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HomeMy WebLinkAbout2025-06-16 City Council Summary MinutesCITY COUNCIL SUMMARY MINUTES Page 1 of 20 Regular Meeting June 16, 2025 The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 5:30 PM. Present In Person: Burt, Lauing, Lu, Lythcott-Haims, Reckdahl, Veenker Present Remotely: None Absent: Stone Mayor Lauing called the meeting to order. The clerk called the roll. Mayor Lauing described having attended a memorial service for former Council Member and Mayor, Leland Levy. Agenda Changes, Additions and Deletions Ed Shikada, City Manager, announced Item Number 18 would be deferred until the next evening. Public Comment 1. Dave C. thanked the Mayor, the Vice Mayor and City Council officials for passing the resolution proclaiming Palo Alto's values and protecting the city from the unlawful actions of the current administration. 2. Bob L., Airport Association, presented an invitation to view an electric aircraft at the airport. There are plans to electrify the airport. 3. Aram F. gave personal opinions on the Mayor and Vice Mayor regarding the Palestinian cause. 4. Deborah G. advocated for an all-gender family changing room at Rinconada Pool. SUMMARY MINUTES Page 2 of 20 City Council Meeting Summary Minutes: 06/16/2025 5. Rent Control mentioned a project planned on Forest Avenue and requested putting in the contract and agreement pertaining to building permits that applicants be held to respect future Palo Alto Rent Control. 6. Iris B., rising senior at Henry M. Gunn High School, hoped to gain the support of the City for the Vote 16 Palo Alto initiative. 7. Carol G., founder and producer of Third Thursday California Avenue Music Festival, spoke about the upcoming Wine Walk and provided a link to buy tickets at www.3rdthursday.fun. 8. Walter C. spoke in support of the Third Thursday event. Council Member Questions, Comments and Announcements Mayor Lauing discussed a meeting with the US Council of Mayors regarding the situation in Los Angeles created when the administration called on the National Guard for citizen protests when it was not requested by the governor or mayor. The mayor talked about a letter that was received about the Santa Clara County budget from Supervisor Abe-Koga. Vice Mayor Veenker described having attended the League of California Cities Statewide Public Safety Policy Committee meeting the past week. There was one item on Prop 36 implementation and another item on wildfires, fire insurance and zone zero. Councilmember Burt spoke about attending the Neighborhood Town Hall for the Palo Alto Hills, Miranda and Esther Clark neighborhoods along with Councilmember Reckdahl and the mayor. The number one concern was wildfires. There as a follow-up discussion at the MTC on the prospect of the regional transit tax being viewed as an essential lifeline to keep the transit agencies operating at a service level that does not result in a death spiral. Councilmember Lythcott-Haims talked about attending a press conference put on by Supervisor Susan Ellenberg regarding childcare resolutions passed by 14 of the 15 cities in Santa Clara County, including Palo Alto, affirming that access to affordable childcare is critical for families, the kids and the people who work in childcare. There was a Cubberley Master Plan community meeting attended by about 130 community members looking at three different models the consultants put together for the new Cubberley. The community will meet next in September. Councilmember Lythcott-Haims spoke about the successful Indivisible March, the We the People March, the No King's Day March and the Democracy Fair that followed it in Rinconada Park. SUMMARY MINUTES Page 3 of 20 City Council Meeting Summary Minutes: 06/16/2025 Consent Calendar Public Comment: 1. Joe P. (Item 12) asked Council to direct the Planning Department to formulate its proposed amendment regarding relocating square footage from one area of the home to another on an expedited basis and direct the department to return it to the Council within three months and to withhold consent to Agenda Item 12 and proceed with a hearing at its earliest opportunity on the proper interpretation on the code provisions raised by the department. 2. Laura B. (Item 20), Sand Hill Property Company, requested the removal of Item 20 and the 20% affordability requirement be further discussed. A recommendation was made to do an in-lieu fee instead of the 20% affordable onsite requirement. Laura B. asked that Sand Hill Property Company be held to the same requirement as the Builder’s Remedy applications. 3. Herb B. (Item 6) talked about why the CAO evaluation process should not be held in closed session. 4. Amie A. (Zoom), Executive Director of Palo Alto Forward, requested Council to pull Item 20 from the Consent Calendar. Disclosures on Agenda Item Number 12 from Councilmembers Burt, Lythcott-Haims, Lauing, Lu, and Veenker. Vice Mayor Veenker, Lu recused from Agenda Item Number 20 Councilmember Burt, Reckdahl, Lythcott-Haims requested to pull Agenda Item Number 3. Councilmember Burt, Reckdahl, Lythcott-Haims requested to pull Agenda Item Number 11. Councilmember Burt, Lu, Lythcott-Haims requested to pull Agenda Item Number 12. MOTION: Councilmember Burt moved, seconded by Councilmember Reckdahl to approve Agenda Item Numbers 1-2, 4-10, 13-17, 19-21 (Item 18 Deferred to June 17, 2025 City Council Meeting), and to pull off Consent Agenda Item Numbers 3, 11, 12. MOTION PASSED ITEMS 1-2, 4-10, 13-17, 19, 21: 6-0-1, Stone absent MOTION PASSED ITEM 20: 4-0-1-2, Stone absent, Veenker, Lu Recused 1. Approval of Minutes from June 2, 2025 Meeting 2. Adoption of a Resolution Revising the Citywide Records Retention Schedule and Repealing Resolution No. 9565 SUMMARY MINUTES Page 4 of 20 City Council Meeting Summary Minutes: 06/16/2025 3. Approval of Office of the City Auditor Emergency Preparedness: Wildfire Audit Report as Recommended by the Policy & Services Committee 4. Recommendation that the City Council to Refer to the Policy and Services Committee an Update to the City of Palo Alto Advocacy Process Manual to Address Sponsorship of Legislation; CEQA – Not a Project 5. Policy & Services Committee Recommends Approval to Amend the City Auditor Bakertilly FY2024 and FY2025 Budgets for Task Orders to Realign the Authorized Budgets with a Net Zero Impact; CEQA - Not a Project 6. Approval of the Council Appointed Officers (CAO) Committee‘s Recommendation to Approve the CAO Annual Evaluation Process, Timeline, and