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HomeMy WebLinkAbout2018-06-18 City Council Summary MinutesCITY OF PALO ALTO CITY COUNCIL FINAL SENSE MINUTES Page 1 of 24 Special Meeting June 18, 2018 The City Council of the City of Palo Alto met on this date in the Council Chambers at 5:03 P.M. Present: DuBois, Filseth, Fine, Holman, Kniss; Kou arrived at 5:05 P.M., Scharff; Tanaka arrived at 5:05 P.M., Wolbach Absent: Closed Session 1. PUBLIC EMPLOYMENT Title: City Manager Authority: Government Code Section 54957(b) MOTION: Council Member Wolbach moved, seconded by Council Member Holman to go into Closed Session. MOTION PASSED: 7-0 Kou, Tanaka absent Council went into Closed Session at 5:03 P.M. Council returned from Closed Session at 6:55 P.M. Mayor Kniss announced no reportable action. Agenda Changes, Additions and Deletions Mayor Kniss reported a Special Meeting of the Council was scheduled for July 30, 2018 at 6:00 P.M. City Manager Comments James Keene, City Manager invited the community to a panel discussion entitled "Meet the Chiefs" on July 12, 2018, where speakers focused on key issues in the Police, Fire and Emergency Services Departments. Staff walked a segment of Louis Road to notify residents of an accelerated effort to finish construction underway on Louis Road between Moreno and Amarillo Avenue as part of the Neighborhood Traffic Safety and Bicycle Boulevard FINAL SENSE MINUTES Page 2 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Project. The Public Art Program received two awards from Americans for the Arts for Safe and Sound by artist Tomo Saito and StreeTALK by M-A-D artists Erik Adigard and Patricia McShane. Friday Night at the Art Center was scheduled for June 22, 2018 from 7:00 to 10:00 P.M. The City issued a statement on behalf of the Mayor regarding posters opposing the Palo Alto Library's Pride Month displays. Staff had not received a formal application or any type of submission regarding a project at the Hotel President; therefore, the Council was not in a position to take any action. Mayor Kniss noted the Pride flag was placed on the dais in response to the incident that occurred over the weekend. Oral Communications Joe Hirsch, speaking for Fred Balin, Suzanne Keehn, Becky Sanders and Herb Borock advised that a telephone survey was underway regarding the reduced Office/Research and Development (R&D) cap initiative. The public had a right to know whether the survey was being funded in any way by the City of Palo Alto, conducted by any person or organization associated or collaborating with the City or a Council Member and a right to know if it was conducted by any person or organization at the request of the City or a Council Member. The survey contained many gross inaccuracies regarding the initiative. Approval of the initiative did not force a vote on every new office building through 2030 and was not going to cost the City $450 million annually. The initiative did not change the existing process. The initiative was not anti-jobs and did not institute a moratorium on new R&D. The initiative proposed an overall cap during the 15 year period of the Comprehensive Plan. Valerie Stinger, speaking as an individual, remarked that the Human Relations Commission (HRC) was working toward making Palo Alto's commitment to a diverse, supportive, inclusive and protective community actionable. The HRC planned on presenting recommendations to the Council regarding resources, facilities, and training for the Lesbian, Gay, Bi-sexual, Trans-sexual and Questioning (LGBTQ) community. John Vermes related that the Hotel President community questioned whether change at the Hotel President should occur precipitously without debate. Michelle Kraus expressed concerns about potential redevelopment of the Hotel President. Dennis Backlund stated the Hotel President was the City's largest historic resource and a designated landmark designed by Birge Clark. FINAL SENSE MINUTES Page 3 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Simone Boswell requested the Council include the Hotel President community in the process and act as representatives for the group. Iqbal Serang shared details of the Hotel President residential units. He questioned whether a boutique hotel was needed more than affordable housing. The workforce housing overlay was appropriate for the Hotel President site. Jeffrey Jones asked the City Council not to rush the process to redevelop the Hotel President and to perform its due diligence in a transparent way. Tucker Berckmann felt residents of the Hotel President held priority over a new business because they had been living in the City for a long time. He did not think progress should occur at the expense of residents. Katja Priess commented regarding the loss of her home and business, 75 apartment units, and a diverse community because of the new ownership of the Hotel President. Diane Boxill related residents' concerns regarding their eviction from the Hotel President and requested the City Council advocate for residents. Chris Kellogg requested the Council act transparently with regard to the Hotel President. Kevin Goulding voiced concerns regarding the effects of eviction on residents of the Hotel President. Clay Shepherd remarked that eviction of residents from the Hotel President would create a significant financial hardship for them. Residents needed help in preserving their homes. Alex Smaliy did not expect to find housing in Palo Alto similar to the Hotel President given the developer's proposed timeframe for residents to move from the building. Mary Riordan shared the many benefits provided to the City by the residents of the Hotel President. Jeff Brown did not accept the City Manager's notion that the City Council could not dictate the allowed uses of the Hotel President site. He was disappointed that the Council did not inform the community about the sale, if it knew in advance of the sale. To redevelop the site for a hotel was the height of irresponsibility. FINAL SENSE MINUTES Page 4 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Mary Jane Marcus felt the situation with the Hotel President would be a test of the City Council. She requested the Council schedule a discussion regarding use of the fine imposed on College Terrace Center. Diane Morin, Palo Alto Forward advised that Palo Alto Forward supported any efforts to allow the Hotel President to continue as a residential use. Steven Levy suggested the Council direct Staff to consider more buildings like