV chargers for the general public or for airport users, and a project for electrification of the airport’s three vehicles. The 2017 ballot measure identified 13 high-priority stormwater improvement projects. One was completed. Six are included in the five-year Stormwater Management Fund CIP, of which five are completing design very soon. Two will begin construction during Fiscal Year 2024. The wastewater treatment plant is over 50 years old. We have an extensive CIP plan underway to rebuild much of the plant to meet new regulatory requirements. The largest of these projects is the secondary treatment upgrade that began this fiscal year and will take five years to complete. Other projects underway are the primary sedimentation tanks project and electrical upgrades project throughout the plant. We are at 90% on the design for the advanced water purification facility. We are evaluating options for how the new lab and environmental services building should move forward. We are in design on the project for joint intercepting sewer rehabilitation and outfall line construction. Staff will present a report on outfall line construction before the Council break. Staff recommended updating the 2012 long-range facilities plan beginning this fiscal year, which would take a couple fiscal years to complete. Utilities Director Dean Batchelor spoke about the proposed budget for Utilities. In 2024, they will rebuild some secondary networks and install transformers to increase the capacity of about 500 homes around the Embarcadero/Louis/Amarillo area and potentially design and SUMMARY MINUTES Page 11 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 construction for the first 10% of the system. Most of this area is 4 kV versus 12 kV, so they had to upgrade it anyway. The five-year CIP included the following: Develop opportunities to coordinate projects such as electrification and fiber expansion or FTTP for synergies. The main replacement schedule of the aging infrastructure of our sewer system will accelerate starting in the 2026 budget. The 9% rate increase was important for the sewer system. We are at about 138 years of replacement but we want to be on a 100-year timeline. In the Electric fund, the five-year $290M CIP expenses included the grid modernization project, upgrading with high-resolution security cameras, a design to build a wall completely around the Colorado Substation, substation breaker replacements, and Foothill fire mitigation. It is 11 miles from Foothill to the top. We have 2.5 miles of substructure in and hope to have another 2.5 to 3 miles built underground through Foothill Park. As we underground the electrical line through there, we will add fiber in the conduit. Some customers in that area were having difficulty obtaining internet services, so by building 11 miles we can gain some customers as well as get fire danger out of the hills. Due to supply chain issues, we were having a difficult time obtaining electric meters mostly for commercial but also for some residential meters. The beta phase will probably start in October or November 2023. The Fiber Fund five-year CIP included a $26M dark fiber project and $20M FTTP project. The Gas Fund five-year CIP included $33M. Utilities was applying for grants for two upcoming gas main replacements, Projects #25 and #26. If we get grants, we can do between 2600 to 2800 linear feet. If we are not successful with the grants, we probably have to drop that down to less than 2000 linear feet. Project #25 is in the Palo Verde, Midtown, Evergreen and Ventura area. Project #26 is the University Park and Crescent Park neighborhoods. The Wastewater Collection Fund five-year CIP included the following: Accelerate wastewater main replacement from 1 mile to 2.5 miles beginning in 2026. Begin construction of the $8.6M Wastewater Collection Replacement Project #31 to align with Caltrans street improvements. We needed to move some dollars from 2024 to the 2023 budget to align with Caltrans’ El Camino paving project. The Water Fund five-year CIP included a $9.6M water main replacement project and $7.4M for seismic water tank upgrades or replacement. A contractor will assess the last two of our six water tanks. Public Comment: None. Council Member Lythcott-Haims inquired on the projected duration of the FTTP project. Director Batchelor responded that the first phase was to do the backbone portion. Once the backbone was up, they will build in two locations for a pilot. Then they would assess and report to Council because they will have spent almost all the dollars from the Fiber Fund. Council would decide if we move forward. They estimated a five-year build to complete the entire city. SUMMARY MINUTES Page 12 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 The two locations were determined for the pilot by using heat maps of the highest potential take rate, one in south Palo Alto and one in north Palo Alto. Vice Mayor Stone asked if the Council Chambers redesign included a physical remodel or only technology upgrades. Director Numoto replied there was physical work involved to make it ADA compliant but it was mostly technology. Vice Mayor Stone queried what the price for one police vehicle. Director Eggleston responded they budgeted $75,000 for Ford Interceptor replacements. Vice Mayor Stone mentioned a police department pilot program to test electric vehicles and he shared the Fremont PD website for further information. The cost for a new Tesla Model Y completely refurbished was about $85,000. He wondered about the possibility of including it within this budget if PD was interested in doing the pilot program this year. Director Eggleston can discuss that with PD to see if they were interested in pursuing it. Chair Burt was in support of pursuing electrification of police vehicles. He was interested in the PD’s response from a performance standpoint and whether a Model Y had enough space. Chair Burt wanted to know what technology upgrades were needed for Council Chambers and why. Director Numoto explained it was for updating decades-old technology. They can consolidate a lot of the equipment to more current technologies. They would replace the TVs on each side with better displays for the public to view presentations in higher definition. Chair Burt strongly supported the Foothills undergrounding, especially for fire safety. This was important funding and he wanted to prioritize it. Chair Burt was very interested in Council considering a policy directive for streamlining the permitting and inspection processes for electrification. Our current standards may be barriers or hindrances to electrification, whether they are noise standards as we install heat pumps to the home or roof-mounted for commercial. Director Eggleston stated that could be part of the discussion during the S/CAP adoption tentatively scheduled with Council for June 5. He had the list of 72 Council priority objectives. One of them was to approve municipal code amendments for advancing S/CAP goals, specifically to facilitate photovoltaic energy storage systems, electric vehicle charging stations and heat pump installations. City Manager Ed Shikada requested anecdotal feedback be given to staff on permitting and inspection issues so they can identify systemic themes and resolve those issues. Chair Burt will gather the ones he is aware of, which were mostly about how we approve new devices and the noise issues related to them. Chair Burt commented on wastewater and our carbon neutrality goal. We have an opportunity to use the same carbon capture technology used in Redwood City’s Wastewater Treatment Facility and turn that into a carbon-neutral or carbon-negative process. We do not have information on carbon emissions from our current sludge process disposal as we air dry. We use a Scope 2 process for carbon accounting. He was not sure if we exclude carbon emissions from our sludge disposal offsite. Director Eggleston replied that they did not exclude it, SUMMARY MINUTES Page 13 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 although our estimates may not be the best. Emissions from composting yard waste, biosolids and other things were part of the scope of emissions we report. Chair Burt asked how to begin the process of evaluating the pros and cons of pyrolysis, if we needed to include it in this capital plan or should it commence through S/CAP. Director Eggleston responded that it was in this capital plan. The long-range facilities plan update draft scope included an update to the biosolids facilities plan that was last updated in 2019. Chair Burt remarked that around 2006, before we owned the airport, one of the primary initiatives in the airport master planning process was how to green the airport. The land for car parking, hangers and tie-down areas was perhaps the largest opportunity to use City-owned land for solar panels in our community. We used the Palo Alto CLEAN program for putting solar on top of our parking garages. That program had some amount of megawatt capacity. If we go forward with significant distributed generation within the city on City-owned land, having microgrid resiliency and local generation, he thought this location was a prime target for potentially a lot of solar. Director Eggleston stated they were excited about that potential for the airport and were looking into it as part of the long-range facilities and sustainability plan. Director Batchelor commented that Utilities had a project in 2017 to research adding solar and battery storage at the golf course but the cost was too high compared to what they could extract for power. They thought about using the airport aprons but they never thought about the open space area where the airplanes park outside the cover. That could be feasible. They can look at it from a Utilities perspective and update the study to include the golf course as well as the airport. Chair Burt said that using solar in the apron area provided weather protection they could monetize. He met with a solar developer at least eight years ago and the revenue potential from awnings might exceed the lease rate for solar