Questions; and Approval of Professional Services Contract Number C25193915 with the Municipal Resources Group, LLC (MRG) in an Amount Not to Exceed $208,500 for Council Appointed Officer Performance Evaluation Services for a Period of Three Years. CEQA Status - Not A Project 7. Recommend the City Council Adopt the Fiscal Year 2026 Investment Policy as Recommended by the Finance Committee: CEQA Status – Not a Project 8. Adoption of Memoranda of Agreement with International Association of Fire Fighters (IAFF) Local 1319, Fire Chiefs Association (FCA), and Utilities Managers and Professionals Association of Palo Alto (UMPAPA) for Terms Ending June 30, 2028, and Adoption of the Updated Management and Professional Compensation Plan and Corresponding Salary Schedules; CEQA Status – Not a Project 9. Approval of a Surveillance Use Policy for Security Cameras at Ada's Café at Mitchell Park Community Center and Library; CEQA Status - Not a Project 10. City Council Appointment of the Castilleja Neighborhood Committee in Accordance with Condition Number 33 Contained in Record of Land Use Action 2022-22 Authorizing Redevelopment of Private School at 1310 Bryant Street (Castilleja School). Environmental Assessment: Exempt from CEQA Pursuant to CEQA Guidelines Section 15061(b)(3). 11. Accept Electric System Reliability Key Performance Indices; CEQA – Not a Project 12. Approval of a Director’s Interpretation Pursuant to PAMC Section 18.01.025 Concluding That Noncomplying Residential Gross Floor Area may not be Relocated Within a Structure; Denial of the Associated Appeal; Direction to Prepare a Future Code Amendment for Administrative De Minimis Exceptions to the Zoning Code; CEQA: Exempt Pursuant to CEQA Guidelines Section 15061(b)(3) SUMMARY MINUTES Page 5 of 20 City Council Meeting Summary Minutes: 06/16/2025 13. Approve and Authorize the City Manager or Designee to Execute Purchase Orders as Needed with the Okonite Company, Extending the Term for the Blanket Purchase Order for Purchase and Standardization of Underground Cable Through December 31, 2025, and to Increase the Not-to-Exceed Amount by $100,000, for the Extension Period. CEQA Status: Not a Project. 14. Approval of Construction Contract No. C25194279 with Estate Design and Construction, Inc. in the Amount Not-to-Exceed $283,770 and Authorization for the City Manager or Their Designee to Negotiate and Execute Change Orders up to a Not-to-Exceed Amount of $28,377 for the University Underpass Refurbishment Project; Capital Improvement Program University Avenue Parking Improvements (PF-14003) and Street Lights Improvements (PO-05054) projects; CEQA Status – Exempt under CEQA Guidelines Section 15301(c) 15. Approval of Change Order No. 3 to Contract C22183580 with MP Nexlevel of California, Inc., to reallocate funding from Change Order No. 2 to the Fiber-to-the-Premises (FTTP) Project and to incorporate FTTP into the Scope of Work extending through August 31, 2025; CEQA Status - For FTTP, Council action on this item is within the scope of the Final Initial Study and Mitigated Negative Declaration (IS/MND) for the Fiber-to-the-Premises Project, adopted on June 17, 2024; otherwise exempt. 16. Approval of Two Professional Services Contracts for a Term of Two Years: C25193536 with 4Leaf, Inc. in an Amount Not-to-Exceed $291,253 and C25194267 with Interface Engineering, Inc. in an Amount Not-to-Exceed $101,585 for Fire Station 4 Replacement Capital Improvement Program Project (PE-18004); CEQA Status - Exempt under CEQA Guidelines Sections 15302 and 15303 17. Approval of Contract Amendment No. 4 to Contract Number C19171363 with Professional Account Management LLC, dba Duncan Solutions, to Extend the Contract for one year to June 30, 2026, and to Adjust Billing Rates, Without an Increase to Compensation, for a Not -to-Exceed Amount of $767,000 for Parking Permitting and Citation Management Services; CEQA Status -- Not a Project. 18. Approval of Amendment No. 3 to Contract Number C23184827 with Nomad Transit, LLC (Via) in the Amount of $1,100,000 for a total not to exceed $4,901,550 over a Four-Year Term to Continue the City of Palo Alto On-Demand Transit Service through June 30, 2026; CEQA status - not a project. Item Deferred to June 17, 2025 City Council Meeting 19. QUASI-JUDICIAL. 1033 Amarillo Avenue [25PLN-00015]: Request for a Parcel Map with Conditional Exceptions to Subdivide a 20,774-Square-Foot R-1 Property into Two Lots (10,661 and 10,113 Square Feet). Exceptions include Minimum Lot Width, Maximum Lot Size, and Residential Density. Zoning District: R-1 Single Family Residential. CEQA: Exempt pursuant to CEQA Guidelines Section 15301 (Existing Facilities). SUMMARY MINUTES Page 6 of 20 City Council Meeting Summary Minutes: 06/16/2025 20. SECOND READING: Ordinance of the Council of the City of Palo Alto Amending: Chapter 18.14 (Housing Incentives) of the Palo Alto Municipal Code to Implement Program 3.4E of the 2023-2031 Housing Element to Expand and Revise Regulations for the El Camino Real Focus Area; Making Conforming Amendments to Chapter 16.58 (Development Impact Fees) (FIRST READING: May 27, 2025; PASSED: 5-0-2, Lu, Veenker recused) 21. SECOND READING: Ordinance of the Council of the City of Palo Alto Amending Title 16 (Building Regulations) and Title 18 (Zoning) of the Palo Alto Municipal Code to Amend Requirements Relating to Accessory Dwelling Units and Junior Accessory Dwelling Units (FIRST READING: May 12, 2025; PASSED 7-0) City Manager Comments City Manager Shikada noted that Items Number 11 and 12 will be scheduled for the next available action agenda, likely in August. A slide presentation was presented including upcoming summer events, Water Heater Giveaway program extension, upcoming community engagement and notable tentative upcoming Council items. Action Items 22. PUBLIC HEARING & PROPOSITION 218 HEARING: Finance Committee Recommends Adoption of Six Resolutions: 1) Approving the Fiscal Year 2026 Wastewater Collection Utility Financial Forecast and Reserve Management Practices, Amending Wastewater Collection Rate Schedules S-1, S-2, S-6 and S-7, and Repealing Wastewater Collection Rate Schedules S-3 and S-4; 2) Approving the Fiscal Year 2026 Water Utility Financial Forecast, Reserve Management Practices and Reserve Transfers, and Amending Water Rate Schedules W-1, W-2, W-3, W-4, and W-7; 3) Approving the Fiscal Year 2026 Gas Utility Financial Forecast and Reserve Management Practices, Reserve Transfer, and General Fund Transfer, Approving the