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HomeMy WebLinkAbout2018-03-26 City Council Summary MinutesCITY OF PALO ALTO CITY COUNCIL FINAL SENSE MINUTES Page 1 of 27 Special Meeting March 26, 2018 The City Council of the City of Palo Alto met on this date in the Council Chambers at 5:14 P.M. Present: DuBois, Filseth, Fine, Holman, Kniss, Kou, Tanaka, Wolbach Absent: Scharff Study Session 1. Status Report Regarding the Stanford Research Park Transportation Demand Management (TDM) Program. James Keene, City Manager introduced Ms. Griego and Ms. Jarvis, who will provide an overview of Transportation Demand Management (TDM) activities in Stanford Research Park (SRP). Representatives of Palo Alto's Transportation Management Association (TMA) were going to provide a similar presentation to the Council once the annual survey of commuters was complete. Tiffany Griego, Director of Asset Management of Stanford Research Park reported SRP's mission was to support innovative companies in their research and development pursuits by providing modern facilities and offering sustainable transportation programs that helped employees get to and from work with ease. SRP organized a TMA to serve 140 companies and 29,000 employees. All of the largest employers were members of the SRP and the TMA. Representatives from VMware, SAP, Varian, Morrison Foerster, Sand Hill Properties, HP Inc., Hudson Pacific Properties, Tesla, Uber, CPI, Ford, Stanford Healthcare, Lockheed Martin and Jazz Pharmaceuticals. They showed their support for, and commitment to, TDM. Many of the large employers had very strong in-house TDM programs that served their employees directly, but they also believed strongly in participating in the collective effort because SRP programs complemented in- house programs. Marketing is an essential part of TDM efforts. Jamie Jarvis, Director of Sustainable Transportation Programs at Stanford Research Park advised that the TMA's first year focused on providing programs and partnerships that would provide the framework for an FINAL SENSE MINUTES Page 2 of 27 City Council Meeting Final Sense Minutes: 3/26/18 effective TDM effort. In the first year, the 12 largest companies joined the TMA; she was hired full-time, the website was launched, Valley Transportation Authority (VTA) SmartPasses were purchased in bulk, the Marguerite Caltrain shuttle service continued, the guaranteed ride home program was enhanced, additional Zipcars were obtained and the Bicycle Champions Advisory Group was launched. In the second year, major new programs were launched, such as strategic outreach and marketing initiatives being implemented, the TMA expanded to 18 companies, a trip planner and tracker was launched at SRPGO.com, monthly prize drawings and points rewards programs were instituted, VTA SmartPasses continued, the Scoop carpool program was adopted and subsidized, bike repairs were made, cycling clinics and park-wide Bike to Work Days were offered and the San Francisco commuter bus was launched. The dedicated outreach coordinator developed a database of more than 9,000 commuters through survey responses, events, emails and activities and held dialogs with commuters to provide information and promote services. SRP engaged a professional marketing and design team to assist with programs, distributed three monthly newsletters, held a variety of monthly promotions with incentives, staffed onsite events, displayed bus-stop ads and launched social media campaigns. The second commuter survey was conducted in April and May 2017 and received almost 6,000 responses, a 31 percent increase over 2016, and more than 2,000 requests for information were made. According to survey data, the drive-alone rate decreased 5 percentage points to 68 percent. Mode share varied significantly based on the point of origin. For Single Occupancy Vehicle (SOV) commutes, 44 percent were from San Francisco, 55 percent from Palo Alto, 57 percent from East Bay and 68 percent from Santa Clara County. SOV commutes from Santa Cruz, San Benito, Monterey and San Mateo Counties were high perhaps because of the low number of commuters in the area or the lack of carpool lanes. Commuters used alternative transportation because of quality of life factors. The drive-alone rate was 14 percentage points lower at companies that offered the VTA SmartPass and other programs. Transit use was lowest in lower SRP, defined as between El Camino Real and Hansen Way. The SOV rate was lowest in upper SRP, where larger companies were located. In the third year of the program, SRP staff launched an express Caltrain shuttle to the largest worksites and a South Bay commuter bus, they continued to form vanpools with subsidies, they held monthly Bike to Work Days, they worked on providing real-time mobility information, they would participate in the Palo Alto bikeshare pilot program, they expanded the Bicycle Champions program to carpooling and transit, they continued outreach to small companies, and they hired an additional staff person. The SRP TMA retained 89 VTA bus services to California Avenue and had a 100 percent renewal of SmartPasses, despite a price increase. SRP companies had adopted 37 bus stops throughout SRP for cleaning and reporting of maintenance needs. FINAL SENSE MINUTES Page 3 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Zipcar use was up three times, compared to the prior year's use. The number of trips logged into the trip tracker was eight times the number from the previous year. The TMA recently exceeded 2 million miles saved. The SRP TMA had strategically implemented TDM programs for two years, achieved a significant reduction in SOV use, and continued to launch major new initiatives. Ms. Griego stated the TMA benefited from offering customized solutions that were based on analysis of survey data. The TMA had the data, knowledge and ability to develop and launch solutions that best met the needs of employees. The TMA had the flexibility to abandon unsuccessful programs and relaunch them in a different form. The TMA benefited by collaborating with partner companies to leverage data, ideas and staffing. She thanked the City of Palo Alto for their support of the TMA. Mayor Kniss related that she and Vice Mayor Filseth attended an SRP TMA meeting and learned about the various programs. David Coale appreciated SRP's increased use of alternative transportation. The Palo Alto TMA's success increased with expansion into the California Avenue area and implementation of the bikeshare program. Council Member Wolbach inquired about plans to include more contractors, particularly lower-income contractors, in programs. Ms. Jarvis noted the survey showed contractors and interns were less likely to drive alone than other types of employees. Large companies often did not offer benefits to contractors; however, the TMA was able fill some of the gaps. SRP TMA programs were available to anyone, regardless of employment status. Council Member Wolbach asked about non-English language outreach to employees and contractors. Ms. Jarvis advised that the TMA had not utilized languages