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HomeMy WebLinkAbout2024-10-15 Finance Committee Summary MinutesFINANCE COMMITTEE SUMMARY MINUTES Page 1 of 8 Special Meeting October 15, 2024 The Finance Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 2:30 PM. Present In-Person: Burt (Chair), Lauing, Veenker Absent: None Call to Order Chair Burt called the meeting to order at 2:30 PM. The clerk called roll and declared all were present. Public Comment No Public Comment. Agenda Items 1. Finance Committee (FC) Discussion for Director of Utilities Department Recruitment and Input of Candidate’s Key Characteristics and Salary; CEQA Status – Not a Project Human Relations Department Director Sandra Blanch voiced that they were present to discuss recruitment of the next Utilities Director given that Dean Batchelor would be retiring. They were requesting the Committee’s input related to desired candidate qualities. She introduced the recruiter, Teri Black with Teri Black & Co., who was present remotely and would lead this conversation. Teri Black & Co. Executive Recruiting President & Founder Teri Black requested the Committee’s thoughts and insights on qualities and characteristics desired for a new director and input related to the priorities the new director should focus on the first 6 to 12 months of their tenure. Item 1 Public Comment Herb B. discussed why he was surprised to see this on the agenda. He stated that the Municipal Code outlined the functions of a Utilities Director. He remarked that the job description in the packet differed from what was online. He wondered if it had already been decided that the CEO would become the director. SUMMARY MINUTES Page 2 of 8 Sp. Finance Committee Meeting Summary Minutes: 10/15/2024 Council Member Veenker commented that Director Batchelor’s retirement was bittersweet. She did not consider the succession to be set. She discussed the position requiring a broad skillset, and she also wanted the director to manage climate goals with partners inside and outside of the City. Vice Mayor Lauing thought the City Manager would get input from multiple sources, not just this Committee. He noted that Director Batchelor had agreed to be available even after his retirement, so there was not a tight schedule to fill the position, and he wanted time to be taken to find the exact right person for the job. He added that having the CEO could allow for even more time to conduct the search. He expressed that electrification had to be a top priority and that the director should think long term, not just a few years out. He wanted the director to be up to date on new technologies, cost conscious, a great manager and recruiter of staff, and able to manage in all directions. He thought it would be preferable to hire someone known in the industry. Chair Burt addressed the City being in a critical transformation of utilities. The foremost function was to have reliable, cost effective, and safe utilities. He wanted the position to be framed as an opportunity to have a leading and transformative impact to utilities. He added that there would not be a perfect candidate, but he wanted the best candidate. He wanted to ensure exceptional reliability in transitioning from gas to greater reliance on electricity. He discussed the relationship of the staff liaison, the UAC, the Utilities Department, the Climate Action Ad Hoc Committee, and Stanford and leveraging resources. He asked Director Batchelor what transformations he had seen, what he saw on the horizon, and what should be looked for in his successor. Utilities Department Director Dean Batchelor replied that the successor needed to be open to understanding what the possibilities could be, which he elaborated on. He stated that if there was a deal with Cubberley, it should be the number-one goal because that would be where folks would go in an emergency and would be the location of cooling and heating centers. Batteries needed to be addressed. He thought the new director should strategize and think about where the utility would go and how it would support customers and that they should be able to manage throughout the organization, onboard people into positions, and look at the potential for the future and how to move forward. He added that there needed to be a better partnership with Stanford, and the director should be able to collaborate with them and other agencies. Chair Burt voiced that the new director would not be a superstar in all the different types of utilities but should have a broad scope, and he asked if there should be greater strengthening in senior staff and directors in major category areas. Director Batchelor responded that they had been investigating succession planning. The most important piece was electrification. The City was strong in gas and wastewater from the AD. They would potentially fill an opening that could happen this year on the electric side, which SUMMARY MINUTES Page 3 of 8 Sp. Finance Committee Meeting Summary Minutes: 10/15/2024 would play key to the engineering and operational side, and they were speaking with folks who understood Palo Alto. Council