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HomeMy WebLinkAbout2002-03-25 City Council Summary Minutes Special Meeting March 25, 2002 1. Joint Meeting with the Planning and Transportation Commission re Zoning Ordinance Update ...................... 462 ADJOURNMENT: The meeting adjourned at 8:18 p.m. ................. 462 ORAL COMMUNICATIONS ............................................. 463 APPROVAL OF MINUTES ............................................. 463 1. PUBLIC HEARING: The Palo Alto City Council will consider adopting new development impact fees for parks, community centers and libraries ..................... 463 2. PUBLIC HEARING: The Palo Alto City Council will consider increasing the Commercial Housing In-Lieu Fee; eliminating exemptions and other administrative changes; and increasing the Transportation Impact Fee for Stanford Research Park/El Camino Real Service Commercial Zone ............................................ 473 3. Ordinance 1st Reading entitled “Ordinance of the Council of the City of Palo Alto Amending the Palo Alto Municipal Code to make Repeals and Amendments to Obsolete and Outdated Provisions Relating to Code Enforcement and Municipal Prosecution” ..................... 476 4. Extension of Existing Natural Gas Master Purchase Agreements for a Five-Year Term ............................ 476 7. Vice Mayor Mossar and Council Member Burch re Modifications to Fence Height and Floor Area Ratio (FAR) Regulations for Residents Impacted by San Francisquito Creek Joint Powers Authority Floodwall Replacement Project ........................................ 477 7A. (Old Item No. 6) 800 High Street (02-PC-01) – Initiation of a Preliminary Review (PAMC 18.97.030) 03/25/02 460 for a Proposed Planned Community Rezoning Consisting of 61 Residential Condominium Units and 1,921 Square Feet of Retail Space. The Proposed Project Site consists of Three Parcels that Total 42,000 Square Feet ....................................................... 477 7B. (Old Item No. 5) Confirmation of Staff Strategy for AT&T/Comcast Transfer of Ownership Process and Cable Rate Regulation ............................................ 482 COUNCIL COMMENTS, QUESTIONS, AND ANNOUNCEMENTS .................. 486 ADJOURNMENT: The meeting adjourned at 12:00 a.m. ................ 486 03/25/02 461 The City Council of the City of Palo Alto met on this date in the Council Chambers at 7:05 p.m. CITY COUNCIL PRESENT: Beecham, Burch, Freeman, Kishimoto, Lytle, Morton, Mossar, Ojakian ABSENT: Kleinberg PLANNING AND TRANSPORTATION COMMISSION PRESENT: Bialson, Burt, Cassel, Griffin, Holman, Packer, Schmidt SPECIAL MEETING 1. Joint Meeting with the Planning and Transportation Commission re Zoning Ordinance Update No action required. ADJOURNMENT: The meeting adjourned at 8:18 p.m. 03/25/02 462 Special Meeting March 25, 2002 The City Council of the City of Palo Alto met on this date in the Council Chambers at 8:34 p.m. PRESENT: Beecham, Burch, Freeman, Kishimoto, Lytle, Morton, Mossar, Ojakian ABSENT: Kleinberg ORAL COMMUNICATIONS Wayne Martin, 3687 Bryant Street, spoke regarding libraries. John K. Abraham, 736 Ellsworth Place, spoke regarding construction noise ordinance. Bob Moss, 4010 Orme Street, spoke regarding historical perspectives. Lynn Chiapella, 631 Colorado Avenue, spoke regarding zoning variance for small lots. Larry Duncan, spoke regarding good neighbors. Herb Borock, P.O. Box 632, spoke regarding 744-752 Colorado and 754-760 San Carlos. APPROVAL OF MINUTES MOTION: Council Member Beecham moved, seconded by Mossar, to approve the Minutes of February 19, 2002, as submitted. MOTION PASSED 8-0, Kleinberg absent. PUBLIC HEARINGS Mayor Ojakian announced that discussion of Item Nos. 1 and 2 would be heard together. 1. PUBLIC HEARING: The Palo Alto City Council will consider adopting new development impact fees for parks, community centers and libraries 03/25/02 463 Council Member Burch, Chairperson to the Finance Committee, noted that the fees, which were actually two-thirds in some cases of the recommended nexus, were unanimously approved by the Finance Committee and should be approved by Council. Mr. Benest said the idea of fees for new development was part of the Long-Range Financial Plan, which was one of the Council’s top five priorities. The proposed impact fees were charged only to new development, which often resulted in increased demand for City services. The fees provided funding for mitigating the impacts of new development and the corresponding burden on City services. The Council was asked to consider new fees in parks, community centers, and libraries and increases to the existing fees for housing and traffic. The business community was concerned about the overall impact of fees and what they meant to the local businesses. Staff felt the fees were in line with the external market. The proposed fees did not impact existing businesses unless the businesses expanded their offices or warehouses and caused an additional burden on City services. Staff proposed a Citywide transportation impact fee, which would impact new development. Traffic congestion was one of the top five priorities in the community. The Council appointed a Blue Ribbon Committee to look at the storm drain fee increase, and the Council might decide to put a measure for all property owners in the spring 2003. Palo Alto was one of the few cities in California that did not have a business license fee, but that issue was not under consideration during the current recession. Conceptual discussion was held about a Transient Occupancy Tax increase, which might return to the Council in November 2003. That increase would impact visitors to the community. A general obligation bond measure for libraries and other possible community facilities might be considered for the election in November 2002, which would impact residential and commercial property owners. Director of Planning and Community Environment Stephen Emslie said the Finance Committee discussed fee exemptions and the possibility of exempting affordable housing. The recommendation was based on current Comprehensive Plan (Comp Plan) policy to exempt only projects that were 100 percent affordable. The draft Housing Element recommended extending the exemption to Below- Market-Rate (BMR) units. Staff’s recommendation was based on the existing policy. If the draft Housing Element became the formal policy of the City, staff would look at the implications in terms of the exemption. Vice Mayor Mossar asked for a definition of a “new” building. 