Distribution of a Climate Credit to Small and Medium Capacity G-2 Customers in December 2025, and Amending Gas Rate Schedules G-1, G-2, G-3 and G-10; 4) Approving the Fiscal Year 2026 Electric Utility Financial Forecast, Reserve Management Practices and Reserve Transfers, and Amending Electric Rate Schedules E-1, E-2, E-2-G, E-4, E-4-G, E-4 TOU, E-7, E-7-G, E-7 TOU, E-14, E-16, E- EEC-1, and E-NSE-1; 5) Amending Utility Rate Schedules EDF-1 and EDF-2, and Approving the Palo Alto Fiber Broadband Internet Services Rate Schedule F-1; and 6) Amending Storm Water Utility Rate Schedule D-1; CEQA Status: Not a project under CEQA Guidelines Sections 15378(b)(4) and (5) and Exempt Under Section 15273(a) Note: Resolutions are included in the packet as Attachments A – F, Attachment G reflects the Table of URLs for the Exhibits to Attachments A – F. SUMMARY MINUTES Page 7 of 20 City Council Meeting Summary Minutes: 06/16/2025 Alan Kurotori, Utilities Director, and Lisa Bilir, Utilities Senior Resource Planner, provided a slide presentation about the FY 2026 financial forecasts and rate proposals including utilities rate proposals for fiscal year 2026, utilities rate review timeline and outreach, residential median bill projections, median residential bill comparison to neighboring cities, water rate proposal, water cost and revenue projections, single-family residential water bill comparisons, wastewater collection rate proposal, wastewater collection cost and revenue projections, monthly single family residential wastewater rate comparison, recommendation, * Molly Stump, City Attorney, outlined prop 218. Public Comment: Proposed water and wastewater collection rate changes and financial plans 1. Floura N. expressed struggles with utility prices in Palo Alto. 2. Peter D. discussed the alternative water supply plan and how using reasonable demand projections would reduce the need for alternative water supplies by 37 million gallons per day. 3. Julianne F., landscape architect, opined that the SFPUC design drought is based on non- existent or poorly interpreted data and that the CPA should reject the SFPUC expensive Alternative Water Supply Projects. 4. Dave W. requested Council say no to the amendment until the SFPUC provides drought risk data. 5. Chris T. urged Council to use whatever political leverage and effort available vis-a-vis the San Francisco PUC through BOSCA to get answers to the questions in a letter the Utility Advisories Commission drafted and recommended to Council. 6. David S. urged Council to take leverage to protect the possibility that there will be water for people in the future. 7. Winter D. (Zoom) encouraged Council to continue to press SFPUC for accurate facts and a robust analysis. 8. Jeffrey H. wanted the SFPUC to reduce its design drought so more flow can go to the fish and to the community and expensive alternatives for quality water do not need to be pursued. Mayor Lauing asked for a count of the written protests on the wastewater and water collection rates. Mahealani Ah Yun, City Clerk, reported eight protests against the water rates. Mayor Lauing concluded since there was no majority protest, Council would consider the resolution of adopting a water rate increase. SUMMARY MINUTES Page 8 of 20 City Council Meeting Summary Minutes: 06/16/2025 Councilmember Lu wanted to confirm with Staff how the rates are structured and if the possibility of adding more tiers with progressively higher costs has been investigated. Ms. Bilir replied the water rates are designed in accordance with Prop 218. Cost of service studies are done looking at the cost allocation and rate design. That can be looked at as part of the next cost of service and rate design study. The analysis Councilmember Lu mentioned has not been done so far but could be looked at in the next study. Vice Mayor Veenker asked for comment from Staff on the theme of the public comment, the potential impact if the SFPUC responded and redesigned their design droughts and what the timeline would be. Karla Dailey, Utilities Assistant Director, replied there is no big alternative water supply projects in any of the rates right now. What was before Council included a little bit of money for some studies that SFPUC is doing that flows through to their rates and their rate projections. Director Kurotori commented there are studies in regards to the Urban Water Management Plan. A lot of that information will be studied in the future and is currently in the budget. The other items some of the speakers mentioned are beyond the scope of the rate increases being discussed. The studies brought to the UAC are a matter of public record and not included as projects. Councilmember Burt wanted to see a study session in the coming months to allow at deeper dive into this. Director Kurotori indicted the One Water Plan would be coming to the S/CAP Committee on September 19 and confirmed to Councilmember Burt it could be recommended that Council review it. Mayor Lauing asked for the number of written protests received against the proposed wastewater collection rates. City Clerk Ah Yun reported there were eight protests against wastewater rates received. Mayor Lauing concluded since there was no majority protest, Council would consider the resolution of adopting a wastewater collection financial plan and increases. Mayor Lauing indicated Council would consider the financial plans and rates not subject to Prop 218 in item 22, namely adoption of resolutions adopting financial plans and fiscal year 2026 rates for gas, electric, fiber and stormwater. Ms. Bilir provided a slide presentation including the gas rate proposal, gas cost and revenue projections, electric rate proposal, electric cost and revenue projections, electric bill comparisons, fiber rate proposal, what the City is doing to keep costs down, resources from the City to keep bill costs low and recommendations. Public Comment: Financial plans and proposed rates for gas, electric, fiber, and stormwater 1. Herb B. offered personal comments on the new fiber internet rates. SUMMARY MINUTES Page 9 of 20 City Council Meeting Summary Minutes: 06/16/2025 2. Utsav G. (Zoom) stated opposition to giving a gas rebate using green cap-and-trade funds. A request was made to remand the issue to the Utilities Advisory Commission for a proper review. If the Council still chooses to proceed, the resolutions recitals are different than what is in the staff report and must be amended so that the gas utility interest portion and the cap-and-trade portion together totals 1.1 million, not in addition to one another. 