installation. That developer installed solar panels at the Tiburon Ferry parking lot. When he visited a year or two later, it was $5 to park in the sun or $10 to park under the awnings. They recognized that everybody wanted to park under the awnings and had pricing that reflected the value. Regarding the Palo Alto CLEAN program, Chair Burt asked how we valued microgrids, local generation and storage. Peninsula Clean Energy was launching a program to go 24/7/365 renewable. They claimed it was cost effective up to around 98% 24/7 but the last couple percent was not cost effective. Chair Burt was interested in understanding that program and comparing it to our approach. He wanted to discuss the Palo Alto CLEAN Program this coming year because it was a valuable tool as we look at microgrids. Chair Burt commented on the electrification of our fleet. Contractors’ fleets do not show up in the capital budget. He wanted to look at having policies on contracting. Council Member Lythcott-Haims shared an anecdote from a restaurant owner on South El Camino who was stunned by the cost to upgrade the transformer. It felt like a punishment of early adopters to pay the cost of a new transformer when others will ultimately benefit from it. SUMMARY MINUTES Page 14 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Council Member Lythcott-Haims has a hard time hearing members of the public at the podium microphone and some Council Members in the Council Chambers. She believed the Chamber should resonate with the voice of whoever was speaking. We miss the subtleties of arguments when we cannot properly hear what was said. The Committee asked departments to advocate for funding of their priority items in Tier 2. If not advocated for, then the Committee will presume they are more of a Tier 3. Director Eggleston said the item on his list most tied to Council priorities was determining next steps for the sea level rise and adaptation plan. Our partner, Valley Water, was working with the Army Corps of Engineers on the Shoreline study to evaluate the benefits and costs. Late last year, a draft of their report said they do not see a threat to Palo Alto that would justify an expensive project until later this century. The sea level rise adaptation plan would determine what projects we need and when we need them, land use and zoning codes, as well as groundwater impacts. That plan was on hold because the Army Corp of Engineers and Valley Water work is not complete. Staff spoke with Valley Water about scheduling a public meeting this year so community members can engage and ask questions. The goal is to determine next steps and begin work by the end of this calendar year. The Tier 2 component is for additional funding likely needed to hire a consultant for the adaptation plan. Director Numoto appreciated the comments about Chambers. One of their primary goals with this redesign was to enhance the experience of the in-person and virtual audience. The challenge is you get feedback if the microphone is too sensitive. There are ways they can help enhance that, so they will include it as part of the project. Council Member Lythcott-Haims noted a Tier 2 request for $40,000 under Technology Innovations. Director Numoto replied it was for special projects that come up as the year progresses that they can leverage. Director Batchelor was not pushing on the two Customer Service Representative (CSR) positions. There was a process going through the union to reclassify all CSRs. If there were a change, it would be outside the budget hearings and would come to Council. Assistant City Manager Kiely Nose stated there were two items on Tier 2 that pertain to Cypress Lane. There was a referral from Council through the budget process on what would it cost to take ownership of the Cypress Lane property and make improvements. City Manager Shikada explained it was an unpaved dirt alley with many deep puddles. It was west of El Camino Real between Military Way and Barron Park Avenue. There were longstanding ownership questions. It is a utilities easement with poles. Council Member Lythcott-Haims noted that some of those businesses have an egress out Cypress Lane. Chair Burt asked if staff could explain the process by which the City would take ownership. City Manager Shikada responded that they have done enough title search research to determine it was a straightforward action. It does not require permission from the individual properties. Council Member Lythcott-Haims pointed out that Cypress Lane continued past Military Way to the south, past Happy Donuts, to the edge of SUMMARY MINUTES Page 15 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Buena Vista, so she hoped we would improve the entire length rather than just a portion of the alley. City Manager Shikada replied that staff would look into that. Assistant City Manager Nose stated there was an additional $1.5M on the Tier 2 list for LifeMoves and the Homekey project that was reconciled in the write-up. They identified a $4.5M gap for that capital project, of which $2M was in the proposed capital budget for the baseline capital gap and $2.5M was for design aspects. The additional $1.5M in Tier 2 would add back in some of those features, including solar on the facilities. There was a list of some of those design features on Page XXVII in the Operating Transmittal Letter, Attachment C. Director Eggleston spoke of the three S/CAP studies in Tier 2, $600,000 for the EV strategic plan, reliability and resiliency strategic plan, and resource and funding opportunities. Chair Burt said the LifeMoves solar project was a potential candidate for the Palo Alto CLEAN Program that could reduce the cost of the project to the General Fund. Assistant City Manager Nose remarked that $2.5M was for eliminated elements and permitting fees. Of that $2.5M, $500,000 was for estimated permitting fees and $2M was for a different type of fencing, sunshade sails, solar and EV chargers. She does not know what portion of the $2M was for solar. City Manager Shikada replied that the Tier 2 amount would not change because it based on the assumption of having a donor for the solar. Chair Burt knows LifeMoves did their own philanthropic fundraising and had different partners but did not know the funding details. Assistant City Manager Nose stated the baseline General CIP had about a $6M gap that the three parties were splitting $2M each. Tier 2 was for items beyond what the capital project encompassed. EVs and solar were important to the City but were eliminated from the project scope as they looked at grant funding and the cost to build. Chair Burt was concerned with cost escalations. He wanted to know the pros and cons of the additional components to determine how important each may be. As a general direction, he wanted us to work within the latest updated cost. Assistant City Manager Nose replied that if price breakdowns were of interest, staff might need to follow up. Deputy City Manager Chantal Cotton Gaines noted that staff would bring a comprehensive report to City Council on June 5. Chair Burt stated leaders in another city who had been looking at their transitional housing project recently approached him with their concern about LifeMoves based upon the cost escalations we have seen. He thinks we need to limit our cost because it was now at a level significantly higher than what we originally planned. Deputy City Manager Cotton Gaines had that conversation with LifeMoves. The City wanted this project to feel like a part of our community, for example not using regular fencing but instead using something that made it feel like a comfortable community and part of the Palo Alto fabric. We have tried to be very diligent with the things we are asking from them to get a quality project without the added costs that continue to grow. Construction costs have escalated and that has been an impact to the budget as well. Chair Burt suggested putting LifeMoves in Tier 2 as a categorical listing without a dollar SUMMARY MINUTES Page 16 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 amount. After Council provides input to the presentation on June 5, the Committee can determine if we need to put a funding amount for some subset or the entirety of Tier 2. Council Member Lythcott-Haims commented that LifeMoves was struggling with operations of their Mountain View project. It will be important for us to evaluate the feasibility of the model as well as what we need to do differently to improve our project outcomes. Deputy City Manager Cotton Gaines talked to LifeMoves about some of the concerns in the article, so they will include that in the staff report as well as provide opportunity for Council to engage with LifeMoves at the June 5 meeting. Included in the project scope that will come to Council is a revenue agreement with Santa Clara County for an operating agreement with LifeMoves. Our City does not have a lot of experience in operating a full-time shelter. The Office of Supportive Housing in Santa Clara County will help us with performance metrics as well as help us understand the general patterns of people coming and going and the expected timeframes. We are writing that into our agreement with Santa Clara County and they will carry that forward in their agreement with LifeMoves. If Council was interested in adding additional metrics in the revenue agreement, we want to have that discussion at the June 5 meeting. The goal was to have a way to hold LifeMoves accountable for our service expectations. MOTION: Council Member Lythcott-Haims moved, seconded by Vice Mayor Stone to tentatively approve the proposed budget for Infrastructure and Environment: Capital Improvement Program, Enterprise Fund Projects & Internal Service Fund Projects and add to the parking lot the following Tier 2 items: • Next steps for sea level rise and adaptation plan • Cypress Lane Alley Improvement • Partnership with LifeMoves for Palo Alto Homekey project • S/CAP Sustainable Transportation Modes Staffing • Transition to full EV replacement in FY 2024 MOTION PASSED: 3-0 Council took a one-hour break. 