03/25/02 464 City Attorney Ariel Calonne said a distinction was drawn between residential and nonresidential development. Residential development had a new development definition that meant the addition of residential units and explicitly excluded replacement of residential units. Nonresidential defined new development to include the creation of any new square footage. Mayor Ojakian declared the public hearing open at 9:08 p.m. Stacey Wagner, SBC Pacific Bell, 345 Hamilton Avenue, said her company expanded its central office in South Palo Alto to accommodate the increased demand in services. New equipment would be housed in the central office. SBC did not believe the expansion increased traffic, and there was no increase in noise. SBC hoped the Council would consider exempting a public utility or consider a sliding scale, depending on the negative impact that the development might have. Council Member Beecham asked how much of an expansion SBC anticipated. Ms. Wagner said the expansion consisted of 15,000 square feet. Sunny Dykwel, 480 Gary Court, was concerned about a ripple effect for homebuyers that contributed to the lack of affordable housing in the City. Although existing square footage was exempt, the fee, adversely affected existing homeowners who wanted to add space to improve their property. There was no correlation between the size of a house and the number of occupants. Those who built larger homes paid more for City services. City facilities were available for all residents to use as well as people who worked in Palo Alto. Prior to Council approval of the development impact fees, she wanted to see what other fees were proposed that would affect homeowners and potential homeowners in Palo Alto. Steve Blanton, 345 S. San Antonio Road, Los Altos, said asking new residents to pay a disproportionate fee was an inequity. If the City faced financial difficulties, there might be an increased need for greater fees. A broader based fee might be an appropriate method to look at. Tracy Hutchison, Palo Alto Chamber of Commerce, 325 Forest Avenue, was concerned that the development impact fees would discourage small businesses from building or expanding. The Chamber encouraged the Council to seek other ways to generate revenue, which might be fairer and a larger revenue source, such 03/25/02 465 as a marginal tax that was spread out among a wide variety of people. The Chamber suggested the Council hold off on a decision and to continue outreach. Businesses were willing to pay their fair share, but additional outreach to smaller businesses was needed. Jason Peery, 1285 Wilson Street, said the increase from $4.21 to $15 was inequitable. The City had its own financial challenges to meet, but new developers had to pay fees that existing developers did not have to pay. The Council was requested to consider ways that the fees could be distributed more equitably. Steve Reyna, 840 Kipling Street, said the development impact fees were good ideas, important, and long overdue. The $10,000 and $6,000 impact fees for single and multi-family residential were a concern. The fees were structured in such a way that reduced the available, moderate, and small sized housing that could be built in the City. A change to the particular structures, such as basing it more on square footage, was requested. Herb Borock, P.O. Box 632, said he submitted a letter to the Council that referred to the transportation fee. The transportation fee in section C calculated the fee using old numbers when new numbers and new square footage should be used. The transportation fee ordinance needed to be changed. The staff report (CMR:146:02) to the Finance Committee counted the Mayfield square footage to determine what could potentially be raised, but that was residential and not covered by the fee. Kerry Yarkin, 135 Churchill Avenue, urged the Council to vote in favor of the transportation impact fees. The residents needed a way to move cars back out to Alma Street, El Camino Real, Embarcadero Road, and Page Mill Road. Alma Street needed to be improved to make it two lanes going northbound. Embarcadero needed to be improved to two lanes going in the eastbound direction. Residential neighborhoods should not have to carry thousands of cars because major roadways in Palo Alto were overburdened, clogged, congested, and not expanded since the 1950s. Joy Ogawa, 2305 Yale Street, said the ordinance before the Council did not address all her concerns; however, the Finance Committee directed staff to look into and return with recommendations as to some of her concerns. The concerns included the structure of the community services fee to be charged on a per unit basis. She agreed with the recommendation 03/25/02 466 to allow for no exemption for an increase in commercial floor area. Others had expressed concern about allowing for exemptions for small expansions of existing commercial. An exemption of up to a 125-square-foot addition to existing commercial was supported. The rationale was that up to a 125-square-foot increase was statistically zero in terms of job increase. More than 125 square feet was at least one job where an impact fee should be assessed. The recommendation to look into exceptions for retail, based on rationale stated by the Finance Committee was supported. The in-lieu housing fee increase was proposed to recoup only 25 percent of the full cost recovery. The fees did not make up for past impacts but were for impacts of new development. Mark Sabin, 4274 Wilkie Way, said if the City provided disincentives for families who made less than $150,000, a situation was created where the City jeopardized the possibility of gaining residents who made a critical contribution to the City. The City needed to be mindful of the unintended consequences of some of the policies that resulted out of what was planned with the fees. Other fees, such as the transportation impact fees, worked as a disincentive to meeting some of the City’s top goals. The Council was urged to take a more serious and equitable approach. Barbara Gross, 729 Center Drive, asked the Council to refrain from voting on the issue. The fee hit small businesses in a direct way. The community service impact fees dramatically affected small businesses. Without the exemptions for the 2,500- square-foot exemption, a business would be charged $46,875 to add 2,500 square feet. In the Stanford Research Park, the 2,500-square-foot expansion cost $67,375. The Chamber offered to facilitate dialogue with small businesses in the community to determine how the fee would affect the small businesses. The idea of how the fee impacted businesses from a comprehensive standpoint, was frightening. The Chamber was concerned with the turn over of small businesses, maintaining the unique look of Palo Alto, and providing all the services necessary for the community. Mayor Ojakian declared the public hearing closed at 9:40 p.m. Mr. Benest said the fee did not impact home expansions. The nexus study demonstrated and documented a developer’s specific contribution to new service demands. The City could not charge a current developer going through the process for the demand caused by previous development. 