3. Hamilton H. (Zoom) endorsed Utsav G.’s comments. Hamilton H. asked that Council approve the proposal minus the use of cap-and-trade funds for the rebate. 4. Lynn C. (Zoom) expressed concerns about the rates in affecting the small users and requested a comparison to how other cities assign rates. Councilmember Burt remarked the Finance Committee was concerned with the proposed cost of service analysis. It was recommended to put aside the change in the billing structure based on the proposed new COSA and requested that be reviewed by the UAC. Major impacts under the proposed COSA led to the dilemma on whether to use cap-and-trade dollars to help mitigate certain of those increases. This resulted in the proposal to use a combination of interest income and cap-and-trade dollars. Section 4 of the recitals is confusing as to whether the 1.1 million from cap-and-trade is additive to the interest rate income. It is written to use the interest rate income and make up the balance of the 1.1 million with cap-and-trade. Councilmember Burt suggested changing that language to make it more clear. Director Kurotori stated Staff’s intent was to include the interest income as non-rate revenue as the priority first and then supplement that with available natural gas cap-and-trade funds. Council can make modifications such that it is clear to the public. Councilmember Burt inquired about the approximate amount of income from the interest. Director Kurotori believed it was in the $200,000 range and was being looked at in terms of what interest income would be received. Funds in the gas utility have been depleted. Councilmember Burt had questions about the existing City resolutions regarding uses of the cap-and-trade funds and restrictions. Director Kurotori explained the cap-and-trade funds must follow CARB regulations first. That is a standing goal of the City. As part of those policies, the preference was to use that for greenhouse gas reduction measures before rebates. As part of S/CAP, Council is putting significant funds toward the use of natural/greenhouse gas funds for electrification to promote the City’s longstanding sustainability and climate action goals. There are significant funds available to do both the goals for the City Council on this S/CAP and this one-time rebate moving forward and completing the study. Councilmember Burt provided comments about the fiber project and asked about the cost of going from 1 GPS to 5. Director Kurotori stated the scale of going to additional customers is what it will be, especially in the pilot area. To scale and provide a different rate for that to get a higher level of associated customers, those are the balancing act that will have to be performed. Councilmember Burt talked about the high speed fiber offers. Director Kurotori stated that the fiber speeds are symmetric. Part of the competitive advantage for the City is SUMMARY MINUTES Page 10 of 20 City Council Meeting Summary Minutes: 06/16/2025 having multiple utilities so customer service, outreach and personnel are already on premises. There is a DART FIBER system making investments on the backbone. The cost increase between the 2 and 5 gigabit technology was explained. The more common types of uses available to the public are 2 gigabits/second. The higher range has different, more specialized equipment which may not provide a true value for the customer. Councilmember Burt had questions about speed increases and price points. Director Kurotori mentioned this was up-to pricing and a schedule was needed to move forward and start talking to potential customers as part of the pilot area. A 30-something percent take rate was being sought initially to see if it will scale as the system is expanded for economic viability. The rate schedule provides flexibility to start doing outreach and marketing to residents and businesses. Councilmember Burt reasoned Council could approve the up-to dollars but give guidance to Staff to explore more competitive pricing on the faster speeds within their discretion but to do so in a way that breaks up the pilot and find out what is the uptake of adoption if one set of options or pricing is given versus another. If only one approach is taken, it will not be clear what the best approach is. Mayor Lauing asked what impact a rebate of $1+ million would have on the rates and what alternatives there are. Councilmember Burt replied one alternative was to accept the COSA and severe impacts would be there. The other would be to not provide this mitigation on the cost increases with some jeopardy that would accrue. There were no other sources of funds looked at that Staff suggested. That is where the Committee probed and came up with the interest. Mayor Lauing stated the UAC did not find the recommendation of interest tasteful. Vice Mayor Veenker wanted to know what percent of the G2 customers median annual gas bill is the rebate. Ms. Bilir answered the small G2 is about 40%. For the medium, it is about 2% of the annual bill. Director Kurotoria added one reason why the commercial multifamily master meters are such a reduction is because the meter charge for the multifamily residential is higher. Ms. Bilir explained under the cost of service study, the small had a larger reduction in the bill because of the way the groups had been designed based on the meter capacities and the very big differences in the meter capacities between the small, medium and large. There is not as much of a difference for the medium under the cost of service results as there is for the small. Vice Mayor Veenker asked what total dollars it was costing to give the $200. Ms. Bilir replied it was estimated to be about $180,000. Vice Mayor Veenker asked how much is in the cap-and-trade reserve. Ms. Bilir replied it is projected to be about 11.2 million at the end of 2025. Councilmember Lu inquired if alternate forms of rebates had been considered. Director Kurotori wanted to defer that when it goes back to the Sustainability and Climate Action Committee. Palo Alto has some of the most aggressive climate action goals. The rebates and incentive programs are unmatched in the Bay Area. Information can be provided to customers on the ability to switch and do fuel switching over to electrify homes or businesses and a touch point to talk about some of the benefits and values where the cap-and-trade money can be used to switch them from natural gas to electrify their homes or