other than English. She typically worked with one contact person who shared information with other employees or contractors and then reported back to her. Council Member Wolbach inquired regarding opportunities to partner with surrounding TMAs. Ms. Jarvis reported the transportation community readily shared information and resources. She often had to focus solely on them because of the large number of companies in SRP. FINAL SENSE MINUTES Page 4 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Council Member Wolbach requested the cost of the California Avenue parking garage. James Keene, City Manager responded $41 million. Council Member Wolbach advised that the parking structure would primarily address the lunch-time crush. He asked if there was any data on the number of people from SRP who visited the California Avenue area during lunch. Ms. Jarvis did not have that data but included two questions related to that on the 2018 survey. She suspected people in lower SRP walked to California Avenue and people in upper SRP remained onsite. Council Member Wolbach asked if Marguerite shuttles traveled between California Avenue and Stanford Research Park during the lunch hour. Ms. Jarvis responded no. A previous shuttle between SRP and California Avenue ceased because of extremely low ridership. Ms. Griego heard from people who worked at Palo Alto Square that crossing Page Mill required approximately 10 minutes; therefore eating lunch at California Avenue required more time than expected. Many companies in SRP offered catering and kitchens. Council Member Wolbach inquired whether the 10-minute crossing applied to pedestrians, bicyclists and/or drivers. Ms. Griego replied that it applied to all of them. Council Member Wolbach felt it would be interesting to see whether biking would reduce the time as bikeshare programs were implemented. Ms. Jarvis looked forward to having a bikeshare program in SRP. Council Member DuBois requested the annual budget of the SRP TMA. Ms. Griego respectfully declined to answer because there was no method to capture, accurately, the investments made by SRP and individual companies. Council Member DuBois noted that Palo Alto TMA was attempting to draft a budget. Ms. Griego advised that the SRP TMA was privately funded. SRP staff accounted for points of origin for each employee daily and launched programs they thought worked for a particular population. They had a FINAL SENSE MINUTES Page 5 of 27 City Council Meeting Final Sense Minutes: 3/26/18 different strategy given the location, geography and business environment of SRP. The Palo Alto TMA had assets and opportunities that shaped their offerings, and the costs were dramatically different, based on the Caltrain GoPass. Council Member DuBois hoped SRP staff would share ballpark figures for different programs with the Palo Alto TMA. He asked how she knew what the number of employees in SRP was. Ms. Griego quoted the 2016 Business Registry information. Ms. Jarvis conducted surveys and had the ability to calibrate Business Registry data against survey responses. The vacancy rate increased slightly over the last year, but 29,000 was the best number she had at the current time. Council Member DuBois inquired about the number of people who utilized TMA services. Ms. Jarvis reported the TMA member companies covered approximately 75 percent of commuters in SRP. Mode share data showed the number of people who used alternatives on a given day. Council Member DuBois asked if Ms. Jarvis knew the number of people who utilized services from the TMA itself. Ms. Jarvis had not summarized data in that way; she looked at it by program. Council Member DuBois expressed curiosity regarding the number of people who engaged with marketing efforts. Ms. Jarvis reported that the new employee would analyze data more intently. Council Member DuBois inquired regarding the number of full-time staff. Ms. Jarvis answered there will be a 1.5 staff, plus one staff to be hired. Including contract vendors, the TMA had five full-time employees. Council Member DuBois asked if Stanford University was a member of the TMA. Ms. Jarvis remarked that Stanford University employees located in SRP were eligible for TMA services. Council Member DuBois asked if Stanford University was not listed because its employees were relatively small in number. FINAL SENSE MINUTES Page 6 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Ms. Jarvis stated Stanford University was not a major employer in SRP, and the employees would be moving to Redwood City. Council Member DuBois requested comments regarding the biggest challenges the TMA faced. Ms. Jarvis recited uncertainty around public transit and low levels of service at the California Avenue Caltrain station. Council Member DuBois supported an express bus from the south. Ms. Jarvis advised that the South Bay commuter bus was underway. Council Member DuBois inquired about plans to expand TMA bus routes. Ms. Jarvis replied that the TMA was considering adding capacity to the San Francisco bus. Ridership on the South Bay bus was growing until someone began shooting at the buses with pellet guns. They were relaunching the marketing effort to regain ridership. Council Member DuBois asked if large employers contributed to the cost of bus service. Ms. Jarvis clarified that large employers provide guidance for bus routes and cost-share the programs. The companies determined fares for their employees. The TMA provided funds for a pool of seats that were made available to anyone in SRP and set the fares for those seats. Council Member DuBois was interested in utilizing a cost-sharing model in the Palo Alto TMA. Ms. Jarvis stated cost sharing was key for small companies. Council Member Fine commented that TMAs were one of the most promising and cost-effective ways to manage SOV trips and hoped the Council continued to encourage, study and fund them. The SRP TMA was one of the most successful in the Bay Area; therefore, sharing any knowledge with the Palo Alto TMA was helpful. He requested the weakest point regarding Palo Alto’s TMA. Ms. Jarvis viewed Palo Alto TMA as having an incredible challenge. Small businesses, which were Palo Alto TMA's main audience, were the most difficult to reach. She assumed retail workers would be a challenge due to varying shifts and employees having multiple jobs. Having adequate staffing was extremely important. FINAL SENSE MINUTES Page 7 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Council Member Fine requested comments regarding the continuous process of TMAs. Ms. Jarvis reported the TMA had to build and review programs continuously. When a new business joined SRP, staff had to begin outreach with its employees. Employee turnover also necessitated ongoing outreach. In addition, new transit services had to be reviewed and considered as a new program. Council Member Fine asked if TMA staff utilized the expertise of Ford, Uber and Lyft. Ms. Jarvis advised that the companies were very engaged in the TMA, and she expected exciting things from them. Council Member Fine requested comments regarding Stanford