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Home My WebLink About2010-05-17 City Council Agenda Packet 1 05/17/10 MATERIALS RELATED TO AN ITEM ON TH IS AG ENDA SUBMITTED TO TH E CITY COUN CIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AV AILABLE FOR P UBLIC I NSPECTION IN TH E CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Agenda posted according to PAMC Section 2.04.070. A binder containing supporting materials is available in the Council Chambers on the Friday preceding the meeting. Special Meeting May 17, 2010 6:00 PM ROLL CALL COUNCIL CONFERENCE ROOM STUDY SESSION 1. Study Session with Youth Council on Palo Alto Youth Issues ATTACHMENT 7:00 P.M. or as soon as possible thereafter COUNCIL CHAMBERS SPECIAL ORDERS OF THE DAY 2. Selection of Appli cants to be Interviewed for the Human Rela tions Commission ATTACHMENT 3. Proclamation Recognizing May as Mental Health Month 2 05/17/10 MATERIALS RELATED TO AN ITEM ON TH IS AG ENDA SUBMITTED TO TH E CITY COUN CIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AV AILABLE FOR P UBLIC I NSPECTION IN TH E CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. ATTACHMENT CITY MANAGER COMMENTS ORAL COMMUNICATIONS Members of the public may speak to any item not on the agenda; three minutes per speaker. Council reserves the right to limit the duration or Oral Communications period to 30 minutes. CONSENT CALENDAR Items will be voted on in one motion unless removed from the calendar by two Council Members. 4. Approval of Te rmination of NC PA Nat ural Gas Procurement Program Third Pha se Agreement , Including the City’s Obligations Under the Agreement, Upon Effective Date of New Facilities Agreement Schedules for Fuel Procurement CMR 224:10 AND ATTACHMENT 5. 2nd Reading: Adoption of an Ordinance Approving and Adopting a Plan for Improvements to the Nolte Property Addition to Mitchell Park (First reading May 3, 2010 – Passed 9-0) 6. 2nd Reading: Adoption of an Ordinance Amending Sec tion 2.30.360 (Exemptions from Competitive Solicitatio n Requirements) of Title 2 (Adminis trative Code) of the Palo Alto Municipal Code Regarding Contracts and Purchasing Procedures (First reading May 3, 2010 – Passed 9-0) 7. Appointments to the Historic Resources Board for Three Terms Ending on May 31, 2013 ATTACHMENT AGENDA CHANGES, ADDITIONS, AND DELETIONS HEARINGS REQUIRED BY LAW: Applications and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and put up to three minutes for concluding remarks after other members of the public have spoken. OTHER AGENDA ITEMS: Public comments or testimony on agenda items other than Oral Communications shall be limited to a maximum of three minutes per speaker. 3 05/17/10 MATERIALS RELATED TO AN ITEM ON TH IS AG ENDA SUBMITTED TO TH E CITY COUN CIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AV AILABLE FOR P UBLIC I NSPECTION IN TH E CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. ACTION ITEMS Include: Public Hearings, Reports of Committees/Commissions, Ordinances and Resolutions, Reports of Officials, Unfinished Business and Council Matters 8. Public Hearing: to Hear Objections to the Lev y of Proposed Assessments on the Palo Alto Downtown Business Improvement District and Adoption of a Resoluti on Confir ming the Report of the Advisory Board and Levying an Assessment for Fiscal Year 2011 on the Downtown Palo Alto Business Improvement District CMR 241:10 AND ATTACHMENT 9. Adoption of (1) Resolution of Intent and (2) Ordinance to Ame nd the Contract Between the Board of Administra tion of the California Public Employees’ Re tirement System (CalPERS) and the City of Palo Alto to Implement California Government Code Section 20475 (2.0% @ 60 Full Formula) Pro viding a Second Tier of Di fferent Level of Benefits for New Miscellaneous Employees CMR 249:10 AND ATTACHMENT 10. Approval of Recom mendation from the High Speed Rail Committee Regarding Revisions to Guiding Pr inciples; and Discussion of High Speed Rail Issues Summary (Item continued from 5/10/10) CMR 250:10 PUBLIC COMMENT 11. Policy and Services Commit tee Recommendati ons Regarding Council Formation of an Infrastructure Blue Ribbon Committee CMR 247:10 AND ATTACHMENT 4 05/17/10 MATERIALS RELATED TO AN ITEM ON TH IS AG ENDA SUBMITTED TO TH E CITY COUN CIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AV AILABLE FOR P UBLIC I NSPECTION IN TH E CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. 12. Colleagues Memo from Council Members Shepherd and Schmid regarding City Investment Policy (Item continued from 5/10/10) ATTACHMENT ******************************* AT THIS POINT THE CITY COUNCIL WILL ADJOURN AND RECONVENE AS THE PUBLIC IMPROVEMENT CORPORATION ******************************* COUNCIL MEMBER QUESTIONS, COMMENTS, AND ANNOUNCEMENTS Members of the public may not speak to the item(s). ADJOURNMENT Persons with disabilities who require auxiliary aids or services in using City facilities, services, or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact 650-329-2550 (Voice) 24 hours in advance. Page 1 of 1 CITY OF PALO ALTO MEMORANDUM TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: COMMUNITY SERVICES DATE: MAY 17, 2010 SUBJECT: POTENTIAL LIST OF TOPICS OF DISCUSSION FOR THE JOINT STUDY SESSION SPECIAL MEETING WITH THE PALO ALTO YOUTH COUNCIL Below are the proposed topics of discussion for the joint study session with the PALO ALTO YOUTH COUNCIL scheduled for May 17, 2010 at 6:00 PM. 1) 2009-2010 PAYC Presentation a. Accomplishments b. Future Plans c. Issues facing Palo Alto Teens 2) Open discussion on presentation 3) Other items ____________________________ _____________________ Rob de Geus STEVE EMSLIE Division Manager, Recreation & Golf Services Deputy City Manager May 17, 2010 HONORABLE CITY COUNCIL City of Palo Alto SUBJECT: Selection of Applicants to be interviewed for the Human Relations Commission Dear Council Members: Enclosed are ten applications submitted for three terms on the Human Relations Commission. Two of the terms are three year terms which will end on March 31, 2013 and one is an unexpired term which will end on March 31, 2012. The five applicants that interviewed before the Council on March 18, 2010 are still interested in serving on the Human Relations Commission. Five additional applications have since been received. At the Council Meeting on Monday, May 17, 2010 the City Council will select applicants to be interviewed for the Human Relations Commission, with the interview date to be determined. Past practice has been to interview only the new applicants. The City Clerk will announce the results. Applicants who receive four or more votes will be scheduled for an interview. The applicants are as follows: Name Address Phone 1. Masuma Ahmed* 2421 Greer Road, 94303 650-384-5759 2. Renee Budak 767 Talisman Court, 94303 650-855-9344 3. Theresa Chen* 468 Lowell Avenue, 94301-3813 650-329-8456 4. Richard Dworak 727 Seneca Street, 94301-2233 650-321-5318 5. Robert Kuhar* 947 Addison Avenue, 94301 650-324-1447 6. Diane Morin* 1635 El Camino Real, 94301 650-325-3830 7. Jill O'Nan* 241 Curtner Avenue, Apt. T, 94306 650-493-7479 8. Anne Ozer 1850 Sand Hill Road. #9, 94304 650-328-2365 9. Maxine Rand 820 Colorado Avenue, 94303 650-813-1222 10. Sunita Verma 3495 Ross Road 94303 650-493-3792 * Applicants from the first recruitment Respectfully submitted, Ronna Jojola Gonsalves Deputy City Clerk Enclosures cc: All applicants (without enclosure) Donna Grider, City Clerk Greg Hermann, Staff Liaison CITY OF PALO ALTO PROCLAMATION MENTAL HEALTH MONTH WHEREAS, in 1949, the U.S. Congress officially recognized May as “Mental Health Month”; and WHEREAS, the President’s New Freedom Commission (2003) declared that mental disorders and mental health problems affect people of all backgrounds and all stages of life, and no one is immune; and WHEREAS, Surgeon General, Dr. David Satcher, in his 1999 "Call to Action to Prevent Suicide " stated suicide in the United States is a serious public health issue and the most preventable form of death; and WHEREAS, one in 10 children has a serious mental health disorder that, if untreated, can lead to school failure, physical illness, substance abuse and even suicide; and the average age of onset of the major mental illnesses is 15 years old; and WHEREAS, suicide is frequently the tragic outcome of a brain disease with 70% of teenage suicides and 90% of adult suicides the result of a diagnosable and treatable illness; and WHEREAS, the World Health Organization found mental illnesses rank first in terms of causing disability in the United States and, collectively, are the most prevalent America health problem today - more common than cancer, lung and heart disease combined; and WHEREAS, educating people on good mental health and removing stigma from mental illness through treatment, recovery and resiliency is enlightened action; and WHEREAS, the National Alliance on Mental Illness, NAMI of Santa Clara County, and their State and national partners observe Mental Health Month each May to raise awareness and understanding of mental health and illness. NOW, THEREFORE, BE IT RESOLVED the City of Palo Alto, hereby proclaims May 2010 Mental Health Month in the City of Palo Alto, and calls upon all citizens, government agencies, public and private institutions, businesses and schools to join us in our vision for community mental health care through treatment, recovery and resiliency. PRESENTED: May 2010 ______________________________ Patrick Burt Mayor , ;, TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: UTILITIES DATE: MAY 17,2010 CMR: 224:10 REPORT TYPE: CONSENT SUBJECT: Approval of Termination of NCPA Natural Gas Procurement Program Third Phase Agreement, Including the City's Obligations Under the Agreement, Upon Effective Date of New Facilities Agreement Schedules for Fuel Procurement RECOMMENDATION Staff recommends that City Council approve and authorize the City Manager to execute the attached Tennination of Natural Gas Procurement Program Third Phase Agreement. BACKGROUND The Northern California Power Agency (NCPA) is an organization of municipal electric utilities including Palo Alto. NCPA arranges for delivery of the City's electric power and manages electric resources that Palo Alto jointly owns with other NCPA members. In 1991, Palo Alto entered into an agreement to purchase natural gas through NCPA's gas procurement program in order to establish a back-up natural gas supply alternative, but no gas was ever purchased by Palo Alto under this agreement. In 1993, NCPA passed a resolution redefining the members' participation percentages and obligations in the gas procurement program. At Palo Alto's request to withdraw from the program, a clause in the resolution attempted to terminate Palo Alto's obligations under the agreement without actually amending the contract. Palo Alto signed the NCPA resolution, which purportedly ended Palo Alto's participation in the gas procurement program. Since that time, the parties have treated Palo Alto as a non-participant in the program. DISCUSSION Another NCPA member, Turlock Irrigation District, now plans to leave the gas proeurcment program, and, as a result, NCPA is tenninating the associated contracts. Both NCPA's legal counsel and Palo Alto's City Attorney recommend that Palo Alto execute the Termination of Natural Gas Procurement Program Third Phase Agreement to assure that Palo Alto is fully protected from any possible future, obligations resulting from NCPA's gas procurement program. Additional infonnation is provided in the NCPA Commission Staff Report (Attachment B). CMR:224:10 Page 1 of2 RESOURCE IMPACT This project has no resource impact. POLICY IMPLICATIONS There are no policy implications. ENVIRONMENTAL REVIEW The provision of these services do not constitute a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under CEQA is required. ATTACHMENTS A. Termination of Natural Gas Procurement Program Third Phase Agreement B. NCP A Commission Staff Report March 11, 2010 PREPARED BY: REVIEWED BY: KARLA DAILEY Senior Resouree Planner ~RATCHYE \jAssistant Director, Utilities Resource Management VAL~ONG DEPARTMENT APPROVAL: Director of Utilities CITY MANAGER APPROV AL: KEENE Ci c:rv1R: 224: 10 Page 20f2 , " TERMINATION OF NATURAL GAS PROCUREMENT PROGRAM THIRD PHASE AGREEMENT .ATTACHMENT A This Termination of Natural Gas Procurement Program Third Phase Agreement ("this Termination") is made and entered into as of this day of , 20 I 0 by and between the Northern California Power Agency, a California joint powers agency, and the Cities of Alameda, Lodi, Lompoc, Palo Alto, and Roseville and the Turlock Irrigation District (collectively, the "Parties") (the Parties other than NCPA are referred to herein as "the Participants"), and WITNESSETH: WHEREAS, on March 28, 1991, the Commission of the Northern California Power Agency ("the Commission") adopted its resolution no. 91-09, approving the Natural Gas Procurement Program Service Schedule ("the Service Schedule") authorizing NCPA to procure contract and other rights for the transportation, storage and supply of natural gas as fuel to the NCPA Combustion Turbine (CT1) Project, the Combined Cycle (STIG-CT2) Project (Unit One-Lodi and Unit Two-Ceres also known as Turlock), and for the needs of those NCPA members executing the Service Sehedule; and WHEREAS, the Service Schedule contemplated that it would be superseded by a "third phase agreement"; and WHEREAS, on or about November 6,1991 NCPA and the Participants entered into the Natural Gas Procurement Program Third Phase Agreement (" the Third Phase Agreement") as contemplated by the Service Schedule and which by its terms superseded the Service Schedule; and WHEREAS, on or about September 15, 1993 the Commission adopted its resolution no. 93- 16 which transferred the Natural Gas Procurement Program to the STIG-CT2 Project and additionally attached Gas Service Schedule A ("Schedule A") which is a service schedule related solely to the Turlock Irrigation District. Said resolution, copies of which were executed by NCPA and the Turlock Irrigation District, appears to hav .. been intended as a contract. In addition, said resolution also appears to attempt to terminate the obligations of the City of Palo Alto under the Third Phase Agreement, and although an amendment to the Third Phase Agreement to that effect has not been approved, the Parties have since treated Palo Alto as not being a participant under the Third Phase Agreement; and WHEREAS, NCPA is, concurrently with the approval of this Termination, approving new Schedules as attachments to its Facilities Agreement by which NCPA intends to procure contract and other rights for the transportation, storage and supply of natural gas as fuel to the cn and Unit One ofSTIG-CT2. The intention is that each NCPA Project requiring natural gas will have its own independent Facilities Agreement Schedule defining the terms by which the participants in the respective projects have determined to acquire natural gas; and WHEREAS, the Facilities Agreement Schedules upon adoption will supersede the Third Phase Agreement and the Parties desire to formally tenninate the Third Phase; and WHEREAS, section 25 of the Third Phase Agreement provides that it may not be tenninated without the consent of all Participants and NCP A and unless the means have been established to timely pay, extinguish, or discharge, without liability to NCPA or any Participant, all obligations entered into and liabilities incurred under the Third Phase Agreement; and WHEREAS, this Termination includes the obligation of the Participants to pay for those net costs and liabilities incurred under the terms of the Third Phase Agreement, whether known or unknown, and the obligation ofNCPA to pay Participants any funds owing under the tenns of the Third Phase Agreement; and WHEREAS, the new Schedules, to which the Cities of Alameda, Lodi, Lompoc and Roseville (but not the City of Palo Alto or the Turlock Irrigation District) will be subject as signatories to the Facilities Agreement, include ratification of pre-existing term gas pipeline agreements the term of which extends beyond the Effective date of this Termination and entered into by NCP A under the tenns of the Third Phase Agreement. The Cities of Alameda, Lodi, Lompoc, and Roseville will be responsible for the on-going costs and obligations of those pipeline agreements under the terms ofthe Facilities Agreement. NOW, THEREFORE, the Parties agree as follows: I. When this Tennination takes effect in accordance with Section 6, NCPA shall immediately cease purehasing natural gas under the Third Phase Agreement or incurring new obligations under it, and shall immediately begin procurement of natural gas for the CT No. I Project and Unit One of the STIG-CT No.2 Project utilizing the new Facilities Agreement Schedules. 