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HomeMy WebLinkAbout2018-06-04 City Council Summary MinutesCITY OF PALO ALTO CITY COUNCIL FINAL MINUTES Page 1 of 35 Special Meeting June 4, 2018 The City Council of the City of Palo Alto met on this date in the Council Chambers at 5:06 P.M. Present: DuBois, Filseth, Fine, Holman, Kniss, Kou, Scharff, Tanaka, Wolbach Absent: Closed Session 1. PUBLIC EMPLOYMENT Title: City Manager Authority: Government Code Section 54957(b) MOTION: Vice Mayor Filseth moved, seconded by Council Member Scharff to go into Closed Session. MOTION PASSED: 9-0 Council went into Closed Session at 5:07 P.M. Council returned from Closed Session at 7:23 P.M. Mayor Kniss announced the Council would return to Closed Session after Agenda Item Number 8 - PUBLIC HEARING/LEGISLATIVE AND QUASI- JUDICIAL: 2755 El Camino Real [16PLN-00464] … . Agenda Changes, Additions and Deletions Beth Minor, City Clerk, announced Staff's request to continue Agenda Item Number 9 to June 11. MOTION: Council Member Wolbach moved, seconded by Council Member Scharff to continue Agenda Item Number 9 - PUBLIC HEARING: LEGISLATIVE AND QUASI-JUDICIAL 250 and 350 Sherman Avenue, Public Safety Building Project … to June 11, 2018. MOTION PASSED: 9-0 FINAL MINUTES Page 2 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 City Manager Comments James Keene, City Manager noted the power outage over the weekend was caused by a mylar balloon becoming entangled in power lines. The Fire Department is being recommended for accreditation by the Commission on Fire Accreditation International after a rigorous multiyear process. On August 9, 2018 an 11-member commission formally reviewed the Fire Department's application. The Public Works Department, Development Services Department and Urban Forestry Program attained similar achievements. The Magical Bridge Family Concert Series is scheduled every Friday night through August 31, 2018. The public was invited to "re: Make Your Community," the Library's Summer Reading Program. "re: Maker Fair" was planned for June 23, 2018 at Mitchell Park Community Center. The Buoyancy Teen Music and Art Festival was a great success with the highest attendance yet. Oral Communications Keith Bennett stated if developers built 1.7 million square feet of office space and if one developer was allotted 1,000 square feet of living space per worker, approximately 10 million square feet of residential space was required to house all workers in the office space. The entire Caltrain right- of-way built to three or four stories was comprised of approximately 10 million square feet. Sea Reddy offered mementoes in gratitude for a beautiful City. He requested support for his write-in campaign. Stephanie Muñoz thought the Council should recognize that they could not eliminate traffic while using development rights to fund projects. The City needed to insist that residents not own a car before allowing them to occupy affordable housing units. Rita Vrhel hoped the City would require new developments to be fully parked and should charge businesses their fair share. Minutes Approval 2. Approval of Action Minutes for the May 21, 2018 Council Meeting. MOTION: Vice Mayor Filseth moved, seconded by Council Member Wolbach to approve the Action Minutes for the May 21, 2018 Council Meeting. MOTION PASSED: 9-0 FINAL MINUTES Page 3 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Consent Calendar MOTION: Council Member Kou moved, seconded by Council Member Holman, third by Council Member Tanaka to pull Agenda Item Number 4 - QUASI-JUDICIAL: Consideration of Appeals of the Planning and Community Environment Director’s Decision to Approve the Architectural Review Application for 620 Emerson Street … to be heard on a date uncertain. James Keene, City Manager reported the Council had amended the Code to require Council review of discretionary items to be rescheduled so that the community received notice. Elizabeth Wong spoke regarding Agenda Item Number 4. Many commercial parcels provided parking spaces at the rear of buildings; allowing the applicant to eliminate the parking was a dangerous precedent. By her count, 2,124 parking spaces were similarly situated in the Downtown Parking Assessment District. Greg Stutheit spoke regarding Agenda Item Number 4. The existing parking spaces were not compliant with the Code, and making them compliant rendered parking on the lot infeasible. The building was attached to the adjacent structure, which provided sufficient restroom facilities for the development. MOTION: Vice Mayor Filseth moved, seconded by Council Member Scharff to approve Agenda Item Numbers 3, 5-6. 3. Approval and Authorization for the City Manager to Execute an Electric Enterprise Fund Construction Contract With Hot Line Construction, Inc. in the Total Not-to-Exceed Amount of $652,558, Which Includes the Contract Amount of $593,235 Plus a 10 Percent Contingency of $59,323, for the Pole Replacement 2018 Project. 4. QUASI-JUDICIAL: Consideration of Appeals of the Planning and Community Environment Director’s Decision to Approve the Architectural Review Application for 620 Emerson Street (17PLN- 00331) to Allow Demolition of an Existing Single Story Building and Construction of a new Two-story 4,063 Square Foot Commercial Building for the Expansion of Nobu Restaurant. The Project Includes Replacement of Three On-site Parking Spaces With Five In-lieu Spaces in the Downtown Parking Assessment District. Environmental Assessment: Exempt From the Provisions of the California Environmental Quality Act (CEQA) per Guideline Section 15303 (New Construction). Zoning District: CD-C (GF)(P) (Downtown Commercial). FINAL MINUTES Page 4 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 5. Ordinance 5440 Entitled, “Ordinance of the Council of the City of Palo Alto Amending Chapter 10.51 of Title 10 of the Palo Alto Municipal Code Related to the Crescent Park No Overnight Parking Program to Reflect the Current Status of Approved Streets Within the Program, to Tentatively Approve Additional Street Segments Within Crescent Park, and to add Provisions for Opting-out of or Dissolving the Restricted Parking Area (FIRST READING: May 14, 2018 PASSED: 8-0 DuBois absent).” 6. Ordinance 5441 Entitled, “Ordinance of the Council of the City of Palo Alto Amending Palo Alto Municipal Code Chapter 4.39 (Private Intrusion Alarms) to Include the Addition of Unwanted, Unwarranted Residential, and Commercial Fire Alarms (FIRST READING: May 14, 2018 PASSED: 8-0 DuBois Absent).” MOTION PASSED: 9-0 Action Items 7. Review of Refined Public Opinion Survey Results Regarding Potential 2018 Ballot Measure to Address the Funding Gap for the 2014 Infrastructure Plan and Unplanned Potential Community Assets Projects, and Potential Direction to City Staff for a 2018 Ballot Measure. Dave Metz, FM3 Research, reported 1,003 local voters were interviewed during the second and third weeks of May. The survey tested the impact of new versions of ballot language that was required under a ballot measure proposed by the California Business Roundtable (CBR). Model ballot language proposed a 2 percent increase in the Transient Occupancy Tax (TOT), a range of general City services to be funded, the amount of the measure and an end date to be determined by voters. Two-thirds of local voters supported language that did not comply with the CBR initiative. Support decreased to 62 percent when the CBR language was included. There was strong support across partisan lines. Differences in support by ethnicity were relatively minor. Support reached 60 percent and higher across gender and age cohorts. There was strong support across income levels and from both homeowners and renters. At least half of voters rated every item listed as a potential use of funds as very important. Two-thirds or more of voters rated improvements to the 9-1-1 emergency communications network, repairing potholes and paving streets, ensuring safe routes to schools and maintaining City streets and roads as very important. Generally speaking, the rank order of public priorities relative to one another remained fairly consistent since 2013. Support rose from 65 to FINAL MINUTES Page 5 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 68 percent after arguments in favor of the measure and declined to 61 percent after arguments against the measure. The top tier of supportive arguments focused on potential public safety improvements, improvements to infrastructure as a contribution to quality of life, and transportation safety on roads and sidewalks. The second tier of supportive arguments focused on the nature of the tax, accountability provisions and benefits to local property values. None of the messages drew an intense reaction, but many were viewed as broadly persuasive. The top tier of opposition arguments focused on the City's management of finances, having the highest TOT in the State, an anti-tax argument and other priorities. Generally, opposition arguments were seen as less