03/25/02 467 Mr. Calonne responded to Mr. Borock’s comments and said the numbers could be updated but not at the current meeting. Staff originally began last fall reviewing only the community service, park, and library material without proposing increases to the transportation or housing fees. The course changed dramatically in February, and staff was unable to change the course so dramatically as to recompute the basis for the transportation impact fee. Staff intended to do that, along with looking at some of the exemptions in the ordinance. Mayor Ojakian said Vice Mayor Mossar could not participate in matters related to Stanford University, although he did not believe the matters were involved in Agenda Item No. 1. Mr. Calonne said Vice Mayor Mossar was unable to participate in the Research Park transportation fee increase discussion. Mayor Ojakian said the staff report (CMR:188:02), Agenda Item No. 1, included three recommendations: 1) Approve the recommended levels for new development impact fees for parks, community centers, and libraries; 2) Approve the recommended policies related to exemptions and implementation; and 3) Adopt the ordinance to establish the proposed development impact fees. Council Member Burch said the Finance Committee understood staff did a nexus study of what the actual cost was for the City in terms of parks, community centers, and libraries, for every new home that was built. The Finance Committee concurred with two-thirds of what was acceptable as a cost recovery fee. For each single-family home, the cost recovery was $15,798, and the Finance Committee approved $10,580. Page 3 of the staff report (CMR:188:02) indicated, “Although the Committee unanimously recommends adoption of the above-proposed nonresidential rates, there is a desire to preserve local services and encourage the retention of retail outlets in town. The Committee directed staff to perform further analysis and return to Council at a later date with the feasibility of lower fee levels for retail development.” That statement was the consensus of the Finance Committee and the basis for a unanimous vote. Council Member Lytle said one point that was lost in the discussion was who paid for the burden. The answer from staff at the Finance Committee was that the taxpayers paid the burden. The City Manager had commented on how the City approached the handling of the infrastructure through an equitable and shared approach such as bond measures. The 2,500-square-foot exception was not approved because it applied to both large and local 03/25/02 468 businesses. The Finance Committee wanted a follow-up study to target the smaller retail and local serving businesses. The Finance Committee asked to have BMRs included as soon as possible and for a follow up to do the transportation and traffic study. The Quimby Act was brought up as an issue to be looked at. Items were mentioned in the Finance Committee minutes, which were not included in the staff report (CMR:188:02). The Council should consider the follow up that was identified by the Finance Committee. Mr. Benest said some of the analysis that staff was committed to do as a follow up to the Finance Committee’s direction got complicated in terms of redoing the nexus studies. He suggested returning to the Finance Committee, based upon legal analysis, and let the Council know what had to be done to look at the issues. Council Member Morton said the Finance Committee sensed the City was remiss in updating fees. The Finance Committee realized there was a big impact on both residential and commercial, but the community wanted the City to fund some of the impacts that living in Palo Alto caused. Parks and libraries were funded. New construction should pay a proportionate share of what others had invested in the community. Council Member Kishimoto commended staff for doing the meticulous nexus research that was necessary to carefully document the impacts. The Finance Committee discussed the issue of whether or not the Council had the right, on large projects, to forego the mitigation fee; for example, for a park, and ask that in its place an onsite provision of a park be provided. The ordinance wording was ambiguous. She suggested making an amendment at the current meeting to ask staff to develop ordinance provisions that allowed the Council the authority to consider and impose alternative mitigation in-lieu of fees, where the Council deemed it necessary or advisable; and direct staff to develop ordinance provisions to make it clear that supplemental mitigation measures could be imposed by the Council when the impact fees did not fully mitigate the impacts of the specific project. Council Member Morton was concerned that Council Member Kishimoto’s language was too broad, which meant there was not a consistent impact fee, and the fee would be designed for each project. A project that was large enough to accommodate a park would probably go to the Council as a Planned Commercial (PC) zone. 03/25/02 469 Mr. Calonne said Council Member Kishimoto was correct that there was theoretical room for supplemental mitigation and in some circumstances, trading land for money was advantageous. Administrative issues were associated with both approaches; one of the desirable elements of a fee ordinance was the certainty and finality that was injected into the local economy. If the Council opened the door to a discussion about what mitigation was appropriate, companies would ask the question at every opportunity. That would be costly administratively. With respect to the PCs, the ordinance did not stop the Council in a PC zoning situation from pursuing other extraordinary benefits. Council Member Lytle said the Finance Committee felt the study was an AB 1600 nexus study that dealt with the impact on the current facilities. A California Environmental Quality Act (CEQA) analysis compared the project against the Comp Plan standards that required two acres of park space per 1,000 population. The AB 1600 study did not come close to allowing the City to achieve the Comp Plan standards for quality of life in the community would allow to be charged. The loss of CEQA’s ability to mitigate was questioned. Mr. Calonne said he did not intend to suggest that the changes proposed by Council Member Kishimoto were necessary to protect CEQA authority. The nexus study that was favorably described was not an inexpensive or ordinary document but was an analysis that took time and money. Staff would not be in a position to custom craft conditions on each project. Vice Mayor Mossar clarified there was no full impact recovery