Research Park Transportation (SRPgo) scaling with the growth of Stanford University's main campus. Ms. Griego clarified that TMA staff focused on companies in SRP as the demographic and business environment they served. Council Member Fine remarked that Stanford University and SRP were often linked, and it could be difficult to separate the two entities. Vice Mayor Filseth asked if there was an estimate of the number of employees who lived within three miles of SRP. Ms. Jarvis answered approximately 5 percent. The number of employees who lived within seven miles was approximately 10 percent. Mayor Kniss inquired about employees' reasons for choosing a train trip, a vanpool or biking over the others. Ms. Jarvis stated that employees used a combination of modes on a single day or used different modes on different days. Employees took transit in one direction and carpool in the other, depending on their need and schedule. Choosing one mode often resulted from time and personal factors. Scoop had a multiplier effect in that the number of traditional carpools were increasing. Mayor Kniss congratulated Staff on the success of the vanpool program. Council Member Holman asked if the mode share percentages referred to the percentage of 29,000 employees. FINAL SENSE MINUTES Page 8 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Ms. Jarvis responded yes. Council Member Holman inquired about geographic gaps in services. Ms. Jarvis wanted to provide reasonable transit options for all employees. Areas of the South Bay were not covered by five express buses. Hopefully, the Evergreen area of San Jose was going to be served with a vanpool. Commuter buses or vanpools were options for areas outside the Caltrain Corridor in San Francisco. If the vanpool in Dublin was successful, the area was a target for a commuter bus. The Oakland-Berkeley area was under consideration. One difficulty with vanpools was parking for the van at nights and weekends. Council Member Holman asked if there were advantages to commuting along Highway 92 from the upper East Bay area. Ms. Jarvis responded possibly. They needed to determine which bridge was more reliable. Council Member Holman inquired about SRP TMA activity regarding Dumbarton Rail. Ms. Jarvis indicated that, while Dumbarton Rail was a big issue for both Stanford University and SRP, she focused on near-term goals. Council Member Holman inquired if SRP staff was confident in survey results. Ms. Jarvis explained that survey responses were scrubbed before analysis began and calibrated against other data. Council Member Holman asked if there was a way to capture the number of commuters who parked in perimeter areas and bicycled into SRP or Stanford University campus. Ms. Jarvis answered no. Council Member Holman inquired about variation in survey responses by season. Ms. Jarvis articulated that surveys were typically conducted in the spring or early fall. In both cases, surveys captured more of the bicycling community. Other modes needed to be consistent across seasons. Surveys did not need to be conducted in the summer because of changes in commute patterns. Shuttle and bus ridership increased on rainy days. FINAL SENSE MINUTES Page 9 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Mayor Kniss was aware that Palo Alto bus routes would be reduced or eliminated in the next round of VTA budget cuts. The City and SRP had to advocate for their continuation. 2. MuniServices Presentation on Sales Tax and Economic Trends. Harriet Richardson, City Auditor reported the City had a contract with MuniServices to recover Sales Tax that had been either under-reported or misallocated to other jurisdictions. Quarterly, MuniServices provided a Sales Tax digest summary and an economic news and trends report. Doug Jensen, MuniServices Senior Vice President advised that MuniServices worked for approximately 240 cities in California and 800 cities nationwide and tracked about 85 percent of all taxable sales activity in California. Regulations were complex just on whether food was taxable. The retail experience was changing rapidly. The City of Palo Alto had a total Sales Tax per capita of $355 while the statewide total per capita was only $152. Major economic categories other than retail were greater than they were before 2008. Retail had contracted on a per capita basis since 2008. Comparing the third quarter of 2017 to the third quarter of 2016, electronic equipment had contracted statewide. Spikes were common, and fewer companies were purchasing network services because of cloud computing. The City's number one economic category was restaurants. This was the most stable of all categories. The second largest category was auto sales. Increasing competition among auto dealers led to more competitive pricing, which fluctuated the Sales Tax revenue. Rapidly changing auto technology was moving consumer behavior toward leasing or short-term ownership. The New Car Dealers Association of California expected growth of 2 1/2 percent to 5 percent over the next few years. Miscellaneous retail had been strong for quite a while. The latest trend was the online purchase of big ticket items, such as fine jewelry and fine art. Leasing showed incredibly robust growth. Some department stores were changing their business model to be more like a small warehouse distribution center, which resulted in Sales Tax going through Countywide pools. Sales tax growth was not keeping track with growth of the overall economy primarily because of uncollected Sales Tax on internet sales, a narrow tax base, and exemptions. Palo Alto's Sales Tax revenue as a percentage of State Gross Domestic Product (GDP) was declining. The percentage of e-commerce transactions as a percentage of all retail sales was 0.6 percent in 1999 and 9.1 percent in the third quarter of 2017. The County pool of Sales Tax from amazon.com had been increasing on average about 25.9 percent. The estimate of uncollected internet Sales Taxes ranged between $8 billion and $13 billion. Currently, Palo Alto was losing between $700,000 and $1.5 million per year in internet Sales Tax revenue. Approximately one-third of spending was subject to Sales Tax in FINAL SENSE MINUTES Page 10 of 27 City Council Meeting Final Sense Minutes: 3/26/18 California. The cost of Sales Tax exemptions to local government was approximately $3.2 billion annually and $14 million for Palo Alto. Two bills in Congress allowed states to require online retailers without a physical presence in the state to collect Sales Taxes. The United States Supreme agreed to hear the Wayfarer case, which called for a review of the Quill decision. Retail was not dead. Investments were being made in shopping centers with a great deal of people and spending power. Recent trends were the sharing economy, the impact of millennials, convenience, technology and voice. Sales tax reform was long overdue and had to include long jurisdictions. The Sales Tax rate needed to be lowered and the base broadened. Ms. Richardson explained that Sales Tax revenues not allocated to a specific city went to the County pool, which