convincing than supportive arguments. Next, a Real Estate Transfer Tax (RETT) was tested, and support did not reach a simple majority threshold. Neither supportive nor opposition arguments changed the level of support. Next, a 2-cent per ounce Soda Tax was tested. With or without CBR initiative language, support reached approximately half, with equal numbers of voters strongly for and strongly against a Soda Tax. These numbers were lower than polling numbers observed in neighboring cities. He thought these numbers could have been affected by voters' views of mechanisms tested earlier in the survey. A TOT increase appeared clearly viable as a general tax requiring simple majority support; although, obtaining a two-thirds support was difficult. A RETT increase did not appear viable as it failed to reach a simple majority support. Voters were divided over a Soda Tax. Ballot language that complied with the CBR initiative tended to receive slightly lower support than other ballot language. At the two-thirds supermajority level, a ballot measure in compliance with the CBR initiative was difficult to call because of the narrow margin of support. Lalo Perez, Chief Financial Officer and Director of Administrative Services advised that an At-Places Memorandum summarized Staff's meeting with five general managers of Palo Alto hotels. Generally, the managers were dissatisfied with last-minute contact and concerned about the impacts of increasing the TOT, having the highest TOT in the State, and impacts on already declining occupancy rates. James Keene, City Manager noted that agendas were filled and reminded the Council of the few meeting dates before the Council's break. The Council needed to provide clear direction to Staff if they wished to place a measure on the November ballot. Ken Horowitz felt a Soda Tax was good for the City and provided health benefits to residents. The survey was flawed as the proposed ballot language stated revenues were placed in the General Fund. FINAL MINUTES Page 6 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Mary Sylvester supported placing a Sugar-Sweetened Beverage Tax measure on the November ballot. There was an overwhelming link between consumption of sugar-sweetened beverages and obesity, hypertension, Type II diabetes, liver disease and tooth decay. She encouraged the Council to consider placing a Soda Tax measure on the ballot to support public health programs. Anisha Patel noted the link between consumption of beverages with added sugar and obesity, hypertension, fatty liver disease and diabetes. Soda taxes in other cities were effective in curbing consumption of sugary drinks and in increasing the intake of water. Through an advisory committee, community members could contribute to determining the expenditure of tax revenues. Stephanie Wansek remarked that a 2-percent TOT increase would result in a $7 increase for a room at the Cardinal Hotel. A 2-percent increase in the TOT would be a 14 percent increase in cost to hotel customers. Ella Herman, Garden Court Hotel, commented that hotel customers would stay in other cities around Palo Alto rather than pay a higher TOT. Hotels could not support a higher TOT. John Hutar, Dinah's Garden Hotel understood a TOT increase would result in $3.4 million in revenues. The short-term rental market was generating $5.34 million in TOT revenues, but less than $1 million was being collected. Short-term rentals paid their fair share of TOT, and the City needed to collect all taxes owed by short-term rentals. Julie Kaufmann, American Heart Association supported a tax on sugar- sweetened beverages. Over consumption of sugary beverages directly led to chronic illnesses. The American Heart Association recommended children consume no more than 8 ounces of sugary beverages a week. Revenues could be used for health education and prevention programs. Ricardo Berrospi, Zen Hotel proposed an independent party assess the consequences of an increase in the TOT. The current consideration was rushed. The owners of Zen Hotel opposed a TOT increase. Stephanie Muñoz recommended the City collect the TOT taxes from short- term rentals. She supported an increase in the RETT but not a Soda Tax. Josh Brown, American Heart Association Silicon Valley Board of Directors supported a Sugary Drink Tax on the November ballot. Improved polling showed higher support. FINAL MINUTES Page 7 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Bret Andersen, Carbon Free Palo Alto remarked that parking garages and new or increased taxes should be reconsidered. David Coale, Carbon Free Palo Alto questioned the need for parking garages and the public's desire for parking garages. Many less expensive alternatives were available. Jennifer Liu expressed concern that increased taxes would result in a business-unfriendly City. Rita Vrhel remarked that the Council did not poll regarding a Business Tax. She supported a Soda Tax. Council Member Scharff felt the Council should eliminate an increase in the RETT based on the lack of support. He inquired regarding the direction Staff needed to develop a ballot measure for a tax on sugar-sweetened beverages. Mr. Keene indicated this was the first Council discussion of a Sugar- Sweetened Beverage Tax. He did not believe Staff could prepare ballot language in two weeks. Council Member Scharff wanted to know the final date a ballot measure could be submitted. Mr. Keene responded August 10, 2018. The Council's first meeting after the break was August 14, 2108. Mayor Kniss asked about the minimum time needed to obtain support for a Soda Tax before it was placed on the ballot. Mr. Metz advised that San Francisco voters approved a Sugar-Sweetened Beverage Tax on the third attempt. In Berkeley, individuals met privately and in a public process over a period of months to develop the first tax in the Bay Area. Oakland also utilized a fairly extensive process. Mayor Kniss remarked that a long and sensitive process was needed to build support for a Sugar-Sweetened Beverage Tax. Council Member Scharff supported a tax on sugary drinks, but his intent was to start the discussion with the Council Members. Molly Stump, City Attorney reported that the Council would need to provide direction on a number of policy components. A Sugary Beverage Tax was an Excise Tax on the privilege of doing a certain kind of business; it was not a Sales and Use Tax. The City did not have an administrative structure in FINAL MINUTES Page 8 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 place to enforce, implement or collect that kind of tax. Staff needed to work with stakeholders, businesses and the public. Council Member Scharff believed the Council should proceed with the TOT increase. With an increased TOT, there was a projected increase of $3.2 million. Mr. Keene clarified that the estimate was $3.4 million in additional tax revenue, which would yield $35 million for capital projects. Council Member Scharff noted the uncertainty in project costs. Voters overwhelmingly supported a TOT increase in 2014. The hotel industry made the same arguments in 2014 that they were making in 2018, but the 2014 TOT increase had no impact on the hotel industry. The TOT was a Business Tax. MOTION: Council Member Scharff moved, seconded by Vice Mayor Filseth to direct Staff to return to Council with language for a 2 percent Transient Occupancy Tax (TOT) revenue measure for the November 2018 ballot. Council Member Scharff encouraged the Council to support a TOT increase so that the Infrastructure Plan could be completed. Mayor Kniss requested Staff address the possibility of placing a TOT increase and a Tourist Tax on the ballot. Mr. Perez advised that the hotel industry requested the Council consider a 1 percent TOT increase and a 1 percent Tourist Tax. Ms. Stump explained that a special assessment district could not be completed by November, 2018. Staff needed time to work on the new proposal. A TOT increase and a Tourist Tax required two measures, which would change the cost of the election and introduce the possibility of one passing and one failing. Council Member Scharff inquired whether Mayor Kniss wanted Staff to return with information regarding a tourist fee. Mayor Kniss replied yes. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE OF THE MAKER AND SECONDER to add to the Motion, “and an alternative of a 1 percent TOT measure along with a separate 1 percent tourism fee.” FINAL MINUTES Page 9 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Ms. Stump promised to return to the Council with answers regarding the viability of such a fee. Staff had to make assumptions and draft language for a measure because of time constraints. Vice Mayor Filseth noted construction costs had escalated substantially in the last several years. The TOT was fundamentally a Business Tax. The cost increase to hotel customers was not huge. Council Member DuBois indicated work on some infrastructure projects was proceeding. Delaying projects added costs. He supported an emergency meeting to review ballot language, if necessary. He asked whether ballot language could require approval of both or none of the two measures. Ms. Stump questioned the rationale for making the two measures contingent on each other. Council Member DuBois wanted to understand the possibilities. Mr. Keene remarked that adding complexity to ballot measures created confusion. Mr. Metz suggested voter literature clarify the Council's intention that the measures funded identified needs. Council Member DuBois inquired regarding the impact of a 1 percent TOT increase on the Infrastructure Plan. Mr. Perez stated the Council would need to remove a project or re-prioritize projects, assuming construction costs continued to rise. Some of the projected revenue was dependent on the two Marriott hotels opening as scheduled. Council Member DuBois requested the source of the $4.3 million in uncollected TOT from short-term rentals. Mr. Perez understood Mr. Hutar obtained a vendor's report, which showed the stated amounts. The vendor estimated the amounts based on listings and ZIP Codes. Mr. Perez was not able to speak to the accuracy of the data because the City did not have short-term rental information. The City was collecting more than $1 million from Airbnb. Ms. Stump recalled that the Zoning Code did not allow short-term rentals in residential neighborhoods. The City was one of a small group of cities that had an agreement with Airbnb to collect the TOT. There was some interest in revisiting the issue, but it was not be an unsubstantial Staff effort with the community. FINAL MINUTES Page 10 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Mr. Perez clarified that the City had to pledge revenue in order to issue debt. The credit-rating agencies reviewed the tax structure and opine regarding the likelihood of collecting the projected revenues. The credit rating agencies likely viewed taxes generated by short-term rentals differently than taxes generated by established hotels. Council Member DuBois felt the City should be using vendors to collect taxes generated by short-term rentals. The Council was creating an advantage for short-term rentals over hotels. Mr. Perez suggested Staff issue a Request for Proposal (RFP) to collect TOT from short-term rentals. Council Member DuBois supported ballot language indicating tax revenues would be placed in the General Fund and intended for particular uses. Ms. Stump reported a November statewide ballot measure would retroactively convert the voting requirement for tax measures to two-thirds support. That was why FM3 explored that threshold. The statewide measure applied to all tax measures on the November ballot. Council Member Holman was struggling with increasing the TOT because that meant it would be the highest in the State. The community had an appetite for projects, but the Council needed to be fiscally responsible. She supported delaying the Downtown parking garage project until the Transportation Management Association (TMA) could demonstrate its efficacy. Downtown parking garages were not fully occupied. The City needed to tax ghost houses, but the Council had not considered that. The hotel industry's arguments were not the same because the number of hotels and competition among hotels had grown. Setting Palo Alto's TOT rate at the highest rate in the State was not good marketing. Not considering an Employee Tax was a disservice to the community. She did not support an increase in the TOT. Council Member Wolbach supported the Council exploring a tax on ghost houses and an employee Head-Count Tax. He was skeptical that the Council could craft a Soda Tax in time to place a measure on the November ballot. Increasing the TOT was important for funding the Public Safety Building, and he supported it. The Council needed to reconsider constructing a new Downtown parking garage. He questioned whether the taxpayers should fund construction of the Downtown and California Avenue garages if the proposed scale of the garages was not needed. Council Member Kou believed the Council had targeted the hotel industry without exploring other types of taxes and without outreach to hotels. The FINAL MINUTES Page 11 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Council needed to review and re-prioritize projects on the Infrastructure Plan rather than propose taxes. She inquired about the timeline for a ballot measure. Mr. Keene indicated August 10, 2018 was the last date on which ballot language could be submitted and accepted. The Council's recess began June 26, 2018 and ended August 13, 2018. Council Member Kou asked if the Council would approve language for a ballot measure during the June 18, 2018 Council meeting. Mr. Keene advised that Staff was able to return with language for a 2 percent TOT increase, a 1 percent TOT increase and a tourism fee. On June 18, 2018, the Council needed to approve specific language for one of the two alternatives. Ms. Stump remarked that material for the June 18, 2018 meeting had to be published on June 7, 2018. Staff was not likely to have information prepared in time for publication on June 7, 2018. Council Member Kou inquired about litigation regarding the Sugar- Sweetened Beverage Tax. Ms. Stump believed there had been litigation. Council Member Kou asked about the role of mom-and-pop stores in a Soda Tax. Ms. Stump remarked that a definition of small business and an exemption for small businesses was a significant policy question for the Council to discuss. Council Member Kou commented that the TOT was a Business Tax on one industry. Targeting one industry was not sustainable. She did not support an increase in the TOT rate. Council Member Tanaka requested occupancy data during Stanford University's graduation. Ms. Wansek reported the Cardinal Hotel was not fully booked for Stanford University's graduation in 2017 or 2018. Typically, hotels were fully booked in January. Airbnb seemed to be affecting reservations for large events. Council Member Tanaka asked if the lower TOT rate in Mountain View was a factor as well. FINAL MINUTES Page 12 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Ms. Wansek heard other hotel manager’s state that the lower rate was a factor. Council Member Tanaka inquired about possible voter reaction if polling questions reflected a 14 percent increase in the TOT rather than a 2 percent increase. Mr. Metz explained that ballot measures typically expressed the tax rate as an additional increment in the tax rate rather than as a proportion of the existing tax rate. Using the proportion of the existing tax rate led voters to think the increase was a 14 percent increment. Council Member Tanaka inquired about the possible effect of stating the City's TOT rate was higher than Anaheim's rate. Mr. Metz indicated introductory language stated the rate would be the highest in the State, and the effect on hotels was well described in the question. Mr. Keene noted the effective difference between the City's rate and Anaheim's rate was the other tourism fee collected in Anaheim. Council Member Tanaka understood the need for infrastructure projects and funding. Raising taxes a second time for the same infrastructure projects was not logical. The Council had not prioritized infrastructure projects or attempted to reduce costs of projects. In addition, TOT revenue had not been collected. He thought increasing the TOT could result in less revenue for the City and fewer consumers for businesses. He could not support the Motion. Council Member DuBois inquired regarding the length of time needed before the tax increase could sunset. Mr. Perez advised that the sunset date would have to coincide with the length of debt service. Mr. Keene clarified that the debt would have to be structured to align with the sunset date. Council Member DuBois asked if the revenue was estimated over 20 years. Mr. Perez answered yes. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE OF THE MAKER AND SECONDER to add to the Motion, “direct Staff to increase enforcement of short-term stay collection of TOT by auditing providers by FINAL MINUTES Page 13 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 the end of 2019 and spot verification that fees are being collected from the largest rental providers.” (New Part B) Ms. Stump reported the City had a binding agreement with Airbnb, so Staff would need to review the agreement in light of the direction to Staff. Council Member Fine stated the Council did not have a great philosophy of sources and uses. The original plan for funding infrastructure projects included a 2 percent TOT increase and $90 million in other sources. Community support for a Business Tax was pretty clear, and the Council needed to explore a Business Tax. The Council was managing its Infrastructure Plan poorly. Eighty percent of cost increases were related to the Public Safety Building, Downtown parking garage and the California Avenue parking garage projects. The Public Safety Building was essential and was the biggest priority in the Infrastructure Plan. Constructing parking garages was a waste of money. Strategic factors for a TOT increase were having the highest TOT rate in the State and other ballot measures. He supported a delay of the Downtown parking garage project and reducing the California Avenue parking garage project. He asked if Staff could perform spot verifications. Ms. Stump did not know. Council Member DuBois intended for Staff to review online listings to determine whether the TOT was being collected. Mr. Keene suggested general direction to Staff would be better as policy implications were unknown. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace the Motion Part B with, “direct Staff to increase enforcement of short term stay collection of TOT through a process of auditing providers by the end of 2019.” Council Member Wolbach preferred the direction be more general, such as "to increase enforcement of short-term collection of TOT." INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to remove from the Motion Part B, “through a process of auditing providers.” MOTION AS AMENDED RESTATED: Council Member Scharff moved, seconded by Vice Mayor Filseth to direct Staff to: FINAL MINUTES Page 14 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 A. Return to Council with language for a 2 percent Transient Occupancy Tax (TOT) revenue measure for the November 2018 ballot and an alternative of a 1 percent TOT measure along with a separate 1 percent tourism fee; and B. Direct Staff to increase enforcement of short term stay collection of TOT by the end of 2019. MOTION AS AMENDED PASSED: 6-3 Holman, Kou, Tanaka no MOTION: Mayor Kniss moved, seconded by Council Member Fine, to refer the concept of a sugar-sweetened beverage tax to the Policy and Services Committee for further analysis and a long-term plan for placement on a future ballot or not. Mayor Kniss expressed concern that a Soda Tax was not ready for the 2018 ballot. She encouraged deeper discussion so that a measure would be successful. Council Member Fine concurred with Mayor Kniss. A Soda Tax was worth further exploration. It was helpful to identify uses for tax revenues first. Council Member Wolbach reluctantly supported the Motion. He, Council Members Holman, Tanaka, Mayor Kniss and himself had written a Colleagues' Memo but did not want to introduce it with this Motion. Careful consideration was needed to ensure success of a ballot measure, and that could not occur in 2018 because of time constraints. Council Member DuBois remarked that the concept of the tax was to encourage healthy behaviors. Other cities had imposed a Sugar-Sweetened Beverage Tax, and their efforts served as models for Palo Alto. Implementation was delayed until July 2019 or January 2020 so that processes for administration and collection of information was determined. SUBSTITUTE MOTION: Council Member DuBois moved, seconded by Council Member Holman to direct Staff to return to Council with a sugar- sweetened beverage tax modeled after the Berkeley tax with funds directed to the General Fund, funding parks, recreation, and community services. Ms. Stump recommended the Substitute Motion specify a General Tax. Mr. Metz noted successful ballot measures in other cities were not accompanied by advisory measures. Ballot language for those measures created an advisory committee to make recommendations on use of tax revenues. FINAL MINUTES Page 15 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Ms. Stump remarked that further discussion was needed to develop details of the measure. Policy considerations warranted some thought. Mr. Keene commented that the City of Berkeley operated the Health Department, so it had a distinctive position within the State. Council Member Holman inquired whether Staff could craft some ballot language and present it to the Council before the break. Ms. Stump explained that Staff needed explicit direction in order to craft ballot language. Mr. Keene reiterated time constraints and the need for detailed instructions so that Staff did not waste time on provisions the Council would not support. The Council needed to assume the majority of the responsibility for crafting ballot language. Council Member DuBois clarified that he had suggested ballot language be presented to the Council at a special meeting in early August, 2018. Mr. Keene noted the Council's in-depth discussion and revision of Staff's recommendations and Staff's need to complete work and take vacations while the Council was on break. The Council had to consider a ballot measure with only minimal Staff support. The beverage industry would intensely oppose a Sugar-Sweetened Beverage Tax. Council Member Holman asked if the exact language of the Berkeley tax could be utilized for Palo Alto. Ms. Stump indicated that was a Council decision. The Council was able to create an advisory committee that would issue an RFP and make recommendations on expenditure of tax revenues. If the Council did not want an advisory committee, Staff was able to do something different. Ballot language could reflect some intentions for use of the revenues, subject to the Council's annual budget-setting process. The Council needed to review ballot language and schedule a meeting in July or August, 2018 to approve the language. She questioned whether a quorum of Council Members would be available for a special meeting as well as Staff's availability. Council Member Holman inquired whether Staff could present Berkeley language revised to apply to Palo Alto for Council approval at the final Council meeting in June, 2018. In addition, she inquired about potential measures for the spring election. FINAL MINUTES Page 16 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Ms. Stump was not aware of any measures for the spring election. Staff was also working on two citizen initiatives that were likely to qualify for the ballot. Staff was able to revise the Berkeley language and present it at the final meeting in June, 2018. According to Council Member DuBois' comments, the City's ballot language was not an exact replica of Berkeley's Ordinance. Mayor Kniss suggested the Council hear public comment regarding Agenda Item Number 8 and vote on the item the following week. Ms. Stump requested time to determine whether that action was appropriate. Council Member Scharff questioned whether Staff could complete language for a ballot measure. Ms. Stump advised that she would not be present for an August 10, 2018 Council meeting. She was concerned about a quorum of Council Members being present. Vice Mayor Filseth asked if Staff could draft ballot language with the three changes proposed by Council Member DuBois. Ms. Stump agreed that Staff could draft language and present it before the Council's break. Mr. Keene clarified that Staff was going to craft language, but there would not be any analysis of the implications. With respect to Agenda Item Number 8, Staff wished to proceed with the item. There was no legal reason the Council could not continue Item Number 8. Council Member Wolbach believed the complexity of the Berkeley Ordinance required a deeper Council discussion than anticipated. If implementation was delayed for a year or two, then there was no rush to place a measure on the ballot. Mr. Metz appeared to concur with the notion that a ballot measure was going to be more successful in 2020. SUBSTITUTE MOTION FAILED: 4-5 DuBois, Holman, Kou, Scharff yes MOTION PASSED: 8-1 Kou no 8. PUBLIC HEARING/LEGISLATIVE AND QUASI-JUDICIAL: 2755 El Camino Real [16PLN-00464]: Adoption of an Ordinance Amending Palo Alto Municipal Code (PAMC) Title 18 (Zoning) Chapter 18.30 (Combining Districts) to add a new Combining District to Allow for Higher Density Multi-family Housing that Includes a Workforce Housing FINAL MINUTES Page 17 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Component to be Located on Public Facilities Zoned Properties Within 0.5 Miles of Fixed Rail Transit Stations; Adoption of an Ordinance Amending the Zoning Map to Apply the New Combining District to the Subject Property at 2755 El Camino Real; Site and Design Approval to Allow Construction of a 57 Unit Multi-Family Residence at the Subject Property; and Resolution 9760 Entitled, “Resolution of the Council of the City of Palo Alto Adopting the 2755 El Camino Real Multi-Family Residential Project Mitigated Negative Declaration.” Environmental Assessment: An Initial Study (IS/MND) Was Published for Public Comment on January 19, 2018 for a Circulation Period Ending on February 20, 2018. A Final MND was Published on May 18, 2018. Zone District: Public Facilities (PF). Claire Hodgkins, Associate Planner reported the item included a Zoning Code amendment to establish a new Combining District, a Zoning Map amendment, and a Site and Design application for a multifamily, residential, rental project located at 2755 El Camino Real. Key components of the new Combining District were: no density restriction, a higher Floor Area Ratio (FAR) than was typically