and asked what type of outreach took place with the business community on the issues. Senior Financial Analyst Libby Dame said full cost recovery related only to the items in the staff report (CMR:188:02), which were the community services fees. The full cost recovery levels matched the proposed fee levels for parks, community centers, and libraries. Vice Mayor Mossar clarified the staff report for Agenda Item No. 1 (CMR:188:02) was full cost recovery, and the staff report for Agenda Item No. 2 (CMR:189:02) was not full cost recovery. Ms. Dame said that was correct. Staff met with the Government Action Committee of the Chamber in October 2001 and reviewed the proposals and nexus studies. A public forum was held in December 03/25/02 470 2001 where there were some members of the business community as well as members of the public present. Mr. Benest said he and the Assistant City Manager had several conversations with the Government Action Committee as well as the Board of Directors of the Chamber. Vice Mayor Mossar clarified the argument was that new development was asked to pay for services and others were not; but the counter argument was that others paid for the existing services and new development had access to the new services but were asked to pay for the incremental need for additional services. Mr. Benest said the City funded the development of libraries and the operations and maintenance of libraries through a variety of sources that went into the General Fund, such as property and sales taxes. The City was unable to keep up with the demand. Only the new development was charged for its small portion of the new demand. New development was charged for the capital cost of new demands on libraries. Other sources of revenue needed to be found to pay for the total capital costs. Vice Mayor Mossar clarified that new development benefited from what everyone else had already paid for. Mr. Benest said that was correct. Mr. Calonne said the accountability provisions built into AB 1600 and the ordinances were important. The nexus study was based on a forecast of what the community wanted to have built. AB 1600 required periodic accounting and fund accounting to make sure the money was used for purposes within a specified period of time. Vice Mayor Mossar was uncomfortable with discussion that referred to a future study and a possible future action. The notion of charging the fees on residents was perplexing; however, simply requiring the commercial sector to pay was unfair. Charging the fees on residential development had downsides. Mayor Ojakian said the staff report (CMR:188:02) dealt with parks and library fees, and clarified that Ms. Dame indicated items were full cost recovery. 03/25/02 471 Ms. Dame said the Finance Committee recommended full cost recovery for nonresidential and two-thirds cost recovery for residential. Council Member Beecham said there were two errors in the proposal: one philosophical and one pragmatic. According to the report, there were no development fees that people had paid for housing when they moved to Palo Alto. The new fees would require people who moved to Palo Alto to pay development fees that existing residents had not paid. As staff pointed out, the City received very little from property taxes. The City received money from sales tax that consisted of a percentage that was spent by outsiders. The City worked hard to encourage retail and small business owners to be in Palo Alto, but they were charged the same fees as large operations. He suggested exempting small businesses up to 2,500 square feet from the fees and exempt homeowners completely from the fee. Council Member Morton said most small businesses that occupied less than 2,500 square feet could not afford to own the building. Council Member Freeman said the Council needed to move forward to protect the will of the citizens of Palo Alto, to ensure that community parks, libraries and community centers were maintained and improved. Mr. Benest said staff needed to understand the legal restrictions that required studies in place prior to adjusting fees or exempting people. MOTION: Council Member Burch moved, seconded by Morton, the approval of the Finance Committee recommendation to: 1) approve the recommended levels for new development impact fees for parks, community centers and libraries as shown in Tables 1 and 2 on pages 2 and 3 of CMR:188:02; approve the recommended policies related to exemptions and implementation; and 3) adopt the ordinance to establish the proposed development impact fees. Ordinance 1st Reading entitled “Ordinance of the Council of the City of Palo Alto Amending the Palo Alto Municipal Code by Adding Chapter 16.58 Establishing Impact Fees to be Imposed on New Development for Parks, Community Centers, and Libraries” INCORPORATED INTO MOTION WITH THE CONSENT OF MAKER AND SECONDER to direct staff to return to the Finance Committee with an 03/25/02 472 analysis and assessment of the fee structure changes that the Finance Committee identified to encourage local serving businesses, smaller residential units, to exempt BMR’s and to use traffic impact fees for other than intersection improvements. Council Member Freeman clarified staff would return with information as noted in the motion, and the Finance Committee had the responsibility to direct staff to go ahead and do what was necessary. All the items brought up by the Finance Committee in their studies were of paramount importance to making the fees equitable and feasible for all who were involved. Mayor Ojakian said that was correct. Mr. Calonne wanted a clear understanding about the Council’s direction. From a legal perspective, it was not clear that exempting BMR units, for example, made any sense. His office might make a recommendation that was different from what the Finance Committee directed. Mayor Ojakian said people looked for a fair and open analysis from the City Attorney. Mayor Ojakian clarified the funds received for the various impact fees went into specialized designated funds in order to be guaranteed to be used for what they were designated. Mr. Benest said that was correct. The fees had to be audited. INCORPORATED INTO MOTION WITH THE CONSENT OF MAKER AND SECONDER that staff report back to the Council on a periodic basis with regard to how the fee was working. MOTION PASSED 7-1, Beecham “no,” Kleinberg absent. 