the Hotel President. The Council needed to consider increasing the Property Tax and directing the funds be used to purchase buildings in the same situation as the Hotel President. Megan Kanne urged the City Council to do everything they could to retain the residents of the Hotel President in Palo Alto. Winter Dellenbach appreciated Council Member DuBois providing information to Staff regarding the Hotel President situation. Dr. Kelsey Banes hoped the City Council would consider actions to avoid displacement of Hotel President residents and to construct residential buildings similar to the Hotel President. James Keene, City Manager reported Staff was carefully considering many factors relating to the Hotel President. Council Member Holman clarified that Council Members had neither met in private nor negotiated with the new owners of the Hotel President. Council Members had to work with and through Staff to determine possibilities. Mayor Kniss added that the new owners had requested meetings with Council Members but did not define the nature of the meeting with the request. Council Member Kou requested the City Manager notify Council Members during the break of any new information. Minutes Approval 2. Approval of Action Minutes for the June 4, 2018 Council Meeting. MOTION: Council Member Scharff moved, seconded by Vice Mayor Filseth to approve the Action Minutes for the June 4, 2018 Council Meeting. MOTION PASSED: 9-0 FINAL SENSE MINUTES Page 5 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Consent Calendar Ken Horowitz, speaking regarding Agenda Item Number 12 believed the City Council should sell its eight acres at Cubberley Community Center to Palo Alto Unified School District and utilize the sale proceeds to find a permanent solution for the community organizations located at Cubberley Community Center. Alison Cormack, speaking regarding Agenda Item Number 12 was pleased to see some action being taken for Cubberley Community Center and community engagement as part of Concordia's plan. The proposed cost was reasonable. Council Member Tanaka registered a no vote on Agenda Item Number 11 - Adoption of an Updated Salary Schedule and Revised Compensation Plan … . MOTION: Council Member DuBois moved, seconded by Council Member Wolbach to approve Agenda Item Numbers 3-13A. 3. Recommendation That the City Council Accept Audit Status Updates on Contract Oversight of Trenching Installation and Electric Substructure, Inventory Management, and Utility Metering. 4. Recommendation That the City Council Accept the Status Updates of the Cash Handling, Travel Expense Audit, the Cable Franchise and PEG Fees Audit and the Payments Audit. 5. Resolution 9773 Entitled, “Resolution of the Council of the City of Palo Alto Summarily Vacating Public Utility Easements at 333 West Charleston Road and 4202 Ruthelma Avenue.” 6. Resolution 9774 Entitled, “Resolution of the Council of the City of Palo Alto Summarily Vacating Public Utility Easement at 405 Curtner Avenue.” 7. Resolution 9775 Entitled, “Resolution of the Council of the City of Palo Alto Vacating Public Utility Easement at 4301-4329 El Camino Real.” 8. Approval of Contract Amendment Number 4 With Cypress Security, Inc. Increasing the Amount by $330,000 for a Total Not-to-Exceed Amount of $3,662,216, and Extend the Term of the Agreement to September 30, 2018 for Guard Monitoring Services at Palo Alto Caltrain Locations. 9. Approval of Three General Services Contracts for Approximately $2.0 Million per Year in Annual Expenses in the Wastewater Treatment FINAL SENSE MINUTES Page 6 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Enterprise Fund: 1) Contract With Denali Water Solutions, LLC for Sludge Hauling Services in an Amount Not-to-Exceed $2,181,000 for a 3-Year Term; 2) Contract With Lystek International Limited in an Amount Not-to-Exceed $3,649,000; and 3) Contract With Synagro- WWT, Inc. in an Amount Not-to-Exceed $3,415,000, Both for Offsite Sludge Treatment Services for a 5-Year Term. 10. Approval of Amendment Number 5 With C&S Engineers, Inc. to Contract Number C15155208A in the Amount of $119,227 for Construction Administration Services on the Airport Apron Reconstruction, Capital Improvement Program Project AP-16000. 11. Adoption of an Updated Salary Schedule and Revised Compensation Plan for Unrepresented Limited Hourly Employees Effective July 1, 2017 - June 30, 2021. 12. Approval of an Agreement With Concordia LLC for 18 Months in the Amount Not-to-Exceed $565,972 for Cubberley Community Center Master Plan and Visioning; Approval of a Cost Share Agreement With the Palo Alto Unified School District for up to $332,986; and Approval of Budget Amendments to Fund the Master Plan. 13. Approval of Contract C18172547 With Integrated Design 360 for Development and Support of the Sustainability Implementation Plan, the Green Building Program, the Deconstruction and Source Separation Program, the Dewatering Monitoring Program and Utilities On-call Services Through June 30, 2019 for a Total Not-to-Exceed Amount of $606,291. 13A. Resolution 9776 Entitled, “Resolution of the Council of the City of Palo Alto Calling a General Municipal Election for Tuesday, November 6, 2018, for Three Council Member Seats.” MOTION FOR AGENDA ITEM NUMBERS 3-10, 12-13A PASSED: 9-0 MOTION FOR AGENDA ITEM NUMBER 11 PASSED: 8-1 Tanaka no Council Member Tanaka noted the proposed increase in Item Number 11 was three times the budgeted amount. Giving raises exceed the budget and did not make sense. FINAL SENSE MINUTES Page 7 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Action Items 14. PUBLIC HEARING: Adoption of Budget Ordinance for Fiscal Year 2019, Including Adoption of Operating and Capital Budgets and Municipal Fee Schedule. Mayor Kniss advised the Council that the item included adoption of the Fiscal Year (FY) 2019 Operating and Capital Budgets including the Table of Organization and updates to the Municipal Fee Schedule, acceptance of the June 30, 2017 actuarial evaluation of Palo Alto's retiree healthcare plan, approval of full funding of the annual actuarially determined contribution for FY 2019 and FY 2020 and adoption of the amended salary schedules for the Management and Professional Group and Service Employees International Union (SEIU) hourly employees. The Council was able to provide additional direction to Staff on Finance Committee (Committee) requested referrals for additional Staff work. The prior week Council approved a number of items related to utility rates