was then allocated among the cities based on the city's overall percentage of taxable sales. Mayor Kniss asked if trends were limited to the region or the County. Mr. Jensen answered statewide. Mayor Kniss understood trends to indicate retail experiences were decreasing. Mr. Jensen explained that cities could not expect as much growth in Sales Tax revenue as in the past because of the shift to e-commerce. Mayor Kniss remarked that Sales Tax trends also reflected sociological trends. Online purchases changed Sales Tax revenue substantially. Mr. Jensen noted experiences would attract people to shopping centers because people wanted to socialize. Council Member Kou commented that the report reflected many things she had heard. Retail was alive, but it was changing. The youth population was often omitted from the buying process yet they wanted to spend money. She inquired about ways the City could ensure legislation addressed Sales Tax. Mr. Jensen suggested individuals contact the author of legislation. Council Member Kou asked if the Council could encourage the City's lobbyist to explore that. James Keene, City Manager answered yes. He understood there was some interest at the State level to increase Sales Taxes or perhaps reform Sales Taxes. That interest did not include the local capacity to share in changes. FINAL SENSE MINUTES Page 11 of 27 City Council Meeting Final Sense Minutes: 3/26/18 The larger question was how could the League of California Cities, for example, be effective in getting Legislators to understand that cities and counties needed to be included. Staff had to follow-up with the City's lobbyist to learn about the potential for bills that would include cities in changes. A better strategy for the City was to advocate for reform. Council Member Kou inquired as to the need for a Motion to proceed with instructing the lobbyist. Mr. Keene did not believe a Motion was necessary. Council Member Kou inquired about the mechanism for informing the Council. Mr. Keene indicated Staff could provide a report to the Council. Council Member Kou asked if the Quill Decision involved reform of Sales Tax. Mr. Jensen explained that the Quill Decision did not allow a state to require a company to collect Sales Tax unless the company had a physical presence in the state. If the United States Supreme Court overturned the Quill Decision, then a state could require a company to collect Sales Tax, regardless of the company's physical presence in the state. He expected a decision to be published in mid to late-June. Council Member Kou inquired about the means for a city to receive its share of those Sales Taxes. Mr. Jensen advised that the Sales Taxes for cities would go through the County pool. Council Member Wolbach remarked that adding Sales Tax to the City's legislative priorities was important because a lot of money was left on the table. He asked if legislation allowed the State to collect Sales Tax on services but not cities or counties. Mr. Jensen replied yes. Council Member Wolbach stated the City should contact its legislative representatives. Council Member DuBois believed shifting Sales Tax would make a huge difference. There were some innovative retail experiences in Palo Alto. He asked how cities attracted experiential retail and whether it depended on the city or demographics. FINAL SENSE MINUTES Page 12 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Mr. Jensen reported a variety of restaurants along with puzzle rooms, escape rooms and indoor activities such as skydiving were very popular. Council Member DuBois asked if cities were good at attracting those kinds of services. Mr. Jensen replied yes. Cities, mall owners, and real estate holdings were motivated to bring in more tenants. Council Member DuBois inquired about the process for collecting Sales Tax when an item was ordered online but picked up at a local store. Mr. Jensen answered the County pool. An existing bill redirected internet retail Sales Tax from the County pool to the city, where the purchaser lived. Council Member DuBois agreed that the City should lobby for Destination Taxation. He asked if an auto lease was taxed in the same way as cloud storage. Mr. Jensen indicated only tangible property was taxed. Sales tax was collected through each month's lease payment. Council Member DuBois emphasized the importance of car dealers in Palo Alto. There had been discussion about an additional car dealer and keeping electronics. Another huge revenue generator was the business-to-business segment. There was a difference between companies that made hard goods and provided services in terms of revenue for the City. Council Member Holman concurred with comments regarding Sales Tax legislation. Reinstituting meetings with the City's lobbyists and elected representatives was valuable. She requested clarification of Slides 7-12. Mr. Jensen explained there was a comparison of City of Palo Alto Sales Tax for the current period and for the same period in the prior year. Council Member Holman reported a recent retail symposium highlighted the importance of the physical environment and aesthetics of shopping centers to promote sales. Retail was not growing at the rate it had in the past. Online sales were growing but had not reached double-digit percentages of retail sales. She supported comments made by other Council Members. Council Member Fine requested comment on taxes other cities and the State were considering for emerging sales and uses, such as Airbnb, co-working spaces and cannabis dispensaries. FINAL SENSE MINUTES Page 13 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Mr. Jensen stated Airbnb offered to sign a contract to begin collecting Hotel Taxes. Policymakers were attempting to balance negative impacts with revenue. Many different ideas were voiced with respect to cannabis. Cannabis dispensaries had potential to generate a significant amount of revenue. Council Member Fine suggested the Council consider the fiscal impacts these users had with the implementation of regulations and Taxes. Vice Mayor Filseth noted that macro trends for shopping centers suggested the outlook for Stanford Shopping Center and Town and Country Village was difficult, but both seemed to be doing well. He asked what was going on. Mr. Jensen explained that large anchor stores were reducing square footage, which opened space for other retail experiences or restaurants or open space. Vice Mayor Filseth inquired whether Mr. Jensen felt the shift to experience-based retailers would carry shopping centers. Mr. Jensen answered yes. Vice Mayor Filseth referred to the numbers on Slide 6. In general, the San Francisco Bay area numbers were similar to statewide numbers, but Palo Alto numbers were really different. Vice Mayor Filseth inquired about the meaning of that. Mr. Jensen advised that the statewide department store numbers included large chain stores such as Target and Walmart, which resulted in individual store fluctuations. Vice Mayor Filseth inquired about a possible explanation of good business-to- business numbers for Palo Alto. Mr. Jensen suggested