2. PUBLIC HEARING: The Palo Alto City Council will consider increasing the Commercial Housing In-Lieu Fee; eliminating exemptions and other administrative changes; and increasing the Transportation Impact Fee for Stanford Research Park/El Camino Real Service Commercial Zone Vice Mayor Mossar could not participate in Item No. 2 regarding the “Ordinance Amending Section 16.45.060 of Chapter 16.45 (Transportation Impact Fee for New Nonresidential Development in the Stanford Research Park/El Camino Real CS Zone) of the Palo Alto Municipal Code to Increase the Fee and to Revise the List of Intersection Improvements to be funded by the Fee” due to a 03/25/02 473 conflict of interest because her husband was employed by Stanford University. MOTION: Council Member Burch moved, seconded by Morton, approval of the Finance Committee recommendation to: 1) approve the recommended increased fee levels, administrative changes, and implementation milestone; and 2) adopt the ordinance to amend Chapter 16.47 of the Palo Alto Municipal Code to Increase the Commercial Housing In-Lieu Fee from its current level of $4.21 per square foot to an initial base fee of $15.00 per square foot, with annual revisions to account for inflation, eliminate existing square footage exemptions, and other administrative changes; and 3) adopt the ordinance to amend Chapter 16.45 of the Palo Alto Municipal Code to Increase the Transportation Impact Fee from its current level of $3.03 per square foot to an initial base of $8.20 per square foot, with annual revisions to account for inflation. Ordinance 1st Reading entitled “Ordinance of the Council of the City of Palo Alto Amending Sections 16.47.020 and 16.47.040 of Chapter 16.47 (Approval of Projects with Impacts on Housing) to Increase the Commercial Housing In-Lieu Fee and Related Changes” with the amendment requested by the City Attorney deleting “or the permit” from page 3, paragraph (e), lines 3 and 4. Ordinance 1st Reading entitled “Ordinance of the Council of the City of Palo Alto Amending Section 16.45.060 of Chapter 16.45 (Transportation Impact Fee for New Nonresidential Development in the Stanford Research Park/El Camino Real CS Zone) of the Palo Alto Municipal Code to Increase the Fee and to Revise the List of Intersection Improvements to be funded by the Fee” INCORPORATED INTO MOTION WITH THE CONSENT OF MAKER AND SECONDER to direct staff to return to the Finance Committee with an analysis and assessment of the fee structure changes that the Finance Committee identified to encourage local serving business, smaller residential units, to exempt BMR’s and to use traffic impact for other than intersection improvements. INCORPORATED INTO MOTION WITH THE CONSENT OF MAKER AND SECONDER that staff report back to the Council on a periodic basis with regard to how the fee was working. MOTION PASSED 7-0, Mossar “not participating,” Kleinberg absent. 03/25/02 474 CONSENT CALENDAR Council Member Kishimoto requested that Item No. 6 be removed for discussion. City Manager Frank Benest noted that Item No. 6 would become Item No. 7A. Mr. Calonne noted on Item No. 3 that staff recommended removal of the request to initiate a zoning text amendment pertaining to vehicle equipment repair and storage. Policy concerns were raised prior to the meeting that needed further analyzing. Staff would report back with respect to the questions that were raised on the zoning text amendment. Council Member Morton would not participate in Item No. 4 due to a conflict of interest because he was a trustee for a family who would benefit from the agreements. Council Member Freeman spoke regarding Agenda Item No. 4. At the last Council Meeting, she had expressed concern about the checks and balances that were in place to assure adequate risk management. An issue arose at the current meeting that extended the City Manager’s task of responsibility without additional approval from the Council. She understood that a complete review and audit of risk management was being undertaken, which included the Risk Oversight Committee and who should be members of that Committee. There were no budgetary changes although there were no limitations or requirements for Council direction for dollar amounts spent over $65,000. Reports on spending went to the Council if there were rate changes or during a budget cycle. Mr. Calonne said that was correct. Council Member Burch requested that Item No. 5 be removed for discussion. City Manager noted that Item No. 5 would become Item No. 7B. Vice Mayor Mossar would not participate in Item No. 5 due to a conflict of interest because there were AT&T holdings in her family. City Attorney Calonne would not participate in Item No. 5 due to a conflict of interest because he had holdings in AT&T. Senior Assistant City Attorney Grant Kolling would participate in his place. 03/25/02 475 Council Member Beecham said Item No. 4 did not expand the authority of the City Manager, and the Audit Committee encouraged the City Auditor to look at the risk oversight functions of Utilities Department. A report was expected back from the City Auditor. Council Member Freeman said she was under the impression that the City Manager had a limit of $65,000 before an item went to the Council. Under Item No. 4, there was no limit of $65,000. City Manager Benest said if there was a master agreement approved by the Council, he was allowed to approve purchases over $65,000. Staff looked forward to the City Auditor reviewing all the risk management procedures and policies. City Auditor Sharon Erickson agreed that Item No. 4 was no different than any contract the Council approved for a large sum of money in which any staff member might transact business under the contract. For example, if the Council approved a contract for $10 million for sidewalk repair, staff transacted business under that contract and the Council might not necessarily see a report back on expenditures. MOTION: Council Member Beecham moved, seconded by Burch, to approve Consent Calendar Item Nos. 3 and 4. LEGISLATIVE 3. Ordinance 1st Reading entitled “Ordinance of the Council of the City of Palo Alto Amending the Palo Alto Municipal Code to make Repeals and Amendments to Obsolete and Outdated Provisions Relating to Code Enforcement and Municipal Prosecution” Request for Council to Initiate Zoning Text Amendment Pertaining to Vehicle Equipment Repair and Storage ADMINISTRATIVE 4. Extension of Existing Natural Gas Master Purchase Agreements for a Five-Year Term MOTION PASSED 8-0 for Item No. 3, Kleinberg absent. MOTION PASSED 7-0 for Item No. 4, Morton “not participating,” Kleinberg absent. 