and financial plans. James Keene, City Manager appreciated the Committee's thorough review of the Budget and creative and assertive recommendations. Kiely Nose, Office of Management and Budget (OMB) Director reported the Budget contained $711 million in revenue, almost a 5 percent increase over the FY 2018 Budget. Net sales increased by approximately 5 percent or $14 million. The largest components of expenses continued to be salaries and benefits, utility purchases, and capital improvements. Overall, expenses increased 5.8 percent or about $38.9 million over the FY 2018 Budget. Capital improvement investments increased almost $50 million over FY 2018 budgeted levels. Citywide full-time staffing was declining year over year. The Council approved previously a reduction of 11 positions in the Fire Department. The Proposed Budget recommended an additional 6.6 (percent maybe) reductions and a reallocation. The General Fund staffing level was approximately 10 percent below the peak staffing level in 2008-2009. General Fund salary and benefit costs were $218,000 less than in the FY 2018 Adopted Budget. Salary and benefit costs increased about 1.3 percent in all other funds, which resulted in an overall increase of 0.6 percent. Other Post-Employment Benefits (OPEB) expenses decreased year over year due to a biannual actuarily review of the City's liabilities and assets. The Workers' Compensation Fund expenses declined significantly because Staff aligned funding with needs. In January 2018, Staff presented the Long-Range Financial Forecast, which showed a funding gap of $2.6 million in FY 2019. Mayor Kniss requested a clarification of structural deficit. Ms. Nose explained that a structural deficit would be ongoing. FINAL SENSE MINUTES Page 8 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Mr. Keene added that the FY 2019 Proposed Budget was balanced with structural savings so that the FY 2020 Budget would remain at the FY 2019 level. Ms. Nose noted known/unknown factors such as labor negotiations and growing infrastructure costs. General Fund revenues totaled $214.5 million. Approximately 60 percent of revenues were derived from general taxes. Overall, revenues increased by 3.6 percent over FY 2018 primarily due to increased tax revenues. Mr. Keene indicated the variety of investments and other approaches in the General Fund placed the City in a favorable position compared to many other cities in that only 60 percent of the Budget was derived from tax revenues. In effect, tax revenues funded the Police, Fire and Community Services Departments. Mayor Kniss remarked that the local Sales Tax revenue funded the Fire Department. Ms. Nose reminded the Council that the City received approximately 8 percent of total Property Taxes collected from Palo Alto parcels. Council Member Tanaka commented that this was the first acknowledgement of the City's Unfunded Pension Liability. The proposed $4 million reduction was the first step in reducing the Unfunded Liability. It was possible to balance the Capital Budget with current projections. Staying within the Budget was critically important, but the City needed more work in this area. Total compensation for an average City employee was $205,000 annually, which was higher than many other cities. The City needed to benchmark itself against other cities, control expenses, to utilize competitive bidding for projects and to prioritize projects. Council Member Tanaka left the meeting at 8:30 P.M. Mr. Keene reiterated the City's receipt of 8 percent of all Property Taxes collected. Mayor Kniss commented on the extreme difference between the lowest and highest Property Tax collected on parcels. Mr. Keene noted the median Property Tax was lower than the average Property Tax. Fifty percent of the community paid $800 in Property Taxes to the City annually. FINAL SENSE MINUTES Page 9 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Ms. Nose reported the primary share of Sales Tax revenue was generated by restaurants. Sales Tax revenue from leasing increased while Sales Taxes from miscellaneous retail deceased. Revenues from the Transient Occupancy Tax (TOT) increase implemented in 2015 and hotels that began operations in and after 2015 were dedicated to fund the 2014 Infrastructure Plan. General Fund expenses totaled $210.7 million in the FY 2019 Proposed Budget. Salary and benefit expenses comprised 60 percent of expenses. The Finance Committee recommended the City Manager identify reductions in General Fund expenses totaling $4 million in the remaining six months of the calendar year. The Budget Stabilization Reserve (BSR) Fund remained at or above the target level of 18.5 percent. The Proposed Budget balanced the budgets for FY 2019 and FY 2020 with expense reductions of $2.3 million recommended by the City Manager and $4 million recommended by the Finance Committee. The Proposed Budget continued to address the City's Unfunded Pension Liability by allocating $2 million to the Pension Trust Fund. Community Development Block Grant funding needed to be adjusted based on the approved allocation. Senate Bill (SB) 1 funding of approximately $1.2 million annually was assumed in the Proposed Budget. The Proposed Budget included continuation of parking services. Staff planned to transfer $14.7 million of Stanford University Medical Center Development Agreement funding for capital improvement investments over five years. Mr. Keene explained that the Capital Improvement Program (CIP) was a five year planning document. The Capital Budget allocated funding for projects in the first year of the CIP. Ms. Nose advised that the CIP contained capital investments totaling $746.9 million, of which $331.8 million was allocated to the General Capital Fund over five years. Mr. Keene added that $380 million of the $746 million was allocated to capital improvement projects within the Enterprise Funds. Ms. Nose continued by stating Staff recommended $221 million of the $746 million be appropriated for FY 2019 capital projects. Approximately half, $133 million, of the $221 million was associated with General Capital Fund activities. Infrastructure Plan projects were funded with $89 million of the $221 million. Mr. Keene clarified that the cost estimate to complete all Infrastructure Plan projects was $261 million, and those nine projects were to be completed within the five year term of the CIP. Once the Infrastructure Plan was complete, the funding streams dedicated to infrastructure projects were set to