Member Veenker noted that Palo Alto’s reputation in the utilities world and the advocate community could attract candidates with the desired attributes. Vice Mayor Lauing pointed out that the process was important. It was a City Manager hire, but he requested that the Committee be provided touchpoints in the process. Assistant City Manager Kiely Nose stated they were planning to have a conversation with the UAC, which she believed would be this month or next month. She requested that Director Blanch and Teri Black & Co. Black provide information related to the utilities market for executives. She added that compensation may need to be discussed. Director Blanch voiced that the industry and market was very competitive and compensation would be a challenge. They were working to find a strategy and philosophy to attract and retain employees, and she believed salaries were competitive, but it was being reviewed. There may be a need for a 5- to 10-percent salary request, which would come to the Committee and go to Council. Teri Black & Co. Black echoed Director Blanch’s comments and stressed that it was difficult for public sector utilities to compete with the private sector. Salaries and retirements were increasing at a rapid pace, so they were looking at a base salary of about $400K, which was competitive in the public sector. It was seven figures in the private sector. They would focus on this being an opportunity that would be compelling to the right person. Chair Burt asked if the candidate pool may be outside of California. Teri Black & Co. Black answered that it would be a nationwide recruitment. Council Member Veenker inquired if housing assistance could be part of the compensation package. She spoke of it being advantageous for the director to reside within Palo Alto’s border or at least nearby. Assistant City Manager Nose had heard a general acknowledgement that compensation needed to be adjusted, and a salary adjustment schedule could be presented to Council on consent. The Committee supported that. NO ACTION TAKEN AA1. Overview of University Avenue, California Avenue, and RPP Parking Fund Financial Status, Pricing Policy Options Development, and General Fund Loans; CEQA: Not a Project SUMMARY MINUTES Page 4 of 8 Sp. Finance Committee Meeting Summary Minutes: 10/15/2024 Office of Transportation Director Philip Kamhi announced that staff would provide an update on the status of parking funds, including challenges, potential solutions, and next steps. He displayed a slide with an overview of what would be covered at this meeting. Office of Transportation Senior Analyst Joseph Shin provided a slide comparing pre- and post- pandemic revenues and a slide with the breakdown of revenues in the University Avenue and California Avenue funds, including adopted numbers for FY2025 and projections through FY2029. He shared a slide of the expense summary, a pie chart with projected expenditures, and a graphical representation of the General Fund support and the fund balance provided to the parking funds. They were projecting that by FY2030 the University Avenue fund would need more than the $700K budgeted annually to remain solvent. Director Kamhi remarked that the current paid parking system presented some challenges, which he outlined. They were developing a new parking management concept to improve parking efficacy and user experience, which would include dynamic pricing, flexible permit options, mobile payment integration, hourly pricing, and a merchant validation program. They were working on pricing and new permit changes to improve revenues, and they proposed increasing permit prices starting in FY2026. The parking permit technology was currently being upgraded, which was needed to achieve new permits, and they were in the process of selecting a new vendor. They did not think the pricing and new permits would address much of the deficit. Next steps included presenting the parking concepts to the PTC in November and then to Council. In early 2025, they would conduct additional public engagement, particularly on the new vendor as permit options, curb management strategies, and on-street pricing would be explored. During the FY2026 budget process, staff would recommend evaluating the General Fund support as a full or partial subsidy without an obligation for repayment. Item AA1 Public Comment Herb B. spoke of the reasons for having the color zones. If retail establishments were to validate parking, he felt it should be in the commercial areas. John S. (zoom) felt strongly that Attachments E, F, and G did not provide valuable data and that more accurate data was needed. He requested that the scope of the parking funds be analyzed. He explained why he did not think there had been enough time to engage the public on this issue. Chair Burt queried what outreach had been done with property owners and businesses in the downtown area and what the feedback had been to the considered proposals. Director Kamhi thought the outreach work was starting and that it would begin in early 2025. There had been a survey. He believed Assistant to the City Manager Steve Guagliardo