03/25/02 476 COUNCIL MATTERS 7. Vice Mayor Mossar and Council Member Burch re Modifications to Fence Height and Floor Area Ratio (FAR) Regulations for Residents Impacted by San Francisquito Creek Joint Powers Authority Floodwall Replacement Project Vice Mayor Mossar said the item went to the Council as a subsidiary to a larger conversation that occurred with residents who owned 15 properties along Edgewood Drive and were impacted by the construction of the levee project on the Palo Alto side of the San Francisquito Creek. At the time the residents met with the Santa Clara Valley Water District (SCVWD), some issues were brought to everyone’s attention. Many of the issues were within SCVWD’s jurisdiction. Staff was asked to pursue the possibility of changing the height limit for the back fence for the 15 affected properties. Council Member Burch said the residents were willing to allow SCVWD to go onto their property to build and maintain the levee, which meant the residents lost small portions of their property. MOTION: Council Member Mossar moved, seconded by Burch, to direct staff to develop a plan to address the fence height and Floor Area Ratio (FAR) issues described above and submit it to the Planning and Transportation Committee for review prior to returning to Council for final approval. MOTION PASSED 8-0, Kleinberg absent. 7A. (Old Item No. 6) 800 High Street (02-PC-01) – Initiation of a Preliminary Review (PAMC 18.97.030) for a Proposed Planned Community Rezoning Consisting of 61 Residential Condominium Units and 1,921 Square Feet of Retail Space. The Proposed Project Site consists of Three Parcels that Total 42,000 Square Feet Council Member Beecham would not participate in the item due to a conflict of interest because he had a former client who was within a radius of the project. Council Member Kishimoto said she wanted to hear comments from members of the public, including the University South Neighborhood Group, and with regard to a comprehensive letter from one of the development’s neighbors. A preliminary review was important in light of the SOFA II design guidelines and policies. 03/25/02 477 City Manager Frank Benest said staff developed recommendations that went to the Planning and Transportation Commission in April 2002. Director of Planning and Community Environment Stephen Emslie said the SOFA II group was scheduled to hold one additional meeting on Tuesday, April 2, 2002, at which time it would review the final changes to the Working Group’s plan and incorporate staff’s recommendation into the plan. Hearings were scheduled with the Architectural Review Board (ARB), Historic Review Board (HRB), and Planning and Transportation Commission (P&TC) through April 2002. May 28, 2002, was reserved to bring the issue to the Council. Mr. Benest said a preliminary review by the Council was important. Council Member Kishimoto asked when the P&TC would give its preliminary review and whether staff was prepared to present a draft of the SOFA II at that time. Mr. Emslie said the P&TC was scheduled to receive the Working Group Plan, recommendations of a minority of the Working Group (Minority Report), ARB recommendations, and HRB recommendations on May 8, 2002. Council Member Kishimoto asked when the P&TC would do a review of the 800 High Street project. Mr. Emslie said the review was scheduled for March 27, 2002. Staff would not be able to share the staff recommendation until after the meeting on April 2, 2002. Council Member Kishimoto recommended proceeding with the preliminary review but asked for a delay in the P&TC review until after the Working Group finished its review. Mr. Benest asked whether the P&TC could delay the first preliminary review of 800 High Street for several weeks. Mayor Ojakian said he assigned Council Member Kishimoto as the Council liaison to the SOFA II Working Group. Elaine Meyer, 609 Kingsley Avenue, University South Neighborhood Group and SOFA II Working Group, said the 800 High Street project was in the middle of the nine-block area that the Working Group worked on. The Working Group moved along rapidly 03/25/02 478 and expected to be done soon. University South was invited by the developer to look at its plans. Several members of the Working Group met with the developer. The project consisted of three modern apartment buildings: 55 to 60 feet tall, five stories, and a Floor Area Ratio (FAR) of 2.47. The Council and P&TC were urged to not allow the immense, block-long project to be considered until the SOFA II Plan was completed and approved. Robert Parker, 111 Homer Avenue, said he was directly impacted by the project. The parking problems and construction costs placed a burden on small businesses. The Council was urged to not take action until after receiving the report from the Working Group. Ian Irwin, 800 Cowper Street, said the project violated nearly all the Comprehensive Plan (Comp Plan) checklists that were required for PCs. The project was outside the scale and character of the community and destroyed historic buildings. The Council was urged to delay action on the project until after receiving the Working Group recommendations. Carol Kiparsky, 800 Cowper Street, said 800 High Street was the largest single project in the SOFA II area. The project’s height, mass, and monotony placed the project outside any guidelines SOFA II came up with. SOFA II might place severe limitations on PC projects. PCs were to encourage public benefit in the projects. The project was before the Council at the current meeting in order to avoid SOFA II regulations. The Council was urged to postpone a decision until after the guidelines were written. Steve Reyna, 840 Kipling Street, asked the Council to delay action until after the SOFA II recommendations were available to the ARB as well as Council and P&TC. The recommendations set significant criteria for consideration that the ARB needed to hear prior to making an opinion. Larry Hassett, 875 Alma Street, said approximately four years prior, the Council appointed a working group that spent a great amount of time considering the issue. The Working Group consisted of developers, planners, and people from housing who put four years of dedication into a product. A comprehensive plan for the proper development of the area would be brought to the Council. The plan worked for the community and the goals the Council originally charged the Working Group with. The goals included a dramatic increase in the housing, an emphasis of 03/25/02 479 retaining retail as opposed to office, and an increase in the FAR to encourage residential use. Doug Ross, 909 Alma Street, commended the citizens on their effort and perseverance with the SOFA II study. The proposed project met the guidelines with two primary exceptions. One was the PC process. The application was legal and complied with all the staff requirements. The application was filed in January, and he did not believe he should have to wait a lengthy period when his project was technically not bound by the SOFA II study. The project was market rate and affordable housing. Herb Borock, P.O. Box 632, said the development project preliminary review procedures were in Chapter 18.97 of the Palo Alto Municipal Code (PAMC). There were three ways to go through the procedure. First, was that the applicant paid a fee prior to submitting a