2. Within sixty (60) days NCPA shall provide a closing statement to all Participants for all known costs or liabilities incurred pursuant to the Third Phase Agreement separately setting forth all credits and debits (which statement may be included in the monthly NCP A "All Resources Bill"), and which shall be paid by the Participants in accordance with the terms of the Third Phase Agreement. Should any Participant be entitled to payment of funds by NCP A, NCP A shall pay such funds within the same time period during which Participants would be required to pay NCP A. If and when any unknown cost~ or liabilities incurred pursuant to the Third Phase Agreement or pursuant to Resolution no. 93-16 arise, NCPA shall present such net costs to the Participants who shall pay such costs in accordance with the terms of the Third Phase Agreement or said resolution, respectively, and if any Participant is entitled to paymentof any funds, NCPA shall pay such funds to such Participant at the same time as the Participant would be obligated to pay funds to NCPA .. The Parties agree that, in accordance with the intent expressed in Resolution no. 93-16, none of such costs or liabilities shall be allocated to Palo Alto, which shall be treated for purposes of this Termination as if the Third Phase Agreement had been amended to exclude that Participant in 1993. The Cities of Alameda, Lodi, Lompoc and Roseville acknowledge that, upon approval of the new Facilities Agreement Schedules as contemplated by this Termination, existing gas pipeline Termination of Natural Gas Procurement Program Third Phase Agreement 1381743,3; rev. 412010 Page 2014 agreements the term of which extends beyond thc Effective Date of this Termination, shall be deemed to be ratified by the Cities of Alameda, Lodi, Lompoc, and Roseville and authorized by those new Facilities Agreement Schedules authorizing the NCPA Commission to periodically authorize contracts with third persons for transportation and storage services. The Cities of Alameda, LOOi, Lompoc and Roseville agree to pay costs arising out of the preexisting pipeline agreements under the terms of the Facilities Agreement. 3. The Third Phase Agreement is hereby terminated, and except for the obligations to pay outstanding costs and liabilities, net of any credit or debit adjustments, pursuant to section 2 of this Termination as well as any unknown net costs that arise subsequent to the closing statement, and the indemnity obligations of section 30 of the Third Phase Agreement which shall survive this Termination, all rights, obligations, and liabilities of the Parties to each other with respect to the Third Phase Agreement are extinguished and released. 4. This Termination may be executed in any number of counterparts and each executed counterpart shall have the same force and effect as an original instrument and as if all signatories to all of the counterparts had signed the same instrument. 5. Eaeh Participant executing this Termination warrants and represents that it has agreed to be bound by the terms of this Termination and that it has been executed after authorization and approval by its governing body. 6. This Termination shall take effect upon the later of: (a) the adoption and effective date of the Facilities Agreement Schedules for gas purchases for the CTI and Unit One of the STIG-CT2 project; (b) the effective date of such agreement or agreements by which TID makes alternative gas purchase, management and transportation arrangements replacing such services which it may have received directly or indirectly under the Third Phase Agreement or under Resolution no. 93-16; (c) the effective date of the permanent assignment to TID of its share of all pipeline rights which NCPA holds and to which TID is entitled to a 50% share on the pipeline systems of NOVA Gas Transmission Limited, Foothills Pipe Lines Ltd., Gas Transmission Northwest Corporation and Pacific Gas and Electric Co.; and (d) execution of this Termination by all Parties. IN WIlNESS WHEREOF the Parties by the signatures of their duly authorized representatives below have executed and delivered this Termination. NORTHERN CALIFORNIA POWER AGENCY By: ~--~------------------Its: General Manager Date: CITY OF ALAMEDA By: Its: --------------- --~.~.--~ .. --~.--~ Date: ______________ _ Termination of Natural Gas Procurement Program Third Phase Agreement 1381743v3; "",.412010 Approved as to form: General Counsel Approved as to form: City Attorney Page 3 014 CITY OF LODI By: ______________________ __ Its: _____________ _ Date: _______ _ CITY OF LOMPOC By: ___________ ___ Its: ' ------ Date: _________ _ CITY OF PALO ALTO By: ___________________ _ Its: ______________ _ Date: ________ _ CITY OF ROSEVILLE By: ___________________ _ Its: _____________ _ Date: _________ _ TURLOCK IRRIGATION DISTRICT By: ___________________ _ Its: ________ _ Date: _________ _ 1381743,3 Termination of Natural Gas Procurement Program Third Phase Agreement 1381743v3; rev. 412010 Approved as to form: City Attorney Approved as to form: City Attorney Approved as to form: City Attorney Approved as to form: City Attorney Approved as to form: General Counsel Page 4 of4 Commission Staff Report Date: March 11, 2010 To: NCPA Commission ATTACHMENT B 651 Commerce Drive Rosev1lle, CA 95678 phone (916) 781-3636 fax (916) 783-7693 web www,ncpa"com AGENDA ITEM NO.: Subjec1: Natural Gas Procurement Program (NGPP) Termination and New Facilities Agreement Schedules for Fuel Procurement Background This Commission Staff Report recommends that the Commission authorize the General Manager to execute an agreement to terminate the Natural Gas Procurement Program (NGPP) Third Phase Agreement, and in its place implement more modern gas procurement procedures under the Facilities Agreement (FA). This recommendation is made in the context of NCPA's many gas agreements and resolutions that reflect a very complex background. A detailed staff report was sent to Utility Directors on September 1, 2009, which described the history of NCPA's gas agreements. That report outlined a recommended process and alternative options for updating the Facilities Agreement in combination with simultaneously replacing the outdated set of gas agreements in a manner that would also facilitate TID's requested withdrawal from the Agency. The September 1,2009 staff report to the Utility Directors is attached for reference to assist those seeking the more details and history of NCPA's gas supply arrangements over the past two decades. In brief, the September 1, 2009 staff report the Utility Directors describes how the current set of gas-related agreements were Initially derived in 1991, In conjunction with the CT1 Project. Later, the gas procurement provisions were transferred from the CT1 to the CT2 Project, and plant operations provisions were mostly transferred from the Member Services Agreement to the Facilities Agreement. Now, however, the passage of time and the eVOlution in NCPA's gas procurement processes requires a more comprehensive update and restructuring 01 all these gas and pipeline arrangements. Therefore, this Commission Staff Report, focusing on the NGPP and its successor FA Schedules, has been prepared to work in combination with a second Commission Staff Report addreSSing the necessary changes to the remaining natural gas contract issues associated with the agreements between NCPA and third parties. The Natural Gas Procurement Program Third Phase Agreement (NGPP Agreement) was approved in November of 1991 and executed by Alameda, Lodi, Lompoc, Palo Alto, Roseville and TID. The NGPP Agreement was intended to be a comprehensive program under which all NCPA natural gas and pipeline rights were to be procured. However, over time, limitations in the NGPP Agreement have surfaced, for example: • Individual Member forward purchases of gas to fix fuel costs are not permitted; • The dollar threshold for Commission approval at $15,000, is too low, reflecting 1991 gas prices; SR: No. Natural Gas Procurement Program Termination and New Facilities Agreement Schedules for Fuel Procurement March 11,2010 Page 2 • TID;an original signatory, wishes to terminate its involvement in the NGPP Agreement; • The Natural Gas Information Program eliminated the need for portions of the NGPP Agreement; • Palo Alto, an original signatory, was permitted to terminate its participation in the NGPP Agreement in 1993 by adoption of a resolution without amendment to the NGPP, Attached to this staff report is a "termination" document, which when executed by all of the NGPP project participants, including both Turlock and Palo Alto, will terminate the NGPP Third Phase Agreement. The termination document is contingent upon payment by the participants of any outstanding obligations entered into under the NGPP Third Phase Agreement, and is also contingent upon approval by the Commission of the new Facilities Agreement Schedules which will replace it. To replace the NGPP Third Phase Agreement, staff has drafted the two attached Facilities Agreement (FA) Schedules to procure necessary fuel for the CT No.1 and CT No.2 Projects respectively. The two new FA Schedules are quite similar in that each provides the supporting details that were contemplated by each Project's Third Phase Agreement -under which NCPA is charged with doing all things necessary to cause Project output to be delivered to the Participants, including fuel procurement and transport. Of course the Project Third Phase Agreements are necessarily general in this regard, as they anticipated that the fuel supply details would mostly appear in supporting operating agreements. Nonetheless, the two FA schedules do differ in a few areas due to the different operating characteristics of each CT Project. One significant difference between the CT No.1 and the CT No.2 fuel procurement schedules is that the former does not permit forward purchases of natural gas fuel. The CT No. 1 Project consists of peaking generators, with high heat rates, and as such they only operate intermittently, Any forward purchases of fuel for the CT 1 Project, absent emergency reliability factors, would necessarily be speculative, and therefore are not authorized. Conversely, forward fuel procurement for the CT NO.2 Project has occurred from time to time throughout the Project's history, and will continue to be authorized under the new FA schedule, provided that the Project Participant has accepted financial responsibility for the forward purchase under a separate agreement to insure that NCPA's nonparticipating Members are insulated from the risk of such purchases. In addition, the ability of the CT No.2 Participants to purchase fuel in advance of consumption has been expanded by removing the restriction that all Project Participants must unanimously agree to the timing and amount of each such forward transaction. Notwithstanding the added flexibility for individual Participant forward purchases provided to the CT No.2 Project, the primary method of fuel procurement for each Project is reflected in the new FA schedule: daily purchases of gas under a primary fuel management agreement, currently, the Constellation Consolidated Natural Gas Purchase and Management Agreement. Therefore NCPA will be permitted to purchase fuel in advance for the CT No.2 Project provided that the term of the contract does not exceed one month, and delivery will be completed prior to the next calendar month. Such forward purchases are consistent with "Balance-of-Month" electric purchases authorized under the NCPA Pooling Agreement. In addition, NCPA must be authorized to obtain fuel transportation rights under the new FA Schedules in order to bring the gas purchased to the Project sites, Fuel transportation rights are also anticipated to be managed under the primary fuel management agreement. SR: No. Natural Gas Procurement Program Termination and New Facilities Agreement Schedules for Fuel Procurement March 11,2010 Page 3 The NCPA Commission is authorized to adopt new Facilities Schedules by the terms of the Facilities Agreement upon the recommendation of the Facilities Committee, The Facilities Committee has recommended approval of these new FA Schedules, Approval of the Schedules by the individual participating members in the Facilities Agreement is not required, Fiscal Impact Since fuel and pipeline capacity transactions flow through to the Project PartiCipants no significant fiscal impact to NCPA is anticipated to arise from the change in contractual provisions for gas procurement. Any fiscal impact that could arise from forward purchases authorized hereunder would be accounted for in the required enabling agreement, for example, the Single Member Services Agreement. Environmental Analysis Neither the termination of the NGPP Agreement nor the adoption of two new Facilities Agreement Schedules authorized herein create "projects" for CEQA and NEPA because neither action will cause neither a direct physical change in the environment nor a reasonably foreseeable indirect change in the environment. (Pub, Res, Code sec, 21065,) Recommendation Staff recommends that the Commission adopt a re.solution directing the General manager to execute the attached termination document for the Natural Gas Procurement Program Third Phase Agreement and approving the attached two new Facilities Agreement schedules (one for each CT project) that would authorize acquisition of pipeline capacity, gas storage, transport, fuel supply and any other things necessary to secure fuel supplies, consistent with agency risk management policies, The Commission approval of the attached FA Schedules is conditional, and the Schedules should become effective upon the latest of the dates that all affected members' governing bodies terminate the NGPP, Respectfully submitted, JAMES H, POPE General Manager Attachments (5) Termination Agreement FA 9,01 FA 9,05 NGPP Agreement Prepared by: JAMES RUDOLPH Contract Specialist Power Management September 1, 2009 Staff Report to the Utility Directors SR: No, __ Approved By: DAVID DOCKHAM Assistant General Manager Power Management May 17, 2010 HONORABLE CITY COUNCIL City of Palo