businesses. There are a series of programs working with Department of Public Works, the S/CAP group and several staff members from Utilities to do that outreach to the customers to show them how that works and SUMMARY MINUTES Page 11 of 20 City Council Meeting Summary Minutes: 06/16/2025 then tie that back into electrification meeting both goals. The use of rebates under the cap-and- trade is standard in investor owned utilities and returning some of those in a non-volumetric charge to the customers. Research showed Long Beach did a one-time credit and that history could be reviewed to look at the uses of funds from the other public-owned utilities. City Attorney Stump added the staff needed to find funding outside of the rate revenues for the rebates due to California state law. Prop 26 does not allow using electric rate revenue to provide this rebate on the gas side. Councilmember Lu suggested the rebate could be provided from cap-and-trade dollars but on electricity costs. Director Kurotori stated it is a unified bill. That would be possible if Council wanted to make that consideration. When looking at equity issues and the ability to use reserves from the natural gas cap-and-trade the recommendation was to use those funds that were available. Mayor Lauing asked about the total impact of the million dollars. Director Kurotori replied there are no other rate impacts to the other customers for the use of the $1.1 million from the natural gas cap-and-trade to the other gas rate payers. The funds are restricted. The Council can use them as non-volumetric credits. The use of these funds will not impact other customers in terms of their rates. City Manager Shikada stated it would be a Council discretion and decision as to how to frame the credit. Director Kurotori commented the COSA will be brought back to the UAC at the first available meeting. The intent is to have the COSA completed so it can be implemented in January 2026. Mayor Lauing was not sure it would be a big enough impact to go through what was being recommended and suggested possibly declining it and ask UAC to come up with different ideas to help with rates. Director Kurotori stated if Council makes that determination, the cost of study could be brought back for consideration when it was completed. Mayor Lauing was in favor of that. Vice Mayor Veenker asked how many small G2 customers with the 40% impact there are. Ms. Bilir said it is Approximately 1100. Councilmember Lythcott-Haims voted no on the gas utility resolution due to concern that potential litigation might be faced. MOTION: Councilmember Burt moved, seconded by Councilmember Reckdahl to adopt: 1. For the Water Utility, a Resolution (Attachment B): a. Approving the FY 2026 Water Utility Financial Forecast and Reserves Management Practices; and b. Approving the transfer of up to $3 million from the Rate Stabilization Reserve to the Operations Reserve in FY 2025; and c. Amending the Water Utility Rate Schedules effective July 1, 2025 (FY 2026): i. W-1 (General Residential Water service), ii. W-2 (Water Service from Fire Hydrants), iii. W-3 (Fire Service Connections), SUMMARY MINUTES Page 12 of 20 City Council Meeting Summary Minutes: 06/16/2025 iv. W-4 (Residential Master-Metered and General Non- Residential Water Service), and v. W-7 (Non-Residential Irrigation Water Service) MOTION PASSED: 6-0-1, Stone absent MOTION: Vice Mayor Veenker moved, seconded by Mayor Lauing to adopt: 1. For the Wastewater Collection Utility, a Resolution (Attachment A): a. Approving the Fiscal Year (FY) 2026 Wastewater Collection Utility Financial Forecast and Reserves Management Practices; and b. Amending the Wastewater Collection Utility Rate Schedules effective July 1, 2025 (FY 2026): i. S-1 (Residential Wastewater Collection and Disposal), ii. S-2 (Commercial Wastewater Collection and Disposal), iii. S-6 (Restaurant Wastewater Collection and Disposal), and iv. S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger); and c. Repealing the Wastewater Collection Utility Rate Schedules effective July 1, 2025: i. S-3 (Industrial Waste Laboratory and Analysis Charges), and ii. S-4 (Hauled Liquid Waste Charges) MOTION PASSED: 6-0-1, Stone absent MOTION: Councilmember Burt moved, seconded by Mayor Lauing to adopt: 1. For the Gas Utility, a Resolution (Attachment C) with the following modification: a. Approving the FY 2026 Gas Utility Financial Forecast and Reserves Management Practices; and b. Approving the transfer of up to $1.5 million from the Gas Utility Operations Reserve to the Distribution Rate Stabilization Reserve in FY 2025; and c. Transferring up to 18% of gas utility gross revenues received during FY 2024 to the General Fund in FY 2026; and d. Amending the Gas Utility Rate Schedules effective July 1, 2025 (FY 2026): i. G-1 Residential Gas Service, ii. G-2 Residential Master-Metered and Commercial Gas Service, iii. G-3 Large Commercial Gas Service, and iv. G-10 Compressed Natural Gas Service); e. Remand the issue of a one-time credit to the Utilities Advisory Commission to be considered at the time they review the updated COSA. MOTION PASSED: 5-1-1, Lythcott-Haims no, Stone absent SUMMARY MINUTES Page 13 of 20 City Council Meeting Summary Minutes: 06/16/2025 MOTION: Councilmember Burt moved, seconded by Council Reckdahl to adopt: 1. For the Electric Utility, a Resolution (Attachment D): a. Approving the FY 2026 Electric Utility Financial Forecast and Reserves Management Practices; and b. Approving the transfer of up to $5 million from the Electric Utility Supply Operations Reserve to the Distribution Operations Reserve in FY 2025; and c. Amending the Electric Utility Rate Schedules effective July 1, 2025 (FY 2026): i. E-1 (Residential Electric Service), ii. E-2 (Small Non-Residential Electric Service), iii. E-2-G (Residential Master-Metered and Small Non-Residential Green Power Electric Service, iv. E-4 (Medium Non-Residential Electric Service), v. E-4-G (Medium Non-Residential Green Power Electric Service), vi. E-4 TOU (Medium Non-Residential Time of Use Electric Service), vii. E-7 (Large Non-Residential Electric Service), viii. E-7-G (Large Non-Residential Green Power Electric Service), ix. E-7 TOU (Large Non-Residential Time of Use Electric Service), x. E-14 (Street Lights), xi. E-16 (Unmetered Electric Service) to recover capital and maintenance costs for utility pole attachments and telecom conduit, xii. E-EEC-1 (Export Electricity Compensation) to reflect 2024 avoided cost, and xiii. E-NSE-1 (Net Surplus Electricity