development application. The applicant indicated he had a development submitted for a PC zone. Second, was to initiate by motion of the Council with the concurrence of the project proponent. The staff report (CMR: 193:02) indicated that was the choice. A third option before the Council was “upon request of the City Manager and project proponent, with the concurrence of the City Council.” The P&TC meeting of March 27, 2002, included an item that was a request of Palo Alto High Street Partners for a preliminary review under Chapter 18.97. The P&TC meeting agenda was publicly noticed, but the Council had not acted on the item. The Council should maintain its prerogative and freedom of action to decide whether or not to do a preliminary review prior to the scheduling of a P&TC meeting. Mayor Ojakian clarified if the Council decided to not move ahead with the preliminary review, the item was removed from the P&TC agenda. Mr. Emslie said that was correct. The P&TC could do its prescreening on May 8, 2002, which was the date it was scheduled to review the ARB/HRB recommendations and the Working Group’s recommendations. The item could return to the Council for prescreening on May 20, 2002, at which time the Council would have all the recommendations. Council Member Burch asked whether the developer was subject to wait if a complete application was filed. Mr. Calonne said the developer was entitled to process the application under the existing rules; however, once the new rules came in, the rules applied to the project. The difficulty 03/25/02 480 was that the PC needed to be consistent with the Comprehensive Plan (Comp Plan). Unless a coordinated area plan was adopted that changed the rules, the Comp Plan controlled the development. The area plan would not preclude a PC unless there was specific action to foreclose that from being used. Having an application did not create a legal advantage to the project. The burden was on the City to change the rules once the application was in or process it under the existing rules. Council Member Burch said the Working Group created a set of guidelines, but needed to go before the P&TC for approval and subsequently for the Council for approval. Mr. Calonne said his recollection was the ordinance allowed joint sessions with the Council and P&TC. Council Member Burch said he did not want the Working Group to assume that what it decided became the rule. Mr. Calonne said that was correct. Mr. Benest said the Council would receive the majority and minority opinion from the Working Group, which was advisory to the P&TC and the Council. Mr. Calonne said there was a natural, unavoidable conflict between going ahead with a development project and an area plan that might be inconsistent. The preliminary review was different from approving the merits of the project. The point of the preliminary review was to inform the applicant about problem areas the Council might foresee. Considering approving a project was different with a pending area plan as opposed to a preliminary review. The Council might decide it wanted the developer to comply with the SOFA II Plan. The preliminary review should not be confused with approval of the project on its merits. Council Member Burch was interested in hearing what the Working Group came up with. MOTION: Council Member Mossar, seconded by Morton, that the City Council will not initiate the preliminary review of the proposed development project at 800 High Street, as allowed by Palo Alto Municipal Code Chapter 18.97 and to delay the review until the completion of the SOFA II Plan. 03/25/02 481 Vice Mayor Mossar said Mr. Hassett spoke clearly that if both items were moved forward simultaneously, a process began of bending and changing what the Council wanted. Council Member Morton said it was important to wait to hear from the community. Height and parking were loudly suggested as issues, which the developer might take into consideration. Council Member Lytle wanted to clarify with the City Attorney whether the Council could say in its preliminary review that the developer had to comply with the SOFA II Plan, and questioned how the Council could say that without knowing what the SOFA II Plan included. Mr. Calonne assumed from what Mr. Emslie said, that the Council would have the core of the SOFA II Plan in time to make a decision. Council Member Lytle asked whether the developer could simply proceed to file their PC application without a preliminary review and force a timeline under permit streamlining for a regular PC zone change. Mr. Calonne said the developer could file an application and move the application through the process. He was not prepared to say the extent to which the permit streamlining applied to a legislative act such as a PC zone. MOTION PASSED 7-0, Beecham “not participating,” Kleinberg absent. 7B. (Old Item No. 5) Confirmation of Staff Strategy for AT&T/Comcast Transfer of Ownership Process and Cable Rate Regulation Council Member Burch said the staff report (CMR:183:02) indicated, “When staff returns to Council with a recommendation regarding the transfer request, it will follow one of the three approaches.” He went on record to say there was no way there should be an unconditional approval of the transfer. Issues with AT&T needed to be dealt with. Council Member Morton would not participate in the item due to a conflict of interest because he had holdings in AT&T. Robert Mancuso, 271 Nova Lane, Menlo Park, spoke on behalf of himself and his mother, Natalia, who were customers of Cable Co- 03/25/02 482 op since it started in Menlo Park in 1988. Turner Classic movies were removed from the basic service to the premium service. Because of that change, he disconnected cable and used rabbit ears for reception. Since AT&T took over, rates increased approximately $7 with no increase in service. Customer service had not been good. Richard Karp, 334 Diablo Court, found Direct TV to cost less than basic cable. The Council should direct staff to carefully investigate the extent to which AT&T followed the mandate it promised to the citizens of Palo Alto and other cities when it took over the cable TV system. Bob Moss, 4010 Orme Street, said the staff report (CMR:183:02) listed three options for the response to the Federal Communications Commission (FCC) Form 394. He agreed with Council Member Burch that under no circumstances should the Council unconditionally approve the franchise transfer and leaned toward denial unless AT&T explicitly stated it would cure all its malfeasances in a time certain or pay a substantial fine. A year prior, he urged the Council to regulate cable rates. Staff said rates should not be regulated and Council agreed. The Council should regulate rates because 100 percent of every subscriber had to take