Alto SUBJECT: Appointments to the Historic Resources Board for three terms ending on May 31, 2013. Dear Council Members: On Monday, May 17, 2010 the City Council should vote to appoint three three year terms ending on May 31, 2013. The Candidates are as follows: David Bower Beth Bunnenberg Patricia DiCicco Voting will be by paper ballot. Five votes are required to be appointed. Respectfully submitted, Ronna Jojola Gonsalves Deputy City Clerk cc: Donna Grider, City Clerk Kelly Morariu, Staff Liaison TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DATE: MAY 17,2010 REPORT TYPE: PUBLIC HEARING DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT CMR: 241:10 SUBJECT: Public Hearing to Hear Objections to the Levy of Proposed Assessments on the Palo Alto Downtown Business Improvement District and Adoption of a Resolution Confirming the Report of the Advisory Board and Levying an Assessment for Fiscal Year 2011 on the Downtown Palo Alto Business Improvement District. RECOMMENDATION Staff recommends that the City Council: 1. Hold a public hearing on the levy of proposed assessments in Fiscal Year 2011 in connection with the Downtown Palo Alto Business Improvement District; and 2. Approve a resolution confirming the report of the Advisory Board and levying an assessment for Fiscal Year 2011 on the Downtown Palo Alto Business Improvement District. BACKGROUND On April 19, 2010, the City Council: • Adopted a resolution preliminarily approving the report filed by the Palo Alto Downtown Business Improvement District Advisory Board for the FY 2011; • Adopted a resolution of intention to levy the annual assessment for 2010-11; and • Set May 17,2010 at 7:00 p.m. or soon thereafter, as the date and time for the public hearing on the levy of the proposed assessments. CMR: 241:10 Page 1 of3 DISCUSSION The City Council is required to annually hold a public hearing, approve the Advisory Board Annual Report and determine whether or not to levy the annual assessment for the Palo Alto Downtown Business Improvement District (BID). The BID is required by State law to be authorized annually. As such, it is not possible under state BID law to implement capital projects that would take longer than one year to complete. Traditionally, funds generated from Business Improvement Districts are used for marketing, promotions, maintenance and beautification of business districts. The assessments levied on businesses in the BID are based on the size, type and location of downtown businesses. Based on a cost benefit analysis, retailers and restaurants pay a larger assessment because they receive more benefit from the activities undertaken in the business district. For example, a small-large retailer/restaurant would pay $225-$450 while small-large professional businesses (architects, accountants, etc.) pay in the $50-$225 range. Professional businesses pay the least since they receive minimal benefit from these efforts. Absent a majority protest at the public hearing, the Council may adopt a resolution approving the report for Fiscal Year 2011 as filed or as modified by the Council at the conclusion of the public hearing. The adoption of the resolution constitutes the levying of the BID assessments for Fiscal Year 2011. The staffreport (April 19, 2010) is attached and describes the actions related to the BID, including the report of the Palo Alto Downtown Business and Professional Association (P ADBP A) to the City Council (Attachment 2). RESOURCE IMPACTS Adoption of the proposed BID budget does not directly impact City revenue. BID assessments are restricted for use exclusively by the BID. A healthy BID will typically encourage growth of the retail community and consequently result in additional sales tax revenue for the City. Minimal staff effort is expended annually to administer the collection of the BID. Staff will continue to monitor administrative time devoted to the collection of BID assessments to assure that City costs do not exceed estimates for these services. The cost and collection of BID assessments past 60 days is borne by the BID. The Attorney's Office will continue to provide legal oversight to the BID during the annual reauthorization process. Administrative Services staff provides assistance in the collection of BID assessments. The Economic Development Manager will continue to provide oversight of the BID and will prepare the annual reauthorization. CMR: 241:10 Page 2 of3 ENVIRONMENTAL REVIEW This action by the City Council does not meet the definition of a project under Section 21065 of the California Environmental Quality Act, and therefore no environmental assessment is necessary. ATTACHMENTS Attachment 1: Attachment 2: PREPARED BY: Resolution of the City Council of the City of Palo Alto Confirming the Report of the Advisory Board and Levying an Assessment for Fiscal year 2010-11 in Connection with the Downtown Palo Alto Business Improvement District CMR: 190:10 Adoption of Resolution Preliminarily Approving BID Advisory Board's 2010-11 Budget Report and Adoption of Resolution of Intention to Levy 2010-11 Assessments in the Palo Alto Downtown Business Improvement District and Setting a Public Hearing on the Levy of Assessments ~SAN L. BARNES I conomlC Development and Redevelopment Manager DEPARTMENT HEAD: CITY MANAGER APPROVAL: CMR: 241:10 CURTIS WILLIAM Director Planning and Community Environment Page 3 of3 ATTACHMENT 1 Not Yet Approved Resolution No. --- Resolution of the Council of the City of Palo Alto Confirming the Report of the Advisory Board and Levying an Assessment for Fiscal Year 2011 on the Downtown Palo Alto Business Improvement District THE CITY COUNCIL OF THE CITY OF PALO ALTO DOES HEREBY FIND, DECLARE AND ORDER AS FOLLOWS: SECTION 1. The Parking and Business Improvement Area Law of 1989, California Streets and Highways Code Sections 36500 et seq. (the "Law"), authorizes the City Council to levy an assessment against businesses within a parking and business improvement area which is in addition to any assessments, fees, charges, or taxes imposed in the City. SECTION 2. Pursuant to the Law, the City Council adopted Ordinance No. 4819 establishing the Downtown Palo Alto Business Improvement District (the "District") in the City of Palo Alto. SECTION 3. The boundaries of the District are within the City limits of the City of Palo Alto (the "City")' and encompass the greater downtown area of the City, generally extending from El Camino Real to the West, Webster Street to the East, Lytton Avenue to the North and Addison Avenue to the South (east of Emerson Street, the boundaries extend only to Forest Avenue to the South). Reference is hereby made to the map of the District attached hereto as Exhibit "A" and incorporated herein by reference for a complete description of the boundaries of the District. SECTION 4. The City Council, by Resolution No. 8416, appointed the Board of Directors of the Palo Alto Downtown Business & Professional Association, a California nonprofit mutual benefit corporation, to serve as the Advisory Board for the District (the "Advisory Board"). SECTION 5. In accordance with Section 36533 of the Law, the Advisory Board prepared and filed with the City Clerk a report entitled "Downtown Palo Alto Business Improvement District, 2010-11 Annual Report" (the ."Report"), and, by previous resolution, the City Council preliminarily approved such report as filed. SECTION 6. The City Council has adopted a Resolution of Intention, Resolution No. 9048 declaring its intention to levy and collect an assessment for fiscal year 2011 against businesses in the District. SECTION 7. Following notice duly given pursuant to law, the City Council has held a full and fair public hearing regarding the levy and collection of an assessment within. the District for fiscal year 2011. All interested persons were afforded the opportunity to hear and to be heard regarding protests and objections to the levy and collection of the assessment for fiscal year 2011. The City Council finds that there was no majority protest within the meaning of the 1 100426 jb 0130583 Not Yet Approved Law. All protests and objections to the levy and collection of the assessment and any and all other protests and objections are hereby overruled by the City Council. SECTION 8. Based upon its review of the Report, a copy of which has been presented to the City Council and which has been filed with the City Clerk, and other reports and information, the City Council hereby finds and determines that (i) the busInesses in the District will be benefited by the expenditure of funds raised by the assessment, (ii) the District includes all of the businesses so benefited; and (iii) the net amount of the assessment levied within the District for the 2011 fiscal year in accordance with the Report is apportioned by a formula and method which fairly distributes the net amount in proportion to the estimated benefits to be received by each such business. SECTION 9. the Advisory Board. The City Council hereby confirms the Report as originally filed by SECTION 10. The adoption of this Resolution constitutes the levy of an assessment for the fiscal year 2011 (commencing July 1, 2010, and ending June 30, 2011). The assessment formula, including the method and basis of levying the assessment, is set forth in Exhibit "B" attached hereto and incorporated herein by reference. New businesses established in the District after the beginning of any fiscal year shall be exempt from the levy of the assessment for that fiscal year. In addition, nonprofit organizations, newspapers, and professional "single-person businesses", defined as those businesses which have 25% or less full time equivalent employees, including the business owner, shall be exempt from the assessment. SECTION 11. The City Council hereby declares that the proposed uses of the revenues derived from the assessments levied against businesses in the District are for the following facilities and activities: The types of improvements to be funded by the levy of an assessment against businesses within the District are the acquisition, construction, installation or maintenance of any tangible property with an estimated useful life of five years or more. The types of activities to be funded by the levy of an assessment against businesses within the District are the promotion of public events which benefit businesses in the area and which take place on or in public places within the District; the furnishing of music in any public place in the District; and activities which benefit businesses located and operating in the District. II II II II II II 2 100427 jb 0130583 Not Yet Approved SECTION 12. The Council finds that the adoptiol} of this resolution does not meet the definition of a project under Section 21065 of the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Sr. Asst. City Attorney 100426 jb 0130583 3 Mayor APPROVED: City Manager Director of Administrative Services · . The City of Palo Alto Downtown Palo Alto Business Improvement District This map Is a product of the City of Palo Alto GIS -. a 500' documenll,. vr-Phlc ' .... _nI8l1on .~IOUICH. EXHIBIT A T"'Cll)lofP8loAllo __ no,MPOMIbIIII)Iror~_. Retailers and Restaurants (100%) Service Businesses (75%) Professional Businesses (50%) Lodging Businesses (100%) Financial Institutions Downtown Palo Alto Business Improvement District Annual BID Assessments ZONE A $225.00 (Under 6 FTE employees) (50%) $340.00 (6 to under 11 FTE employees) (75%) $450.00 (11 + FTE employees) (100%) $170.00 (Under 4 FTE employees) (50%) $260.00 (4 to under 7 FTE employees) (75%) $340.00 (7+ FTE employees) (100%) ZONED (75%) $170.00 $260.00 $340.00 $130.00 $200.00 $260.00 EXEMPT (25% or fewer FTE employees, including the business owner) $ 60.00 (26% to under 1 FTE employees) (25%) $ 50.00 $110.00 (2 to 4 FTE employees) (50%) $ 90.00 $170.00 (5 to 9 FTE employees) (75%) $130.00 $225.00 (10+ FTE employees) (100%) $170.00 $225. 00 (up to 20 rooms) (50%) $340.00 (21 to 40 rooms) (75%) $450.00 (41 + rooms) (100%) $500.00 $170.00 $260.00 $340.00 $500.00 Note 1: For retail, restaurant, service, and professional businesses, size will be determined by number of employees either full-time or equivalent (FTE) made up of multiples of part-time employees. A full FTE equals approximately 2000 hours annually. Lodging facilities will be charged by number of rooms available and financial institutions will be charged a flat fee. Note 2: Second floor (and higher) businesses located within Zone A, will be assessed the same as similar street-level businesses located within Zone B. Note 3: Assessment amounts are rounded to the nearest ten dollars. The minimum assessment will be $50.00. EXHIBIT B ATTACHMENT 2 City of Palo Alto City Manager's Report TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DATE: APRIL 19,2010 REPORT TYPE: CONSENT DEPARTMENT: PLANNING AND . COMMUNITY ENVIRONMENT CMR: 190:10 SUBJECT: Preliminary Approval of the Report of the Advisory Board for Fiscal Year 2011 in Connection with the Palo Alto Downtown Business Improvement District and Adoption of Resolution Declaring its Intention to Levy an Assessment Against Businesses within the Downtown Palo Alto Business Improvement District for Fiscal Year 2011 and Setting a Time and Place for a Public Hearing on May 17, at 7:00 PM or Thereafter, in the City Council Chambers EXECUTIVE SUMMARY Since the Business Improvement District (BID) inception in 2004, a number of activities consistent with State BID law have been accomplished by the Palo Alto Downtown Business and Professional Association (P ADBP A), the entity with which the City contracts to provide services to the 740+ businesses assessed in the Downtown. These include addressing the two main issues facing downtown businesses: cleanliness and homeless issues that affect downtown business operations, as well as participation in zoning and other matters affecting downtown businesses. Assessments for BID businesses are based on the size, type and location of the business. Assessments range from $50 to $500 annually for individually owned professional businesses to banks. The PADBP A has monthly open meetings governed by the Brown Act which any business or individual can attend. This Council action would include preliminary approval of the BID's annual report and setting a public hearing to determine any objections to assessments. RECOMMENDATION Staff recommends that the City Council: (a) Preliminarily approve the BID Advisory Board's 2011 Budget Report for the Business Improvement District (BID) (Attachment 1); and (b) Adopt a Resolution of Intention to Levy Assessments in the Palo Alto Downtown Business Improvement District for fiscal year 2011, setting a date and time for the public hearing on the levy of the proposed assessments for May 17,2010, at 7:00 p.m. or thereafter, in the City Council Chambers (Attachment 3). CMR: 190:10 Page 1 of4 BACKGROUND The Palo Alto Downtown Business Improvement District (BID) was established by the City Council in 2004 pursuant to the California Parking and Business Improvement Area Law t~ promote the econo~ic revitalization and physical maintenance of the Palo Alto Downtown business district. The Council appointed the Board of Directors of the Palo Alto Downtown Business and Professional Association, a non-profit corporation, as the Advisory Board for the BID. The Board's purpose is to advise the Council on the method and basis for levy of assessments in the BID and the expenditure of revenues derived from