was doing some outreach to businesses. Senior Analyst Shin thought most of the engagement work had been an assessment of the current pain points. The parking planning efforts prior to COVID had many of the same pain SUMMARY MINUTES Page 5 of 8 Sp. Finance Committee Meeting Summary Minutes: 10/15/2024 points. Since then, they had been developing a larger planning framework in terms of using more data and thinking about parking as a planning tool for mobility rather than a simple provision. The color zone had been set up for specific reasons, and there was a specific employee program. He explained that there was a different scenario now. They realized they needed more tools, and more engagement would be done. They were working to bring on partners to determine needed options. Director Kamhi spoke of this item being an update and informing the Committee that they would be doing stakeholder engagement, going to PTC, and starting the process and outlining General Fund subsidies that would be needed and what they were considering as potential concepts for improving the financial stability of the funds. If there was a desire to take on other things, that would be another discussion. Chair Burt stated it was helpful that it had been clarified that this was the beginning of the process. He noted that the Committee received a late packet and that the staff recommendations did not align with what Director Kamhi just described. It was recommended that the Committee receive information, which was not engaging with the Committee to provide guidance and direction in terms of the process. He thought that current versus pre- COVID and anticipated problems should be discussed, and he did not see that being asked of the Committee today. It would be an iterative process to think about the problem definitions and the goals and strategies to address such. Vice Mayor Lauing addressed the bar graphs and projections going out to 2029 and questioned if revenues in the modeling had been raised between now and then. He asked if Palo Alto was competitive with other cities on EV charges. Senior Analyst Shin responded that revenues had been increased by 5 percent for daily and long-term permit sales. EV revenues had been forecasted at a 15 percent increase. He did not have information related to the competitiveness of Palo Alto’s EV charging. Vice Mayor Lauing requested that the information related to the competitiveness of Palo Alto’s EV charging be obtained, as prices may be able to be raised. Regarding the Public Works maintenance contracts, he inquired how much of the salary and benefits were outsourced. He asked what was meant by hourly pricing shortened time limits in busy areas but then add affordable extensions; if merchant validation meant businesses would pay for parking as opposed to the customer paying; and if the major disruption of ECR had been built into the modeling. Senior Analyst Shin answered that most of the maintenance in terms of janitorial, street sweeping, and power washing was done by outside contracts. Staff ran more of the operational aspect of the parking garages and lots. Slide 7 somewhat broke down the expenses. He believed that the residential parking program would be impacted by the ECR closure primarily and that there would not be much impact to the commercial district funds. SUMMARY MINUTES Page 6 of 8 Sp. Finance Committee Meeting Summary Minutes: 10/15/2024 Assistant City Manager Kiely Nose added that Packet Page 80 provided cost details of in-house staff versus contracts. Director Kamhi added, regarding ECR, that they had recommended that some of the impacted businesses consider getting a Cal Ave garage permit. He stated, regarding hourly pricing shortened time limits in busy areas but then add affordable extensions, there was currently a lot of two- and three-hour free parking, so the idea was to limit that to maybe one hour free but to make it easy to add time with the use of a mobile app. The structure would need to be developed, but the notion of merchant validation was that there would be a mutual relationship benefitting the business and the parking. Council Member Veenker suggested that Palo Alto’s EV charging rates be somewhere in the middle of Palo Alto’s electric rates and neighboring cities’ rates, which may provide additional funds to the City. She was glad to see the current paid parking pain points itemized, which she felt were accurate. She addressed lights reflecting empty parking spots that were not really empty and requested that that be fixed. Under the concepts under development section, she thought mobile payments should be used. She was nervous about dynamic pricing and rates being based on demand, and she was interested in seeing the feedback from stakeholders. She asked if merchant validation was intended primarily for Cal Ave and downtown. She queried how merchant validation had succeeded in other cities, and she wondered if it could be deployed in a way that would help with the economic redevelopment efforts. Regarding new permit types, she liked the idea of half day and exploring the concept of long term for two to three