3. Review and Recommend to Council to Approve the FY 2024 Proposed Municipal Fee Schedule Amendments as Part of the FY 2024 Budget. Budget Manager Paul Harper noted this was part of a late packet memorandum last week. Management Analyst Oscar Murillo presented a summary of the adjustments to the Fiscal Year 2024 Municipal Fee Schedule. Our cost recovery policy separated fees into three categories (low, medium, and high) depending on the cost recovery level. High cost recovery applied to items that benefit one person such as something that would benefit somebody’s property. Low cost recovery would benefit the entire community such as a class or a program. Staff typically priced new fees based on the cost the City incurred to perform the service as well as factoring SUMMARY MINUTES Page 17 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 in the cost recovery level. Every year, we apply a general rate of increase to all fees, which this year is 7.5%. Fees that do not have that factor applied, either the fee will stay the same or change by an amount different from the general rate of increase, were reported in the memo and in provided Attachments A and B. There were 14 new fees this year the Community Services Department (CSD), most of which were related to Pets In Need providing veterinary services, a fee for community center rental lighting, and a fee for camp rentals. Five new fees in the Office of Transportation were for Link on-demand transit. Deleted fees included 12 CSD fees to consolidate a numbers of fees into one fee per Pets In Need’s recommendation as well as some items that the City no longer offered. The Office of Transportation proposed removal of three employee parking permit fees. In Attachment A, about 235 fees changed by an amount other than the general rate of increase. For example, the Budget Book increased by a much higher rate to attain cost recovery. It previously had not been recovered in full, so year over year we are incrementally moving toward that. They proposed keeping the following fees the same to encourage use and keep it affordable: The City Candidate filing fee, field trips for community centers and other programs, as well as the paramedic internship fee with the Fire Department. Council Member Lythcott-Haims asked if the Budget Book fee was the cost to replicate the two big binders for members of the public. Management Analyst Murillo replied that was correct. If a member of the public wanted one printed out for their personal use, we would charge a fee. We have books onsite for the public to reference and they are accessible online. Close to a year ago, Council approved assessing development impact fees on a square foot basis and directed staff to conduct a feasibility study. Council Member Lythcott-Haims asked about the timeline for completion of the feasibility study. Management Analyst Murillo deferred to Director Lait or Sarah McRee in Planning & Development Services for an update. Council Member Lythcott-Haims noticed in Animal Services we now have different fees for cat and dog adoption based on the animal’s age and in some instances a different fee for residents versus nonresidents. She wondered what the rationale for the difference was. Management Analyst Murillo responded that they based it on discussions with Pets In Need on the number of services provided. Council Member Lythcott-Haims wanted to avoid the administrative burden of figuring out how old the animal was and determining if somebody was a resident when we were just trying to facilitate adoption. Vice Mayor Stone commented that we charge a lesser fee for residents and a higher fee for nonresidents for many other City fees. Residents subsidize these services through their taxes. Director O’Kane stated it had to do with how easy it was to adopt out an animal. Older animals were harder to adopt, so the fee was lower for a senior animal. Puppies and kittens require more care, so the fees were higher to offset the cost. Many of our community service fees were higher for nonresidents. The $25 extra for a kitten versus $100 extra for a puppy was because there were more kittens. SUMMARY MINUTES Page 18 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Vice Mayor Stone asked for an explanation of the paramedic internship fee. Management Analyst Murillo replied it was a fee to have an internship with the Fire Department. He was not sure if they were paid but students need an internship to certify as a paramedic. He suggested that Vice Mayor Stone could follow up with Chief Blackshire if he had further questions. The Fire Department expressed they were having trouble getting qualified applicants, so they were keeping the paramedic internship fee the same amount to not discourage applicants and keep it affordable. Vice Mayor Stone asked if it was normal procedure in fire departments to pay a fee to apply to be an intern. Management Analyst Murillo was not sure. Assistant City Manager Nose contacted the Fire team and will follow up with Vice Mayor Stone. Vice Mayor Stone asked how much the fee was. He wanted to understand why we required interns to pay money when unpaid internships were a benefit to the City as well as to the intern. Chair Burt wanted to correlate the fee structure to the cost recovery policy. Table 1 did not specify the level of cost recovery for each item. Going forward, it would be a helpful column to add so the Committee can understand how they categorized fees under that policy. Chair Burt had a question on Attachment A under Public Works, Packet Page 15. There were fees for pavement condition but it was not clear what those fees were for and whom were we charging to do what. Public Works Director Brad Eggleston believed they were trench cut fees or street cut fees. Anyone cutting into a street pays these fees per square foot based on the pavement condition that factored in lifecycle cost and the impacts of trenching streets. Chair Burt asked if we wanted to consider waiving the paramedic internship fee upon hiring or upon one year of service. Senior Management Analyst Amber Cameron replied that paramedic students were assessed a fee when crews hosted the intern on our ambulances. The fee was static to keep it competitive and similar to other agencies that offer paramedic internships. Vice Mayor Stone queried if the fee structure include the new paramedic subscription service. Senior Management Analyst Cameron clarified it was a program, not a municipal fee. Vice Mayor Stone knew we were struggling with getting people to register for that subscription service. He spoke to businesses who mentioned an interest in covering employees or customers, one of which approached the Fire Department but they said it was not part of the service. Senior Management Analyst Cameron advised directing businesses to www.cityofpaloalto.org/FireMed.com for enrollment information in the business program. They based the fees on employee headcount and it covered all employees. Vice Mayor Stone asked what the cost would be for the Fire Department to pay the $1000 paramedic internship fee because $1000 as a student seeking an internship could be prohibitive. Senior Management Analyst Cameron explained that $1000 fee covered staff time and supplies for allowing paramedics to be on our rigs. We can consider reducing the fee. We are only able to support two interns at a time to be with our crews and having staff’s attention. We want to charge a fee because it provides accountability for the student. They are required to choose an agency to complete an internship in order to become a licensed paramedic. Vice SUMMARY MINUTES Page 19 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Mayor Stone inquired if the $1000 fee was 100% cost recovery. Senior Management Analyst Cameron answered no. The staff time that goes into hosting a paramedic, enrolling them and managing the program was substantially more than $1000. Management Analyst Murillo replied it was in the medium cost recovery level. Council Member Lythcott-Haims worried that $1000 was a barrier to entry. Many fields have interns such as physicians, lawyers, and teacher but they were not expected to pay $1000. She wanted to learn more about the industry practice so she could feel comfortable with the fee, particularly for those who were lower income. Senior Management Analyst Cameron stated we provide a $600 bonus payment to the staff member overseeing the intern and $400 covered supplies. Council Member Lythcott- Haims remarked that to mentor somebody was a professional development opportunity. Chair Burt asked if we typically had two interns at a time. Senior Management Analyst Cameron replied no, because it depended on community colleges’ graduation timelines. San Mateo College was a large paramedic school in the area. Chair Burt queried if the purpose of having this program was to bring people in as prospective employment candidates or if all paramedic programs shared an obligation to host interns to build the number of qualified people in the field. Senior Management Analyst Cameron responded that there were many benefits to hosting interns. It allowed our staff to stay sharp. It gives the paramedics exposure to the fire service and to Palo Alto, so it was a recruitment tool. There was an element of reciprocity and doing our part to support the paramedic service in the region. We are piloting a program that we started last year to send our current employees to become paramedics, so they will need to do a paramedic internship as well. Chair Burt reiterated his interested in having a program whereby we waive the intern fee upon hiring or after one year of employment because the fee was low to us but high for the student. Senior Management Analyst Cameron would be interested in providing waivers for students that could show financial hardship if Council was supportive of that. Chair Burt proposed we do it upon any hire. Chair Burt thought Menlo Park and other cities were discounting or waiving electrification permitting fees. He wondered how they were funding it. If we were interested, he wanted to know how we could fund an electrification discount. Utilities Assistant