fund new, unidentified projects. Prioritization of the nine projects of the FINAL SENSE MINUTES Page 10 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Infrastructure Plan was set by the City Council in response to recommendations from the Infrastructure Blue Ribbon Commission (IBRC). The whole budget-setting process was a process of setting priorities. Ms. Nose reported 63 percent of the General Capital Fund, Capital Budget was allocated to buildings and facilities, 24 percent for traffic and transportation, 10 percent for streets and sidewalks and 3 percent for parks and open space. Staff recommended $88.9 million be allocated for FY 2019 projects from the Infrastructure Plan. Near-term challenges included Infrastructure Plan cost escalations, unfunded CIP projects, transportation initiatives, labor negotiations, Unfunded Pension Liability, City-owned assets operated by nonprofit organizations and a potential recession. Mr. Keene advised that the combined Operating and Capital Budgets reflected a commitment to ongoing values as expressed by the Council. A discussion of the $4 million reduction was an exercise in prioritization. Adjustments to the Municipal Fee Schedule warranted a Committee discussion and a presentation to the Council before the end of the 2018 calendar year. Public Hearing opened at 9:02 P.M. Sharon Erickson requested the Council not direct Staff to continue studying the proposal to outsource positions in the City Auditor's Office. The proposal to outsource all audit work ignored the value of independent, in-house auditors, which provided continuity of review and oversight. Bob Moss concurred with Ms. Erickson's comments. Over the years, the City Auditor had identified a number of problems and inefficiencies in City operations and millions of dollars in savings. He urged the Council not to adopt any major changes to Midtown and the Charleston-Arastradero Corridor until changes were fully evaluated. Wayne Martin expressed concern that the City's financial model was geared toward a 3 percent increase with very little input from the Council. He recommended the City consider financial modeling for timeframes larger than ten years. Mark Weiss commented on the Budget and the TOT. Public Hearing closed at 9:12 P.M. Council Member Scharff reported the Committee tasked the City Manager with proposing $4 million in reductions that are least harmful to the City in an effort to control the growth of the Unfunded Pension Liability. The FINAL SENSE MINUTES Page 11 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Committee recommended no changes to the overall Budget. The Council had prioritized capital projects through the Capital Budget. The document entitled "Semi-Annual Update on the Status of Capital Improvement Program Projects" was the best summary of prioritization of capital projects. The Finance Committee reviewed department budgets in detail with each department head. MOTION: Council Member Scharff moved, seconded by Vice Mayor Filseth to: 1. Adopt the Fiscal Year 2019 Budget Appropriation Ordinance, which includes: i. The City Manager’s Fiscal Year 2019 Proposed Operating and Capital Budgets, previously distributed at the April 30, 2018 City Council meeting; ii. Amendments to the City Manager’s Fiscal Year 2019 Proposed Operating Budget (as described in Staff Report, Attachment A, Exhibit 2); iii. Amendments to the City Manager’s Fiscal Year 2019 Proposed Capital Budget (as described in Staff Report, Attachment A, Exhibit 3); iv. Fiscal Year 2019 Proposed Municipal Fee Changes (as described in Staff Report, Attachment A, Exhibit 4); v. Fiscal Year 2019 City Table of Organization (as described in Staff Report, Attachment A, Exhibit 5); 2. Accept the June 30, 2017 actuarial valuation of Palo Alto’s Retiree Healthcare Plan and approve full funding of the annual Actuarially Determined Contributions (ADC) for Fiscal Years 2019 and 2020; 3. Approve amending Salary Schedules for: i. Management and Professional Group (MGMT); and ii. Service Employees International Union – Hourly (SEHL). Vice Mayor Filseth stated the Budget took the first step towards keeping up with the growing Unfunded Pension Liability. The pressure on finances was caused principally by the increasing cost structure of the Bay Area and the growing cost of servicing the existing Unfunded Pension and Health Liability. Postponement of addressing the Unfunded Pension Liability only increased FINAL SENSE MINUTES Page 12 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 the difficulty of addressing it. The Budget was not truly balanced if one considered the real cost of pensions. Council Member DuBois noted the City Council was contributing to cost reductions by eliminating two positions. He inquired whether use of reserve funds as a source of revenue was typical for the City. Ms. Nose responded yes. Depending on financial activities in the Enterprise Funds in any given year, Staff routinely utilized reserve funds but maintained reserve levels. Council Member DuBois inquired about the impact of a younger work force on City finances. Lalo Perez, Director of Administrative Services and Chief Financial Officer advised that the City's actuary conducted some analysis and determined a savings could result from a younger workforce after 15-20 years. Council Member DuBois asked if the replacement of the Enterprise Resource Planning (ERP) system was included in the Proposed Budget. Ms. Nose replied yes, in the capital improvement side of the Information Technology (IT) Fund. Council Member DuBois asked if there was a question of which year the replacement would occur. Ms. Nose suggested there were multiple questions regarding implementation of a new ERP system. Mr. Keene reported that the analysis of the ERP continued. In addition, key Staff transitions were a concern with implementing a new system. Council Member DuBois felt an ERP system would be key in operating the City efficiently with fewer people. The Pension Transparency Memo for the Unfunded Pension Liability was important. He wanted to ensure the City did not overpay the Unfunded Liability when compared to other cities. He was concerned about the relationship of the base-level utility bill with people on fixed incomes or with low incomes and incentivizing conservation. The Council needed to begin searching for new funding sources for Cubberley Community Center and the Animal Shelter. He inquired about a plan for replacing the audio-visual equipment in Council Chambers. Mr. Keene