the assessments. Pursuant to BID law, the Advisory Board must annually submit to the Council a report that proposes a budget for the upcoming fiscal year for the BID. The report must: 1) propose any boundary changes in the BID; 2) list the improvements and activities to be provided in the fiscal year; 3) estimate the cost to provide the improvements and activities; 4) set forth the method and basis for levy of assessments; 5) identify surplus or deficit revenues carried over from the prior - fiscal year; and 6) identify amounts of contributions from sources other than assessments. The Council must then: 1) review the report and preliminarily approve it as proposed or as changed by the Council; 2) adopt a resolution of intention to levy the assessments for the upcoming fiscal year; and 3) set a date and time for the public hearing on the levy of assessments in the BID. Absent a majority protest at the public hearing on May 17,2010, at the conclusion of the public hearing, the Council may adopt a resolution confirming the report for Fiscal Year 2011 as filed or as modified by the Council. The adoption of the resolution constitutes the levying of the BID assessments for fiscal year 2011. DISCUSSION The Advisory Board has--prepared a report (Attachment 1) for the Council's consideration which includes ,the proposed budget for the Palo Alto Downtown BID for fiscal year 2011. As required by BID law, the report has been filed with the City Clerk and contains a list of the improvements, activities, and associated costs proposed in the BID for fiscal year 2011. The Advisory Board has recommended no change in the BID boundaries or the method and basis for levying assessments. Many of the activities and improvements are an extension of those initiated last year or in prior years. For example, in the past year the BID participated in the renovation of Lytton Plaza, a- public/private partnership that reinvigorated the Plaza, addressed loitering and other issues and provided a lovely gateway into the City's downtown. In addition, in partnership with the City, the BID leadership developed a "master encroachment permit" effort, that will provide a master ARB submission for downtown tables and chairs and individual (more affordable) encroachment permits for downtown restaurants. A map of the BID is attached (Attachment 2). The proposed assessments in the BID for fiscal year 2011 are the same as the assessments in fiscal year 2009-10. No increases are proposed. CMR: 190:10 Page 2 of4 The budget report for fisc,al year 2011 was reviewed and approved by the Palo Alto Downtown Business and Professional Association at its board meeting on March 17, 2010, (Attachment 1). RESOURCE IMP ACT Adoption of the proposed BID budget does not directly impact City revenue. BID assessments are restricted for use exclusively by the BID. It is anticipated that a healthy BID will encourage growth of the retail community and consequently result in additional sales tax revenue for the City. Some staff effort is expended annually to administer the collection of the BID. Staff will continue to monitor staff administrative time devoted to the collection of BID assessments to assure that City costs do not exceed estimates for these services. The cost and collection of BID assessments past 60 days is borne by the BID. The Attorney's Office will continue to provide legal oversight to the BID during the annual reauthorization process. Administrative Services staff provides assistance in the collection of BID assessments. The Economic Development Manager will continue to provide oversight to the BID and will prepare the annual reauthorization. ENVIRONMENTAL REVIEW This action by the City Council does not meet the definition of a project under Section 21065 of the California Environmental Quality Act, and therefore no environmental assessment is necessary. ATTACHMENTS Attachment 1: Attachment 2: Attachment 3: CMR: 190:10 Report of the Advisory Board with Regard to the Reauthorization of the Downtown Palo Alto Business Improvement District Annual Report for Fiscal Year 2011. Downtown Palo Alto Business Improvement District Map Resolution of the City Council of the City of Palo Alto Declaring its Intention to Levy an Assessment Against Businesses Within the Downtown Palo Alto Business Improvement District for Fiscal year 2010-11 and Setting a Time and Place for hearing Objections Thereto Page 3 of 4 PREPARED BY: SljSAN L. BARNES I· . Economic Development Manager DEPARTMENT HEAD: ~ W~ CURTIS ILLIAMS, Director Planning and Community Environment CITY MANAGER APPROVAL: City CMR: 190:10 " •.••• --_ ........ -.:. ...... :< • .-....:._"'--_ ~ :...: : •. ~.Q •. .o._~ ........ ~.:.._-;.l· . .-:.~!I~:' :''''I_,',? :"~-}2". Page 4 of4 =-----====-=================~======================================~~====~~==~======~==~~==~~~~~=d~~~!~~~~~~~===d r.· ...... -----.. -.. -.. ~.-.-... : .. ---..... -.-----.. -···-d·.-·.-·------.'J 1 .... I ! ." . ". I ! :. " . ! . . 1 :. .. . 1 . I PALOALTq iDOWNTOWNl ~.~$j ne.?§. ?ID~LP r.91~~$lQ.o.~L.t\~~.gg.ati 9n! BID MA.NA.GEMENT www.paloaltodowntown.com Business Improvement District Annual Report 2010-2011 Approved by the Advisory Board of Directors Palo Alto Downtown Business & Professional Association April 01 , 2010 . ~ ~ (1 ~ ~ ~ ...... Introduction This report from the Advisory Board of the Palo Alto Downtown Business & Professional Association ("PAd") was prepared for City Council to review for the annual reauthorization of the Downtown Palo Alto Business Improvement District ("BID") pursuant to Section 36533 of the Parking and Business Improvement Law of 1989 (Section 365'00 and following of the California Streets and Highways code) (the "Law"). This report is for the proposed fiscal year for the BID commencing July 1,2010 and ending June 30, 2011. ("Fiscal Year 2010-11"). As required by the Law, this report contains the following information: I. Any proposed changes in BID boundaries and benefit zones within the BID; II. The improvements and activities to be provided for Fiscal Year 2010-11; III. An estimate of the cost of providing the improvements and the activities for Fiscal Year 2010-11; IV. The method and basis of levying the assessment in sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his or her business for Fiscal Year 2010-11; V. The amount of any surplus or deficit revenues to be carried over from a previous fiscal year; VI. The amount of any contributions to be made from sources other than assessments levied pursuant to the Law. Submitted by Anne E. Senti-Willis, Chair, on behalf of the Advisory Board ("Advisory Board") of the Palo Alto Downtown Business &, Professional Association ("PAd"). The Advisory Board approved this report on April 01, 2010. Received on file in the Office of the City Clerk of the City of Palo Alto on April 01, 2010. 1 Section I BID Boundaries and Benefit Zones There h~ve been no changes in the BID boundaries or benefit zones within the BID and no changes are proposed. The current boundaries are depicted on the map below. Paio AHo Palo A.1to [)O\vllto\vn Business Jlnprovernent [)istrict 2 rtr&:ffi a~:t; 11 P£fduCJ(;·(:tn~,· Ct" <:!iP OIl:> j},'/(J;;:' is i I II TI ~ ~ n 'I ~ I ! I Section II Improvements and Activities Completed in 2009-10 Marketing and Events Programs -PAd maintained a comprehensive website that is user friendly for members and consumers. It includes current activities, a comprehensive business directory, maps for parking and directions, and other links. (www.paloaltodowntown.com). We track nearly 4200 unique hits on the site per month. P Ad offered members the opportunity to advertise their businesses by posting a link to their website on the "Home" page for a fee. We have updated the "What's Happening" page daily with specific information including merchant sales, specials and promotions. PAd updates the database of all downtown businesses continuously for display and use via the website. -On the website, P Ad has cross referenced & categorized comprehensive business sectors. Frequently, PAd has sent email blasts to notify members of pertinent on-goings in the downtown, such as upcoming events, street closures, police alerts and other activities. Events -The Dine Downtown event was launched in August '05 and continued successfully on a bi-annul basis in August 2009, and January 2010. - P Ad participated in a collaboration and partnership to support events with the City of Palo Alto, Stanford University and the Chamber of Commerce. PAd remains an active partner and contributing participant in the promotion of Visitorship to Palo Alto. -Advocated for and saved the Community Farmshop by securing funding and participation from the BID members. The weekly market is held at the renovated Lytton Plaza on Wednesday s from 3:30 -6:30 pm. The PAd secured management of talent and entertainment for Friday night jam sessions at Lytton Plaza. - P Ad held breakfast Roundtable discussions, hosted by the Garden Court Hotel. The Fall presentation was on identity theft. Guest speakers included P APD special agents James Reifschneider and Jason Jenkins. The Spring discussion addressed the issue of an improved conceptual plan for the downtown district, moderated by Curtis Williams, the Director of Planning for the City of Palo Alto. PAd intends to hold these roundtable community/town hall discussions twice a year to encourage member attendance and participation on topics of importance within the BID. Downtown Streets The Downtown Streets Team ("DST") was founded in May 2005 by the PAd, after its initial survey to business owners. The survey was sent to all BID constituents to better understand how PAd could serve its members. Overwhelmingly, homelessness and cleanliness of the downtown area were the issue of most concern. 3 The program participants clean the streets of downtown in exchange for food and shelter. DST is a platform for many formerly homeless to find hobs and housing. This highly successful program was spun off as a separate, self-supporting non-profit entity in 2006 .. P Ad continued t6 support the program through joint promotions and fund raising efforts, as well as a financial pledge of $5,000 to help ensure its continued success. To further the ongoing partnership and continuity, the President of the DST, Eileen Richardson, serves as a liaison to the PAd. DST has built successful working relationships with Innvision, The Opportunity Center, Catholic Charities, Alliance for Community Care, City Council, Palo Alto Police Department ("P APD") , Palo Alto City Management, The Emergency Housing consortium ("EHC"), and now holds a place on the Steering Committee for the County's 10-year plan to end homelessness. The program has received funding and is expecting continued funding from the City of Palo Alto, in both HSRAP and contracts for cleaning, EHC and Innvision contracts, foundation grants and local businesses and residents. PAd will increase the financial contribution to $10,000 in Fiscal Year 2010-11 to the DST, with the provision that said funds will be directed towards increased cleanliness and security within the district. EnvironmentallMarketing -Worked with the City and district members to adopt and implement a master outdoor seating plan. P Ad negotiated a one time fee reduction of the required encroachment fees for outdoor seating and displays. With assistance from Be"llomo Architects, PAd has further secured a blanket ARB permit for such outdoor seating in order to provide a maintained, uniform look and facilitate compliance with City ordinance and state requirements for outdoor dining. PAd worked closely with the P APD to address the issue of panhandling and homelessness in the downtown. Further efforts were made to address the issue of security in the district. The P APD ran a month long pilot program with increased patrol and security in the downtown. Key areas were identified and the PAd worked with the City in creating signage and installation of way finders in certain areas of the BID. The P Ad supported the introduction of K wikcarts within the downtown district, and worked with various stakeholders to secure private parking for the carts. 1;> Ad initiated the resurrection of plans for the upgrading and renovation of Lytton Plaza through a private/pUblic partnership. PAd, through its President Sherry Bijan, served as a member of the Friends of Lytton Plaza Park. Through a collaborative partnership between the City of Palo Alto and the Friends of Lytton Plaza Park, the renovation project including new landscaping, a water feature and community gathering space which recognize and respect this location's importance as a center of community dialogue and free speech was completed in December 2009. P Ad has obtained bids for the lighting at Elinor Cogswell Plaza. The park was selected because the existing available lighting is inadequate, and electrical outlets are available. The lighting of the park will be scheduled once the City approves the" public contribution portion of the cost. P Ad meets quarterly and works closely with City of Palo Alto Departments to address necessary improvements within the BID. 4 -Through a partnership with the City of Palo Alto, PAd produces and installs seasonal banners on the Avenues in the district. The intent is to dress up the downtown and promote the BID. Parking -Representatives from PAd attend the Palo Alto Chamber of Commerce's parking committee meetings to learn of programs underway and contribute the downtown business perspective. -Through the parking district, the PAd and other stakeholders have issued RFPs for added . security and maintenance in the structures. -P Ad will advocate to secure contracts for the DST with the City for the ongoing maintenance and security in the parking structures. Executive Committee -During the current fiscal year, the Executive Committee created a budget for Fiscal Year 2010-11 and completed the 2009-2010 Annual Report. -P Ad created an Advocacy task force to address issues on behalf of downtown businesses. -On an ongoing basis, PAd promotes and develops a working partnership with the Palo Alto Chamber of Commerce. -P Ad has reached out to the P APD to improve communications and build a strong working relationship. The PAd had advocated for greater police patrol and presence within the district. Advocacy -PAd will listen to find out what is on constituent business owners' minds. We regularly speak with prospective tenants and work closely with property owners and manag~rs to ensure the maintenance of a balanced retail mix in the district. The PAd participated and was instrumental in the discussions and ultimate adoption of the Ground Floor Zoning Ordinance within the district. Through a collaboration with the P ACC, the PAd will advocate for streamlining the permit process for new business. , The PAd will continue to perform outreach, identify and attract additional businesses to the downtown district. PAd will lead dialogue on improving the district through aesthetic enhancements, the flow of traffic, the creation of a more welcoming pedestrian and cycling environment. P Ad is represented at the Palo Alto Chamber of Commerce ("P ACC") Government Action Committee ("GAC") meetings. Dufing Fiscal Year 2010-2011, PAd will continue to represent the voice of businesses. Nominating -During the past year, PAd has recruited new members to the Advisory Board to ensure all business sectors are represented, including new Advisory Board members, Adam Mason, partner