allowed and a lower parking requirement. If the Zoning Code amendment was approved, the Zoning Map needed amending to apply the new Combining District to the subject property, which was zoned Public Facility (PF). The proposed Ordinance included a requirement for 20 percent of units to be deed restricted to 120-150 percent of Area Median Income (AMI) and to be additional to any Below Market Rate (BMR) in-lieu fees required. The requirement encouraged mixed-income development and pricing to support the missing middle. To encourage reduced single occupancy vehicle (SOV) use, local preference was given to persons living or working within the City of Palo Alto and then to persons working within a half mile of a Caltrain station. The proposed Ordinance did not restrict unit density but limited the maximum floor area to 2.0. In addition, the proposed Ordinance limited housing units to a maximum of 750 square feet to encourage smaller units. Based on parking studies conducted for similar developments, the proposed parking ratios of one space per unit and 1.2 spaces per unit were appropriate for the site. The proposed Transportation Demand Management (TDM) program reduced overall vehicle miles traveled (VMT) consistent with City, County of Santa Clara (County), and State goals. Multiple conditions of approval related to enforcement of the TDM program, local preferences, and deed restrictions. Staff recommended Condition of Approval Number 2 reflect the approved plan set dated March 22 and an additional condition of approval stating a new bus shelter shall be provided. FINAL MINUTES Page 18 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Council Member Tanaka disclosed conversations with a developer from Windy Hill and residents. The conversations did not include any information that was not in the public record. Council Member Kou disclosed no ex parte communications. Council Member Scharff disclosed a conversation with the applicant. The applicant requested additional conditions of approval to reflect a preference for those living or working within three miles of Palo Alto and approval of local preferences at the time of the certificate of occupancy. Vice Mayor Filseth disclosed no ex parte communications. Mayor Kniss disclosed a meeting with Todd Spieker. Council Member Wolbach disclosed conversations with Todd Spieker and a voice mail from the applicant. The voice mail message included the applicant's request for a preference for those living or working within three miles of the City. Council Member Fine disclosed conversations with the applicant, which included a request for a live/work preference of three miles. He had spoken with a number of neighbors. Council Member Holman disclosed a conversation with Todd Spieker possibly regarding the subject project. Council Member DuBois disclosed no information that was not part of the public record. Mayor Kniss disclosed that she had visited the site a number of times. Public Hearing opened at 10:27 P.M. Todd Spieker, Windy Hill advised that Pollock Financial purchased the site from the Valley Transportation Authority (VTA) and proposed a primarily office project. Based on Council feedback, Pollock Financial and Windy Hill formed a partnership and submitted an application for a residential project. At a prescreening, the Council provided positive feedback for a housing project. In January 2018, the Planning and Transportation Commission (PTC) unanimously approved the project. The Architectural Review Board (ARB) subsequently recommended approval of the project. In response to community, PTC, and ARB comments, the applicant decreased the number of units to 57; reduced the FAR to 2.0; changed the proportion of units to two- thirds studio and one-third one-bedroom; added 23 parking stalls; moved the drive aisle to the rear of the lot; added four guest parking spaces; added FINAL MINUTES Page 19 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 space for drop-off, pick-up, and deliveries; excluded the project from the Evergreen Residential Preferential Permit Parking (RPP) program; and added a local preference. Negotiating the housing agreement prior to the issuance of a building permit could be tight; therefore, the applicant requested the agreement be negotiated at the time of issuance of a certificate of occupancy. In order to target renters with the best chance of using alternate modes of transportation, the applicant requested local preferences be extended to renters who live or work within three miles of the City of Palo Alto. The site received a walk score of 83. The TDM Plan included Caltrain Go Passes and VTA Echo Passes for all residents, unbundled parking, bike parking, a bike kitchen, information kiosks, information boards, and an onsite transportation coordinator. The applicant anticipated the TDM Plan for the project would result in a 35 percent reduction in car trips. If approved, the project would be the first project in Palo Alto to be green trip certified by TransForm. The applicant proposed deeding a portion of the property along Page Mill for a future right turn-lane. The project complied with requests for more housing and Comprehensive Plan policies for housing. Becky Sanders, speaking for Rob Levitsky, Mary Sylvester, Annette Ross, and Tirumala Ranganath, commended the applicant for proposing an appealing project, but she opposed the project based on the PF zoning. The need for housing did not justify the loss of PF zoning without the receipt of some type of benefit. She preferred any housing on the site be 100 percent BMR. The project should be fully parked to accommodate today's needs rather than tomorrow's dreams. Somebody needed to pay for up-zoning the site. Frank Ingle supported the project because it proposed smaller units near transportation. Bill Ross stated Staff's position that assessing the proposed Ordinance was too ethereal was not founded in law and not the subject of a statutory or categorical exemption. The Council did not have any guaranty of uniform regulations. Bob Moss felt the Staff Report omitted the area, the density, and the lack of compliance with existing zoning. In theory, a project similar to the subject project was built in a single-family residential zone. Mitch Mankin, Silicon Valley at Home enthusiastically supported the project, which would provide BMR homes for moderate-income workers. Housing for the “missing middle” was critical in Palo Alto. Stephanie Muñoz remarked that the Council was changing the nature of the PF zone. FINAL MINUTES Page 20 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Leo Vera supported the project and said the applicant had addressed complaints. Colin Roche supported the project for its mix of affordable housing and multi-modal transportation options. Caitlin Hinds supported the project because of the local preferences and BMR housing. Ruben Sandoval commented that the project would provide an opportunity for members of the community to remain in the community while supporting their families. Fabio Sangiores supported the project and the proposed high-density housing. Sheryl Klein supported the project because of its affordable workforce housing. Bonnie Packer, League of Women Voters supported the Combining District and the project. She urged the Council to expand workforce housing beyond PF zones. Greg Osborn remarked that the applicant met all requirements and responded to all the various needs of the community. He fully supported the project. Nina Rizzo, TransForm advised that the project exceeded TransForm's standards. She thought transportation near the project and TDM proposals should limit residents' needs for personal vehicles. Rob Wilkins, Palo Alto Housing supported the new Combining District and the project. He commended Staff for accepting the reduced parking ratio and the developer for proposing an in-lieu fee. John Kelley encouraged the Council to approve the project because of its location, income diversity and housing stock diversity. He supported the applicant's requests for modifications of the conditions of approval. Lisa Van Dusen supported the project. Terry Holzemer expressed concerns about affordability, parking and the loss of a PF-zoned parcel. The site needed to be permanently excluded from the Evergreen RPP district. FINAL MINUTES Page 21 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Eric Rosenblum, Palo Alto Forward supported the project because of the target residents and the size of the units. He wished the original parking requirement had remained in place. Patricia Saffir supported the project and the Combining District because of the proposed housing for people such as teachers, firefighters and nurses. The size of the units was appropriate for working people and seniors. She thought the Combining District should be expanded to include commercial districts. Stephen Levy stated the repurposing of PF sites was a public benefit. He supported the project and granting the applicant's requests for modifying the