Director Jon Abendschein did not know what other cities were doing. With our Advanced Heat Pump Water Heater pilot program, we paid for the permit fees when the customer signed up. Staff could look into having an electrification discount. We have a variety of funding sources, such as Cap- and-Trade funding. Chair Burt was interested in pursuing that. Chair Burt asked if there was an update on the Lucie Stern issue regarding access to the second set of bathrooms in the corridor when we have a dedicated facility rental. Community Services Department Director Kristen O’Kane replied that when we have an exclusive-use event at Lucie Stern there have been issues with theater patrons using the restrooms at the same time but we were working to resolve that. The proposed operating budget had an additional hourly attendant to help bring guests in and make sure they leave right after they use the restroom facilities. We hope to implement that probably around the fall. Chair Burt suggested having “do not go past this point” signage. Chair Burt stated the exclusive-use rentals were good income SUMMARY MINUTES Page 20 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 for us. Palo Alto Players and TheatreWorks were community programs that the City had once fully funded and they spun off into a nonprofit under an understanding that they are community partners. He wanted to make sure we remember those partnerships. Chair Burt asked if staff had any thoughts on the appropriate way to consider discounting or waiving electrification fees, if it needed to be a referral, maybe as a policy question to Council when we discuss goals and key actions. Director Eggleston responded it might be appropriate for part of the larger discussion in the S/CAP funding sources and needs study. Chair Burt did not want to wait that long. He thought there needed to be a policy direction from Council if this is something they wanted to do and then we follow up with the first step. One of the first things we might want to do is see how other cities were doing it and whether those were good models for us to consider. City Manager Shikada suggested that staff evaluate how this fits within the context of the S/CAP three-year work plan. Chair Burt asked if it needed to be included in the motion. City Manager Shikada replied that they could write it into the staff report. MOTION: Vice Mayor Stone moved, seconded by Council Member Lythcott-Haims to recommend Council approve the FY 2024 Proposed Municipal Fee Schedule Amendments as part of the FY 2024 budget, with the following addition: • Paramedic internship fee to be reimbursed if intern is hired by Fire Department MOTION PASSED: 3-0 4. Infrastructure and Environment a) Utilities: Operating i) Electric Fund ii) Fiber Optics Fund iii) Gas Fund iv) Wastewater Collection Fund v) Water Fund b) Public Works: Operating i) General Fund ii) Airport Fund iii) Refuse Fund iv) Stormwater Management Fund v) Vehicle Replacement and Maintenance Fund vi) Wastewater Treatment Fund c) Sustainability & Climate Action Plan Update. Management Analyst Oscar Murillo presented the FY 2024 Proposed Budget for Infrastructure and Environment Service Area for Public Works and Utilities. From 2023 to 2024, we had an SUMMARY MINUTES Page 21 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 increase of about 13% in the General Fund and 3% in staff. In the Public Works funds and Enterprise Funds, we had a decrease of 5.4% in expenditures and an increase of 2.3% in staff. Utilities Director Dean Batchelor presented the FY 2024 recommended utility rates and five- year outlook. The Water Utility Fund showed a 6% rate increase; however, SFPUC was voting today on approval of their rate increases. There was a possibility that they will drop their increases from 11.6% to 9.6%, which would save us 1%. If so, we would drop the 6% rate increase to 5%, which represents going from $5.90 down to $5.22. We will find out later today. Major efforts were underway to invest in the electric grid infrastructure to support electrification. We plan to obtain some grants. The Resource Planning Group will perform a Cost-of-Service Analysis (COSA) to inform on future rates. Other projects include launching the new outage management system hopefully before wintertime. We did some budget realignment for the Low Carbon Fuel Standard program to support EV programs to reduce greenhouse gases. We recognized that we received $24M from the Bureau of Reclamation for the CVP. There was a $25M increase in capital expenditures for grid modernization, most of which would be for contract services, buying equipment and augmentation of staffing. Regarding implementation of electric advanced metering infrastructure (AMI), we have supply chain issues on some of the commercial and residential electric meters but we expect a full launch after Calendar Year 2024. We are in the process of applying for some Department of Energy (DOE) grants for electrification. We are requesting four positions in this year’s Fiber Fund budget: Assistant Director, Sales and Marketing Manager, Outside Plant Manager to oversee construction, and Senior Network Engineer/Architect to work with IT since we will become our own ISP. As we underground the electrical line running up to the foothills, we will add dark fiber to improve City communications going to the new Safety building as well as provide service to homes in that area. We are looking for cost-sharing construction opportunities on CIPs. Starting in 2026, we will accelerate the sewer replacement schedule from 1 mile to 2.5 miles to replace aging pipes. There is a new Environmental Protection Agency regulation for lead and copper testing of water service laterals. We possibly have some lead connectors. We will run a study on all our water meters in the ground on all the connection points going to residents, schools, and businesses, to identify any lead connections and replace them. We will invest resources to study the downsizing of gas. We will obtain DOE grants for natural gas distribution infrastructure safety and modernization. We have not been able to find any consultants but we are optimistic we can find somebody to do this for us. Public Works Director Brad Eggleston reviewed the Public Works operating budget proposal for the General Fund and Enterprise Fund. General Fund budget proposals focused mainly on SUMMARY MINUTES Page 22 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 maintenance of City facilities and development plan review at the Development Center. Major proposed changes in the General Fund included adding a 1.0 FTE project manager. We eliminated that position in Fiscal Year 2021 at the beginning of the pandemic. Bringing back this position increases our capacity for oversight of maintenance and construction contracts at City facilities and we intend to use this position to help implement City facility electrification. The additional 1.0 FTE Facilities Technician position to maintain equipment and the City Hall security proposal were related to the upcoming completion of the Public Safety building. With the police department leaving the City Hall area, we have funding to provide security. Reclassification of an FTE Engineering Technician III position to an FTE Associate Engineer was to review development applications with a higher level of complexity. Public Works had 24 full-time vacancies, 12% vacancy rate. A year ago, there were 31 vacancies, 18% vacancy rate. They fill many positions internally. The three-year S/CAP update to Council is tentatively scheduled for June 5. The Urban Forestry group is making progress in implementing the new tree protection ordinance approved last June. Potential modifications to the ordinance will be coming to Council for discussion. The Regional Water Quality Control Plant proposed to add 1.0 FTE project engineer and 1.0 FTE engineer to support rebuilding of the plant. We have a three-person engineering team but they cannot keep up with the large projects and regular maintenance projects. Adding 1.0 FTE chemist to the laboratory would increase capacity primarily related to the new State Environmental Laboratory Accreditation Program. We need more capacity for the many new requirements related to recordkeeping and new analysis steps. Reclassification of 1.0 FTE Street Maintenance Assistant position in the Refuse Fund to a 1.0 FTE Landfill Technician allows that position to do more complex work needed to assist with maintenance of the closed landfill systems that collect landfill gas and leachate. The reclassification of an hourly Maintenance Assistant position to an Equipment Maintenance Service Person is reversing the change made in FY 2021 as a budget savings idea that ultimately resulted in higher-paid mechanics doing work that the Equipment Maintenance Service Person should be doing. For the FY 2024 Enterprise Fund, we are underway with the planning effort for the Airport and we expect to have unleaded aviation fuel available soon. We are coordinating with Valley Water on their proposed purified water facility at the Los Altos Treatment Plant. Planning & Development Services is bringing a pre-screening study session of that project to Council soon. Council recently approved a reimbursement agreement for Valley Water to pay for the time that staff and our consultants were spending on that effort. There was a strong emphasis on bringing the Newell Road Bridge project to the construction phase as well as assisting the JPA with other Reach 2 efforts. Another big area of emphasis is City fleet electrification and providing charging infrastructure. Utilities Assistant Director Jon Abendschein addressed budget requests related to S/CAP focused on achieving the City’s climate action goals. This year’s requests included preparing the SUMMARY MINUTES Page 23 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 City’s gas and electric infrastructure for building and vehicle electrification, new active transportation programs to promote low-carbon forms of transportation and to reduce emissions in City facilities. There were climate-related priority investments