days per week tailored to hybrid work schedules. Director Kamhi voiced that Public Works was currently fixing the issue with the lights reflecting empty parking spots that were not really empty. Merchant validation was intended primarily for Cal Ave and downtown where there were parking garages and lots and commercial parking and potentially other commercial areas if commercial paid parking should be added. He explained that they envisioned a paid parking pilot in one or two high-usage garages first. The general idea of merchant parking was that it would be mutually beneficial. He provided an example of how it would benefit a business and a customer. Whether merchants would send the City a share of per validation or per the value of a purchase was still being investigated. Chair Burt questioned how EV charging stations provided income to parking revenue. He discussed people not being charged for a parking space if they were EV charging, people from outside the City using Palo Alto’s charging stations, and people who lived in PG&E areas charging their EVs at their workplaces in Palo Alto, and he noted he had previously requested economic modeling, which he had not yet seen. He referenced Slide 5 and inquired why the adopted FY2025 budget showed a projection higher in long-term permits and lower in EV charging fees. To understand what a full recovery or X percent of a full recovery might look like, he wanted the bar charts on Slides 4 and 5 to go back to FY2019 (pre-COVID), which could be used as a baseline, and he thought it was important to have the in-between years included as well. Concerning dynamic pricing, he asked why there were no 2024 occupancy numbers. He asked if there were times of day that 100 percent parking was being approached and the SUMMARY MINUTES Page 7 of 8 Sp. Finance Committee Meeting Summary Minutes: 10/15/2024 reasoning for charging a higher fee if there was not adequate demand. He felt dynamic pricing was good in principle but was less appropriate when in a low-demand period. He asked if the pricing on Cal Ave was the same regardless of the garage. Senior Analyst Shin stated he had to doublecheck exactly what the funding mechanism was, but revenues did post in the parking funds specifically for electric charging. He explained why the adopted FY2025 budget showed a projection higher in long-term permits and lower in EV charging fees. He thought EV charging revenue was now growing at a healthy pace. Director Kamhi stated that the 2024 occupancy count was done annually and would be later this month. He noted that moving forward there would also be APS data in some of the garages. Certain locations had more parking demand than others, and the fee would not be higher in low-demand areas. He voiced that Cal Ave permits were not purchased for a specific garage but parking could occur at any garage or lot. Chair Burt thought that consideration may need to be given to purchasing a permit for a specific garage on Cal Ave, not parking at any garage. He explained why he was suggesting that reconsideration be given to the RPP programs. Regarding the RFP going out to the new permit vendor, he asked if it would be the same vendor and system for the mobile payment or if the mobile payment would be a different vendor and if it was becoming the norm that vendors providing the mobile payment would provide a range of capabilities. He thought it was important to understand who would pay for what when it came to merchant validation. He wanted to know how Council and Committees could participate in a more informal workshop discussion with some of the stakeholders. Director Kamhi answered that the RFP included an option for a mobile payment and to connect to the APGS systems. Office of Transportation Planning Manager Nate Baird stated, concerning vendors providing the mobile payment providing a range of capabilities, that it was highly selective. They put out the requirements and 30 or so firms viewed them, and they received 3 good bids, so they were asking for a lot of capability in the vendor. They were looking for vendors to provide more options than the City was currently able to provide. Assistant City Manager Nose thought the Committee had provided staff with what they needed to embark on next steps. As for how Council and Committees could participate in a more informal workshop discussion with some of the stakeholders, she thought that could be first done at Retail Committee in November with property owners. The Retail Committee meeting tomorrow would address options for such a forum. There were rules and regulations around Brown Act and how such dialogues could be hosted, which could be navigated through at that meeting. Chair Burt did not recall procedures and protocols having a procedure for committee study sessions and requested that it be considered. SUMMARY MINUTES Page 8 of 8 Sp. Finance Committee Meeting Summary Minutes: 10/15/2024 NO ACTION TAKEN Future Meetings and Agendas: The November 5 Finance Committee meeting is cancelled, and the next Finance Committee meeting will be on November 19. Adjournment: The meeting was adjourned at 4:15 PM.