Loading...
HomeMy WebLinkAbout2025-03-04 Finance Committee Summary MinutesFINANCE COMMITTEE SUMMARY MINUTES Page 1 of 7 Special Meeting March 4, 2025 The Finance Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 5:30 PM. Present In-Person: Reckdahl, Lauing, Chair Burt Absent: Lythcott-Haims Call to Order Chair Burt called the meeting to order. He noted Mayor Lauing would be substituting for Councilmember Lythcott-Haims. The clerk called the roll. Public Comment No requests to speak. Agenda Items 1. Recommend City Council Adoption of a Resolution Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) Reflecting a 2.4% Consumer Price Index Rate Increase to $17.61 Per Month Per Equivalent Residential Unit for Fiscal Year 2026; CEQA Status – Not a Project Karin North, Assistant Director Public Works, provided a slide presentation about the Stormwater Management FY 2026 proposed rate increase including a breakdown of the Stormwater Management fee, capital projects funded by the Stormwater Management fee and FY 2026 proposed rate increase and impacts. Mayor Lauing asked if she commented on the contractors because they were busy and raising their prices. Assistant Director North replied everything was just harder to get bids on and just wanted it in the record to make people aware. Councilmember Reckdahl had questions about the budget fund. He asked why it was tied to the CPI. Assistant Director North remarked that the voters had approved the Stormwater Fee as a separate enterprise fund that her team would manage. It would fund a bunch of projects within SUMMARY MINUTES Page 2 of 7 Finance Committee Special Meeting Summary Minutes: 03/04/2025 Public Works. She confirmed if the funds ran out they could access money from the general fund upon Council approval. It was proposed by the Green Ribbon Stormwater Committee. The Stormwater Fee was going to sunset and they were concerned about not exceeding it. Chair Burt added that was how the proposal was designed by the committee that put it to the voters. He talked about the City being at the forefront of moving forward on green stormwater. He had questions about the Hamilton Avenue project on slide four. He opined it was the highest priority and was concerned it may be slipping. He talked about effective benefits that had already been provided but acknowledged there were still risks the needed to be addressed. He suggested putting the 40 cent increase in the title. Assistant Director North stated she would get back to him on the timeframe of construction and completion on the Hamilton Avenue project. MOTION: Council Member Lauing moved, seconded by Council Member Reckdahl, to recommend the City Council adopt the attached resolution amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage), to implement a 2.4% rate increase consistent with the applicable Consumer Price Index, increasing the monthly charge per Equivalent Residential Unit (ERU) by $0.41, from $17.20 to $17.61 for Fiscal Year 2026. MOTION FAILED/PASSED: 3-0 2. Recommend City Council Adopt Planning and Development Services Cost of Services Study and Proposed Municipal Fee Adjustments Item 2 Public Comment – No Public Comment Oscar Murillo, Senior Management Analyst, provided a slide presentation of the findings of the study and proposed fee adjustments including the purpose of the study, the context and role of PDS fees, key findings, breakdown of fees, Technology Surcharge, Comprehensive Plan, DS Reserve policy, City’s Cost Recovery Policy, subsidy considerations, electrification, minor residential (trade permits), Finance Committee decision, next steps and implementation timeline. George Hoyt, Chief Building Official, explained how they changed the structure of how they established the evaluation of construction projects. Councilmember Reckdahl asked why the difference between going square foot for single family but for other projects doing valuation based. Mr. Hoyt explained single family was easy to establish because the square footage was not as complex and there was construction throughout that structure. A tenant improvement or commercial building might have big floor square footage areas that they were not doing a lot of SUMMARY MINUTES Page 3 of 7 Finance Committee Special Meeting Summary Minutes: 03/04/2025 work on. It is easier and more equitable to base it that way. ADU was proposed to be square footage based. Mayor Lauing asked if they felt like they had taken everything possible and gotten it into the fee. He commented there was a messaging when fees go up that needed to be addressed. Mr. Murillo commented the idea was to view it as a self-sustaining enterprise fund that when the budget process rolled out they would assume that Development Services cost neutral. At the end of the year, they would look at whether there was net income and factor that into the Development Services reserve contribution. He remarked it was a balance between fiscal sustainability and policy discussions making things affordable. Chair Burt did not see an issue in terms of message. He stated there was a separate question of whether their fees should be set where they are but a philosophical one of whether fees would be different from what is obtained from taxes. Councilmember Reckdahl queried about the discrepancy in the numbers. He mentioned that it was said they were not running a deficit but the Staff Report indicated they had only 71% cost recovery. He wanted clarification on slide 11 about 60 days after adoption. Mr. Murillo replied part of the process looked at finding efficiencies in what they were doing but sometimes they would go under the assumptions from 2016 that the process was a certain amount of hours, times, costs. As a result of this new analysis, they found it to be a lot less. He explained they were trying to