in Tier 2 listed in the transmittal memo, including funding for several S/CAP studies, sea level rise planning and implementation, natural habitat protection, construction dewatering, staffing for additional transportation projects and electrification of the City’s vehicle fleet. Staff expected additional budget requests in the future for various purposes. Studies in progress might lead to policy actions by Council that would require staff to implement. Programs in development were staffed (such as the advanced HVAC pilot) but may need non- salary staffing for incentives and program operational budgets once we determine how those programs will be run but we would probably do those by BAO as we did with the Advanced Heat Pump Water Heater pilot. We have not fully funded many mobility programs in S/CAP. A variety of other sustainability efforts related to sea level rise, zero waste, urban canopy and green stormwater infrastructure likely would need future funding. Public Comment: None. Under Electric, Council Member Lythcott-Haims noticed an adjustment in contract services for tree clearing of $87,000. She asked if we needed to budget more given the events we saw last winter. Director Eggleston responded there might be a mix-up on that funding. There was a Public Works increase to the canopy contract for $87,000 for planting new trees. During the midyear, Council approved approximately $1.5M for Utilities line clearing. Council Member Lythcott-Haims commented on the $400,000 gas decommissioning study. She thought it was a wonderful opportunity to collaborate with the university to have climate scientists, civil and environmental engineers, and behavioral economists put together a study to not only help us but might allow us as a City and university partnership to offer a white paper to other municipalities. She wondered if staff thought it was feasible. Director Batchelor remarked that we reached out to Stanford a couple of times to see if there was an opportunity to partner with them but we have not found anybody. Council Member Lythcott-Haims suggested the Stanford Ad Hoc might be able to raise this issue with Stanford. Council Member Lythcott-Haims was curious why upgrading the fleet to EV was Tier 2 as opposed to a primary budget request. Director Eggleston replied that the FY 2024 project was nearly all electric with the exception of large vehicles where it was a much higher investment. In determining the best use of our resources, Vice Mayor Stone asked if this was the right timeline for the gas study given the Ninth Circuit decision in Berkeley. Director Abendschein replied there were technical and financial components to gas decommissioning. He thought the Ninth Circuit dealt with mandates. Our voluntary program has seen significant uptake. If we continue to design excellent voluntary programs, we may see significant impacts to the gas system without mandates. It is important for us to know the technical dimensions, the way the SUMMARY MINUTES Page 24 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 system will behave as we start to reduce its loads and what parts of the system we need to scale back earlier. From a financial standpoint, managing a utility through steeply declining sales will require a lot of analysis. Director Batchelor said we need to start the studies now. If we get it done in a two-year period, the information will still be relevant on how we go about managing the deduction of mains and how to keep the fund moving in a positive direction. Vice Mayor Stone inquired about City Hall security, if we would hire a private security firm and if we did that at other City facilities. He knew the school district had private security in the evenings. Director Eggleston responded that other City facilities have security. He does not think we scoped how we would use this funding. It was a placeholder based on the cost of a hired security person. Assistant City Manager Kiely Nose explained that once Police moved, the natural nexus of their offices being at here would be lost. Chair Burt agreed that Stanford was a great opportunity for the study on gas transition. Stanford was working with AC Transit, who is one of the leaders in electrification of their bus fleet. Now they agreed to meet with VTA. There were various Stanford research groups. Steve Eglash was formerly on our Utilities Commission and is the Director of the Applied Energy Division at SLAC, which is now integrated with the DoR School. Steve volunteered repeatedly to introduce us to key people. Chair Burt would be glad to follow up with staff. Chair Burt asked if there were any recent hydro updates. Director Abendschein does not have an updated financial projection. Staff presented the latest update at the April 17 Council meeting. When you have a very high hydro year, you have a lot of excess power but so does everybody else and the prices come down. We based our hedging from year to year on revenue, so he anticipated we could replenish the hydro stabilization reserve to the target level most likely this year but he does not have an updated forecast. This winter, Chair Burt heard from members of the public questioning why were we not undergrounding throughout the city when we had many trees go down and take power lines. He recalled years ago that we pulled back the bulk of our undergrounding program because of prohibitive cost. He thought we need to explain to the community why we were not moving forward with undergrounding, how much cost was involved, why it was a priority in the foothills, as well as the pros and cons of underground in the flat lands such as vault flooding. Director Batchelor planned to present a report to the UAC in August or September about the future of undergrounding and present it to Council afterward. Strategic Business Manager Dave Yuan addressed Chair Burt’s questions on grant opportunities for electrification and gas transition. The Department of Energy paid up to 50% of the total budget cost, so we were applying for $110M for grid modernization and another $10M for the AMI project. We submitted concept papers for these grants and they highly recommended that we fill out the application. We sent the AMI application maybe 1½ months ago and we will know the result this summer. We are sending the grid modernization application next week and we will find out in the fall. Chair Burt said the Assistant Secretary of Energy was a keynote SUMMARY MINUTES Page 25 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 speaker at the Climate Collaboration Summit in the fall and he was enthusiastic about what our neighboring communities and we were doing. He offered his as well as the Department’s support. Business Manager Yuan stated that staff was collecting letters of commitment and partnerships and they could follow up with Chair Burt. City Manager Ed Shikada advised that federal grant applications had very strict anti-lobbying rules. On Slide 14, Chair Burt wondered if it was correct that a Street Maintenance Assistant was in the Refuse Fund. Staff replied it was correct. The duties they were fulfilling were not specifically working on streets. It was labor related to projects at the landfill. Chair Burt commented that pyrolysis facilities generated biofuel, either biogas or biodiesel. He wondered whether we could use landfill gas to power a low-emission fuel cell and convert it to electricity rather than a conventional generator. He asked about the GHGs we generated from flaring landfill gas. Director Eggleston recalled we had a cogen project but the quality of the gas was less productive because of the length of time the landfill was closed and so we discontinued the project. Chair Burt inquired about AMI enabling time-of-use metering. Director Abendschein responded that part of our electric cost-of-service analysis was for developing time-of-use rates. Chair Burt encouraged staff to emphasize how this created opportunities for the public to use electricity in a smarter way that can save them money and be greener. He commended 350.org for their grassroots work on the Heat Pump Water Heater Program. Director Eggleston stated that Public Works’ priority items in Tier 2 included SFO airplane noise. They do not have dedicated staffing available to work on it but they were trying to work with community advocates to make progress. Under Community Health and Safety on Page 28, Tier 2 included some funding for consultant assistance that might help. Director Abendschein’s Tier 2 priorities for his department were studies, sea level rise and electric vehicles. For Transportation Modes, there were timing issues with the Safe Streets for All grant. The study for the Vision Zero Safe Systems Program might not finish in time to obtain grant funding for implementation. Chief Transportation Official Philip Kamhi stated that part of their Tier 2 request for a senior planner was to deliver items within the S/CAP three-year work plan. We have a grant to write a Safe Streets for All action plan to help us identify projects to apply for federal funding. There is $1B per year of federal Safe Streets for All funding we can apply for once we have our Safe Streets for All action plan. We will identify the resources, grants and programs we need for the Vision Zero program. We do not have any existing resources to do any of that work. MOTION: Council Member Lythcott-Haims moved, seconded by Vice Mayor Stone to tentatively approve the proposed budget for Infrastructure and Environment and add to the parking lot the following Tier 2 items: SUMMARY MINUTES Page 26 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 • SFO Airplane Noise consulting assistance • S/CAP sustainable transportation modes financing MOTION PASSED: 3-0 5. Citywide Internal Support and Administration a) Information b) Administrative Services (including Printing & Mailing Fund) i) Debt Services Fund c) Human Resources i) General Fund ii) General Liabilities Insurance Program iii) Workers’ Compensation Fund iv) General Benefits Fund v) Retiree Health Benefit Fund d) City Attorney’s Office e) City Auditor’s Office f) City Clerk’s Office