at Jungle Digital Imaging and Abraham Khalil, who owns and operates both retail and professional businesses in the downtown. -P Ad coordinates the annual member meetings and election of directors of PAd. 5 Finance During the past year, PAd has: -Maintained accounting systems for PAd bookkeeping. Assisted in the billing of annual fee assessments. Improved the invoicing process. Planned and implemented delinquent member collections. Completed year-end tax filing. Schedule4 an annual Audit to be completed through June 30, 2009 for submittal to the City. 6 Section II Expected Improvements and Activities for 2010-11 During Fiscal Year 2010-2011, PAd plans the following improvements, activities and programs. Marketing and Events Programs -Maintain and grow website aimed for consumer and member use and for cross-promotion of downtown businesses. It will include current activities, a comprehensive business directory, maps for parking and directions, and other links. The website - (www.paloaltodowntown.com) provides opportunities for members to self promote on the website through advertising. Regular e-blasts will be prepared and distributed. Encourage and develop business to business exchange. Support the launch of the eMax online business networking site, dedicated to downtown Palo Alto. -Support the launch of the magazine, Made in Palo Alto, promoting downtown district business. -Through a joint effort with the California Shoe and Luggage repair, to address both the environmental impact and address fundraising, the P Ad will recycle the street banners into tote bags. These bags will be available for purchase at various downtown establishments, where the profits from sales will be shared. Events -Review and Revamp the Dine and Shop Downtown promotional campaign. -Support the WeeklY'Palo Alto Community Farm Shop. -Support the Made In Palo Alto Fashion Show & fundraiser for the "Awearness" campaign against domestic violence. -Support and maintain ongoing entertainment and events at Lytton Plaza, through the Friday night music jam sessions. -Support and sponsor the World Music Day, through the extension of the PAd liability insurance for the event and participation of member businesses. -Support the City of Palo Alto Recreation Dept with various events including the May Fete Parade, and the B& W Ball. -Continue to produce seasonal banners for the Avenues and additional pieces highlighting upcoming evep.ts on the bridges and side streets. -Support the SMCVB to accommodate the influx of visitors to local business and Stanford University, and Stanford Athletics events. -Work with the City to promote a pedestrian-friendly environment through events that will feature entertainment and a draw to the BID. Downtown Development Downtown Streets Team -Continue support of the program financially with a pledge of $5,000.00 for the year, with the provision that it be used towards the security and cleanliness efforts within the district, including the parking structures. 7 Environmental -Design and display seasonal banners featuring business promotion. P Ad will work with the City to amend the current banner ordinance that precludes adv~rtising on the banners which is currently limited to seasonal, historical and event driven messages. Identify areas for installation of additional directional and way finding signs. Identify areas for installation of additional lighting. Recommend removal and or replacement of benches. Identify certain key areas for landscaping, hanging baskets or potted plants. Continue efforts through the partnership with the' P APD to monitor panhandling and enforcement of the sit/lie ordinance. PAd will work closely with other business districts to help promote the expansion of the sit/lie ordinance if requested. Work with the P APD to retain police patrol in the district. Improve lighting at the Transit Station. Parking r -Create education and outreach programs to inform business owners and managers of the downtown parking options. Advocate for parking & directional signage. Continue to work with the City and the parking committee to enable transferable parking permits. Use outreach programs to educate public of the ample free parking. Evaluate and implement parking survey results. Address security enforcement in the parking structures. P Ad will support the use of the DST for Ol1going maintenance and security within the downtown parking structures. Encourage City contracts with the DST to provide additional maintenance in the district. Executive Committee Continue to refine P Ad structure and organizational development. -Continue to update and refine information provided to Advisory Board Members. -Continue to advocate on behalf of downtown businesses. -Hold bi-annual roundtable meetings to encourage discussion among members, l participation in PAd and information about relevant topics. -Create visibility within the business community. -Begin conceptual planning initiative for the downtown area. -Continue to partner with property owners and leasing agents to ensure a good retail mix in the district. Nominating -Oversee the filing of year end tax return. -Oversee the filing of the Annual Audit. -Review and advise on annual budget and explore income/fundraising opportunities. 8 Section III: Budget for 2010-11 The total funds available for activities for this fiscal year are estimated to be $131,390. The budget for providing the activities is set forth as follows: BID 2010/11 Budget INCOME Assessments Uncollectible fees Total Assessments IncomelFundraising 09-10, Surplus Carryover TOTAL INCOME EXPENSES Operating Expenses Staff Salaries Executive Director Salary Health Insurance Payroll Taxes Surplus Carryover from Prior Year 09-10 fiscal Office Supplies & Expenses . Internet/Website Maintenance Telephone Rent Reauthorization Advertising Audit-Tax Returns ' Legal Insurance-Liability Workman's Comp Nominating Contingencies Total Operating Expenses Marketing and Events Programs & Member Outreach Permit Fees Banners Roundtable $130,000 $(20,000) $110,000 $17,650 $3,740 $131,390 Expenses $60,000 $4,200 $6,000 $66,000 $3,740 $1,500 $ 500' $1,000 $6,000 $2,500 $4,000 $1,000 $1,500 $1,000 $1,000 $3,500 $97,440 $1,000 $2,000 $7,650 9 $17,650 Income (Donation) $1,000 (Donation) $6,650 Events & Fundraising Dine/Shop Downtown $3,000 Events $5,000 Promotional Sales/Fundraising $2,000 Total Environmentall Marketing & Events $20,650 $ DST $5,000 District Improvement $8,300 Environmental Total $13,300 Total Expenses/Income $131,390 Section IV: Method and Basis of Levying the Assessment Cost Benefit AnalysislBID Assessments $3,000 $5,000 $2,000 $17,650 $17650 The method and basis of levying the assessment is provided sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his or her business for Fiscal Year 2010-11 and is not changed from the FY 2009-10 assessment. There have been no changes made to the Cost-Benefit Analysis or to the BID Assessments since they were approved by City Council on February 2,2004. The method of calculation used to determine the cost and benefit to each business located in the BID is described below. The BID assessments are based on three criteria: the type of business, the location of the business and the size of the business. It has been consistently demonstrated that the typical BID program places a higher priority on activities such as commercial marketing. As a result, the retail and restaurant establishments in the BID are assessed more than the service and professional businesses in the district. While servi.ce-oriented businesses benefit from a BID less than retailers and restaurateurs, they benefit more than professional'businesses such as medical, dental, architectural, consultant and legal offices with their minimal advertising and promotion needs. For these reasons, various business types are assessed according to the benefit that they receive from the BID, as follows: 10 > Retail and Restaurant > Service > Professional 100% of base amount 75% of base amount 50% of base amount Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of location o'r size and lodging businesses that are typically charged by total rooms. The location of a business also detennines the degree of benefit that accrues to that business. Centrally located businesses tend to benefit more, as do businesses located on the ground floor. For this reason,A and B benefit zones have been identified for the BID. In Palo Alto, Zone A benefit business are assessed 100% of the base benefit assessment while Zone B businesses are assessed 75%. A third criterion is used in the BID to determine benefit. This criterion, the size of the business, takes into consideration the number of full time employees employed by the business. Please refer to Attachment 1 for a more complete understanding of the application of these three variables to establish BID benefit. Attachment 2 is the BID assessment for each business located within the BID boundaries. Applying the criteria identified in Attachment 1, a summary of the assessment that applies to each business by size, type and location is outlined. In addition to the Cost-Benefit Analysis, the assessments include the following criteria: > An exemption for "single person professional businesses" that have 25% or fewer full time equivalent ("FTE"), including the business owner. This covers employees who work less than 1 0 hours a week (based on a 40 hour work week(A full FTE equals approximately 2000 hours annually) > An assessment specifically for "single person businesses" that have 26% FTE to 1 FTE in the professional business category of the BID (A full FTE equals approximately 2000 hours annually) > The tiring of other professional businesses by size based (according to benefit) on the "single person business" criteria This outline provides information by which a business can determine its annual assessment based on objective criteria. Except where otherwise defined, all terms shall have the meanings identified below: Definitions of Business Types in the Downtown Business Improvement District Retailers and Restaurants: Businesses that buy or resell goods such as clothing stores, shoe stores, office supplies as well as businesses that sell prepared food and drink. Service Businesses: Businesses that sell services such as beauty or barber shops, repair shops, most automotive businesses, dry cleaners, art and dance studios, printing firms, film processing companies, travel agencies, entertainment businesses such as theaters, etc. 11 -j I Hotel and Lodging: These include businesses that have as their main business the lodging of customers. This is restricted to residential businesses that provide lodging services to customers for less than 30 days. Professional Businesses: Businesses that require advanced andlor specialized licenses or academic degrees such as architects, engineers, attorneys, chiropractors, dentists, doctors, accountants, optometrists, realtors, insurance brokers, venture capital finns, consultants, advertising and marketing professionals and mortgage brokers and similar professions. Financial Institutions: Includes banking, savings and loan institutions and credit unions. Additional clarification on business definitions will be defined according to Section 18.04.030 (De'finitions) of the Palo Alto Municipal Code. The Advisory Board recommends that the following businesses be exempt from the BID assessment: ~ New businesses established in the BID area following the annual assessment for the year in which they locate in the BID area ~ Non-p;ofit organizations ~ Newspapers ~ "Single person professional businesses" that have 250/0 or less full time equivalent (FTE), including the business owner The Assessment calculated shall be paid to the City no later than 30 days after receipt of the invoice with the amount of the annual assessment sent by the City. A second notice will be mailed as a reminder to businesses that have not remitted payment by that date. Late payment will be subj ect to a 10% late fee. Section V: Revenue Surplus or Deficit Based on the revenue balance on 04/01/10 of$41,740, the PAd expects a surplus carryover of $3,740. Expected expenses for the remainder ofFY 09-10 are as follows: Current revenue balance Expected expenses for remaining FY Staff Salaries , Staff Health Insurance Elections and Annual Report Office + Operating Expenses Outside Audit Advertising DST donation Total expected expenses Expected carry-over $41,740 $25,000 1,000 2,000 1,000 4,000 2,500 2,500 $38,000 $ 3,740 12 Section VI: Non-assessment Income It is estimated that $17,6°50.00 will be raised in fundraising and sponsor support. Additionally, anticipate in-kind contribution towards expenses for Fiscal Year 2010-11. Projected Income For Fiscal Year 10-11 -Roundtable (donation) -Legal (donation) Dine/Shop Downtown -Events -Promotional SaleslFundraising Total $6,650 $1,000 $3,000 $5,000 $2,000 $ $17,650 13 Section VII: PAd Board of Directors by Business Type Retailers and Restaura·nts Robert Beschiem, Tamarine Restaurant Claudia Cornejo, Caffe del Doge Whitney Denson, Five Ten Gifts Georgie Gleim~ Gleim Jewelers Jeff Selzer, Palo Alto Bicycles Abraham Khalil, A.K. Insurance Services, KanZeman, Abby's, Med Wraps Hotel and Lodging Barbara Gross, Garden Court Hotel Services Businesses Stacey Yates, Skin Spirit Financial Institutions Deborah Pappas, Borel Bank Professional Organizations Anne E. Senti-Willis, Thoits, Love, et al. Elliot Lee, e-Max Sherry Bijan, PAd LIAISONS Chamber of Commerce Paula Sandas Downtown Streets Team Eileen Richardson City of Palo Alto Susan Barnes *Termed member(s) of the Board of Directors who continue to serve as officers or volunteer heads of PAd committees. 14 ATTACHMENT 1 A General Statement Regarding Cost-Benefit Analysis for BID Businesses Using The Traditional Three Criteria Formula Criteria 1) Type of Business: Statement Concerning Cost-Benefit Formula for BID Businesses Regarding Type of Busil)ess: In a review of 200 California Business Improvement Districts, it is consistently demonstrated that the typical BID Program places a higher priority on Commercial Marketing Programs than on Civic Beautification and Commercial Recruitment Programs. With that trend in mind, retail and restaurant businesses, with their emphasis on, and need for, commercial marketing, are traditionally assessed more than less marketing-sensitive service-oriented or professional- oriented businesses. However, while service-oriented businesses benefit from a BID less than retailers and restaurateurs, they benefit more, (from commercial marketing programs), than professional businesses such as medical, dental and legal offices with their minimal advertising and promotion needs. Therefore, set forth below, is an example of how various business types might be considered regarding the computation of the annual benefit assessment. • Retail and Restaurant: • Service: • Professional: 100% of base amount 75% of base amount 50% of base amount Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of location or size and lodging businesses that are typically charged by total rooms. Lodging businesses are assessed based on the total number of rooms because it is a more equitable manner of determining size. Many lodging businesses have many part time employees, but revenues are based on the room occupancies of the hotel, not the goods sold or services provided by employees. Criteria 2) Location of Business: Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Location of Business: It has also been consistently demonstrated that the more centrally located businesses tend to benefit from BID activities and services to a greater degree than businesses located toward the periphery of the proposed BID boundaries. Events and activities tend to originate in the central core of the downtown area and spread benefit to the outer areas with diminishing energy and impact, much like the ripple effect of a stone crossed into a body of calm water. Furthermore, ground floor businesses tend to benefit to a greater degree than businesses locat~d in upper floors. Therefore, in some cases, a new BID's annual benefit assessment formula also takes these street level criteria into account. 