conditions of approval. Public Hearing closed at 11:03 P.M. Mayor Kniss requested Staff address PF zoning for the site. Jonathan Lait, Acting Director of Planning and Community Environment explained that the PF zone stood for Public Facilities, a district designed to accommodate government, public utility, educational, community service and recreational facility uses. PF did not mean publicly owned, and the property was not publicly owned. The property was previously owned by VTA and, at some point, VTA determined the property was surplus. VTA sold the property to a private entity. The property was not intended to be used for any of the uses set forth in the Zoning Code. Mayor Kniss understood many people thought the property was City property. VTA had offered the property to the City of Palo Alto, but the City was not interested in the property. MOTION: Council Member Fine moved, seconded by Council Member Scharff to: A. Adopt a mitigated negative declaration Resolution and a mitigation monitoring and reporting plan; B. Adopt an Ordinance to create a new “Workforce Housing Combining District;” C. Adopt an Ordinance to amend the Zoning Map and apply the new Combining District to 2755 El Camino Real; D. Approve the site and design application based on the findings and subject to conditions of approval included in the draft Record of Land FINAL MINUTES Page 22 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Use Action including the following changes to the conditions of approval: i. Replace in Condition 1, “February 20, 2018” with “March 22, 2018;” ii. Add a Condition, “the applicant shall be responsible for financing the new bus shelter shown on the project plans sheet C7;” iii. Replace in Condition 7, “Building Permit” with “Certificate of Occupancy;” E. Add to Municipal Code Section 18.30(K).090(d), “within a three (3) mile radius of the project or” after “whose place of employment is;” and F. Direct Staff to return to Council with an Ordinance applying this district to commercial properties. Council Member Fine remarked that the project proposed the type of housing needed in Palo Alto. Smaller units were inherently more affordable. The location was near transit, and the project had probably the strongest TDM program in the City. The applicant proposed payment of in-lieu fees and deed restriction of 12 units. He noted the many pages of documents, studies, and reports and the many public hearings regarding the project. Council Member Scharff expressed concern about directing Staff to return with an Ordinance applying the Combining District to commercial properties. The proposed Ordinance did not require retail in certain locations. Mr. Lait suggested Staff needed time to consider details of applying the district to commercial properties. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace Motion Part F with, “direct Staff to return to Council with an appropriate Ordinance applying a workforce housing combining district to commercial properties.” Council Member Scharff requested Staff comment on the timing for negotiating the regulatory agreement to which Condition of Approval Number 7 referred. Mr. Lait agreed that the regulatory agreement should not delay the issuance of a building permit. Staff had sufficient time to work with the applicant to identify mutually agreeable terms. Staff recommended negotiations occur at the time of issuing a building permit. FINAL MINUTES Page 23 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Council Member Fine asked the applicant to clarify the reasons for requesting the change. Mr. Spieker wanted more time to negotiate. The three-mile radius was his main concern. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to remove Part D.iii. from the Motion. Council Member Scharff did not understand the local preference. A waiting list for market-rate units was not needed because the units would not be rent restricted. Without a waiting list and without more demand for units, he did not understand how the local preference worked. Ms. Hodgkins advised that Staff left terms in the agreement open so that Staff could determine a reasonable timeframe. Offering a couple of weeks was not unreasonable, given the 30 day period renters were required to pay. Mr. Lait added that some details would be sorted during negotiation of the regulatory agreement. The applicant was able to notice a unit as available for rental and, once he had a list of rental applicants, the applicant could rank the rental applicants. Council Member Scharff reiterated that there would not be a list of rental applicants. During the first two weeks, a unit was not rented to someone who did not meet the local preference. Following the two-week period, the applicant was able to rent a unit to anyone regardless of local preferences. Mr. Lait clarified that the applicant would collect rental applications during a period of time. Rental applicants who met the preference rose to the top of the list, and the applicant then screened rental applications. That process did not add a great deal of time. Council Member Scharff believed the applicant would lease a unit to the first person who met the local preference requirements. He questioned whether a better requirement would be 50 percent of units were to be occupied by people who live or work in Palo Alto. The negotiation would be a problem for management of an apartment building. Mr. Spieker concurred with Council Member Scharff. The requirement was able to be negotiated as part of the regulatory agreement. He preferred a look-back period rather than a period of time during which units could be vacant. FINAL MINUTES Page 24 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Mr. Lait indicated Staff's objective in developing a preferential list was to target a population that lived or worked in Palo Alto and that could take advantage of public transportation. Staff's interest was having units occupied under the preference in order to reduce parking. Each time a unit was vacant, the applicant followed a process to fulfill the preference requirements. Council Member Scharff inquired whether the applicant could obtain financing without knowing that detail. Mr. Spieker did not know but thought it was possible. Mr. Lait clarified that Staff did not wish to be involved in the day-to-day leasing of units. A look-back was an evaluation of the applicant's process for vetting rental applications against the preference. Vice Mayor Filseth asked if the deed restriction would limit the amount of rent charged for a unit or limit renters to those with specific incomes. Ms. Hodgkins advised that rental rates would be set annually by the County based on AMI. In addition, the restrictions limited renters based on income. Vice Mayor Filseth stated rent of $3,000 a month was at or above the current market rate. He inquired about the number of housing units approved in the first half of 2018. Mr. Lait did not have the information. Vice Mayor Filseth requested the amount of the affordable housing in-lieu fee. Ms. Hodgkins replied a one-time payment of $602,920. Vice Mayor Filseth asked for a definition of unbundled parking. Ms. Hodgkins explained that the units would be separate from parking spaces. The applicant charged a fee for a parking space in addition to rent. Vice Mayor Filseth inquired whether other parcels zoned PF were privately or publicly owned. Ms. Hodgkins indicated some PF-zoned properties were privately owned. Vice Mayor Filseth requested reasons for a private entity to purchase PF- zoned property. FINAL MINUTES Page 25 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Mr. Lait did not know. Vice Mayor Filseth understood the argument that the owner could hope the City would up-zone the parcel. There was some value to removing the PF zoning. Molly Stump, City Attorney assumed an owner applied for a zone change because it was valuable. The City had the ability to rezone an area. As the area developed over time, it had to conform to the new zoning. The City was obligated to consider applications for rezoning, but the City was not obligated to grant the specific zone requested by the applicant. Council Member DuBois remarked that the rent limitation would be effective for 99 years. He asked if the three-mile radius covered Palo Alto and Stanford University only. Ms. Hodgkins explained that the majority of the three-mile radius was located in the City of Palo Alto. The radius extended to a portion of Stanford property and a portion of Menlo Park. Council Member DuBois inquired whether the Council could specify in the Ordinance that use of the Combining District would prevent a developer from utilizing the State Density Bonus Law. Ms. Stump reported the Ordinance could indicate the zone was available only for non-State density bonus projects. She said the language could not ask developers to waive their rights under State law. The language provided that the zoning district was available if the State Density Bonus Law was not being used by the