the minimum basic service. AT&T violated both federal law and the franchise agreement when it changed to two levels of basic, dropped four channels, and raised rates without giving the 30-day legally required notice. The Council was urged to direct staff to deny the transfer unless Comcast and AT&T explicitly complied with the law and franchise agreement. Bob Smith, 2291 Greer Road, advised the Council to give the matter careful consideration. AT&T made a number of commitments during the franchising process and as a part of the sale of Cable Co-op to AT&T, and some of the commitments were not kept. There was no reason, technical or marketing, why AT&T could not continue to offer FM service. Channels that were lost represented a callous attitude toward the people who liked the channels. AT&T failed to respond to high definition television. Palo Alto had a high penetration of high definition television. AT&T’s customer service was lousy with no hope of getting significant problems solved. Mayor Ojakian asked for clarification regarding comments made by Mr. Moss about violation of the law with regard to how AT&T proceeded recently. 03/25/02 483 Manager Information Technology David Ramberg said AT&T provided a 30-day notice, which appeared on February 5, 2002. Council Member Freeman asked whether the notice was for Cable FM. Mr. Ramberg said the notice was for the channel lineup change that took place on March 7, 2002. Mayor Ojakian asked what specific action was requested of the Council. Mr. Ramberg said action was requested on one of the three approaches listed in the staff report (CMR:183:02). Staff presented a position on cable rate regulation and would not recommend pursuing rate regulation at the current time. Council Member Burch said the system deteriorated since AT&T took over. The Council had the responsibility through the Joint Powers Authority (JPA) to provide PEG channels. As subscribers got fewer, the Council’s ability to communicate through the government, public, and educational channels got less. Mayor Ojakian noted that five Council Members were present and asked whether a vote required all five Council Members or a majority of the five members. Senior Assistant City Attorney Grant Kolling said the vote required all five Council Members. MOTION: Council Member Burch moved, seconded by Kishimoto, that the Council give initial recommendation for the review and approval of staff’s approach to the AT&T/Comcast transfer of ownership process with conditions and strong recommendations for change. Mr. Ramberg said staff was not asking for approval at the current time, but rather asked for initial direction, with a staff recommendation to follow in June. Council Member Freeman suggested going forward with either Option 2 or 3, with or without conditions. If Option 2 were approved, she suggested adding a condition of reinstituting cable FM, if there were no technical or financial ramifications on AT&T/Comcast. 03/25/02 484 Mr. Ramberg said on March 7, 2002, AT&T split from a flat basic to a split basic. The basic cable was offered for $12.20 per month, and the extended basic was $38.99. A requirement for basic cable was necessary to anyone to receive cable service. If there were a direction to move for rate regulation, the City had authority to regulate only the basic tier of service. If it were found after the lengthy rate regulation process that basic rates in Palo Alto were excessive, the adjustment only affected people who had the basic cable. Council Member Freeman clarified that if only 5 percent or less residents received basic cable, that the cost of rate regulation would not be offset by any increased revenue received as a result of rate regulation. Mr. Ramberg said that was correct. Mr. Kolling said staff could ask AT&T, as part of the transfer, to reinstate FM service, but that could not be required as a condition of approval of the transfer. Council Member Freeman asked for an explanation of what Mr. Kolling said. Mr. Kolling said under federal law, the City could not require any franchisee to provide a specific service. The franchisee had the prerogative under federal law to provide that type of service. The FM service was a service that AT&T had the prerogative to provide. Federal law said the type of services AT&T provided could not be dictated. If the Council attempted to do that, it would impinge upon AT&T’s First Amendment right to provide cable television service. Council Member Freeman asked whether the contract could be denied because AT&T had not provided the service. Mr. Kolling said no. Council Member Lytle asked what conditions the Council looked at in Option 2. Mr. Ramberg said all the conditions were not fully exhausted. Staff looked at three possible conditions: customer service standards, potential for outstanding invoices, and confirming the rebuilt timeline that applied to the rebuilt cable system as well as to the institutional network. 03/25/02 485 Council Member Lytle asked whether the FM issue applied to the Turner channel. Mr. Kolling said the Council could ask to reinstitute the Turner channel. Mr. Benest suggested the Council communicate to AT&T the customer feedback received by the City. Council Member Lytle asked what would be denied if the Council got to the denial option. Mayor Ojakian said the transfer would be denied. Mr. Kolling said the law specifically said the transfer could be denied based on financial, legal, technical, and character qualifications. Mr. Benest asked that anyone with information related to the criteria for denial, to inform the Council of that information. Mayor Ojakian said customer service was an area the Council would look at based on concerns from the public. SUBSTITUTE MOTION: Council Member Burch moved, seconded by Kishimoto, to move forward with direction to staff to only look at Option 2 or 3. Further, to advocate strongly for the cable FM music station and the Turner Classic Movie (TCM) channel. SUBSTITUTE MOTION PASSED 5-0, Morton, Mossar “not participating,” Beecham, Kleinberg absent. COUNCIL COMMENTS, QUESTIONS, AND ANNOUNCEMENTS Council Member Freeman announced Neighbor’s Abroad “Linköping, Sweden Day” and requested that Council participate. ADJOURNMENT: The meeting adjourned at 12:00 a.m. ATTEST: APPROVED: City Clerk Mayor 03/25/02 486 NOTE: Sense minutes (synopsis) are prepared in accordance with Palo Alto Municipal Code Sections 2.04.180(a) and (b). The City Council and Standing Committee meeting tapes are made solely for the purpose of facilitating the preparation of the minutes of the meetings. City Council and Standing Committee meeting tapes are recycled 90 days from the date of the meeting. The tapes are available for members of the public to listen to during regular office hours. 03/25/02 487