15 As mentioned above, special events, fairs, festivals and other activities tend to take place within, or along, the Main Street core rather than in the areas at the periphery of the downtown core. Additionally, BID-sponsored seasonal decorations, public art projects, street banners and street furniture tend to be located within the immediate core area. Therefore, businesses located within the most central area of the proposed BID are considered to be within "Zone A". which should\be considered the primary benefit zone. There is typically a "secondary zone" or "Zone B" within most proposed BID areas. This area receives less benefit than Zone A and should be assessed accordingly. An example of how different zones might be treated regarding the computation of the annual benefit assessment is as follows. • Zone A: 1 00% of base benefit assessment • Zone B: 75% of base benefit assessment In the case of Downtown Palo Alto, it is recommended that all Zone A upper floor businesses, as well as any other businesses located at the periphery of the proposed BID, be considered as Zone B businesses. Please refer to the map in Attachment 1. Criteria 3) Size of Business: Statement Concerning Cost-Benefit Formula for BID Businesses Regarding Size of Business: In approximately 50% of newly established BIDs, a third assessment criterion is used. This criterion involves the size of each individual business that is based upon the businesses' total number of full-time employees. Full-time employees are those working a total of2,000 hours per year. Part-time employees are grouped into full-time job positions, i.e., two half-time employees total one full-time. Fractions are rounded down to the nearest whole number with no less than one person as a minimum for business. An example of how various business sizes might be treated regarding the computation of the annual benefit assessment is as follows: • Small: • Medium: • Large: 50% of base assessment 75% of base assessment 100 % of base assessment *Full-time employees (FTE) RetaillResta urants under 6 FTE* 6-under 11 FTE* 11+ FTE* Service Businesses Under 4 FTE* 4 to under 7 FTE * 7+ FTE* Additionally, an exemption was established for "single person professional businesses" that have 25% or less full time equivalent (FTE), including the business owner. This covers employees who work less than 10 hours a week (based on a 40 hour work week). Since "single person businesses" that have 26% FTE to 1 FTE in the professional business category of the BID benefit the very least from the assessment, their assessments have been tiered by size based (according to benefit) on the new "single person business" criteria. ATTACHMENT 1, page 2 16 Retailers and Restaurants (100%) Service Businesses (75%) Professional Businesses (50%) Lodging Businesses (100%) Financial Institutions Downtown Palo Alto Business Improvement District . Annual BID Assessments ZONE A $225.00 (Under 6 FTE employees) (50%) $340.00 (6 to under 11 FTE employees) (75%) $450.00 (11+ FTE employees) (100%) $170.00 (Under 4 FTE employees) (50%) $260.00 (4 to under 7 FTE employees) (75%) $340.00 (7+ FTE employees) (100%) ATTACHMENT 2 ZONEB (75%) $170.00 $260.00 $340;00 $130.00 $200.00 $260.00 EXEMPT (25% or fewer FTE employees, including the business owner) $ 60.00 (26% to under 1 FTE employees) (25%) $ 50.00 $110.00 (2 to 4 FTE employees) (50%) $ 90.00 $170.00 (5 to 9 FTE employees) (75%) $130.00 $225.00 (10+ FTE employees) (100%) $170.00 $225.00 (up to 20 rooms) (50%) $340.00 (21 to 40 rooms) (75%) $450.00 (41 + rooms) (100%) $500.00 $170.00 $260.00 $340.00 $500.00 Note 1: For retail, restaurant, service, and professional businesses, size will be determined by number of employees either full-time or equivalent (FTE) made up of multiples of part-time employees. A full FTE equals approximately 2000 hours annually. Lodging facilities will be charged by number of rooms available and financial institutions will be charged a flat fee. Note 2: Second floor (and higher) businesses located within Zone A, will be assessed the same as similar street-level businesses located within Zone B. Note 3: Assessment amounts are rounded to the nearest ten dollars. The minimum assessment will be $50.00. 17 "":1," • The City of Palo Alto Ilopoz.2. 2003'()7·251~:17:39 Proposed 81D Mop 7125103 (llcc-prmlraklGlsSIDII.IP6lSOflallJ_z2.mdb) ATTACHMENT 2 Downtown Palo Alto Business Improvement District - This map is a product of the City of Palo Alto GIS --a 500' Thl. do<urnenll. 8 Oraphlc represenlaUon only 01 b •• lavallable SOUl",>. . Tnt Cily 01 Palo Alto •• sum .. no rosponolbllay for any"""",. I ATTACHMENT 3 Not Yet Approved Resolution No. --- Resolution of the Council of the City of Palo Alto Declaring Its Intention to Levy an Assessment Against Businesses Within the Downtown Palo Alto Business Improvement District for Fiscal Year 2011 and Setting a Time and Place for May 17, 2010 at 7:00 PM or Thereafter, in the Council Chambers THE CITY COUNCIL OF THE CITY OF PALO ALTO DOES HEREBY FIND, DECLARE, AND ORDER AS FOLLOWS: SECTION 1. The Parking and Business Impro.vement Area Law o.f 1989 (the "Law"), Califo.rnia Streets and Highways Code Sectio.ns 36500 et seq., autho.rizes the City Co.uncil to. levy an assessment against businesses within a parking and business improvement area which is in additio.n to. any assessments, fees, charges, o.r taxes impo.sed in the City. SECTION 2. Pursuant to. the Law, the City Co.uncil ado.pted Ordinance No.. 4819 establishing the Do.wnto.wn Palo. Alto. Business Impro.vement District (the "District") in the City o.f Palo. Alto.. SECTION 3. The City Co.uncil, by Reso.lutio.n No.. 8416, appo.inted the Beard o.f Directo.rs o.f the Palo. Alto. Do.wnto.wn Business & Pro.fessio.nal Asso.ciatio.n, a Califo.rnia no.npro.fit mutual benefit co.rpo.ratio.n, to. serve as the Adviso.ry Beard fer the District (the "Adviso.ry Beard"). SECTION 4. In acco.rdance with Sectio.n 36533 o.f the law, the Adviso.ry Beard prepared and filed with the City Clerk a repo.rt entitled "Do.wnto.wn Palo.· Alto. Business Impro.vement District, Annual Repo.rt 2010-2011" (the "Repo.rt). The City Co.uncil hereby preliminarily appro.ves the repo.rt. SECTION 5. The bo.undaries o.f the District are within the City limits o.f the City o.f Palo. Alto. (the "City") and enco.mpass the greater do.wnto.wn area o.f the City, generally extending from EI Camino. Real to. the East, Webster Street to. the West, Lytto.n Avenue to. the No.rth and Addiso.n Avenue to. the So.uth (east o.f Emerso.n Street, the bo.undaries extend o.nly to. Fo.rest Avenue to. the So.uth). Reference is hereby made to. the map o.f the District attached hereto. as Exhibit "A" and inco.rpo.rated herein by reference fer a co.mplete descriptio.n o.f the bo.undaries o.f the District. SECTION 6. The City Co.uncil hereby declares its intentio.n, in additio.n to. any assessments, fees, charges o.r taxes impo.sed by the City, to. levy and co.llect an assessment against businesses within the District fer fiscal year 2010-2011 (July 1, 2010 to. June 30, 2011). Such assessment is net pro.po.sed to. increase fro.m the assessment levied and co.llected fer fiscal 1 100331 jb 0130568 Not Yet Approved year 2009-2010. The method and basis of levying the assessment is set forth in Exhibit ."B" attached hereto, and incorporated herein by reference. SECTION 7. The types of improvements to be funded by the levy of an assessment against businesses within the District are the acquisition, construction, installation or maintenance of any tangible property with an estimated useful life of five years or more. The types of activities to be funded by· the levy of. an assessment against businesses within the District are the promotion of public events which benefit businesses in the area and which take place on or in public places withi;n the District; the furnishing of music in any public .place in the District; and activities which benefit businesses located and operating in the District. SECTION 8. New businesses established in the District after the beginning of any fiscal year shall be exempt from the levy of the assessment for that fiscal year. In addition, non-profit organizations, newspapers and professional "single-person businesses," defined as those businesses which have 25% or less full time equivalent employees, including the business owner, shall be exempt from the assessment. SECTION 9. The City Council hereby fixes the time and place for a public hearing on the proposed levy of an assessment· against businesses within the District for fiscal year 2010-2011 as follows: TIME: DATE: PLACE: 7:00 p.m. Monday, May 17,2010 City Council Chambers 250 Hamilton Avenue Palo Alto, California 94301 At the public hearing, the testimony of all interested persons regarding the levy of an assessment against businesses within the District for fiscal year 2010-2011 shall be heard. A protest may be made orally or in writing by any interested person. Any protest pertaining to the regularity or sufficiency of the proceedings must be in writing and shall clearly set forth the irregularity or defect to which the objection is made. Every written protest must be filed with the City Clerk at or before the time fixed for the public hearing. The City Council may waive any irregularity in the form or content of any written protest and at the public hearing may correct minor defects in the proceedings. A written protest may be withdrawn in writing at any time before the conclusion of the public hearing. Each written protest must contain a description of the business in which the person subscribing the protest is interested sufficient to identify the business and, if a person subscribing is not shown on the official records of the City as the owner of the business, the protest shall contain or be accompanied by written evidence that the person subscribing is the owner of the 2 100331 jb 0130568 Not Ye~ Approved business. A written protest which does not comply with the requirements set forth in this paragraph will not be counted in determining a majority protest (as defined below). If, at the conclusion of the public hearing, written protests are received from the owners of businesses in the District which will pay 50 percent or more of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protests to less than 50· percent (i.e., there is a majority protest), no further proceedings to levy the proposed assessment, as contained in this resolution of intention, shall be taken for a period of one year from the date of the finding of a majority protest by the City Council. If the majority protest is only against the furnishing of a specified type or types of improvement or activity within the District, those types of improvements or activities shall be eliminated. SECTION 10. For a full and detailed description of the improvements and activities to be provided for fiscal year 2010-2011, the boundaries of the District and the proposed assessments to be levied against the businesses within the District for fiscal year 2010- 2011, reference is hereby made to the Report of the Advisory Board. The Report is on file with the City Clerk and open to public inspection. SECTION 11. The City Clerk is hereby authorized and directed to provide notice of the public hearing in accordance with law. II II II II II II II II II II II II 3 100331 jb 0130568 Not Yet Approved SECTION 12. The Council finds that the adoption of this resolution does not meet the definition of a.project under Section 21065 of the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: . ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: . Senior Assistant City Attorney 100331 jb 0130568 4 Mayor APPROVED: City Manager Director of Administrative Services Director of Planning and Community Environment The City of Palo Alto -':' ," lIopo>2, 2003'()1·25 '~:'7:39 p,~ 810 Map 7/25103 (\lcc-pnnI1akIGIOSIO.t.IP"'""""'lIopeZl.rndbl EXHIBIT A Downtown Palo Alto Business Improvement District This map is a product of the City of Palo Alto GIS -. 0' Thl. dOC\Jf1100II •• graphic ,._nIeUon only 01 be.1 8.1111_ SOUl"". Tho City 01 Palo AlII> assum .. no ,osponalbll;.y lor ""If ...., ... Retailers and Restaurants (100%) Service Businesses (75%) Professional Businesses (50%) Lodging Businesses (100%) Financhd Institutions EXHIBITB Downtown Palo Alto Business Improvement District Annual BID Assessments ZONE A $225.00 (Under 6 FTE employees) (50%) $340.00 (6 to under 11 FTE employees) (75%) $450.00 (11+ FTE employees) (100%) $170.00 (Under 4 FTE employees) (50%) , $260.00 (4 to under 7 FTE employees) (75%) $340.00 (7+ FTE employees) (100%). ZONEB (75%) $170.00 $260.00 $340.00 $130.00 $200.00 $260.00 EXEMPT (25% or fewer FTE employees, including the business owner) $ 60.00 (26% to under 1 FTE employees) (25%) $ 50.00 $110.00 (2 to 4 FTE employees) (50%) $ 90.00 $170.00 (5 to 9 FTE employees) (75%) $130.00 $225.00 (10+ FTE employees) (100%) $170.00 $225.00 (up to 20 rooms) (50%) $340.00 (21 to 40 rooms) (75%) $450.00 (41 + rooms) (100%) $500.00 $170.00 $260.00 $340.00 $500.00 Note·1: F or retail, restaurant, service, and professional businesses, size will be determined by number of employees either full-time or equivalent (FTE) made up of multiples of part-time employees. A full FTE equals approximately 2000 hours annually. Lodging facilities will be charged by number of rooms available and financial institutions will be charged a flat fee. Note 2: Second floor (and higher) businesses located within Zone A, will be assessed the same as similar street-level businesses located within Zone B. Note 3: Assessmentamounts are rounded to the nearest ten dollars. The minimum assessment will be $50.00. TO: "HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: HUMAN RESOURCES DATE: May 17,2010 CMR: 249:10 REPORT TYPE: CONSENT SUBJECT: Adoption of (1) Resolution of Intent and (2) Ordinance to Amend the Contract Between the Board of Administration of the California Public Employees' Retirement System (CaIPERS) and the City of Palo Alto to Implement California Government Code Section 20475 (2.0% @ 60 Full Formula) Providing a Second Tier of Different Level of Benefits for New Miscellaneous Employees RECOMMENDATION Staff recommends that Council adopt the attached Resolution of Intention of the Council of the City of Palo Alto stating its intent to amend the contract between the California Public Employees' Retirement System (CaIPERS) and the City of Palo Alto to implement Section 20475 (2.0% @ 60 Full Formula) providing a second tier of different level of benefits for new Miscellaneous employees; and an ordinance to authorize the Amendment. BACKGROUND On October 26, 2009, the City Council approved Resolution #8994 which imposed the City's Last, Best and Final offer to employees represented by