explained that funds had been placed in a reserve account and were not appropriated in the Budget. Once a plan was identified, Staff appropriated the funds through a midyear adjustment. FINAL SENSE MINUTES Page 13 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Council Member DuBois supported the City Auditor and more senior Staff positions in the City Auditor's Office. He inquired about the process for items referred to the Committee returning to the Council. Mr. Keene indicated the Council would need to validate the Committee's recommendations for $4 million in reductions and adjustments to the Municipal Fee Schedule. Staff planned to return to the Council before December, 2018. Council Member DuBois suggested the Council reconsider the layout of the infrastructure project for Embarcadero near El Camino once the Council identified the preferred grade separation options. Perhaps the Council was able to review the improvements for Embarcadero Road in conjunction with preferred grade separation alternatives. Mr. Keene preferred not to link the improvements with grade separations in the event one or the other proceeded. Council Member DuBois inquired about the possibility of referring the Embarcadero Road improvements to the Committee. Council Member Scharff thought the issue would be more appropriately discussed at the Council rather than the Committee level. Council Member DuBois questioned whether the $4.5 million for the improvements needed to be approved as part of the Budget. Mr. Keene recommended the Council take action on the Budget. The issue was understanding the decision for the Embarcadero Road improvements in the context of possibilities related to grade separations. A Council discussion of grade separations included the Embarcadero Road improvements. Vice Mayor Filseth felt it was premature to change the Budget as the Council had not changed the plan for the improvements. Council Member Wolbach recalled that two Council Members would have to recuse themselves from a discussion of grade separations. Council Member Scharff suggested Staff agendize a discussion for the City Council Rail Committee (CCRC). Mr. Keene concurred. Funds for the Embarcadero Road improvements were appropriated in FY 2018 and would be re-appropriated to FY 2019. FINAL SENSE MINUTES Page 14 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Council Member Scharff clarified that the CCRC could review the improvements in relation to grade separations, but the Council needed to make the decision regarding the improvements. Council Member Holman was delighted the Urban Forest Master Plan was funded. She inquired about the ability to reallocate funds from the tree trimming cycle while maintaining the seven-year cycle. Ms. Nose reported an analysis of the tree trimming contract demonstrated unexpected efficiency, which resulted in a cycle of five or six years. Staff determined the contract amount could be reduced without affecting the seven-year cycle. The amount of the contract reduction, which was $150,000, was reallocated to the Urban Forest Master Plan. Mr. Keene explained that Staff constantly reevaluated contracts and schedules. Ms. Nose reminded the Council that the contract with the new vendor extended for three years. Staff reviewed the cycle and the contract after reviewing the vendor's performance. Council Member Holman did not find any funds allocated to improvements for the Animal Shelter. Mr. Keene advised that the Budget contained more than $800,000 for the Animal Shelter. Staff continued to discuss the capital plant and its adequacy with Pets In Need. Ms. Nose indicated Staff appropriated $831,000 to the Animal Shelter, Project PE-19002, in the Capital Budget. Council Member Holman inquired about the meaning of rescinding the Committee's directive regarding the City Auditor's Office. Ms. Nose reported the Committee wished to formally rescind its recommendation to reduce Full-Time Equivalents (FTE) and to revise the Table of Organization regarding the City Auditor's Office. However, the Committee wanted Staff to consider delivery of audit services as a part of cost savings measures. Mr. Keene clarified that the Committee wished to rescind its direction but did not have sufficient time to discuss other concepts for the City Auditor's function. Council Member Holman asked if outsourcing the role of the City Auditor's Office had been removed from consideration. FINAL SENSE MINUTES Page 15 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Mr. Keene answered yes. Council Member Holman noted the Budget did not provide funding for positions above entry-level auditor. She questioned the amount of the savings for the Office of Sustainability. Mr. Keene reported Staff reduced funding for the Chief Sustainability Officer and increased funding for part-time or contract Staff. The change would not occur until November of the 2019 Fiscal Year. Council Member Holman inquired about plans for a low-income rental rate for community gardens, the methodology for determining market value of parks and the amount raised by increasing fees. Kristen O’Kane, Assistant Director of Community Services Department (CSD) advised that the current Fee Reduction Program applied to seniors, disabled residents and youth. In FY 2019, Staff added a category of low-income adults on a trial basis to determine community interest. The low-income adult rate applied to rental of community garden space. Mr. Keene remarked that the Council would review fees again in the context of a Committee recommendation for adjustments to the Municipal Fee Schedule. Council Member Holman inquired about a senior rate for the golf course. Mr. Keene stated rates for the golf course required a conversation rather than an answer. Mayor Kniss concurred with agendizing an item regarding golf course rates. Council Member Holman requested Staff present an item regarding senior rates for the golf course in August, 2018. Mr. Keene inquired whether an agenda item should be scheduled for the Committee or Council. Mayor Kniss felt the Council needed some feedback as to the logic of the fees being charged. Council Member Scharff believed more time was needed to develop data and feedback about fees. Mr. Keene advised that Staff would schedule an item for the Council. FINAL SENSE MINUTES Page 16 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Council Member Holman inquired about the relationship between a Planning Arborist and half-time Landscape Architect Park Planner. Ms. Nose