the City maintain sufficient space for this type of business to grow and remain in Palo Alto. Vice Mayor Filseth asked if biotech generated a lot of Sales Tax. Mr. Jensen indicated the Use Tax on equipment generated a significant amount of one-time revenues, but the end product typically was not taxable. Council Member Tanaka referred to Slide 14 and asked if Palo Alto was receiving about 14 percent of the amount prior to 2001. Mr. Jensen responded yes. FINAL SENSE MINUTES Page 14 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Council Member Tanaka inquired whether nearby cities were experiencing the same thing as Palo Alto. Mr. Jensen advised that the numbers were almost identical. In general, all cities were receiving smaller amounts. Council Member Tanaka requested a comparison of Palo Alto's numbers with other cities. Mr. Jensen reported Palo Alto's per capita amount was almost double the County amount. Overall, Palo Alto's economic base was well balanced between business-to-business, food products, and general retail. The only under-represented sector in Palo Alto was construction. Council Member Tanaka suggested Palo Alto, as an affluent community, had a higher percentage of online sales than other cities. He questioned whether Palo Alto was losing its share of Sales Tax. Mr. Jensen did not have data, but said it could be true. Council Member Tanaka clarified that Palo Alto probably had a higher percentage of online sales; therefore, it was not receiving its fair share of Sales Tax because it was calculated by the amount of physical retail. Mr. Jensen reported that was probably true for taxes that were collected by online retailers. Transactions and Use Taxes were not allocated to a County pool; consequently, data for cities with a transactions and Use Tax demonstrated online sales. Council Member Tanaka requested reasons for the City's per capita Sales Tax being twice the County's. Mr. Jensen advised that successful, high-volume regional malls, strong auto dealers and robust business-to-business bases drove the capita Sales Tax higher. Council Member Tanaka noted a conflict in theories for Palo Alto's higher Sales Tax: either Palo Alto was being shortchanged on Sales Tax or it was receiving its fair share. Mr. Jensen stated the theories were separate. Per capita Sales Tax was based on point of sale in Palo Alto. Internet sales were separate from that amount. FINAL SENSE MINUTES Page 15 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Mr. Keene explained as much as 35 percent of shoppers at Stanford Shopping Center could be nonresidents. That factored into Palo Alto's per capita rate. Palo Alto benefited from sales to nonresidents in Palo Alto. Council Member Tanaka requested further clarification of whether Palo Alto was receiving its fair share of Sales Tax from internet sales. Mr. Jensen reported Palo Alto captured more Sales Tax from brick-and- mortar sales than its residents would ordinarily generate based upon disposable income. Sales tax from internet sales was different because it was distributed differently and sometimes not collected. Council Member Tanaka asked if Palo Alto was receiving its fair share of internet sales. Mr. Jensen explained that Palo Alto received its Sales Tax, which was divided by the Countywide Sales Tax. Mr. Keene understood Palo Alto's population was approximately 3 1/2 percent of the County population, and the amount of Sales Tax it received was typically twice that amount. If Palo Alto was receiving a distribution of internet Sales Tax based on Palo Alto's total sales, then Palo Alto was probably faring better than they assumed. Council Member Tanaka felt that would be a good thing to know because it could be reported toward lobbying efforts. Mr. Jensen did not have data for individual spending. Council Member Tanaka reiterated the need for space to allow companies to grow and remain in Palo Alto. Mayor Kniss noted anchor stores were leasing store space to other entities. Rita Vrhel suggested a Tax on Airbnb and a Use Tax on employees. Downtown no longer had retail stores; it was all restaurants. Perhaps it was time to hire an Economic Development Manager. Fourth Street in Berkeley offered a good retail experience. Council Member Holman inquired about the frequency of audits of the County Sales Tax. Ms. Richardson reported Staff did not conduct an audit of the whole thing; the State conducted the audit. Council Member Holman wished to ensure an audit was conducted. FINAL SENSE MINUTES Page 16 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Ms. Richardson explained that the numbers reported as Sales Tax recovered resulted from the State's audit. Council Member Holman questioned whether services such as Scoop and Lyft would be taxed under the pending legislation. Retail shops in Downtown were located along Emerson Street. Agenda Changes, Additions and Deletions None. City Manager Comments James Keene, City Manager reported that the Development Services Department had completed transition of Business Registry registration and fee collection to MuniServices. This move provided more data at a lower cost. The deadline for businesses to register was extended to May 1. Philip Kamhi, who managed parking programs, resigned from City employment. This highlighted the need to simplify parking programs. Staff requested a timeout for Residential Preferential Parking Permit (RPP) Programs at least through the remainder of 2018. Two open houses for the Charleston- Arastradero project were scheduled for March 27 and March 29. Work on the Upgrade Downtown Project began the prior week, and information was found on the website. The Association of Local Government Auditors recognized the City Auditor's Office with a Distinguished Award for its audit of the accuracy of Water Meter Billings. The Palo Alto Art Center planned a one-day exhibition of ceramic works made by visiting artists from Korea for April 1. On May 1, nationally acclaimed scholar Clay Jenkinson would present an interpretation of Theodore Roosevelt. Oral Communications Rita Vrhel related information regarding the effects of sugar-sweetened beverages. She joined Ken Horowitz in recommending the Council adopt Berkeley's tax on sugar-sweetened drinks. Mary Sylvester supported and advocated for a tax on sugar-sweetened beverages as proposed by Dr. Horowitz. Ken Horowitz requested City Manager Keene arrange a meeting with him, Mayor Kniss and Council Member Holman to write a Colleagues' Memo in support of a tax on sugar-sweetened beverages. He provided a draft Ordinance for Council review. FINAL SENSE MINUTES Page 17 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Sea Reddy noted Passover, Easter and Iranian celebrations. Iran needed to make peace with Saudi Arabia. Facebook needed to stop giving away data. Jeremey Robinson felt ongoing negotiations with Pets In Need were unfair to Animal Shelter Staff. The details needed to be finalized so that Staff would know their employment status. Terri Valenti remarked that Friends of Palo Alto Animal Shelter had worked to ensure the survival of the Animal