assign a monetary value to time that was not being captured. When that factored into the revenue coming in, it created a deficit. If they kept doing that particular permit that had a deficit, they would be retaining less and be moving toward less cost recovery. That did not mean that increasing the fees would immediately generate a surplus of revenue or it would increase as a whole but would put them in a direction of getting closer to fiscal sustainability. They were comparing the revenue and workload from a prior year and seeing what that looked like. They needed the fees to avoid a potential subsidy in the future. It would create a more equitable situation. Mr. Hoyt added the item mentioned was the UNO associated with a building permit, which is the final document of certifying the building as a particular occupancy. There was no review that takes place. They previously just had one standalone UNO fee they would charge for all applications. They created a new one associated with building permits that looks at that particular administrative portion to process that UNO. Lauren Lai, Administrative Services Director, called attention to page three of the Staff Report talking about the 2015 cost recovery level policy. She pointed out that it distinguished that these fees were for transactions that primarily benefit a private individual, whereas taxation is to benefit the broad general public. This exercise was a cost of service study to understand the typical hours and staff time incurred plus indirect costs for those transactions that had primary private benefit. She explained the 60 days after the adoption was of the fee schedule. They were considering moving that up and were seeking to see how this deliberation went and the SUMMARY MINUTES Page 4 of 7 Finance Committee Special Meeting Summary Minutes: 03/04/2025 referral to the Council. If they could, it would be cleaner but they also had the citywide municipal fee update coming to the Finance Committee in April and were going to align those various pieces and hoped to make all the fees effective July 1 recognizing that property-related fees had a 60-day noticing period between effective dates. Chair Burt had questions about the Fees Study Summary findings. He asked if there was any data on the cycle time improvements. He wondered if they could do comparisons to adjacent cities. He asked about categories of electrification that people were bypassing permitting and how they could reduce that leakage in the permitting. He asked if they were aware of tools cities use to cause a greater conformance. He asked how much is saved them and the customer to have more efficient automatic online permitting. He encouraged them to toy with using ChatGPT. He asked if they looked at incentives that has lower or more streamlined fees if they incentivize residents to lower-watt approaches to their electrification. He wondered if there were certain circumstances where they could go with remote inspections for heat pump water heater installations. He asked if they should be looking at consequences of avoiding permitting. Mr. Murillo explained if they charged the current rates, the current expenses would have a shortfall. The Comprehensive Fee Study was in 2016 but they do an annual update and it was 2% to 4%. There had been a net income in each of he prior years for the Development Services Operation. Some of the program areas had a higher cost recovery than others so the revenue was higher than expenses at the end of each year. In terms of accounting for the missing time, they had to put it into the equation as dollars. To capture it, they would have to increase the fees associated with that. Jonathan Lait, Director Planning/Community Environment, agreed to include the data on the cycle time improvements when the report went to Council. They were also looking to do information online. They wanted to do a similar, front-facing report on their system improvements for Development Services. He said they could look at doing comparisons to adjacent cities. They could also reach out to their different departments and see if they could collect that data. They had begun to collect positive information on the survey results and added there were fewer complaints coming in. He stated ways to improve conformance with permitting included making the fees and the process not onerous. He stated they now have an instant permit where contractors can go online and pull their permit instantly with a low fee. They were looking to expand those offerings. They also had the SolarAPP+ app. He said they had made progress on the permitting operations of electrification. It fluctuated based on staffing. They had some vacancies that impacted some of their operation in terms of review for all of their permits. Council authorized a position of special project manager and that recruitment was underway. He agreed to consider use of ChatGPT. He stated they had done a number of pilot programs internally to assess how people want to interact with them. He explained AB 1236 had expedited permitting for level two chargers for 1 to 3 days after filing complete applications. He said he would make sure they were in compliance with that with the review process. He indicated they experimented with remote inspections during the pandemic. It made sense in some instances but there were concerns about what information they were being shown on the receiving end and some things could get missed. He said they did not have SUMMARY MINUTES Page 5 of 7 Finance Committee Special Meeting Summary Minutes: 03/04/2025 any local legislation that would establish consequences about contractors subverting some requirements. He recalled discussion about filing complaints to the Contractors Board. Mr. Hoyt said bathroom and kitchen remodels and water