explained that a Landscape Architect license was needed to review park plans subject to State mandates. The department requested a reclassification of the Planning Arborist so that Staff could continue to review plans. The full-time position was being split between the Public Works Department and Development Services Department (DSD). Mr. Keene added that the reclassification increased Staff capacity. Council Member Holman asked if the Landscape Architect Park Planner could perform arborist work as well. Mike Sartor, Public Works Director reported Staff reclassified Dave Dockter's former position to a higher level so the position could perform the duties of a Planning Arborist and detailed reviews of planning applications. Council Member Holman requested Staff comment regarding performance of mitigation monitoring. Mr. Keene promised to provide the Council with an email regarding mitigation monitoring. Council Member Wolbach felt the City was headed in the right direction with structural Budget changes. He opposed outsourcing the City Auditor's Office and construction of a Downtown garage. The City needed to study and invest in climate change adaptation. Council Member Kou understood the Committee directed the City Auditor to return to the Committee in August, 2018 with plans to make the office productive; therefore, the City Auditor's Office was in limbo. That was unacceptable. Mr. Keene advised that the Proposed Budget contained funding for the City Auditor's Office and authorized the positions shown in the Table of Organization. There was no change in the City Auditor's Office. Council Member Kou inquired about a Contingency Plan if the City did not receive SB 1 funding. Ms. Nose indicated SB 1 funding was programmed in the outer years for maintenance of streets and sidewalks. In FY 2019, SB 1 funds were allocated to the Charleston-Arastradero project. FINAL SENSE MINUTES Page 17 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Council Member Kou inquired about a contingency plan for TOT funding from the two Marriott hotels, should they not be completed as anticipated. Ms. Nose noted Agenda Item Number 16 pertained to a Contingency Plan. Council Member Kou concurred with Council Member Tanaka's comments regarding prioritization of Infrastructure Plan projects. Mayor Kniss recounted a brief history of the City's Pension Liability. The Council hoped to contain the growth of the Unfunded Pension Liability by contributing more funds each year. Council Member Scharff indicated the City's Unfunded Pension Liability was in the top ten of the State per capita. Mr. Keene clarified that the City's Unfunded Liability was greater than other cities' liability because the City provided more services than most cities. By calculating the Unfunded Liability with a lower rate of return, the Council was leading other cities in the State. MOTION PASSED: 7-1 Kou no, Tanaka absent Council Member DuBois left the meeting at 10:22 P.M. Council took a break from 10:22 P.M. to 10:27 P.M. 15. Resolution 9777 Entitled, “Resolution of the Council of the City of Palo Alto Placing an Initiative Measure on the November 6, 2018 Ballot to Amend Title 5 of the Palo Alto Municipal Code to Limit Health Care Costs That Hospitals, Medical Clinics and Other Health Care Providers May Charge Patients and Other Payers.” Molly Stump, City Attorney reported the Council directed Staff to return with administrative elements needed to place the initiative on the November ballot. Staff drafted the proposed ballot language carefully and sought formal feedback regarding the language. An At-Places Memorandum recommended minor changes to the proposed ballot language. In drafting the ballot language, Staff had to be impartial and to avoid prejudice either for or against the measure. Staff planned on proceeding with preparing factual and objective information regarding the potential effect of the measure if adopted. The measure was quite complex and had no precedent; therefore, Staff focused on impacts to the City. Curt Kirschner, speaking for Sarah Diboise, Stephanie Bruzzese, Karen Lambert, Patrick Bartosch and as legal representative for Stanford Health Care (SHC) and Palo Alto Medical Foundation (PAMF) suggested the ballot FINAL SENSE MINUTES Page 18 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 language be revised to "[s]hall the Palo Alto Municipal Code (PAMC) be amended to regulate and limit the amount that hospitals, medical clinics and other health care providers in Palo Alto and may charge patients or other individuals, primary insurers, secondary insurers and other payers excluding government payers?" The initiative did not regulate healthcare costs, so including references to healthcare costs in the language was inaccurate and misleading to voters. The initiative sought to limit the payment made to healthcare providers. Quinn McKenna, SHC Chief Operating Officer spoke for Jon Cowan, Jenn Torai, Mary Stutts and Mizhiko Tanabe and requested the Council oppose the measure. The initiative did not limit the rates that insured patients and employers paid to insurance companies. The initiative limited the services Palo Alto healthcare providers could deliver by restricting funds for community healthcare programs and services. Healthcare oversight was expensive, and the City did not have the experience or expertise to provide oversight. SHC planned on conducting an in-depth study of the initiative's impact. The City's Administrative Services Department (ASD) was tasked with monitoring and oversight of patient billing for all providers in Palo Alto and Stanford. Claims that City costs were covered by fees or penalties was ridiculous. Assertions that Palo Alto healthcare providers paid more money to fund the City's administrative burden devastated patient care and healthcare providers and provided a significant windfall to insurance companies. Liz Vilardo, PAMF Chief Executive Officer and President speaking for Jim Macsood, Andrew Epstein, Andy Coe and David Jones remarked that the initiative dramatically limited healthcare services, community benefits and access to care and would hurt individual medical practices, mental health providers, physician groups and hospitals. The initiative impacted the City's ability to provide public services. The City did not have the expertise and funding to regulate healthcare providers. The measure did not address healthcare costs and did nothing to improve the quality of care or the safety of patients. She