project. Council Member DuBois asked if that language needed to be an Amendment. Mr. Lait advised that Staff could incorporate the language into the Ordinance. Ms. Stump indicated the Council could direct Staff to add the language. Council Member Fine requested the rationale for adding the language. Council Member DuBois clarified that the Combining District did not reference any zoning densities. The Combining District was a discretionary district that would provide quite a few benefits that were essentially the same as concessions under the State Density Bonus Law. He did not believe the intent was to allow double benefits. FINAL MINUTES Page 26 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Council Member Fine noted the existence of other mechanisms that controlled density. Ms. Stump reminded Council Members that they would review any project requesting the Combining District and could decide whether the densities were appropriate. AMENDMENT: Council Member DuBois moved, seconded by Council Member Holman to add to the Motion, “to direct Staff to revise the Ordinance to provide that the Combining District would not be available to projects utilizing the State Density Bonus Law.” Council Member Holman commented that utilization of the State Density Bonus Law would allow exceptions to height, parking requirements, density and other things the Council could not anticipate. Council Member Scharff did not believe the Amendment would aid the Council in any way; use of the Combining District was not by right. Council Member Holman questioned whether the Council could deny use of the State Density Bonus Law after granting approval of rezoning for the overlay. AMENDMENT FAILED: 4-5 DuBois, Filseth, Holman, Kou yes Council Member DuBois inquired whether the project was located outside the RPP district. Ms. Hodgkins responded yes. Council Member DuBois asked if Staff considered moving the bus stop farther from the corner. Ms. Hodgkins replied yes. VTA supported a location closer to the corner. Council Member DuBois inquired about the bike lane in front of the proposed building. Ms. Hodgkins reported the County's improvement project included addition of a bike lane. The County proposed extending the bike lane located on the opposite of El Camino Real. Mr. Lait clarified Staff's concern was placement of the building relative to the proposed easement to the County. FINAL MINUTES Page 27 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Council Member DuBois asked if the Council was approving the lane configuration. Mr. Lait answered no. Council Member Scharff asked if traffic flow would be altered by the decreased turning radius and the corner bus stop. Mr. Lait did not anticipate any traffic problems, but Staff had not reviewed the County's drawings for improvements. The proposed project did not approve any roadway work. Council Member DuBois appreciated the applicant's modifications in response to comments. He urged his colleagues to consider the meaning of 150 percent of AMI, which was essentially market rate; calling units workforce housing was misleading. He requested Staff's rationale for limiting unit size to 750 square feet. Ms. Hodgkins explained that Staff wanted to encourage smaller units by restricting the size of units. The 750 square foot size seemed a reasonable size for a smaller unit. Council Member DuBois remained interested in exploring micro units and measuring the effectiveness of the TDM program. He inquired whether Staff would work with the applicant to attain TDM goals prior to levying fines for noncompliance with TDM requirements. Ms. Hodgkins responded yes. Council Member DuBois was pleased by requirements for mitigations for the Trichloroethylene (TCE) plume and expressed concern about construction noise. He asked if extending the Combining District to commercial properties would have any California Environmental Quality Act (CEQA) impacts. Ms. Hodgkins needed to explore the issue further. Council Member DuBois requested Item F of the Motion be separated from the remainder of the Motion for the purpose of voting. Mayor Kniss stated, upon advice of the City Attorney, Item F was separated for the purpose of voting. MOTION AS AMENDED RESTATED: Council Member Fine moved, seconded by Council Member Scharff to: FINAL MINUTES Page 28 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 A. Adopt a mitigated negative declaration Resolution and a mitigation monitoring and reporting plan; B. Adopt an Ordinance to create a new “Workforce Housing Combining District;” C. Adopt an Ordinance to amend the Zoning Map and apply the new Combining District to 2755 El Camino Real; D. Approve the site and design application based on the findings and subject to conditions of approval included in the draft Record of Land Use Action including the following changes to the conditions of approval: i. Replace in Condition 1, “February 20, 2018” with “March 22, 2018;” ii. Add a Condition, “the applicant shall be responsible for financing the new bus shelter shown on the project plans sheet C7;” E. Add to Municipal Code Section 18.30(K).090(d), “within a three (3) mile radius of the project or” after “whose place of employment is;” and F. Direct Staff to return to Council with an appropriate Ordinance applying a workforce housing combining district to commercial properties. Council Member Fine felt exploring an expansion of the Combining District to other parts of the City was a good idea. The direction to Staff was to explore an expansion where appropriate. Council Member Wolbach supported exploring opportunities to convert commercial space to residential space. Most Council Members stated they wanted more housing. Council Member DuBois believed Item F was a large zoning overhaul and would shift commercial zoning to non-unit-based zoning for a large part of the City. Council Member Scharff did not view Item F as directing Staff to draft an Ordinance. Council Member DuBois indicated Item F would add to Staff's workload. FINAL MINUTES Page 29 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Vice Mayor Filseth suggested the concept could be presented as part of the Housing Work Plan. MOTION PART F PASSED: 5-4 DuBois, Holman, Kou, Tanaka no Council Member DuBois asked if it would be appropriate for signage to include an emergency phone number in the event of a noise issue during construction. Ms. Hodgkins responded yes. If it was not an existing requirement, Staff could add a requirement. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “add a requirement for an emergency number to report noise concerns.” (New Part F) Council Member Wolbach reiterated VTA's attempts to sell the property and the Council's obligation to consider zoning changes and recalled Council comments from the prescreening of a previous project at the site. The project was an indication of developers working for the City. Council Member Scharff inquired about the rationale for making requirements for ground-floor retail difficult. Mr. Lait explained that existing PF zoned property did not have retail uses. Housing developers had voiced challenges with obtaining the right mix of housing and retail because of parking requirements. Council Member Scharff was curious about the prohibition of retail in PF zones. Mr. Lait clarified that more retail uses required more parking, which made it difficult to maximize the number of housing units. Staff wished to make retail uses ancillary to residential uses. The Council had discretion to change the proposed language. Council Member Scharff asked if Staff would take the same approach in considering commercial properties Mr. Lait advised that Staff would take a different approach. Council Member Holman did not recall Council consideration of purchasing the property. FINAL MINUTES Page 30 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Mr. Lait did not have a specific document verifying an offer to sell the property. The information was obtained through communications with VTA and through the memory of long-term Staff. Council Member Scharff stated an offer was never presented to the Council. Council Member Holman believed the language regarding leasing units according to local preference was meaningless. Mr. Lait noted the regulatory agreement would contain details of a process for administering the Ordinance. Council Member Holman asked why the basic details were not contained in the Ordinance. Mr. Lait advised that Staff could incorporate parameters for a process in Condition of Approval Number 7 at Council's direction. Council Member Holman inquired about an appropriate time period to accept applications from renters. Mr. Lait needed time to consider parameters and details that needed to be implemented into the Ordinance. Council Member Holman asked if Staff was committing to incorporate a time period. Mr. Spieker remarked that the goal of the project was to house workers near their employment. The applicant was willing to commit to a specific percentage of occupants living or