Compensation) to reflect current projections of FY 2026 avoided cost; 2. For the Fiber Optics Utility, a Resolution (Attachment E) with the following additions: a. Amending the Dark Fiber Optic Utility Rate Schedules, consistent with the applicable Consumer Price Index, effective July 1, 2025 (FY 2026): i. EDF-1 (Dark Fiber Licensing Services), ii. EDF-2 (Dark Fiber Service Connection Fees); b. Approving the new Palo Alto Fiber Broadband Internet Services Rate Schedule F- 1, for broadband internet services; c. Direct staff to evaluate one or more alternative pricing models, including a promotional price and consideration of a reduced pricing for higher speed categories; 3. For Storm Water Management, a Resolution (Attachment F): a. Amending the Storm Water Management Fee Rate Schedule, consistent with the applicable Consumer Price Index, D-1 effective July 1, 2025 (FY 2026): i. D-1 (General Storm and Surface Water Drainage) MOTION PASSED: 6-0-1, Stone absent SUMMARY MINUTES Page 14 of 20 City Council Meeting Summary Minutes: 06/16/2025 23. PUBLIC HEARING: Presentation on Status of Vacancies and Recruitment and Retention Efforts and Adoption of Budget Ordinance for Fiscal Year 2026, Including the Operating and Capital Budgets and Municipal Fee Schedule; Adoption of a Resolution determining the Appropriations Limit for Fiscal Year 2026; Vacancies and Recruitment Update (AB2561 Compliance); and Approval of FY 2026 Non-Profit Workplan Phase I Awards as Recommended by the Policy & Services Committee; and Adoption of a Resolution to Extend and Amend the Development Services Reserve Fund Policy; CEQA Status – Not a Project City Manager Ed Shikada and Vice Mayor Veenker recused from Stanford related portions of the item. Sandra Blanch, Human Resources Director, provided a slide outlining AB2561 – vacancy and recruitment. Nick Raisch, Human Resources Assistant Director, provided a slide presentation about the vacancy data and recruitment and retention. Sara Temple, SEIU Representative, provided a slide presentation for the SEIU 521 Unit including an overview of SEIU Unit, SEIU vacancies by department, department vacancies unfilled for one year or more, SEIU Unit turnover and retention, SEIU Unit why employees leave and why they stay, impact to City of Palo Alto, financial health and what the City can do. Paul Harper, Budget Manager, and Lauren Lai, Chief Financial Officer, provided a slide presentation including City Council FY 2026 budget adoption overview, budget conversations and calendar, FY 2026 budget summary, FY 2026 Finance Committee recommendations (general fund sources or revenues), FY 2026 Finance Committee recommendations (general fund uses or expenses), FY 2026 Finance Committee recommendation reserves and placeholders, capital funding, table of organization, municipal fees, Nonprofit Partnership Workplan Phase 1 funding award, referrals for fiscal year 2026 Finance Committee Workplan, draft motion for City Council consideration (based on supplemental memo) and order of proceedings. Councilmember Lu asked how vacancies are being handled in the interim period. City Manager Shikada replied there are some vacancies being pursued on a continuous basis and others that are slowing down pending the decisions that the Council will be discussing in August and September. Public safety and most utilities areas are being continued but general fund positions are being reviewed on a case-by-case basis and proceeding according to necessity and time sensitivity. Councilmember Lu asked about the Safe Routes to School vacancy. City Manager Shikada stated that is being looked at individually. Vice Mayor Veenker wanted to know what the CSD Grants Community Events Programs is. Chief Financial Officer Lai replied this is the program CSD would administer doing community grants up to $5,000 for a total value of $50,000 for the whole year. City Manager Shikada it is a part of the recommended budget in front of Council. It is the extension of the Know Your SUMMARY MINUTES Page 15 of 20 City Council Meeting Summary Minutes: 06/16/2025 Neighbors grant program where an event may be larger than the typical block party and CSD is putting together a program to be able to administer that. Councilmember Burt asked about a comparison of current workforce members versus previously and outsourcing. Director Blanch indicated that would be brought back on August 19. Mayor Lauing had questions about the net FTE proposed in the general fund. Chief Financial Officer Lai answered there are three captains plus the six being added. That would leave a balance of two in other departments so 9 of the 11 relate to the fire department. Mayor Lauing wanted to address placeholders, improving the service of the 310 phone number and mental health. Chief Financial Officer Lai stated placeholders were not put in for additional appropriations to be determined in light of the endeavor to focus on budget reductions. If Council decided on certain priorities to appropriate, it would be a good time. There is a table in the memo that highlights the direct funding to organizations that support mental health. There is also indirect support through HSRAP and other City programs. Councilmember Lythcott-Haims wanted to be sure there is funding within CMO and CSD for JED. City Manager Shikada commented there had been no changes since the last discussion related to the Jed Foundation. There is a follow-up meeting being scheduled with the city school liaison representatives from the City Council with JED Foundation to refine the scope of services and associated fees that would be required. It was anticipated to be accommodated within the community services as well as CMO budgets. Vice Mayor Veenker provided a slide of a document of P&S award recommendations with 22 organizations that had been analyzed. It was decided to bring this recommendation to Council to decide what to do with respect to the $426,000 recommendation on the document. Public Comment: 1. Rika Y., president of Palo Alto Special Education PTA, expressed appreciation of the process of the grant and consideration. 2. Jasmina B., founding director of UNAFF, talked about upcoming presentations by the organization and asked Council to reconsider cutting the budget for the public broadcasting. 