g) City Manager’s Office h) City Council Management Analyst Joseph Shin with the Offices of Management and Budget gave an overview of the Internal Service departments and Council-appointed officers. The General Fund portion of these services increased about 5.3% from the prior year to $27.1M. There was a staffing increase of 0.8%. Other Funds increased 8.2% to $156.8M this year and staff increased by two FTEs, which equates to about 5.5%. Administrative Services Department (ASD) Assistant Director Christine Paras reviewed the operating budget. They proposed to reinstate the 0.5 FTE Administrative Support position to help support technical and managerial staff across multiple divisions in ASD. Some high-priority items for 2024 included the following: Administer the Roth Building lease and ensure we complied with our tenant work letter with the Palo Alto History Museum. Develop lease guidelines for current and new tenants at the Cubberley Community Center. Secure a new tenant for the site formerly occupied by Form Fitness. Assist the redevelopment of the LATP site. Implement the Measure K business tax passed by voters in November. Continue review of purchasing and accounting policies and business practices to enhance and create efficiencies within the organization. SUMMARY MINUTES Page 27 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Human Resources Director Sandra Blanch stated that last fiscal year they focused on maintaining positive employee relations. Reaching agreement with our bargaining groups to secure new labor agreements was an important strategy to retain our talent. Turnover decreased compared to last January. Recruiting and filling vacancies is one of their priorities. Requests included the following: Reclassify two HR technicians to HR representatives because they have been working at a higher level. They help with onboarding new hires as well as work with IT and ASD to improve our processes. Add a 0.75 Citywide customer service representative to supports various departments as well as enhance our ability to respond to the community’s email and public record requests. We restored our new employee orientation monthly event for new hires to meet with department heads. We are asking for funding to hire a tour bus. We do not have a vehicle big enough because our monthly events have more than 15 new hires. The restoration of our tour of various City facilities helps new hires realize they are part of a bigger organization that supports the whole community. In the past, we have received great remarks about our new hire tour. In FY 2024, we will expand our expedited hiring process model. Last year, we piloted working with departments to help us in the recruitment effort. We have three recruiters in HR and one strictly for Utility recruitments. We trained department representatives to review applications and set up interviews and then HR completes the onboarding process. We will expand our training program to offer an advanced leadership academy. We have a basic management academy. We are working with IT to bring new solutions for HR processes. One project we have been working with IT is to launch a new self-service portal for employees to make changes to their benefits. That saves our team from using their time to input data. IT Director Darren Numoto stated that we transitioned to more online services since the pandemic. Many department initiatives require a technical component. One of IT’s proposals for this year is to add a Management Analyst. This position would help manage our contracts within IT (we have about 100 contracts now), new contracts and renewals, manage RFPs, and manage some of Baker Tilly’s risk assessment initiatives. IT requested to increase funding for GIS modernization. Continuing to build on this platform would enable us IT offer better solutions and provide more transparency by displaying our data in a dashboard. IT built the sustainability hub and fiber hub on this new framework. They proposed restoration of dollars for our computer refresh to help keep the City staff’s computers up to date. Continuing to improve our cybersecurity posture is critically important to keep our City infrastructure and data safe. IT is collaborating with the Public Safety Department on the Public Safety Building IT infrastructure and MDC (Mobile Device Computer) replacements. City Attorney Molly Stump pointed out that almost all of the work we heard about in these hearings had a legal component. The work in S/CAP, the housing program, and Capital Improvement Program all involve legal services for contract procurement, financing, regulatory work, drafting ordinances, audits, etc. This year’s budget added a 0.5 FTE Deputy City Attorney SUMMARY MINUTES Page 28 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 because of the increase in complicated projects in S/CAP, the Capital Improvement Program, and Planning. We reallocated a position to the Utilities Fund to reflect the evolution of the type of work done. One proposed change was to create a $250,000 contingency. Personnel investigations were legally required when our workforce raises concerns and we typically do those through the Legal Office. In the past few years, we funded them on an ad hoc basis, depending whom had cash to afford the expensive investigative work overseen in the City Attorney’s Office and HR. We would like to regularize that funding and set aside $250,000. There was no presentation from the City Auditor’s Office since it was in alignment with the Baker Tilley contract. City Clerk Lesley Milton stated that the City Clerk’s Office requested reclassification of a Deputy City Clerk position to an Assistant City Clerk. Currently, their department had a City Clerk, an Assistant City Clerk, a Deputy City Clerk and two administrative professionals but there was a lot of crossover. To make sure there was coverage, it was better to have two Assistant City Clerks. She requested additional funding of $3000 so staff could attend technical training. She also requested restoration of funding for the annual boards and commissions awards and service recognition event instead of using salary savings to cover those expenditures. City Clerk Lesley Milton noted that for the City Council’s Office budget, the main request was the restoration of the travel fund for City Council Members to attend trainings and to represent the City of Palo Alto. They eliminated travel during COVID. City Manager Ed Shikada had no major budget requests for the City Manager’s Office. One Tier 2 item proposed under Planning & Development Services was for a new administrative assistant to support Mr. Guagliardo in an interdepartmental capacity but it was unknown where they would place that position. Director Blanch had two positions they cannot fill because of difficulty finding experienced HR professionals. They have two hourlies and are bringing on a third next week to support recruitment. If they should fill their own vacancies, they would need to find dollars to continue supporting their hourly positions. They need another recruiter but it was not included in Tier 2. They will provide more information regarding administrative support at the next meeting. We contract with executive recruiters. We have two recruiters handling five to eight recruitments. She found another recruiter to assist Public Works. Vice Mayor Stone asked why turnover decreased so dramatically this year from last. Director Blanch believed salary target placement to the market stopped the turnover. City Manager Shikada added that the positive work environment also contributed to lower turnover. Vice Mayor Stone queried what the difference was between an Assistant City Clerk and Deputy City Clerk. City Clerk Milton responded that they now operated as Assistant City Clerks. They take over Council meetings when needed and did complex analysis on the budget, etc. Every SUMMARY MINUTES Page 29 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 City needed City Clerk staff, so our employees were able to do everything in our office and be interchangeable if someone took a position elsewhere. Vice Mayor Stone knows we frequently contract with external firms for litigation. He asked whether that provided more cost savings for the Department rather than having a full FTE or if it was for subject matter expertise. City Attorney Stump replied that we contract out almost all our litigation but we have someone in-house who spends about a third of his time managing litigation and she was very involved as well. We are active supervisors and participators. We help set strategy, review motions, and were involved in all settlement conferences and negotiations. The reason we send the rest of the litigation work out for discovery and initial drafting of motions was expertise and workflow management. We use some outside counsel dollars for specialized advice on transactions. Council Member Lythcott-Haims commented that the culture of a workplace usually had a large impact on our ability to recruit and retain. She wondered if staff could explain more about the positive work environment initiative, the philosophy or methodology, and the feedback from employees as to its efficacy. City Manager Shikada responded that this was an outgrowth during the pandemic of recognizing the stress everyone was feeling and reinforcing that Palo Alto was an employer of choice. Department heads identified priority areas of focus, including employee professional development and training, positive Council-staff interactions, flexible work schedules, special projects, work/life balance and workload management. We formed small teams around each focus area and undertook a few initiatives. For example, the I Love Palo Alto website will identify notable landmarks around town and build skills among staff who were interested in website layout, communication, team project management, etc. That project is just about to launch. We have anecdotal positive feedback on this effort. Council Member Lythcott-Haims noticed we were adding a 0.5 FTE Deputy City Attorney. Water and Electric will draw upon this person’s