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HomeMy WebLinkAbout2025-04-29 Finance Committee Summary MinutesFINANCE COMMITTEE SUMMARY MINUTES Page 1 of 8 Special Meeting April 29, 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, Lythcott-Haims, Chair Burt Absent: Call to Order Chair Burt called the meeting to order. Francesca Reyes, Deputy City Clerk, called the roll. Public Comment No Public Comments Agenda Items 1. Recommend to the City Council Subsidy Options for Select Development Services Fees Related to Gas and Electric Appliances Sarah McRee, Division Manager Planning, provided a slide presentation about the PDS Cost of Services Study: Subsidy Options for Gas and Electric Appliances including the purpose of the presentation, policy context, staff recommendations, electrification subsidy options, implementation considerations, standalone gas HVAC subsidy, requested Finance Committee action and next steps. Jonathan Abendschein, Assistant Director of Sustainability Climate Action, added it was thought that the maintenance of the instant permit at $298 would allow the rebates to cover most of the applications that came in with the existing permit budgets in FY26. It would have to go before Council if additional budget was needed. The instant permits would ensure the ability to serve a large fraction of people that show up needing permits for electrification projects when the Air District regulations went into effect. A review was needed of how many people were not going through the instant permit process and the implications for them. Staff addressed questions from the Committee about the presentation. SUMMARY MINUTES Page 2 of 8 Finance Committee Special Meeting Summary Minutes: 04/29/2025 Ms. McRee explained option 1 was a flat rebate that did not require back end administrative accounting. The second option would entail applying a flat rebate at the time of permit issuance but would require tracking and accounting on the back end. Option 3 would be an upfront subsidy that would be calculated. It would require a plan reviewer and a project coordinator to go through each project and identify what portion would qualify making it more difficult to set the standards and apply the subsidies. It would be a non-flat version of option 2. Option 4 would be a non-flat version through the rebate process. Assistant Director Abendschein confirmed the process could be done online and would be done concurrently with submitted for a rebate and would work for FY26. Jonathan Lait, Director Planning & Community Environment, added options 1 through 4 go from a standpoint of increased complexity for Staff, reconciliation and trying to find the permitting but option 1 was consistent with the current approach relative to other rebates and would be a familiar system for Staff and customers who had participated in the process before. Ms. McRee explained for single-family standalone items such as water heaters, the permit was about $280 to $292. The new fees would go up to $298 for an instant permit. A standalone regular permit would go up to $575. For HVAC, the current regular payment was $542 and the new fee would go up to $766. Assistant Director Abendschein indicated the current water heater rebate to be $298. There was not yet an HVAC rebate established but it was anticipated to be around $500. An accounting process had to happen behind the scenes. Kiely Nose, Assistant City Manager, commented the rebates and permit activity occurred in different funding sources resulting in the need to ensure the sources and uses were aligned. Assistant Director Abendschein added the customer was doing two transactions and the intent was to keep it administratively as simple as possible. Director Lait confirmed gas HVAC was basically forced air furnace. It was suggested that about 20% of people pulled permits for water heaters. This was flagged in order to streamline the process to encourage people to obtain permits. Ms. McRee explained the standalone gas HVAC fees were proposed to be reduced in order to encourage permit compliance at the request of the Finance Committee. George Hoyt, Chief Building Official, indicated that confirmation of smoke detectors, carbon monoxide detectors and water efficient fixtures were required on sale of property but no requirement to confirm everything done in a structure had been properly permitted. Director Lait indicated there was interest in carbon reduction and transition toward electrification safety came first and the goal was to avoid the permitting process and fees being a barrier to that. There would be requirements that preclude the sale of gas appliances in the SUMMARY MINUTES Page 3 of 8 Finance Committee Special Meeting Summary Minutes: 04/29/2025 next couple years which would result in transitioning to electrification. Assistant Director Abendschein agreed with that assessment. Assistant Director Abendschein