Service Employees' International Union (SEIU), Local 521. The terms of that resolution included a change from the current CalPERS retirement formula 2.7% @ 55 Full Formula to the 2.0% at 60 retirement formula for new hires. The Council approved the same change for managers and other professionals in the 2009-10 Management and Professional compensation plan. The attached resolution is necessary to implement the contract amendment as required by PERS rules. The first step in the process is for the Council to adopt a Resolution of Intent and conduct a first reading of the ordinance amending the contract. Once the final ordinance is adopted and becomes effective, the contract amendment will go into effect the following payroll date. Based on the current schedule, the effective date of the contract will be July 17,201 O. CMR: 249:10 Page 1 of3 This benefit change will only affect new hires and not current, active employees in the SElU bargaining unit or the current employees in the Management and Professional group who are all combined and designated by CalPERS as the Local Miscellaneous employees group. This benefit shall consist of the City of Palo Alto paying a percentage of the normal member contributions as described in relevant labor policies and agreements. This change is a result of the City's continuing effort to lower the growing cost of employee benefits. DISCUSSION This change in pension fonnula for miscellaneous new hires is expected to gradually decrease the City's retirement benefit expense. Currently under the 2.7% @ 55 formula, an employee retiring at age 55 with 25 years of service can, for example, retire with a pension equal to 67.5% of final salary. Upon implementation of this amendment, under the new formula, a 60 year old employee with 25 years of service will be able to retire with a pension equal to 50% of final salary. The cost analysis provided by CalPERS states that while there will be no immediate employer contribution rate impact from this amendment, ultimately, the City's normal cost will decrease as new hires in the lower formula begin to replace existing employees in the higher formula who retire or otherwise tenninate. The approximate difference in normal cost is expected to be 3.3%. Thus, if an employee retires at age 60, this employee will be entitled to an annual pension of 2% of his or her salary multiplied by the number of accumulated years of service. RESOURCE IMPACT With the implementation of a 2% @ 60 retirement formula, the City will gradually realize pension contribution savings as new employees replace those now employed under the 2.7% @ 55 formula. Actuarial Information provided by CalPERS indicates that after implementing this change, the City can expect $0.24 million in savings in 2010-11 and $0.43 million in 2011-12, with total savings over the first ten years adding to $7.8 million. These estimates assume a 6.6% annual retirement rate (the average rate for 2006- 08), and a 6% non-retirement termination rate (the actual average rate for 2007-09). The estimates also assume that in 20 I 0-11 Miscellaneous employees Vl'ill decline in number by about 5%, as proposed in the draft 2010-11 budget, and that total Miscellaneous Full Time Equivalents (FTEs) will remain the sanle for the next ten years. CMR: 249:10 Page 2 of3 POLICY IMPLICATIONS This request supports the Finance Committee's recommendation for staff to bring alternatives forward on how to slow the increasing cost of employee benefits and lessen the impact on other City priorities, and is consistent with existing City policies. ENVIRONMENTAL REVIEW This action does not require an environmental review. ATfACHMENT 1. Resolution of Intention of the Council of the City of Palo Alto to Approve an Amendment to Contract with the Board of Administration California Public Employees'Retirement 2. Ordinance of the Council of the City of Palo Alto Authorizing an Amendment to the Contract with the Board of Administration ofthe California Public Employees' Retirement System . PREPARED BY: Sandra T.R. Blanch, Assistant Director, Human Resonrces DEPARTMENT HEAD: tfM;J..Il...-J. 1< .. IPtuI11 If;'" ~tUJJ1LtJl C~ RUSSELL CARLSEN Director of Human Resonrces CITYMANAGE~APPROVAL:~-P;l. Ij v< JA KEENE \ C. I 1 anager "'" CMR:249:1O Page 3 00 ** NOT YET APPROVED ** Resolution No. -:c---::-: Resolution oflntention of the Council of the City of Palo Alto to Approve an Amendment to Contract with the Board of Administration California Public Employees' Retirement WHEREAS, the Public Employees' Retirement Law permits the participation of public agencies and their employees in the Public Employees' Retirement System by the execution of a contract, and sets forth the procedure by which said public agencies may elect to subject themselves and their employees to amendments to said Law; and WHEREAS, the City of Palo Alto ("City") contracts with the Public Employees' Retirement System and desires to amend its contract; and WHEREAS, one of the steps in the procedures to amend this contract is the adoption by the governing body of the public agency of a resolution giving notice of its intention to approve an amendment to said contract, which resolution shall contain a summary of the change proposed in said contract; and follows: WHEREAS, the following is a statement of the proposed change: To provide section 20475 (Different Level of Benefits). Section 21353 (2% @ 60 Full formula) is applicable to local miscellaneous members hired into a miscellaneous classification after the effective date of this amendment to contract. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as SECTION 1. The City Council hereby gives notice of its intention to approve an amendment to the contract between the City and the Board of Administration of the Public Employees' Retirement System, a copy of said amendment being attached hereto, as Exhibit "A" and by this reference made a part hereof. II II II II II 100;12 sh 8261314 ** NOT YET APPROVED ** SECTION 2. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Senior Deputy City Attorney City Manager Director of Human Resources Director of Administrative Services 100512 sh 8261314 2 j • CaJPERS EXHIBIT California Public Employees' Retirement System ---+--- AMENDMENT TO CONTRACT Between the Board of Administration California Public Employees' Retirement System and the City Council City of Palo Alto -------+------- The Board of Administration, California Public Employees' Retirement System, hereinafter referred to as Board, and the governing body of the above public agency, hereinafter referred to as Public Agency, having entered into a contract effective January 1, 1942, and witnessed March 9, 1942, and as amended effective January 1, 1948, April 1, 1949, January 1,1952, July 1, 1954, February 1, 1956, November 1, 1964, September 23, 1968, December 14, 1970, February 1,1974, July 8,1974, January 5,1975, April 1, 1975, September 11,1977, July 1, 1979, February 21, 1981, July 11, 1981, December 12, 1981, June 12, 1982, September 17, 1983, November 12, 1983, February 11, 1991, October 15, 1994, December 10,1994, February 27,1996, October 15,1998, January 1,1999, October 14,1999, July 1, 2000, October 20, 2001, March 9, 2002, September 16, 2006 and January 6, 2007 which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 13 are hereby stricken from said contract as executed effective January 6, 2007, and hereby replaced by the following paragraphs numbered 1 through 15 inclusive: 1. All words and terms used herein which are defined in the Public Employees' Retirement Law shall have the meaning as defined therein unless otherwise specifically provided. "Normal retirement age" shall mean age 55 for local miscellaneous members entering membership in the miscellaneous classification on or prior to the effective date of this amendment to contract, age 60 for local miscellaneous members entering membership for the first time in the miscellaneous classification after the effective date of this amendment to contract and age 50 for local safety members. PLEASE DO NOT SIGN "EXHIBIT ONLY" 2. Public Agency shall participate in the Public Employees' Retirement System from and after January 1, 1942 making its employees as hereinafter provided, members of said System subject to all provisions of the Public Employees' Retirement Law except such as apply only on election of a contracting agency and are not provided for herein and to all amendments to said Law hereafter enacted except those, which by express provisions thereof, apply only on the election of a contracting agency. 3. Public Agency agrees to indemnify, defend and hold harmless the California Public Employees' Retirement System (CaIPERS) and its trustees, agents and employees, the CalPERS Board of Administration, and the California Public Employees' Retirement Fund from any claims, demands, actions, losses, liabilities, damages, judgments, expenses and costs, including but not limited to interest, penalties and attorneys fees that may arise as a result of any of the following: (a) Public Agency's election to provide retirement benefits, provisions or formulas under this Contract that are different than the retirement benefits, provisions or formulas provided under the Public Agency's prior non-CaIPERS retirement program. (b) Public Agency's election to amend this Contract to provide retirement benefits, provisions or formulas that are different than existing retirement benefits, provisions or formulas. (c) Public Agency's agreement with a third party other than CalPERS to provide retirement benefits, provisions, or formulas that are different than the retirement benefits, provisions or formulas provided under this Contract and provided for under the Califomia Public Employees' Retirement Law. (d) Public Agency's election to file for bankruptcy under Chapter 9 (commencing with section 901) of Title 11 of the United States Bankruptcy Code and/or Public Agency's election to reject this Contract with the CalPERS Board of Administration pursuant to section 365, of Title 11, of the United States Bankruptcy Code or any similar provision of law. (e) Public Agency's election to assign this Contract without the prior written consent of the CalPERS' Board of Administration. (f) The termination of this Contract either voluntarily by request of Public Agency or involuntarily pursuant to the Public Employees' Retirement Law. PLEASE DO NOT SIGN "fEXHISlr ONI),!I (g) Changes sponsored by Public Agency in existing retirement benefits, provisions or formulas made as a result of amendments, additions or deletions to California statute orto the California Constitution. 4. Employees of Public Agency in the following classes shall become members of said Retirement System except such in each such class as are excluded by law or this agreement: a. Local Fire Fighters (herein referred to as local safety members); b. Local Police Officers (herein referred to as local safety members); c. Employees other than local safety members (herein referred to as local miscellaneous members). 5. In addition to the classes of employees excluded from membership by said Retirement Law, the following classes of employees shall not become members of said Retirement System: a. PROJECT PROFESSIONAL; PROJECT MANAGER; PROJECT TECHNICIAN; PROJECT ASSISTANT; PROJECT LABORER; LANDSCAPE MAINTENANCE TRAINEE; LIBRARY PAGE; WATER SAFETY INSTRUCTOR ILiFEGUARD; RECREATION LEADER; AND POOL MANAGER HIRED ON OR AFTER OCTOBER 14, 1999. 6. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member in employment before and not on or after January 6, 2007 shall be determined in accordance with Section 21354 of said Retirement Law (2% at age 55 Full). 7. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member in employment on or after January 6, 2007 and not entering membership for the first time in the miscellaneous classification after the effective date of this amendment to contract shall be determined in accordance with Section 21354.5 of said Retirement Law (2.7% at age 55 Full). 8. The percentage of final compensation to be provided for each year of credited current service as a local miscellaneous member entering membership for the first time in the miscellaneous classification after the effective date of this amendment to contract shall be determined in accordance with Section 21353 of said Retirement Law (2% at age 60 Full). 9. The percentage of final compensation to be provided for each year of credited prior and current service as a local safety member shall be determined in accordance with Section 21362.2 of said Retirement Law (3% at age 50 FUll). PLEASE DO 1\10T SIGN "EXHIBIT ONLY" 10. Public Agency elected and elects to be subject to the following optional provisions: a. Section 21571 (Basic Level of 1959 Survivor Benefits). b. Section 21222.1 (One-Time 5% Increase -1970). Legislation repealed said Section effective January 1, 1980. c. Section 21222.2 (One-Time 5% Increase -1971). Legislation repealed said Section effective January 1, 1980. d. Section 21319 (One-Time 15% Increase for Local Miscellaneous Members Who Retired or Died Prior to July 1, 1971). Legislation repealed said Section effective January 1, 2002. e. Section 21325 (One-Time 3% to 15% Increase For Local Miscellaneous Members and Local Safety Members Who Retired or Died Prior to January 1, 1974). Legislation repealed said Section effective January 1, 2002. f. Section 20042 (One-Year Final Compensation). g. Section 21317 (One-Time 15% Increase for Certain Local Safety Members Who Retired for Service Retirement). Legislation repealed said Section effective January 1, 2002. h. Section 21326 (One-Time 1 % to 7% Increase For Local Miscellaneous Members and Local Safety Members Who Retired or Died Prior to July 1, 1974). Legislation repealed said Section effective January 1, 2002. i. Section 21024 (Military Service Credit as Public Service). j. Section 20692 (Employer Paid Member Contributions Converted to Payrate During the Final Compensation Period) for local miscellaneous members and local safety members in the following groups: Local miscellaneous members who are Management and confidential employees; Local police members who are Management and confidential employees; Local fire members who are Management and confidential employees; Local miscellaneous members represented by local 715, SEIU AFL-CIO and CLC; and PLEASE DO NOT SIGN "EXHIBIT ONLY" Local police members represented by the Palo Alto Peace Officer's Association. k. Section 20434.5 ("Local Fire Fighter" shall include any officer or employee of a fire department employed to perform hazardous materials services as described in Government Code Section 20434.5). I. Section 21548 (Pre-Retirement Option 2W Death Benefit) for local fire members only. m. Section 20475 (Different Level of Benefits). Section 21353 (2% @ 60 Full formula) is applicable to local miscellaneous members entering membership for the first time in the miscellaneous classification after the effective date of this amendment to contract. 11. Public Agency. in accordance with Government Code Section 20790. ceased to be an "employer" for purposes of Section 20834 effective on September 11, 1977. Accumulated contributions of Public Agency shall be fixed and determined as provided in Government Code Section 20834, and accumulated contributions thereafter shall be held by the Board as provided in Government Code Section 20834. 