expertise. The FTE was allocated 0.17 for one department and 0.14 for the other, but she did not know where the remaining 0.19 went. City Attorney Stump replied it does not work that way. Attorney Amy Bartel only worked with Utilities. The others were shared positions. We allocate City Attorney Stump's position to the General Fund but she does some work to support Utilities. Chair Burt asked if the bus tour only visited City facilities. Director Blanch responded that it included Stanford. City Manager Shikada noted the synergy between this activity and I Love Palo Alto. The tour included driving quietly by the Garage so as not to disturb anyone in the neighborhood. In years past, we had volunteer tour guides and ambassadors among staff members from HR and the Fire Department. Chair Burt suggested touring our parks and landmarks within the greater downtown area south. He takes visitors from delegations to the Roth Building, HP Garage as well as the first offices for Facebook, Google, PayPal, and LinkedIn. A woman physician cofounded Palo Alto Medical Foundation and created a community clinic model for the United States in the 1920s. Ramona Street was an important ethnic center heritage for our community through the first half of the 20th century. SUMMARY MINUTES Page 30 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Tech companies usually pull back on HR during layoffs or hiring freezes. Chair Burt wondered if we have seen a change in the talent pool and availability for our two open HR recruiter positions. Director Blanch replied that they posted an hourly recruitment opportunity after Apple announced their layoff of recruiters but we did not have anyone respond. She was not sure if it was because of our difference in pay from the private sector. She heard internally as an anecdote that some wanted to take time to reflect on their next steps. Assistant City Manager Kiely Nose addressed Chair Burt’s questions regarding the Cubberley lease and Bryant Garage space. ASD and CSD were looking at the uses of the Cubberley facility, the shorter term or midterm rentals of the City’s facilities and making sure there was an appropriate process when a vacancy arises. Staff did an RFP to solicit brokerage services for the Bryant Street storefront and was unsuccessful at retaining any responses, so we advertised it ourselves. A public RFP on our bids portal was almost ready to post. Regarding the Cubberley Capital Fund, Chair Burt wondered previously why we were unable to make more progress with $1.8M/year. Now he realizes we used those funds for what formerly were other costs associated with Cubberley that were coming out of the General Fund. He was interested in having a better understanding of how we were using the $1.8M/year to make that space more attractive while we develop a longer-term program. For Bryant Garage, Chair Burt asked if we should consider local-serving nonprofits that could provide modest income to the City combined with valuable services in the downtown area. Chair Burt was glad to hear the City Manager’s Office referencing a position working with nonprofit partners and wanted to know how it differed from past practices. City Manager Shikada replied that we have an outstanding referral as the result of an audit from the City Auditor’s Office regarding our ongoing nonprofit relationships and an interest in establishing more consistency in risk management. That referral was a pending assignment for Lupita Alamos to perform an overall review of our public-private partnership policy. Lupita Alamos is currently helping CSD Director Kristen O’Kane with the Pets in Need agreement. Council told us to recognize the community value provided from our nonprofit partnerships, so we are working on that scope and will bring it to Council. Assistant City Manager Nose commented that the second RFP for the Bryant Street storefront area was open to all proposers, including nonprofits or others that were interested. We will advertise it to our networks once we post it. Chair Burt asked if we had a comprehensive list of the nonprofits in our community and nonprofits that serve our community but do not reside here. He was interested in staff compiling a comprehensive, organized list of nonprofits so we understand their focus areas, capacities and missions as well as it being foundational for us to leverage those resources. We can use the Chamber as a resource. The Weekly at one time had a comprehensive list. He encouraged staff to think innovatively about how we can reach those candidates and advertise that space. SUMMARY MINUTES Page 31 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 The list of Council priorities included discussing plans for commercial dewatering requirements for which Tier 2 had a consultant support allocation of $50,000. Housing for Social and Economic Balance had a placeholder of $100,000 for housing and services for unhoused residents. Staff needed to determine the programmatic aspects. Council Member Lythcott- Haims believed there was $750,000 to support unhoused residents and she wanted to make sure we used it if we wanted to. She asked for the total amount requested in Tier 2 for the unhoused. Assistant City Manager Nose replied that was associated with Measure K and clarified it was for affordable housing and unhoused services. Assistant City Manager Nose spoke about the community engagement quarterly newsletter under Enhanced Services in Tier 2. There was a study session mid-April on community engagement and Council discussed mailing a quarterly newsletter. The funding request was $100,000 for four newsletters per year. Chair Burt queried if portions of the newsletter related to S/CAP, Utilities or other Enterprise Funds could cover part of the cost. City Manager Shikada thought it was a placeholder mostly for postage costs. The dollars might potentially be distributed but it may be more trouble to allocate the cost than it is to pay it at this scale. Chair Burt asked for a description of the functions the Economic Development Assistant position would provide that we currently were not serving. Assistant City Manager Nose explained that one staff individual was working on the strategy with the consultant as well as the door-to-door aspect. This position would augment staffing. The other aspect was customer service to businesses and residents. Our community values one-on-one interaction to help navigate services within the City or policy changes. That takes a significant amount of time for staff to have a direct conversation. We want to enhance special event offerings in partnership with the business community. We are increasing our CSD staffing to produce special events. We currently have one staff person and this work will increase when the Street Sense consultant comes back with the implementation strategy. Chair Burt noted that a number of Tier 2 items had funding as if they would be full year but we were unable to staff those positions immediately. It would be useful for the Committee to have those expenses prorated for this year. City Manager Shikada replied that they could staff a position such as an administrative assistant for close to the full fiscal year because it was easier to fill than other positions. Council Member Lythcott-Haims pointed out that we did not include commercial dewatering on the list, which she thought was appropriate because staff did not advocate for it. MOTION: Vice Mayor Stone moved, seconded by Chair Burt to tentatively approve the proposed budget for Citywide Internal Support and Administration and add to the parking lot the following Tier 2 items: • Staffing for Economic Development strategy implementation • Support for study for permanent car-free streets • Unhoused residents for housing and services SUMMARY MINUTES Page 32 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 • Quarterly community engagement newsletter MOTION PASSED: 3-0 The Committee took a five-minute break. 6. Finance Committee Budget Hearing Recap and Next Steps Assistant City Manager Kiely Nose called attention to Pages 2 and 3 that highlight HSRAP in detail. The Committee placed Art Center staffing and visitor staffing in the parking lot. At the bottom of Page 3 is staff’s alternative recommendation that merged the two proposals. This would restore the Art Center’s pre-pandemic open hours to the public, help with installations and the public art program. Page 5 had information about PATMA in response to the Committee’s question about costs of changing the geography. There was not a cost associated with the passes but there was about a $25,000 estimated cost for the administration to work beyond downtown. The parking lot had a Tier 2 item for the Housing Ad Hoc Committee. Staff at this time has not identified additional resources needed to support this. The last item on Page 5 was the Downtown housing plan. The request for $800,000 to support completion of the Downtown housing plan was not on the Tier 2 list. If not funded, work would stop on this plan. Council Member Lythcott-Haims pointed out that the Committee questioned Director Lait about this and her notes say that he was struggling to staff it, he had long-range vacancies in this department and therefore had very little confidence it could be undertaken. City Manager Ed Shikada stated that Director Lait was not here because he needed to attend to a personal emergency. Senior Operations Manager Sarah McRee had a recent discussion on this item and they now think they are likely able to pursue it. The benefit of having this partially grant funded allows them to apply for an extension. If they staff it this year, the additional funding allows them to continue pursuing this project. Vice Mayor Stone pointed out that at last night’s discussion on Housing Element, Council directed we expedite housing programs into the next couple years based on HCD’s request. Since that would dramatically affect the department and what they can do with limited resources, he asked if staff thought they could work on the Downtown housing plan. Senior Operations Manager McRee replied that this project had one consultant