clarified that there would be no fee to electrify a water heater while there would be a $298 fee for a gas water heater. Director Lait remarked work being done on property without a building permit was addressed as it came up. The State Contractors Board was engaged in the case of a repeat offender or particularly egregious issue who would investigate and pursue administrative remedies. It was harder to regulate work being done by individuals who are not licensed contractors. There were fines for individuals doing work without a permit or inconsistently. Once a messaging campaign was developed, there were a number of ways outreach would be performed. Chief Building Official Hoyt stated there was a $250 fine for not pulling a permit and would increase to $500 up to $1000 for repeat offenders. Councilmember Julie Lythcott-Haims remarked the categories that required a permit were not being clearly indicated on the website. Chair Burt added communication could go along with permitting. Director Lait took notes on that feedback and agreed to pursue getting information on the webpage to indicate when a permit was required for what types of activities. Ms. McRee highlighted that a permit wizard was in the process of being built. Assistant City Manager Nose addressed Councilmember Reckdahl’s queries about reimbursements. Staff was recommending the reimbursement occur on the applicant’s side for the electric water heater. The revenue would go into the general fund to offset the costs to deliver the service. The rebate would come from the electric fund. Ms. McRee added the cost to provide that service came from the general fund. When an individual paid the fee, it went back into the general fund to cover the cost. Assistant Director Abendschein agreed to check with the attorney regarding Chair Burt’s suggestion of the gas utility subsidizing the $50,000 from some sort of fund but deemed it unlikely. Assistant City Manager Nose indicated if Staff found it to be legally permissible, the Committee could recommend going that direction. Caio Arellano, Chief Assistant City Attorney commented the analysis came down to the source of the revenue, what types of strings were attached and whether those strings would prohibit advancing any of the policy goals. Cap and trade, low carbon fuel and public benefit could be seen as revenue sources for the other types of incentives and programs. Rate revenue had the most restrictions against it. The challenge would be developing the analysis to support the decision. Having the utility consumer see a climate credit on the utility bill was the main concern. Analysis would be needed to undertake whether the cost would be accounted for in the rate structure or somewhere in the back end. Ms. McRee clarified that option 2 would require the customer returning to verify the installation and inspections which simplified the process by not having to have a separate SUMMARY MINUTES Page 4 of 8 Finance Committee Special Meeting Summary Minutes: 04/29/2025 tracker. Assistant Director Abendschein added the customer still had to go to utilities to receive the rebate so rolling the rebates together would save accounting work. Chair Burt suggested creating a flow chart would aid in grasping an understanding of this. Public Comment: None MOTION: Burt Moved, Reckdahl second to recommend to the City Council to direct staff to: 1) Implement targeted subsidies for building permit fees related to gas and electric appliances, delivered through electrification programs. The amount of subsidy and funding sources to be established on a program-by-program basis; 2) Create a subsidy for stand-alone gas appliances to reduce fees to the level of instant permit costs, to reduce permit avoidance. 2a) Explore whether the gas utility can fund the gas appliance permit subsidy. MOTION PASSED: 3 - 0 2. Recommendation to the City Council to Approve the Citywide Cost of Services Study and Proposed Municipal Fee Adjustments. Lauren Lai, Administrative Services Director, provided a slide presentation about the Citywide Cost of Services Study and Proposed Fee Adjustments including the purpose of the study and City’s 2015 Cost Recovery Policy; the fee study takeaways for Administrative Services Department, City Clerk, Community Services Department, Fire Emergency Medical Services, Police and Animal Control, Public Works, Storm Drain and Wastewater Treatment; and fiscal impact and recommendation. Staff addressed the Committee’s questions about the presentation. Courtney Ramos, Matrix Consultant, responded regarding the domestic partner fees there were oftentimes certain fees were left on a fee schedule in case they were needed in the future. Director Lai noted on the assignment and the easement document on ASD real estate the cost recovery column the current fee was $780 in an attempt to stay in a moderate portion of the range instead of bumping up to $1648. On