requested the Council oppose the measure and change the language to reflect the substance of the measure. Olga Grujic believed the measure could limit her access to healthcare and prevent her from obtaining the best healthcare possible. Brian Dorsey shared his negative experience with healthcare provided by SHC. Tanya Komarova, shared her observations of SHC patient care. FINAL SENSE MINUTES Page 19 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Dan Walls advised that SHC had not addressed concerns raised by Stanford University graduate students. He supported the ballot initiative. Dr. Carliza Marcos indicated dentists opposed the initiative because it was misleading and misguided. The initiative did not reduce the costs of healthcare, increase patient safety or limit patients' premiums. The initiative limited dentists' ability to operate a viable practice. David Entwistle, SHC President and Chief Executive Officer asked the Council to revise the ballot language. SHC opposed the initiative because it would not reduce costs or increase quality. The initiative limited access to healthcare. Veronica Lowery supported the ballot measure and asked the Council to let the voters have their say. MOTION: Council Member Scharff moved, seconded by Mayor Kniss to adopt a Resolution calling an election to submit the Initiative to the voters at the next general municipal election on November 6, 2018 on the Palo Alto Accountable and Affordable Health Care Initiative including the following Ballot Question: “Shall the Palo Alto Municipal Code be amended to regulate and limit the amount that hospitals, medical clinics and other health care providers in Palo Alto may charge patients or other individuals, primary insurers, secondary insurers, and other payers, excluding government payers.” Council Member Scharff felt public comments regarding the accuracy of the ballot language were persuasive. Mayor Kniss indicated the City was not staffed to regulate healthcare. The initiative placed a substantial burden on the City. Council Member Kou asked if the City had the authority to dictate healthcare pricing. Ms. Stump advised that the initiative established a local Ordinance that had the City oversee a limitation and regulation on the types of costs and the amounts of costs that were charged. Healthcare providers and cities in other jurisdictions raised questions about the ability of General Law Cities to have that type of regulation. She thought issues for Charter Cities could be different. Once an initiative qualified for the ballot, California law presumed voters had their say. With voter approval of the measure and well-funded advocates on both sides of the issue, there were court proceedings that determined the permissible extent of regulation. FINAL SENSE MINUTES Page 20 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 MOTION PASSED: 7-0 DuBois, Tanaka absent 16. Resolution 9778 Entitled, “Resolution of the Council of the City of Palo Alto Placing a Measure on the November 6, 2018 General Election Ballot to Increase the City’s Transient Occupancy Tax (TOT) by Two Percentage Points.” Molly Stump, City Attorney reported the Council should decide whether to call an election to increase the Transient Occupancy Tax (TOT) by two percentage points, or a lesser amount, and whether the ballot language should comply with the California Business Roundtable Initiative (CBRI). The CBRI required a two-thirds majority to approve any tax measures placed on the 2018 ballot unless the courts invalidated some or all of the CBRI. James Keene, City Manager advised that if the Council approved the CBRI language and the CBRI failed, a simple majority vote would approve the TOT Measure. If the CBRI passed, then the TOT Measure would need a two- thirds majority to pass. Ms. Stump concurred, unless the courts invalidated some or all of the CBRI. Kiely Nose, Director Office of Management and Budget (OMB) indicated the City's pollster reported the CBRI had not qualified for the ballot but was expected to qualify. The key issue was not the CBRI language of "unrestricted general revenue purposes" but attaining a two-thirds majority for the TOT Measure. In the poll, support for the TOT Measure dropped from 67 percent to 62 percent when the CBRI language was included in the TOT ballot language. Mr. Keene clarified that the TOT Measure could be approved with a majority vote if the CBRI failed. If the CBRI passed and the TOT ballot language did not include the CBRI language, then the City had to place the TOT Measure on a subsequent ballot. He recommended the TOT ballot language contain the CBRI language. Mayor Kniss requested the percentage approval for the 2014 TOT increase. Lalo Perez, Administrative Services Department Director and Chief Financial Officer responded more than 70 percent. Mr. Keene advised that six Council Members must approve a Motion to place the TOT Measure on the ballot. MOTION: Council Member Fine moved, seconded by Council Member Scharff to: FINAL SENSE MINUTES Page 21 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 A. Adopt a Resolution to submit a measure to the voters at the general municipal election on November 6, 2018, to increase the City’s Transient Occupancy Tax (TOT) by two (2) percentage points; and B. Direct Staff to use ballot language conforming to constitutional requirements that would become effective if a statewide measure to amend the California Constitution and impose new procedures on local tax measures is adopted by California voters at the November 6, 2018 election. Council Member Fine remarked that the TOT increase would begin funding the gap in infrastructure project costs. The CBRI language could hurt the TOT Measure if it caused less than 50 percent approval of the TOT Measure. Including the CBRI language was the safer choice. Mr. Perez reported the 2014 TOT increase passed with 76.28 percent approval. Council Member Scharff believed the increase would fund the Infrastructure Plan and perhaps the purchase of real property for parks or Animal Shelter improvements. In addition, the upsurge increased the City's cash flow. Vice Mayor Filseth wanted to fund some of the projects on the community amenities list. If everything worked out, the TOT increase went toward funding some of those projects, as well as infrastructure projects. Council Member Holman requested confirmation that six Council Members would need to approve a Motion to call the election. Ms. Stump reported if the CBRI was approved