heater, furnace and heat pump replacements for condensers were having permitting bypassed. He described the SolarAPP+ process. They had done something similar for residential heat pump water heaters and utilized it for the heat pump water heater program from Utilities. He indicated they had enforcement mechanisms and fines and penalties. Their Building Inspection Team identified projects being done without permits and issued stop work orders. They have a fine schedule for violations. It was in their fee schedule to double fine on plan reviews and building permit fees. They have a close working relationship with the Contractors License Board. Director Lai asked for confirmation on the follow-up Chair Burt was requesting. She asked for direction relative to subsidies and areas of subsidies. Chair Burt replied he wanted follow-up on anywhere there was low compliance and come back with measures other cities have done or ways to improve that. He was interested in bringing gas systems up to cost and not subsidizing it and having significant subsidies on electric. On electrification, he was inclined to a low-cost recovery and a full-cost recovery on gas. Director Lait stated there may be an opportunity to pull off the heat pump systems separate from the gas systems. He asked where the Committee would you want to place that subsidy understanding that what they did not cost recover fully would then offset through some other revenue source. The general fund would be one and they would look for any other options that might be available. Councilmember Reckdahl agreed with a low-cost recovery and a full-cost recovery on gas. He had questions about the cost to inspect gas implementation as opposed to electric and how gas was inspected. Mr. Hoyt indicated the cost to inspect gas implementation as opposed to electric was roughly the same and described the process for inspecting gas. Chair Burt asked why their inspection staff did not carry gas sensors. He asked if that would be lower cost than pressure sensing. Mr. Hoyt agreed they could. He explained if they were just replacing a few joints or small piece of pipe, sensing was a good alternative. Pressure test was the only way to go for a large caliber of gas replacement. Councilmember Reckdahl queried if they test for carbon monoxide. Mr. Hoyt answered they do not test for carbon monoxide but they require carbon monoxide detectors be installed and they test to make sure they are working at final inspection. SUMMARY MINUTES Page 6 of 7 Finance Committee Special Meeting Summary Minutes: 03/04/2025 Chair Burt supported daycare and affordable housing. Councilmember Reckdahl asked if they had a feeling about the paperwork required in Palo Alto compared to other cities. Director Lait replied they were studying where they were too bureaucratic and trying to scale those back to focus in on the service they wanted to provide their customers to make sure the buildings and structures they build would be safe to occupy and focus on their permitting operations. Mr. Hoyt added they try to align along the lines of other cities requirements. Kiely Nose, Assistant City Manager suggested baking the cost reduction into the rebate programs as opposed to reduction in the permit fee. Councilmember Reckdahl asked if the permit fees could be rolled into on bill financing. Ms. Nose stated she would have to talk with the team in terms of how that would matriculate through in each of the current SCAP programs. Director Lai stated they would bring these particular items back for Finance Committee review and then package it all together with the other citywide and make this effective 60 days after the adoption. Councilmember Reckdahl asked about the budget impact if they find they need to hire a new employee. Director Lait answered they would continue to monitor that. They were still trying to get our whole complement of staff onboarded. They had a couple of vacancies planned and were trying to shore up the plan review side from the positions that Council gave them for the current fiscal year. They also had the ability to engage consultants as needed to handle adjustments outside of their normal course of work. If it went beyond that, they would come back to Council with a request and explain how that would be supported by the fees. MOTION: Chair Burt moved, seconded by Council Member Reckdahl, to recommend the City Council amend the Planning and Development Services municipal fees as outlined in Attachment B as part of the FY26 budget and municipal fee schedule with additional recommendation for strong subsidy for electrified appliances and not for gas, except for consideration of compliance with seeking permit. Additionally, continue the same permit subsidy for daycare and affordable housing. MOTION FAILED/PASSED: 3-0 SUMMARY MINUTES Page 7 of 7 Finance Committee Special Meeting Summary Minutes: 03/04/2025 Future Meetings and Agendas Chair Burt wanted to ensure there was a request for Public Works to send a note on the status of the Hamilton Storm Drain and timing for completion. He agreed to have it included in the report to Council. Director Lai reported on upcoming meetings. There was a hold for March 25, TBD. The next meeting for Finance Committee subsequent to March 25 would be April 1, where they would look at a couple of the rate updates for utilities. Chair Burt wanted to know when they would receive a CIP follow-up on the proportionate share of the wastewater treatment plant upgrades to the partners based upon current usage. Ms. Nose stated they would make sure the team was able to talk about that at a cursory level when they talk about the wastewater collection fees on April 1. She would have to figure out if it was at a point it could be agendized. Adjournment: The meeting was adjourned at 7:07 P.M.