the next one, the current fee was $1700 and actual cost $1648. The Finance Committee could opt to make both of them $1648. The cost recovery rate on the ASD revenue collections was set at the medium cost recovery and agreed to amend the chart to go from high to medium. SUMMARY MINUTES Page 5 of 8 Finance Committee Special Meeting Summary Minutes: 04/29/2025 Matrix Consultant Ramos acknowledged the Public Works page looked busy but the people who would be utilizing that portion of the fee schedule would not look at it in that way. The duplicates in the report would be updated and all the data, time estimates, budget, budget information and calculations were parallel in the reports. The City has a cost allocation plan that details all the different indirect costs primarily related to things like human resources, finance, city manager, city clerk, so forth. A lot of different metrics are utilized. The inclusion of the indirect cost is important so the decision makers and stakeholders understand the total cost of providing a service and understand and determine what of those costs should be recovered. Chair Burt observed a debt service was still being paid from rebuilding the golf course. It is now established as a high caliber public course as well as an environmental model course. Significant green fees were being received from non-residents. In the budget, all the expenses of golf is broken down, not just direct. Assistant City Manager Nose added there is an insert in the CSD department section that shows the golf operations and includes the debt service so total cost can be seen. Assistant City Manager Nose addressed the recreational fees. The rates and ranges were within legally acceptable range. Choosing to have fees at a cost recovery rate based on where the market is and in other areas subsidizing activities would be a policy call. Matrix Consultant Ramos explained the first responder fee was a common fee and there was a minimal impact associated with that regarding dissuading people from calling EMS. Amber Cameron, Senior Management Analyst, remarked the first responder fee would be added into the fees being charged only to commercial insurance. They would not be charged to underinsured or uninsured patients. James Reifschneider, Assistant Chief of Police, indicated the supervisors and record staff had the ability to assess whether it was appropriate to waive the vehicle impoundment fee, vehicle repossession receipt or towed stored vehicle fee when an individual showed up to get a vehicle out of storage. Senior Management Analyst Cameron explained other city fire departments charge a first responder fee. The fee would be charged as a bundle bill to the commercial insurance providers, added on to the normal bill who are obligated to pay the fees charged for ambulance transports. Medicaid and Medicare have caps on what they will pay as a whole. The estimates of additional revenue included in the report take that into consideration. Matrix Consultant Ramos explained some jurisdictions call out the first responder fee as a separate fee while others pre-bundle it in their rates. It was agreed to update the language under the Special Events category following the Committee’s discussion about observations made by Councilmember Reckdahl. SUMMARY MINUTES Page 6 of 8 Finance Committee Special Meeting Summary Minutes: 04/29/2025 Eric Jensen, Senior Management Analyst, clarified the impoundment fees on page 22 were for animals that get away and the animal control officers have to recover. He confirmed there were repeat offenders. The fees are meant to encourage people to keep animals contained. They are punitive fees but do not belong in the municipal code. The fees gradually increase for the first, second and third offense. Staff made the decision to increase the fees more significantly by the fourth offense. Staff would look at considering full cost recovery after having to go after an animal more than five times. Matrix Consultant Ramos added that the fees were treated as penalties in which case could exceed the cost of service. Assistant City Manager Nose noted that there needed to be confirmation about penalties versus fees because that would be a different structure. Councilmember Reckdahl suggested offering a information saying which category each fee went into. Senior Management Analyst Jensen explained animals that were under investigation for some kind of possible bite were quarantined in their home. Staff would get back to the Committee on whether the fee was charged if it was definitive the animal bit or still just under investigation. Assistant Chief of Police Reifschneider explained the purpose of the quarantine was to have the animal assessed to make sure it was not rabid or dangerous following a bite. The inspection was the animal control officer going out to the home or property of the owner to ensure there was a proper place to