Shelter. Money was being left on the table by not fundraising for the Animal Shelter. Deborah Buck felt the City was missing a business opportunity with the Animal Shelter. Pets In Need beautified the Animal Shelter, obtained contracts and made money. Ann Pianetta encouraged the Council to finalize a contract with Pets In Need for the Animal Shelter. The Animal Shelter had ceased offering low-cost spay and neuter services. It was imperative for the Council to make a decision immediately. Scottie Zimmerman recounted meetings regarding the Animal Shelter beginning in 2012. The Council needed to do something about the Animal Shelter. Roberta Ahlquist spoke regarding evictions at an apartment complex located at the corner of Hamilton and Webster. There needed to be a moratorium on all rental housing until current residents could find replacement housing. Stephanie Muñoz concurred with Ms. Ahlquist's comments. She encouraged the Council to impose a moratorium on demolition of affordable housing. Judy Kleinberg advised that the Leadership Palo Alto Fellows were planning a celebration of Palo Alto's 125th anniversary in 2019. She invited the City, community organizations and the community to participate. Council Member Holman reported a Colleagues' Memo would be presented the following week regarding an annual Palo Alto Day and inquired about the date a contract with Pets In Need would be presented to the Council. James Keene, City Manager did not have a date as negotiations were ongoing. The City was working diligently with Pets In Need. Consent Calendar MOTION: Council Member Wolbach moved, seconded by Council Member Fine to approve Agenda Item Number 3. FINAL SENSE MINUTES Page 18 of 27 City Council Meeting Final Sense Minutes: 3/26/18 3. Request for Authorization to Increase two Existing Legal Services Agreements With Jarvis Fay Doporto & Gibson for: (a) General Transactional Legal Services (Contract S16164639) by an Additional $45,000 for a Total Not-To-Exceed Amount of $215,000; and (b) Litigation Defense in Staats v. City of Palo Alto (Contract S15159508) by an Additional $120,000 for a Total Not-To-Exceed Amount of $495,000. MOTION PASSED: 8-0 Scharff absent Action Items 4. Authorization of Recommended Council Chambers Audio/Visual and Broadcast System Option for Design/Build Request for Proposal. James Keene, City Manager reported the item was not a request for the Council to award a contract. Staff wished to provide information regarding options they were exploring. Mayor Kniss reiterated that the Council would be providing direction to Staff. Jonathan Reichental, Information Technology Director related deficiencies in the audio/visual equipment used in Council Chambers. The current equipment was unsupportable, expensive and risky. With new equipment, the visual experience for the community was better and more accessible. The City had to meet legal requirements to improve compliance with the Americans with Disabilities Act (ADA). Staff pursued a new voting system for quite a while but determined that the chosen system would not meet the City's needs. The most apparent improvement was the screen. In all the options, the screen was larger and suspended above the dais. The shutters were to be removed, appropriate lighting installed, and draperies replaced with motorized shading devices. A broadcast booth was to be constructed with windows and more space. Monitors on the dais were to be replaced with multifunction units for voting, speaking, and viewing the overhead screen. Prior to choosing a model, Staff needed to provide Council Members with units to test. The broadcast booth and lectern was to be ADA compliant. Mr. Keene noted the number of Council Members would decrease to seven prior to implementation of improvements. Mayor Kniss requested clarification of seating arrangements. Mr. Reichental suggested the Council provide ideas for Staff to explore. FINAL SENSE MINUTES Page 19 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Mr. Keene explained that seating changes were needed to comply with ADA requirements. There was a possibility for the City Manager and City Attorney to be seated on the dais, which provided Staff with more space. The decision point for the project followed the Council break. Mr. Reichental disclosed that most of the design differences pertained to the screen. Staff worked hard to determine the minimum components of the best quality needed for the project. In Option 1, four computer screens were projected concurrently to the large screen. In Option 2, eight computer screens were projected concurrently. Option 3 projected eight computer screens but through a much more expensive technology. Upgrading equipment in the Council Chambers finalized media improvements across City facilities and allowed broadcasting to and from all facilities. The cost for Option 3 was $4.5 million because of technology and suspension of the projector. Option 3 was state-of-the-art but not required for Council Chambers, and repairs required an extended period of time. The major difference between Options 1 and 2 was the larger, wider set of images on the screen. The Council approved the cost for designing the project several years ago. Funding for the upgrades were part of the Fiscal Year 2018-2019 Budget. Mr. Keene reiterated that the project as a whole was expected to cost $2 million. This cost was not a draw on the General Fund. Technology charges accumulated and paid for the project. Mr. Reichental advised that Staff recommended Option 2 and requested Council feedback regarding design ideas and the proposal. Mr. Keene remarked that Staff was seeking an order of magnitude direction from the Council. There were specific factors within each option for the Council to question or comment on. There was a fair amount of variability between the Council's statements in the meeting and Staff's final design. Mayor Kniss expressed concern about the recommendation not providing flexibility. She asked if Staff needed that type of guidance. Mr. Keene did not believe there was a cost-effective recommendation other than Option 2. Some of the components and configurations were subject to change. Moving from analog to digital technology, simplifying wiring, creating functional space, complying with ADA requirements and having quality projection and voting mechanisms were the main components of the $2 million cost. Mayor Kniss clarified that Staff recommended the Council attempt to stay within Option 2. FINAL SENSE MINUTES Page 20 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Mr. Reichental concurred. Mayor Kniss reminded Council Members to consider seating arrangements for Staff and the dais. Council Member Kou inquired about the saucers on the ceiling. Mr. Keene indicated they were originally designed to be lights. When they no longer functioned, Staff placed plants in them. Council Member Wolbach stated the City needed a reliable and functioning system. The cost was harder to understand. He requested information about a functional system rather than a redesigned system. Mr. Keene believed separating functionality