and if the two-thirds provision was upheld by the courts, then a two-thirds vote of the Council was required. If approved, the CBRI required a two-thirds vote of the governing body to place a tax measure on the ballot and a two-thirds majority vote to approve a tax measure. Council Member Holman did not support the TOT increase but did not want to prevent the measure from being placed on the ballot. She did not support the City having the highest TOT rate in the State and suspected that fact could influence support. The Council needed to do a better job of expending funds before the Council asked for additional funds. The 2018 business climate for hotels was different from the 2014 climate. She supported the TOT ballot measure so that voters could demonstrate their support or opposition. FINAL SENSE MINUTES Page 22 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Mayor Kniss did not like the optics of having the highest TOT rate in the Country. Council Member Scharff did not accept a lower TOT increase because he wanted the flexibility to fund more projects. Council Member Fine noted the Council chose the lower TOT increase option in 2014, but that amount had not fully funded the infrastructure gap. The City's TOT rate was already in the neighborhood of the top one or two rates in the State. Council Member Kou was disappointed the Council had not explored other means of generating revenue. The hotel industry was being targeted. She did not support an increase of two or one and a half percentage points. Council Member Fine concurred with Council Member Holman's and Council Member Kou's concerns; however, the 2012 City Council crafted the Infrastructure Plan based on increases in TOT revenue. The poll demonstrated a lack of support for a Parcel Tax. The TOT increase was a way to tax businesses to pay for infrastructure upgrades. Council Member Holman requested clarification of the need for six Council Members to approve a Motion. Ms. Stump reported five votes approving a ballot measure would not comply with the procedures of the CBRI. She did not know whether a court would affirm provisions of the CBRI and hold the provisions to be retroactive. For the TOT Measure to comply with provisions of the CBRI, assuming the CBRI Measure passed and survived litigation, the TOT Measure had to be placed on the ballot by six Council Members, had to contain the CBRI language, and had to attain a two-thirds majority. Approval by five Council Members placed the measure on the ballot. Council Member Fine explained that other cities imposed tourism taxes and impact taxes in addition to a TOT so that total tax rates exceeded 16 percent. Vacancy rates and the revenue generated by a TOT increase showed the increase was supportable. AMENDMENT: Mayor Kniss moved, seconded by Council Member Holman to replace in the Motion Part A, “two (2) percentage points” with “one and a half (1.5) percentage points.” Council Member Holman felt the Substitute Motion was a better proposal and would support a rate of 15.5 percent over a rate of 16 percent. FINAL SENSE MINUTES Page 23 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Mayor Kniss asked if Council Member Kou could support a rate of 15.5 percent. Council Member Kou wanted to purchase the AT&T property for a park and supported 15.5 percent and inclusion of purchase of the AT&T property for a park. Council Member Scharff stated revenues generated by a rate of 15.5 percent would not be sufficient to purchase the real property. Mayor Kniss suggested the real property replace another project on the list, perhaps the parking garage. Mr. Keene advised that a Headcount Tax was a better nexus with businesses and grade separations. Vice Mayor Filseth observed that 0.5 percent equated to $1.50 on a $300 room rate and $8 million in bond revenue. Council Member Holman noted four Council Members supported a 2 percent increase and two Council Members supported a 1.5 percent increase; therefore, an increase of 1.5 percent was going to prevail. Council Member Fine thought a 2 percent increase was advantageous given the City's infrequent attempts to obtain new revenue sources. He thought the $8 million in revenue could be the one floor Staff recommended removing from the California Avenue garage but the Council retained. Council Member Scharff explained that new hotels would provide more tax revenues that could be leveraged with bonds. Council Member Fine encouraged Council Members to oppose the Substitute Motion. Council Member Wolbach commented that the tax would be imposed on hoteliers rather than residents. A Business Headcount Tax was likely to be approved in 2020. Businesses, residents and hoteliers needed be asked to pay for City improvements. He questioned whether the optics were worth $8 million in revenue and the projects that amount could fund. Mayor Kniss reiterated that she had never been enthusiastic about a 2- percent increase. AMENDMENT PASSED: 5-2 Fine, Kou no, DuBois, Tanaka absent FINAL SENSE MINUTES Page 24 of 24 Sp. City Council Meeting Final Minutes: 6/18/18 Council Member Wolbach believed the Council should seriously reconsider constructing a new Downtown parking garage. MOTION AS AMENDED RESTATED: Council Member Fine moved, seconded by Council Member Scharff to: A. Adopt a Resolution to submit a measure to the voters at the general municipal election on November 6, 2018, to increase the City’s Transient Occupancy Tax (TOT) by one and a half (1.5) percentage points; and B. Direct Staff to use ballot language conforming to constitutional requirements that would become effective if a statewide measure to amend the California Constitution and impose new procedures on local tax measures is adopted by California voters at the November 6, 2018 election. MOTION AS AMENDED PASSED: 6-1 Kou no, DuBois, Tanaka absent State/Federal Legislation Update/Action None. Council Member Questions, Comments and Announcements Council Member Holman reported the Peers Park dog park was extremely popular, well-situated, and well-done. Mayor Kniss noted the City now had three official dog parks. Council Member Kou thanked Council Member Scharff and the Santa Clara County Cities Association for approving the Memorandum of Understanding and Bylaws for the Roundtable. Council Member Scharff advised that the Santa Clara County Cities Association approved formation of a Roundtable for the South Bay and Santa Cruz. The next step was approval by each city. Adjournment: The meeting was adjourned at 11:55 P.M.