quarantine the animal and if not the shelter would facilitate the quarantine. The fees would fall under the other special fees category where an hourly rate was charged associated with the animal control officer. There would likely be another way to charge for the boarding if the animal had to be stored for a period of time. Michelle Nelson, Senior Management Analyst, explained tree service fees were charged to residents looking for designations on protected trees, damages and various development- related tree services on private property. The resident would not have to pay for maintenance for a City tree. Graffiti service fees are charged if a warning is issued to a business to cover it but they do not and the City has to do it. The groundwater fees are various state water resource and federal regulations for the industrial waste discharge fees of businesses. Staff would get back to the Committee on the details of the fees. The groundwater fee is standard among all agencies. Chief Assistant City Attorney Arellano weighed in that there are six classifications of certain kinds of liquid waste that may not be discharged into the sanitary sewer or the storm drain so someone has to collect it and dispose of it separately. Senior Management Analyst Nelson explained the flood zone determination letter fee was the staff cost of the stormwater senior engineer permit technicians that go into issuing flood zone determination letters. The $419 was the cost to provide it at full cost recovery. It could be lowered if the Committee and Council so desired. Councilmember Reckdahl opined that was an excessive cost. Matrix Consultant Ramos commented that the mileage calculation for ambulances was based on annual maintenance, fuel and replacement. SUMMARY MINUTES Page 7 of 8 Finance Committee Special Meeting Summary Minutes: 04/29/2025 Director Lai explained that the financial revenue impact of the aggregation of all the fee changes was estimated to be about $1 million or more upon full implementation. In FY26, it would hedge at $700,000 especially because the first responder fee is new. The $700,000 for the general fund would be above the proposed budget that had been published. Assistant Chief of Police Reifschneider addressed the taxi license fee stating there had not been an application for a new taxi license in five years. Regulations allow many taxi providers to register in whatever city the primary amount of business is done and a lot of taxi providers register in larger cities where more business is done. Issuing a new taxi permit required more work versus the renewal and year-to-year updating. Chair Burt suggested including a referral to examine that on a cost basis. Chair Burt requested an informational memo as a follow-up on the outcomes of the recommendations. Director Lai agreed to reflect that in the May 20 meeting in the Finance Committee wrap up process and/or with the fee report on June 16. Public Comment None MOTION: Reckdahl moved, Julie seconded to recommend that the City Council amend the citywide municipal fees as part of the FY26 budget and municipal fee schedule, informed by the findings of the Cost of Services Study. The motion also includes the following amendments: • Review whether Domestic Partner Registration is still required at the local level; if it is already covered by State law, it should be removed from the Municipal Fee Schedule. • The fee ranges under the Administrative Services Department should be adjusted to align with the recommended amounts, with two specific fees identified for this change. • Ensure Full Cost Recovery for all Real Estate Conveyance Fees • The category name for Special Events held by for-profit organizations should be updated to better reflect the types of events. • Explore options for providing subsidies for nonprofit organizations applying for Special Event Permits under Police services. • Empowerment fees should be evaluated to determine whether they function as fees or penalties; if there are five or more charges, a fee amount higher than the actual cost should be recommended. SUMMARY MINUTES Page 8 of 8 Finance Committee Special Meeting Summary Minutes: 04/29/2025 • The fee for the Flood Zone Determination Letter should be reviewed to ensure it accurately reflects the cost of providing the service. • Amend the Taxi New License fee to ensure it covers 70% to 100% of the cost and review the submitted time estimates for accuracy. • The Cost Recovery Policy should be updated to include a new category for services that are to be recovered at 100%. MOTION PASSED: 3 - 0 Future Meetings and Agendas Director Lai announced there would be Finance Committee meetings on May 6 and 7 starting at 9 AM focusing on the budget and on May 20 characterized as budget wrap up. Fiber rates and annual investment policy would be between these meetings or on the agendas. Adjournment: The meeting was adjourned at 7:42 PM