from the recommendation was a mistake. Functionality was a key driver of the project. Mr. Reichental reiterated that the broadcast booth was a hazard, and the existing technology was unsupported; therefore, a minimum amount of technology had to be replaced. The cost of the screen in Option 2 was $275,000. Minimal improvements priced approximately $1.4 million. The project was not meant to be rewiring only, but to implement core quality technology to support media sites for the next 20 years. Council Member Fine supported Option 2. He expressed interest in sharing the dais with Staff as a good way to foster a collaborative relationship and to raise Staff up. He suggested having more feedback mechanisms and video conferencing. He inquired about a timer for Council Member comments. Mr. Keene felt there had to be a timer software available. Council Member Fine also suggested a search feature for Council video. Council Member Holman shared Council Member Wolbach's concern about cost. Audio accessibility, lighting and adaptability of units on the dais were concerns. Seating Staff on the dais did not work well and was a different relationship. Motorized shades were not necessary. She requested clarification of the screens which the Council could view. Mr. Reichental advised that presentations were visible on the large screen, Council Members' units and the screens in front of Staff's table. Mr. Keene noted complaints from the public about presentations being too small on the screen. FINAL SENSE MINUTES Page 21 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Council Member Holman argued that screens three times the size of the proposed screen did not provide legible presentations because of the quality of the presentation. Presentations were larger and legible for the public but not for the Council. Mr. Keene agreed that design protocols for presentations were a concern. Council Member Holman inquired about the 20 percent contingency amount. Mr. Keene wanted to review information and provide an explanation. Council Member Holman requested the next step for the project. Mr. Reichental reported the Council authorized Staff to create bridging documents. To know which bridging documents to prepare, Staff needed the Council to choose Option 1, 2 or 3. The dollar amount for each item surfaced during the budget cycle. A Council decision allowed Staff to conclude the work it was authorized to perform, to determine real costs and to decide whether to proceed. Council Member DuBois requested the rationale for installing motorized shades. Ian Hunter, Shalleck Collaborative proposed shades so that the Council would be visible on camera. The contrast between bright light and Council Members was impossible to resolve. Council Member DuBois believed the issue was motorized versus manual shades. Mr. Hunter stated the windows were too high for manual shades. There was a cost premium for motorized shades. Light from the projector was not an issue. Council Member DuBois inquired about the cost for a rear projector versus a front projector. Mr. Hunter advised that the cost would be the same. Council Member DuBois concurred with the contingency being too high. He asked if profit was built into each component or if the City was purchasing components at cost. Mr. Hunter disclosed that the profit amount was intended to cover costs for a construction project. FINAL SENSE MINUTES Page 22 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Council Member DuBois reiterated his question about purchasing components at cost. Mr. Hunter explained that the amount was a bid price based on the work as designed. Council Member DuBois inquired about future Council discussion of brands at different price points. Mr. Hunter indicated the brands proposed were the "Chevrolets" of brands and standard in the industry. Roger Inman, Interweave Productions added that the equipment was selected because it would last for 20-25 years, when technology would be completely different and require upgrading again. Council Member DuBois suggested a flat screen would be better for legibility. Mr. Hunter recited that industry standards required a screen of a certain height so that people at the rear of the room could read the display. A curved screen was necessary to fit the image size in the allowable space. Distortion were not going to be an issue with 4K projectors. Council Member DuBois preferred Council Member units be raised. Allowing Council Members and the public to project content was good. He hoped communicating with remote sites would be low cost. He requested the rationale for placing the large screen behind the dais. Mr. Reichental remarked that the public and Staff could view the screen and Council Members simultaneously. Mr. Inman added that placing the screen behind the dais eliminated the need for color correction of video. Council Member DuBois suggested having seating at the dais for joint sessions. Mr. Keene indicated reconfiguring the dais was not part of the project. Council Member DuBois hoped to retain the flags on the dais and he did not want the screen to become the focal point of the room. Mr. Reichental reiterated that funding for the project was available in a technology account, and the account was reserved for purchasing technology. If the Council was not comfortable with the cost, it could be discussed further during the budget process. FINAL SENSE MINUTES Page 23 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Mr. Keene recommended the Council take credit for the value saved by continuing to use an outdated system for the past decade. Having the right platform allowed Staff to expand the communications suggested by Council Members. Council Member Tanaka agreed that the cost seemed expensive. He would love to have the new technology but, in light of budget needs, he viewed it as a vanity project. Only a small percentage of residents appreciated glamorous Council Chambers; in fact, few residents visited Council Chambers. He did not support the project at this time. He preferred incremental improvements be made annually. Components needed to be off-the-shelf and updated frequently. The public was able to participate in Council meetings remotely. He liked facing Staff and the public from the dais. Vice Mayor Filseth inquired about the number of people who watched Council meetings remotely. Mr. Inman stated Media Center staff revealed that most viewing occurred the day following a meeting when the video was segmented by item. He had not seen any data about viewership. Vice Mayor Filseth requested clarification of funding for the project. Mr. Reichental reiterated that a technology fee was imposed on some services offered by the City, and the fee totaled more than $1 million annually. The funds were spent only on technology items that benefited the entire City. Mr. Keene suggested 100 percent fundability, even without the technology piece, could be prohibited. Mr. Reichental emphasized that Staff always considered this fund for projects that provided a Citywide benefit. Vice Mayor Filseth wanted the project done right. He