3. Sheryl M., CEO and founder of Musical Memories Foundation, expressed gratitude for the opportunity to bring the organizations programs to Palo Alto. 4. Sarah B., president of Neighbors Abroad, expressed gratitude for the recommendation for funding through the Policy and Services Committee but spoke about the faults of the plan in phase 1. SUMMARY MINUTES Page 16 of 20 City Council Meeting Summary Minutes: 06/16/2025 5. Nicole C-W., executive director of DreamCatchers, described the value of stable funding of nonprofits. 6. OSC Volunteer (Zoom) expressed gratitude for consideration during the award process. 7. Andrew N. (Zoom), director of Peninsula Healthcare Connection Clinic and outreach program, thanked City Council for the opportunity to apply for funding. 8. Bryan B. (Zoom), fundraising chair for the Palo Alto Special Education PTA, expressed appreciation for the grant process. 9. Madeline M. (Zoom), director of Institutional Giving at VISTA Center for the Blind and Visually Impaired, urged the City Council to reconsider the allocation and to fund the Vision Loss Rehabilitation Services Program. 10. Penny E. (Zoom) asked Council to direct Staff to fill the vacant Safe Routes to School FTE as soon as possible. Mr. Harper presented a slide with a list of items that have Stanford related funding mainly related to public safety, fire, police, office of transportation with the Palo Alto Link program and capital programs or projects that could have Stanford implications because they are public safety related. Councilmember Lythcott-Haims wondered if PERT should be on the list. City Attorney Stump replied the funds are already transferred so it is not a current funding item for Stanford. Councilmember Burt encouraged Staff to look at updating some of the outdated items on the list. Councilmember Reckdahl had questions about Palo Alto Link. Mr. Harper answered for that program for fiscal year 2026, the City's cost will be $500,000. Stanford will be reimbursing the City about $520,000 and $80,000 of revenue from the program is expected. The total cost is about $1.1 million with the City's portion being $500,000. It is a reduction from the $760,000 that is funded in 2025. Councilmember Reckdahl stated Palo Alto Link does not seem sustainable. Councilmember Burt shared that concern and asked when an answer was expected regarding other grants being pursued by Staff. Ria Lo, Chief Transportation Official, replied Staff has applied for a TFCA grant and a transit grant from VTA Measure B that go to VTA in October. Councilmember Burt suggested authorizing extension of the program for six months in anticipation of the grants. Councilmember Lu preferred either the six-month term or the ability to terminate the contract early with minimal cost as it is not likely sustainable. Councilmember Reckdahl wanted to put it on a short leash. Kiely Nose, Assistant City Manager remarked one of the do outs from this budget process is to come back in August to look at rebalancing in the general fund. That will be another opportunity to bring up things like Link as an ongoing service, as well as review of that pending the kind of contract term clauses. The current contract stipulates a one-year termination and will end at the end of June. SUMMARY MINUTES Page 17 of 20 City Council Meeting Summary Minutes: 06/16/2025 Councilmember Burt suggested authorizing Link up to six months and get the clarification the next day on what the contract terms are. Mayor Lauing offered holding until August as another option. Assistant City Manager Nose explained approving this would not preclude changing the service delivery model midway through the year. There will be opportunity to talk about it again in August. Councilmember Burt stated if the contract is agreed on, it would be locked into a year. Assistant City Manager Nose replied Staff is looking at the termination clause. Most contracts have a termination clause that allows the City to term a contract with 30 days’ notice. Staff wanted to confirm this contract has that. Mayor Lauing invited discussion of the nonprofit grants. Councilmember Burt provided context of the nonprofit grants and made suggestions about Neighbors Abroad, Environmental Volunteers, the four nonprofits that were funded last year and using $50,000 from the Council Discretionary Fund. Councilmember Lu thought the process needed revisiting and agreed with Councilmember Burt’s comments. Vice Mayor Veenker had questions in terms of past City support UNAFF. Chantal Cotton Gains, Deputy City Manager, shared in FY25 $45,000 was given directly to UNAFF and the community services department absorbed the cost of doing banners as another $10,000 within their existing budget. In FY24, $35,000 was given to UNAFF, $10,000 were for banners from the special events contingency and $25,000 were included in the budget. In FY23, there was $20,000 budgeted within the Community Services Department and it was broken up between banners and other programming. In FY22, about $35,000 was given, $25,000 of which was general support and about $10,000 was for banners from the City Council Contingency. There were two years during COVID no funding was provided to UNAFF. FY17, 18 and 19, it was around $10,000 each year just for banners. Mayor Lauing stated Council could talk about the number of dollars they want to give if they wanted to change from the number P&S started with and raise it but it needed to be done strategically. Councilmember Lythcott-Haims talked about the need to sort out HSRAP. Vice Mayor Veenker stated the interplay with HSRAP needed to be sorted out for next year. Councilmember Reckdahl also agreed with the need to iron out HSRAP/non-HSRAP interaction. MOTION: Councilmember Lu moved, seconded by Councilmember Burt to approve the Stanford related items for the FY 2026 budget (Attachment C) and authorize funding extension of the Palo Alto Link (PAL) On Demand Transit Services program for up to 6 months for FY 2026. MOTION PASSED: 5-0-1-1, Veenker recused, Stone absent SUMMARY MINUTES Page 18 of 20 City Council Meeting Summary Minutes: 06/16/2025 MOTION: Councilmember Burt moved, seconded by Councilmember Lythcott-Haims to approve the allocations recommended by the Policy & Services Committee with the following changes: • Decrease $12,500 from the Policy and Services Committee recommendation and increase the City Manager’s Office budget for FY 2026 for Neighbors Abroad by $17,500; • Decrease $10,780 from the Policy & Services Committee recommendation and increase the Community Services budget for FY 2026 for the Environmental Volunteers by $10,780; • Increase of $50,000 for Magical Bridge Foundation to the Policy Services Committee recommendation to a total of $150,000 