working on it and $150,000/year for a project manager to assist with this. With that combination and in-house staffing, they should be able to manage it. The item listed on Page XXVI had $550,000 proposed out of the General Fund. Senior Operations Manager McRee believed the minimum needed was $300,000. They were evaluating proposals but the average was about $1.1M. We do not know the total cost until the negotiation of the scope and the evaluation were complete. They likely will need $550,000 based on the scopes they have seen, which leveraged $800,000 in grant funding. SUMMARY MINUTES Page 33 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 In response to discussion over Cubberley custodial costs, staff provided a breakdown of the five-year CIP dollars. For FY 2024, janitorial costs are about $0.2M if the Committee wished to move salaries for custodial support from the Cubberley Fund to the General Fund. They did this as an off-cycle budget transaction in response to a referral from Council in 2019 to identify savings in the General Fund for prefunding of pension. Council Member Lythcott-Haims advised us to keep in mind the humans who are trying to earn a living and live in Palo Alto when we make an offer to somebody to fill open roles in the Art Center. Assistant City Manager Nose addressed Council Member Lythcott-Haims’s question on benefit eligibility. City employees typically receive benefits at 0.5 FTE. There are some 0.48 FTE positions. We do not enroll those employees in our pension system because those positions are under 1000 hours. They receive a medical stipend but do not receive a fully benefited package. City Manager Ed Shikada clarified that 0.5 FTEs receive proportionate 0.5 benefits. Assistant City Manager Nose addressed Chair Burt’s questions about HSRAP. The 2001 General Fund budget was $108.8M and in FY 2023 was $247.4M. The table showed the dollar values. The first column reflected entitlements, the second column reflected grant funds and the far right was the total. Calculating the General Fund budget and the total in FY 2001, it was about 1%, maybe 1.1%. For FY 2023, it was about 0.8%. Chair Burt inquired about the negative CPI. Assistant City Manager Nose replied it was a formula error and to ignore it. Chair Burt noted that not just custodial but we also moved landscaping services, fire sprinkler and repair, parking lot sweeping, supplies and equipment to Cubberley in FY 2019. Those were expense categories paid by the City out of the General Fund before we had the Cubberley fund. Discussion ensued on the original motion language. City Manager Shikada stated that Council’s direction to staff in December 2018 was to find $4M to fund the Pension 115 Trust and this was one of the sources tapped for that purpose. Vice Mayor Stone commented on the history of HSRAP funding. The budget increased significantly over time but the percentage amount for HSRAP had decreased. He was interested in a policy of tying it to 1% of the General Fund in the future. Assistant City Manager Nose remarked we would need to allocate an additional $600,000 to increase it to 1% of the General Fund. The Committee can make a referral to Council that they recommend that policy; however, she cautioned against policies using percentages as it can pose challenges in the future. Council Member Lythcott-Haims was in favor of the City committing 1% of its General Fund to this allocation despite the constraints. Chair Burt suggested other approaches, whether it was a policy or a goal and if we accomplish it in one year or spread it over a couple years. Vice Mayor Stone agreed to a referral to Council. Discussion ensued on vacancy rates. Assistant City Manager Nose stated that the Committee could direct staff to more aggressively assume actual vacancy levels in budgeting practices. SUMMARY MINUTES Page 34 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 Chair Burt asked what the minimum request of $145,000 provided versus $406,000 for library hours. Assistant City Manager Nose replied the Library Department provided a full write-up on this. The $145,000 estimate is what is necessary to restore hours to pre-pandemic levels but programming would remain at 50%, while $406,000 reflected 100% restoration of hours and 100% restoration of programming. Council Member Lythcott-Haims inquired on the feasibility of phasing in the full EV fleet replacement over two or three years. Director Eggleston explained there were ongoing projects for replacement of vehicles in the fleet. If we cut the proposed Tier 2 amount in half, four replacements would be EVs and four would be internal combustion. For heavier equipment, the cost of electric replacements was roughly double that of internal combustion. For each of the eight vehicles proposed, the cost of electric equipment was between $450,000 and $800,000. Most were diesel vehicles and we switched to renewable diesel, resulting in lower greenhouse gas emissions. Vice Mayor Stone suggested delaying the replacement of four vehicles to the following year, extending the vehicles’ life by one year. Director Eggleston thought they could accommodate that. The Air Resources Board approved clean fleet regulations in the last couple of weeks, which would result in heavy equipment and trucks being available in electric versions over time and he would expect pricing on them to start decreasing as they become more common and there is more demand. We calculate the gas transfer two years past the actual cost of gas, so the gas spike in 2023 would result in us having a huge surplus in 2025. We could choose to have the gas equity transfer at 15.5%, although the historic practice was 18%. Chair Burt asked for the Committee’s consensus on returning the gas equity transfer to 18% after this fiscal year. The Committee agreed to a 15.5% gas transfer this year and 18% going forward. Assistant City Manager Nose discussed overhead costs. They need at least another attorney for administration, likely another recruiter and procurement staff to pull consultants and execute on Tier 2 items. She could not provide a dollar value now but it was over $200,000 for each position. Staff will bring forward a recommendation on the administration needs to support these investments. Council Member Lythcott-Haims requested that staff estimate the actual costs including labor for next year’s budget discussion. MOTION: Chair Burt moved, seconded by Council Member Lythcott-Haims to refer to the City Council the tentative recommended amendments to the FY 2024 Proposed budgets (draft outlined in the list below) for discussion and feedback and to recommend to the City Council referral back to staff the following: a) Review the coordinated area plan (CAP) process with the Housing Ad Hoc Committee seeking to streamline the process b) Provide detail on a potential subsidy to discount or waive electrification permitting fees through the General Fund SUMMARY MINUTES Page 35 of 35 (Sp.) Finance Committee Meeting Summary Minutes: 5/9/2023 c) Explore establishing a policy that requires 1% of the General Fund be allocated to HSRAP annually. MOTION PASSED: 3-0 Date Finance Committee Adjustments to Budget* FY 2024 GF (cost)/savings or rev Ongoing Dept Date Parking Lot Items Amount (cost)/source Ongoing Dept 5-May Beginning Balance - Council Priorities Reserve $ 2,250,000 $ 2,250,000 9-May Unspent Council Contingency 125,000 - NON 5-May Measure K Housing and Homeless Services 750,000 750,000 NON 5-May FY23 Surplus Major Tax Revenues 2,500,000 - NON 5-May FY23 Vacancy Savings ($1-2M)1,500,000 - NON Subtotal Sources (Revenue)125,000$ -$ 5-May Gas Equity Transfer at 18% in FY25 - 1,000,000 NON 9-May FY23 HomeKey Operations Savings 1,000,000 - NON 5-May HSRAP (inc. from HRC max based on GF %)(150,000) (150,000) CSD 5-May T2: Volunteer Coordinator for JMZ (105,000) (110,000) CSD Subtotal Sources (Revenue)8,000,000$ 4,000,000$ 5-May T2: Library Programs (261,000) (261,000) LIB 9-May T2: Cypress Lane Alley Improvement (400,000) (20,000) PWD 5-May HSRAP (reflects HRC max requested $'s)(150,000) (150,000) CSD 9-May T2: LifeMoves Construction ($ amount TBD)(500,000) - CMO 5-May Art Center Visitor Staffing (112,500) (112,500) CSD 9-May T2: Full Electric Vehicle Fleet Replacement (100%) (400,000) (400,000) PWD 5-May T2: Eucalyptus Tree Removal (400,000) - CSD 9-May T2: Community Engagement Qtrly Newsletter (100,000) (100,000) CMO 5-May T2: Youth Mental Health Programs (200,000) - CSD 5-May T2: Therapeutics Recreation Program (90,000) (95,000) CSD 5-May T2: Library Hours (145,000) (145,000) LIB 5-May Neighbors Abroad (20,000) (20,000) NON? 5-May T2: Permitting and Inspections Operations (115,000) (115,000) PDS Subtotal Uses (Expense)(1,916,000)$ (1,041,000)$ 5-May T2: Zoning Code Update (3 yrs $1.5M)(500,000) (500,000) PDS 5-May T2: Bird Safe Glass/Wildlife Protection (75,000) - PDS 5-May T2: San Antonio CAP (each plan $2M, CalPoly)(50,000) (700,000) PDS Potential Funds Remaining (deficit) / surplus (1,791,000)$ (1,041,000)$ 5-May PATMA Geography Expansion (25,000) (25,000) OOT 5-May T2: Regulate Short Term Rentals (100,000) (100,000) PDS 5-May T2: Seismic Upgrade (additional funding)(75,000) - PDS 5-May T2: Fire Utility Task Vehicle (67,000) (10,000) FIR 5-May T2: Public Safety Dispatcher Staffing (266,700) (284,800) POL 9-May Cubberley Op/Maint Staffing & Non Sal Items (900,000) (900,000) CSD 9-May T2: Sea Level Rise and Adaptation Plan (200,000) (200,000) PWD/UTL 9-May T2: LifeMoves Construction (Shift $2M from ops to PE-24005) (500,000) - CMO 9-May T2: S/CAP Studies (600,000) - PWD/UTL 9-May T2: Full Electric Vehicle Fleet Replacement (50%)(400,000) (400,000) PWD 9-May T2: Transportation Modes Staffing (185,000) (196,000) OOT 9-May T2: Airport Noise Reduction (100,000) - PWD 9-May T2: Economic Dev Assistant (145,000) (145,000) CMO 9-May T2: Car Free Streets (250,000) (250,000) CMO 9-May T2: Unhoused Residence Services (100,000) - CMO Subtotal Use (Expense)(5,771,200)$ (4,348,300)$ Potential Funds Remaining (deficit) / surplus 2,228,800$ (348,300)$ FY 2024 BUDGET PROCESS Adjournment: The meeting adjourned at 5:50 p.m.