inquired about the need to comply with ADA requirements with or without construction. Brad Eggleston, Public Works Assistant Director reported Staff tracked ADA compliance issues regardless of the projects and tried to prepare schedules for completing them. A project that required building permit review triggered a review by the Building Department. FINAL SENSE MINUTES Page 24 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Vice Mayor Filseth expressed difficulty with separating needed from wanted components. He asked about the effect of postponing the project for a couple of years. Mr. Inman advised that the existing electronics were at the end of their life. He had exhausted all the sources for replacement parts, as the equipment was outdated. Upgrading to high definition equipment was inevitable. The consultant considered all factors and proposed a barebones, cost-effective project. This equipment was not going to last another year. Vice Mayor Filseth felt Staff made a good case for Option 2. He struggled with timing. Mr. Keene reiterated that Council needed to favor one of the options. There were clear preferences to break down the project into components. Staff was able to obtain additional direction from the Finance Committee during the budget process and return to the Council for final direction. The City had an obligation to provide improvements in order to comply with ADA requirements. Mayor Kniss related that improvements had been needed for years. Council Members seemed to ignore the special funding for the project and the safety needs. The public was having difficulty watching Council meetings remotely. MOTION: Mayor Kniss moved, seconded by Council Member DuBois to: A. Refer this Item to the Finance Committee with direction to evaluate options between Design Option 1 and Design Option 2. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “direct Staff to continue to value engineer the Project, continue to identify options to reduce the overall cost, and identify items that can be completed incrementally.” (New Part B) Mr. Keene indicated Staff would provide an array of options that allowed the Council to mix and match components. Council Member Holman clarified that under the Motion the Finance Committee needed to consider cost reductions for Option 1. Council Member DuBois agreed. SUBSTITUTE MOTION: Council Member Tanaka moved, seconded by Council Member XX to continue this Item until polling has been completed. FINAL SENSE MINUTES Page 25 of 27 City Council Meeting Final Sense Minutes: 3/26/18 Mr. Keene reiterated that the Council was directing Staff to review the design more closely. Council Member Tanaka believed the optics for this project in relation to infrastructure projects were not good. Mr. Keene suggested reframing the issue could improve the projects. Council Member Tanaka did not see the need because videos were rarely shown. Mr. Keene emphasized that some of the project components were real issues. Characterizing the project as frivolous was not accurate. SUBSTITUTE MOTION FAILED DUE TO THE LACK OF A SECOND AMENDMENT: Council Member Wolbach moved, seconded by Council Member Fine to remove Part A of the Motion. Council Member Fine recommended the Council provide clear direction to Staff and to value engineer Options 1 and 2. INCORPORATED INTO THE AMENDMENT WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Amendment, “and add to Part B, ‘with a focus towards Design Option 2.’” Vice Mayor Filseth remarked that the Finance Committee would conduct this type of review as part of the budget process. AMENDMENT AS AMENDED RESTATED: Council Member Wolbach moved, seconded by Council Member Fine to remove Part A of the Motion and add to Part B, “with a focus towards Design Option 2.” AMENDMENT AS AMENDED FAILED: 3-5 DuBois, Fine, Wolbach yes, Scharff absent MOTION AS AMENDED RESTATED: Mayor Kniss moved, seconded by Council Member DuBois to: A. Refer this Item to the Finance Committee with direction to evaluate options between Design Option 1 and Design Option 2; and B. Direct Staff to continue to value engineer the Project, continue to identify options to reduce the overall cost, and identify items that can be completed incrementally. FINAL SENSE MINUTES Page 26 of 27 City Council Meeting Final Sense Minutes: 3/26/18 MOTION AS AMENDED PASSED: 7-1 Tanaka no, Scharff absent State/Federal Legislation Update/Action None. Council Member Questions, Comments and Announcements Council Member Holman announced she attended the March for Our Lives rally in Redwood City and Palo Alto was well represented. Two speakers from Gunn High School did a great job. She expressed concern that the Council did not provide direction for polling. Council Member Wolbach reported the meeting with the Federal Aviation Administration (FAA) was incredibly frustrating. He attended the meeting with the Army Corps of Engineers regarding San Francisquito Creek. Lastly, he expressed pleasure with the City's facilitation of a youth march that ended at El Camino Park. Council Member Tanaka concurred with Council Member Holman regarding the polling. The Council needed to give direction to Staff on polling. Mayor Kniss reported the poll was developed through the same method used three years ago. James Keene, City Manager advised that the Finance Committee had not yet viewed a survey. Council Member DuBois recalled that a special Committee was formed to review polling three years ago. Mayor Kniss assured Staff that the full Council would review the poll. Closed Session 5. CONFERENCE WITH CITY ATTORNEY- EXISTING LITIGATION United States District Court, N.D. Cal., Case No. 5:17-cv-02516-BLF (One Case, as Defendant) –T.M.; by and Through his Mother and Guardian Alacia Hafner v. City of Palo Alto et al. Authority: Government Code Section 54956.9(d)(1). CONFERENCE WITH CITY ATTORNEY-EXISTING LITIGATION Santa Clara County Superior Court, Case No. 16CV296364 (One Case, as Defendant) –Muza Mdzinarishvili v. City of Palo Alto Authority: Government Code Section 54956.9(d)(1). FINAL SENSE MINUTES Page 27 of 27 City Council Meeting Final Sense Minutes: 3/26/18 6. CONFERENCE WITH LABOR NEGOTIATORS City Designated Representatives: City Manager and his Designees Pursuant to Merit System Rules and Regulations (James Keene, Ed Shikada, Michelle Flaherty, Rumi Portillo, Sandra Blanch, Nicholas Raisch, Molly Stump, Terence Howzell, Charles Sakai, Lalo Perez, Kiely Nose, Robert Jonsen, Eric Nickel) Employee Organizations: Palo Alto Peace Officers’ Association (PAPOA); Palo Alto Fire Chiefs’ Association (FCA); International Association of Fire Fighters (IAFF), Local 1319; and Palo Alto Police Managers’ Association (PAPMA) Authority: Government Code Section 54957.6(a). STAFF REQUESTS THIS ITEM BE CONTINUED TO APRIL 2, 2018 MOTION: Vice Mayor Filseth moved, seconded by Council Member Wolbach to go into Closed Session. MOTION PASSED: 8-0 Scharff absent Council went into Closed Session at 10:03 P.M. Council returned from Closed Session at 10:50 P.M. Mayor Kniss announced no reportable action. Adjournment: The meeting was adjourned at 10:51 P.M.