working within three miles of the project. The applicant would not commit to leaving a unit vacant for a period of time. Council Member Holman reiterated that not having the process in writing was meaningless. Mr. Lait suggested the Council provide parameters for a process. AMENDMENT: Council Member Holman moved, seconded by Council Member DuBois to add to the Motion, “add to Municipal Code Section 18.30(K).090(d), ‘following a two-week offer period’ after ‘first category.’” Council Member DuBois advised that a unit would not have to remain vacant, but the applicant would need to accept rental applications for some period of time. FINAL MINUTES Page 31 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Council Member Scharff did not believe the project could be successful if units were vacant for some time period. He preferred Staff and the applicant negotiate the terms. Mr. Spieker was willing to agree to a percentage of units being occupied by people who live or work in Palo Alto and to provide data to verify employment. Council Member Holman felt the Ordinance should contain a requirement for an audit. Mr. Lait reiterated that a regulatory agreement would stipulate details of the process and enforcement. Council Member Holman did not believe the applicant and Staff could negotiate terms as the applicant stated he would not commit to a two-week period or to 50 percent. Mr. Lait stated the City Attorney's Office and the applicant's attorney could negotiate and reach agreement. The Council could direct Staff to return with the regulatory agreement. James Keene, City Manager suggested the Council amend the Motion with direction to Staff. AMENDMENT WITHDRAWN BY THE MAKER AMENDMENT: Council Member Holman moved, seconded by Council Member Kou to add to the Motion, “require the Regulatory Agreement return to Council.” AMENDMENT FAILED: 4-5 DuBois, Filseth, Holman, Kou yes Mayor Kniss reported she had requested Staff explore the possibility of continuing the Closed Session to the following week. Council Member Holman felt the project was not what the Council wanted. The units were not affordable housing. Some of the documents presented for approval were not adequate. Housing on PF-zoned property should be BMR housing. Housing was able to be attained without machinations. She had concerns about PF-zoned properties that could be changed through application of the Combining District. Council Member Kou expressed concern that VTA's offer to sell the property was not presented to the Council and that traffic impacts did not reflect other development in the area. She questioned whether retired adults and FINAL MINUTES Page 32 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 seniors would be considered for workforce housing. She inquired about the rationale for not including pipeline development projects in the analysis of traffic. Ms. Hodgkins reported changes were made to ensure additional projects were incorporated into the transportation impact analysis. If a development project in the area did not add trips to the intersections under analysis, it may not have been included. Council Member Kou asked if the intersection, already at a D level, would not be impacted by projects at 2515 El Camino Real, 441 Page Mill Road, 2865 Park Boulevard, and 2600 El Camino Real. The Council was being asked to approve a custom Ordinance that would benefit one PF-zoned property. She was not supporting the Motion. Council Member Tanaka inquired whether the units would always be rental units. Mr. Lait answered yes. Council Member Tanaka inquired whether the units could be converted to condominiums in the future. Mr. Lait explained the Code provision for converting rental units to condominiums. At some point in the future, the rental units could be converted to condominiums if the circumstances were correct. Council Member Tanaka expressed concern about a residential project being located adjacent to the busiest intersection in Palo Alto. He asked if retail uses were prohibited in the project. Mr. Lait replied no. The Ordinance limited retail uses to more than 10 percent of the building or lot area. Council Member Tanaka asked why there was any restriction given the compatibility of retail uses and traffic. Mr. Lait was able to delete the limitation on retail uses if the Council directed. Council Member Tanaka supported deleting the limitation for this project. Mr. Lait advised that the applicant did not propose any retail uses. Council Member Tanaka was pleased with the project but disappointed that it was a residential project. FINAL MINUTES Page 33 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Council Member Fine noted the City used the term “workforce housing” rather than “affordable housing.” Replacing a parking lot with housing was an advantage. This kind of housing near transit was important. Vice Mayor Filseth referred to the Comprehensive Plan policy to accelerate housing production and the changes needed to accomplish that policy. The market-rate project was in a good location near Stanford Research Park and transit. The value of up-zoning a PF-zoned parcel was unknown, but he agreed to the value for this project being worth a couple of million dollars. If the City wanted to get more value from PF-zoned parcels, then it needed to train people that PF-zoned parcels were not worth as much per acre as parcels with other zoning designations. He did not want to approve another project on a PF-zoned parcel until the Council figured out a better strategy for use of PF-zoned parcels. Mayor Kniss reiterated that VTA offered the parcel for sale to government entities, and the City did not bid on it probably because it did not have the funds. Apparently the Council needed a Study Session regarding PF zoning and uses. Mr. Keene remarked that housing was a bigger issue than PF zoning. The City could condemn the property, buy it back, and develop it. The City did own PF-zoned parking lots near transit and, the Council could figure out ways to build BMR housing on those lots. Mayor Kniss was not sure of the meaning of up-zoning when applied to a public facility purchased by a private entity from a regulatory agency. The City had added less than 100 housing units over the past two years when the Comprehensive Plan proposed 300 new housing units per year. She was puzzled by the desire to dismantle the Comprehensive Plan only six months after its adoption. She mentioned that this project may not offer affordable housing, but the units were affordable for some people. The land was probably too expensive for an affordable housing project. She supported housing and this project. MOTION AS AMENDED RESTATED: Council Member Fine moved, seconded by Council Member Scharff to: A. Adopt a mitigated negative declaration Resolution and a mitigation monitoring and reporting plan; B. Adopt an Ordinance to create a new “Workforce Housing Combining District;” FINAL MINUTES Page 34 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 C. Adopt an Ordinance to amend the Zoning Map and apply the new Combining District to 2755 El Camino Real; D. Approve the site and design application based on the findings and subject to conditions of approval included in the draft Record of Land Use Action including the following changes to the conditions of approval: i. Replace in Condition 1, “February 20, 2018” with “March 2, 2018;” ii. Add a Condition, “the applicant shall be responsible for financing the new bus shelter shown on the project plans sheet C7;” E. Add to Municipal Code Section 18.30(K).090(d), “within a three (3) mile radius of the project or” after “whose place of employment is;” and F. Add a requirement for an emergency number to report noise concerns. MOTION AS AMENDED PASSED: 7-2 Holman, Kou no Mayor Kniss announced the Closed Session was continued to the meeting the following week. Ms. Stump reported the Council would receive an email summary from the Human Resources Director regarding the Closed Session. 9. PUBLIC HEARING: LEGISLATIVE AND QUASI-JUDICIAL 250 and 350 Sherman Avenue, Public Safety Building Project: Adoption of: 1) Resolution of Approval of Final Environmental Impact Report for a New Public Safety Building at 250 Sherman Avenue and a New Four-Story Parking Structure at 350 Sherman Avenue; and 2) Ordinance Modifying the Public Facilities (PF) Zone Development Standards; and (3) Approval of the Record of Land Use Action Approving Architectural Review Application [File 17PLN-00257] for a new Four-story Parking Structure at 350 Sherman Avenue to Provide 636 Public Parking Spaces Above and Below Grade. Planning and Transportation Commission Review Recommended Modification to PF Zoning Development Standards on January 31, 2018 (STAFF REQUESTS THIS ITEM BE CONTINUED TO JUNE 11, 2018). State/Federal Legislation Update/Action None. FINAL MINUTES Page 35 of 35 Sp. City Council Meeting Final Minutes: 06/04/18 Council Member Questions, Comments and Announcements None. Adjournment: The meeting was adjourned at 12:56 A.M.