and also an increase of $25,000 for UNAFF to the Policy and Services Committee recommendation to a total of $45,000 (with $75,000 coming from FY 2025 Council Contingency). MOTION PASSED: 6-0-1, Stone absent Also, the net balance of $7,366 above FY26 budget based upon the revised P&S recommendation will be funded from FY25 Council Contingency for a total of $82,366. MOTION: Councilmember Burt moved, seconded by Councilmember Lu to: 1. Adopt the Fiscal Year 2026 Budget Ordinance (Attachment A), which includes: a. City Manager’s Fiscal Year 2026 Proposed Operating and Capital Budgets, previously distributed at the May 5 City Council Meeting (Attachment A, Exhibit 1) b. Amendments to the City Manager’s Fiscal Year 2026 Proposed Operating Budget (Attachment A, Exhibit 2) c. Amendments to the City Manager’s Fiscal Year 2026 Proposed Capital Budget (Attachment A, Exhibit 3) d. Fiscal Year 2026 City Table of Organization (Attachment A, Exhibit 4) e. Fiscal Year 2026 Municipal Fee Changes (Attachment A, Exhibit 5) f. Planning and Development Services Cost of Service Study and Municipal Fee Adjustments (Attachment A, Exhibit 6) g. Citywide Cost of Services Study and Municipal Fee Adjustments (Attachment A, Exhibit 7) h. In the Gas Fund: Remove $1,100,000 appropriation for Gas Climate Credits 2. Accept the Fiscal Year 2026 – 2030 Capital Improvement Plan 3. Adopt a Resolution determining the Appropriations Limit for Fiscal Year 2026 (Attachment B) 4. Comply with Assembly Bill 2561 / Government Code § 3502.3 regarding vacancies and recruitment efforts (Attachment D). SUMMARY MINUTES Page 19 of 20 City Council Meeting Summary Minutes: 06/16/2025 5. Approval of FY 2026 Non-Profit Workplan Phase I Awards as amended by Items 5-9 below. 6. Adopt a Resolution to Extend and Amend the Development Services Reserve Fund (DSRF) Policy Resolution, previously adopted by Resolution No. 10142. 7. Authorizing the Measure B funding for Safe Routes to School Planner position and advance recruitment as soon as possible. Amend the Fiscal Year 2026 Budget Ordinance in the General Fund by: 1. Decreasing the Appropriation for the Palo Alto Link program by $550,000; 2. Decreasing Other Revenue from Stanford University by $260,000; 3. Decreasing Charges for Services Revenue by $40,000; 4. Increasing the Budget Stabilization Reserve by $250,000; 5. Increasing the appropriation for Neighbors Abroad in the City Manager’s Office by $17,500 6. Increasing the appropriation for Environmental Services in the Community Services Department by $10,780 7. Increasing the appropriation for Magical Bridge in the Nonprofit Workplan Phase I by $50,000; 8. Increasing the appropriation for UNAFF in the Nonprofit Workplan Phase I by $25,000; 9. Reappropriating the FY 2025 Council Contingent Account by $82,366. MOTION PASSED: 6-0-1, Stone absent 24. Approval of Five Items to Support the Newell Road/San Francisquito Creek Bridge Replacement Project PE-12011: 1) Construction Contract No. C25194068 with Granite Construction Company in the Amount Not-to-Exceed $9,399,787 and Authorization for the City Manager or Their Designee to Negotiate and Execute Change Orders to the Contract up to a Not-to-Exceed Amount of $939,979; 2) Approval of Professional Services Contract No. C25190454 with Zoon Engineering, Inc, in the Amount of $2,559,915 for Construction Management Services through December 31, 2026; 3) Approval of Amendment No. 7 to Contract No. C12142825 with NV5, Inc. to extend the contract term through December 31, 2026 for Construction Support; 4) Approval of Amendment No. 3 to a Cost Share Agreement with Santa Clara Valley Water District Providing Local Matching Funds in the Amount $155,458 for Design, Right of Way Appraisal and Acquisition and Construction Support for the Newell Road/San Francisquito Creek Bridge Replacement Project; and 5) Adoption of a FY 2025 Budget Amendment in the Capital Improvement Fund; CEQA Status - Environmental Impact Report for Newell Road/San Francisquito Creek Bridge (Resolution No. 9889) SUMMARY MINUTES Page 20 of 20 City Council Meeting Summary Minutes: 06/16/2025 Brad Eggleston, Public Works Director, provided a slide presentation about the Newell Road/San Francisquito Creek Bridge Replacement Project including recent project history, advance construction and recommendation. Public Comment: Xenia H. indicated this project is vitally important for public safety, flood control on San Francisquito Creek and transportation improvements and urged Council to vote to approve the proposal. MOTION: Councilmember Reckdahl moved, seconded by Councilmember Burt to: 1. Authorize the City Manager or their designee, after considering Caltrans’ feedback on the Good Faith Effort documentation associated with the Disadvantaged Business Enterprise program, to approve and execute Construction Contract No. C25194068 with Granite Construction Company, in the amount not to exceed $9,399,787 for the Newell Road/San Francisquito Creek Bridge Replacement Project (CIP PE-12011): a. Authorize the City Manager or their designee to negotiate and execute one or more change orders to the contract with Granite Construction Company for related additional but unforeseen work that may develop during the project, the total value of which shall not exceed $939,787; 2. Approve and authorize the City Manager or their designee to execute the attached Professional Services Contract No. C25190454 with Zoon Engineering, Inc. to provide construction management services through December 31, 2026 and a total not-to- exceed amount of $2,559,915, including $2,327,196 for base services and $232,719 for additional services; 3. Approve and authorize the City Manager or their designee to execute Amendment No.7 to Contract No. C12142825 with NV5, Inc. to extend the contract term through December 31, 2026 for construction support services; 4. Approve and authorize the City Manager or their designee to execute Amendment No. 3 to Cost Share Agreement A3581S with the Santa Clara Valley Water District in the amount of $155,458, providing local matching funds; and 5. Approve a Fiscal Year 2025 Budget Amendment for the Capital Improvement Fund (requires a 2/3 vote): a. Increasing the revenue appropriation for the Newell Road/San Francisquito Creek Bridge Replacement Project (PE-12011) by $155,458 for Santa Clara Valley Water District’s local match contribution associated with completing design and right-of-way phases. MOTION PASSED: 6-0-1, Stone absent Adjournment: The meeting was adjourned at 11:20 PM