12. Public Agency shall contribute to said Retirement System the contributions determined by actuarial valuations of prior and future service liability with respect to local miscellaneous members and local safety members of said Retirement System. 13. Public Agency shall also contribute to said Retirement System as follows: a. A reasonable amount. as fixed by the Board, payable in one installment within 60 days of date of contract to cover the costs of administering said System as it affects the employees of Public Agency, not including the , costs of special valuations or of the periodic investigation and valuations required by law. b. A reasonable amount, as fixed by the Board, payable in one installment as the occasions arise, to cover the costs of special valuations on account of employees of Public Agency, and costs of the periodic investigation and valuations required by law. 14. Contributions required of Public Agency and its employees shall be subject to adjustment by Board on account of amendments to the Public Employees' Retirement Law, and on account of the experience under the Retirement System as determined by the periodic investigation and valuation required by said Retirement Law. • B. 15. Contributions required of Public Agency and its employees shall be paid by Public Agency to the Retirement System within fifteen days after the end of the period to which said contributions refer or as may be prescribed by Board regulation. If more or less than the correct amount of contributions is paid for any period, proper adjustment shall be made in connection with subsequent remittances. Adjustments on account of errors in contributions required of any employee may be made by direct payments between the employee and the Board. This amendment shall be effective on the .; day of _________ . \,'--\ BOARD OF ADMINISTRATION /G,8ITY COUNCIL PUBLIC EMPLOYEES' RETIREMENT SYS,:t"EM CITY OF PALO ALTO /~-{.:,\.'\. ' "'V, . ~\ BY , c.';-,.(2J;' LORI MCGARTLAND, CH1~\ = EMPLOYER SERVIC~,JjI"'rSION PUBLIC EMPLOY~~ETIREMENT SYSTEM ,~~ ~'V AMENDMENT ER# 14 PERS-CON-702A ..".,..-,-_ ...... __ .. _------- Clerk ** NOT YET APPROVED ** Ordinance No. ----=--Ordinance of the Council of the City of Palo Alto Authorizing an Amendment to the Contract with the Board of Administration of the California Public Employees' Retirement System The Council of the City of Palo Alto does ORDAIN as follows: SECTION I. An amendment to the contract between the Council of the City of Palo Alto and the Board of Administration, California Public Employees' Retirement System is hereby authorized, a copy of said amendment being attached hereto as Exhibit "A," and by such reference made a part hereof as though herein set out in full. SECTION 2. The City Manager of the City of Palo Alto is hereby authorized, empowered, and directed to execute said amendment for and on behalf of the City. SECTION 3. date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Senior Deputy City Attorney 100512 sh 8261315 This ordinance shall be effective on the thirty-first day after the Mayor APPROVED: City Manager Director of Human Resources Director of Administrative Services 1 CalPERS EXHIBIT Califomia Public Employees' Retirement System ---,+--- AMENDMENT TO CONTRACT Between the Board of Administration California Public Employees' Retirement System .and the City Council City of Palo Alto ---+---- The Board of Administration, California Public Employees' Retirement System, hereinafter referred to as Board, and the goveming body of the above public agency, hereinafter referred to as Public Agency, having entered into a contract effective January 1, 1942, and witnessed March 9, 1942, and as amended effective January 1, 1948, April 1, 1949, January 1, 1952, July 1, 1954, February 1, 1956, November 1, 1964, September 23, 1968, December 14, 1970, February 1, 1974, July 8, 1974. January 5,1975, April 1, 1975, September 11,1977, July 1, 1979, February 21, 1981, July 11, 1981, December 12, 1981, June 12, 1982, September 17,1983, November 12,1983, February 11, 1991, October 15, 1994, December 10,1994, February 27,1996, October 15,1998, January 1,1999, October 14,1999, July 1, 2000, October 20, 2001, March 9, 2002, September 16, 2006 and January 6, 2007 which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 13 are hereby stricken from said contract as executed effective January 6, 2007, and hereby replaced by the following paragraphs numbered 1 through 15 inclusive: 1. All words and terms used herein which are defined in the Public Employees' Retirement Law shall have the meaning as defined therein unless otherwise specifically provided. "Normal retirement age" shall mean age 55 for local miscellaneous members entering membership in the miscellaneous classification on or prior to the effective date of this amendment to contract, age 60 for local miscellaneous members entering membership for the first time in the miscellaneous classification after the effective date of this amendment to contract and age 50 for local safety members. PLEASE DO NOT SIGN "EXHIBIT Or~LY" 2. Public Agency shall participate in the Public Employees' Retirement System from and after January 1, 1942 making its employees as hereinafter provided, members of said System subject to all provisions of the Public Employees' Retirement Law except such as apply only on election of a contracting agency and are not provided for herein and to all amendments to said Law hereafter enacted except those, which by express provisions thereof, apply only on the election of a contracting agency. 3. Public Agency agrees to indemnify, defend and hold harmless the Califomia Public Employees' Retirement System (CaIPERS) and its trustees, agents and employees, the CalPERS Board of Administration, and the Califomia Public Employees' Retirement Fund from any claims, demands, actions, losses, liabilities, damages, judgments, expenses and costs, including but not limited to interest, penalties and attomeys fees that may arise as a result of any of the following: (a) Public Agency's election to provide retirement benefits, provisions or formulas under this Centrad that are different than the retirement benefits, provisions or formulas provided under the Public Agency's prior non-CaIPERS retirement program. (b) Public Agency's election to amend this Contract to provide retirement benefits, provisions or formulas that are different than existing retirement benefits, provisions or formulas. (c) Public Agency's agreement with a third party other than CalPERS to provide retirement benefits, provisions, or formulas that are different than the retirement benefits, provisions or formulas provided under this Contract and provided for under the Califomia Public Employees' Retirement Law. (d) Public Agency's election to file for bankruptcy under Chapter 9 (commencing with section 901) of Title 11 of the United States Bankruptcy Code and/or Public Agency's election to reject this Contract with the CalPERS Board of Administration pursuant to section 365, of Title 11, of the United States Bankruptcy Code or any similar provision of law. (e) Public Agency's election to assign this Contract without the prior written consent of the CalPERS' Board of Administration. (f) The termination of this Contract either voluntarily by request of Public Agency or involuntarily pursuant to the Public Employees' Retirement Law. I 4. (g) Changes sponsored by Public Agency in existing retirement benefits, provisions or formulas made as a result of amendments, additions or deletions to California statute or to the California Constitution. Employees of Public Agency in the following classes shall become members of said Retirement System except such in each such class as are excluded by law or this agreement: a. Local Fire Fighters (herein referred to as local safety members); b. Local Police Officers (herein referred to as local safety members); c. Employees other than local safety members (herein referred to as local miscellaneous members). 5. In addition to the classes of employees excluded from membership by said Retirement Law, the following classes of employees shall not become members of said Retirement System; a. PROJECT PROFESSIONAL; PROJECT MANAGER; PROJECT TECHNICIAN; PROJECT ASSISTANT; PROJECT LABORER; LANDSCAPE MAINTENANCE TRAINEE; LIBRARY PAGE; WATER SAFETY INSTRUCTOR III FE GUARD; RECREATION LEADER; AND POOL MANAGER HIRED ON OR AFTER OCTOBER 14, 1999. 6. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member in employment before and not on or after January 6, 2007 shall be determined in accordance with Section 21354 of said Retirement Law (2% at age 55 Full). 7. The percentage of final compensation to be provided for each year of credited prior and current service as a local miscellaneous member in employment on or after January 6, 2007 and not entering membership for the first time in the miscellaneous classification after the effective date of this amendment to contract shall be detenmined in accordance with Section 21354.5 of said Retirement Law (2.7% at age 55 Full). 8. The percentage of final compensation to be provided for each year of credited current service as a local miscellaneous member entering membership for the first time in the miscellaneous classification after the effective date of this amendment to contract shall be detenmined in accordance with Section 21353 of said Retirement Law (2% at age 60 Full). 9. The percentage of final compensation to be provided for each year of credited prior and current service as a local safety member shall be determined in accordance with Section 21362.2 of said Retirement Law (3% at age 50 Full). j j ~ 10. Public Agency elected and elects to be subject to the following optional provisions: a. Section 21571 (BasiC Level of 1959 Survivor Benefits). b. Section 21222.1 (One-Time 5% Increase -1970). Legislation repealed said Section effective January 1, 1980. c. Section 21222.2 (One-Time 5% Increase -1971). Legislation repealed said Section effective JanuarY 1, 1980. d. Section 21319 (One-Time 15% Increase for Local Miscellaneous Members Who Retired or Died Prior to July 1, 1971). Legislation repealed said Section effective January 1, 2002. e. Section 21325 (One-Time 3% to 15% Increase For Local Miscellaneous Members and Local Safety Members Who Retired or Died Prior to January 1, 1974). Legislation repealed said Section effective January 1, 2002. f. Section 20042 (One-Year Final Compensation). g. Section 21317 (One-Time 15% Increase for Certain Local Safety Members Who Retired for Service Retirement). Legislation repealed said Section effective January 1 , 2002. h. Section 21326 (One-Time 1% to 7% Increase For Local Miscellaneous Members and Local Safety Members Who Retired or Died Prior to July 1, 1974). Legislation repealed said Section effective January 1,2002. i. Section 21024 (Military Service Credit as Public Service). j. Section 20692 (Employer Paid Member Contributions Converted to Payrate During the Final Compensation Period) for local miscellaneous members and local safety members in the following groups: Local miscellaneous members who are Management and confidential employees; Local police members who are Management and confidential employees; Local fire members who are Management and confidential employees; Local miscellaneous members represented by local 715, SEIU AFL-CIO and CLC; and Local police members represented by the Palo Alto Peace Officer's Association. k. Section 20434.5 ("Local Fire Fighter" shall include any officer or employee of a fire department employed to perform hazardous materials services as described in Government Code Section 20434.5). I. Section 21548 (Pre-Retirement Option 2W Death Benefit) for local fire members only. m. Section 20475 (Different Level of Benefits). Section 21353 (2% @ 60 FuJI formula) is applicable to local miscellaneous members entering membership for the first time in the miscellaneous classification after the effective date of this amendment to contract. 11. Public Agency, in accordance with Government Code Section 20790, ceased to be an "employer" for purposes of Section 20834 effective on September 11, 1977. Accumulated contributions of Public Agency shall be fixed and determined as provided in Government Code Section 20834, and accumulated contributions thereafter shall be held by the Board as provided in Government Code Section 20834. 12. Public Agency shall contribute to said Retirement System the contributions determined by actuarial valuations of prior and future service liability with respect to local miscellaneous members and local safety members of said Retirement System. 13. Public Agency shall also contribute to said Retirement System as follows: a. A reasonable amount, as fixed by the Board, payable in one installment within 60 days of date of contract to cover the costs of administering said System as it affects the employees of Public Agency, not including the costs of special valuations or of the periodiC investigation and valuations required by law. b. A reasonable amount, as fixed by the Board, payable in one installment as the occasions arise, to cover the costs of special valuations on account of employees of Public Agency, and costs of the periodic investigation and valuations required by law. 14. Contributions required of Public Agency and its employees shall be subject to adjustment by Board on account of amendments to the Public Employees' Retirement Law, and on account of the experience under the Retirement System as determined by the periodic investigation and valuation required by said Retirement Law. B. 15. Contributions required of Public Agency and its employees shall be paid by Public Agency to the Retirement System within fifteen days after the end of the period to which said contributions refer or as may be prescribed by Board regulation. If more or less than the correct amount of contributions is paid for any period, proper adjustment shall be made in connection with subsequent remittances. Adjustments on account of errors in contributions required of any employee may be made by direct payments between the employee and the Board. This amendment shall be effective on the _-,--'-day of __________ . " \ BOARD OF ADMINISTRATION .\ ,:>6'ITY COUNCIL PUBLIC EMPLOYEES' RETIREMENT S,(;?J.EM CITY OF PALO ALTO "\' .;.<~J<" ~ BY <",.i~f· ~ '.',\ LORI MCGARTLAND, CH@O \ $ EMPLOYER SERVIC~JlW'ISION PUBLIC EMPLOY~~.e~ETIREMENT SYSTEM c~ «) \\~ AMENDMENT ER# 14 PERS-CON·702A Clerk City of Palo Alto 1 0 City Manager's Report TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: CITY MANAGER DATE: MAY 17,2010 CMR: 250:10 REPORT TYPE: ACTION SUBJECT: Approval of Recommendation from the High Speed Rail Committee Regarding Revisions to Guiding Principles; and Discussion of High Speed Rail Issues Summary RECOMMENDATION The Council's High Speed Rail Committee recommends approval of the revised "Role and Guiding Principles." (Attachment A) ROLE AND GUIDING PRINCIPLES FOR THE HIGH SPEED RAIL COMMITTEE Because of the evolving nature of the peninsula segment of the High Speed Rail project, the HSR Committee has proposed the attached revisions to the Council's adopted Guiding Principles. Initially adopted in May 2009 (Attachment B), the Guiding Principles are intended to provide on~going policy direction to the HSR Committee to enable the Committee to effectively represent Palo Alto's interest. The revised principles begin to incorporate policy and Palo Alto's desired outcomes. As more information has been provided regarding the implementation of the San Jose to San Francisco segment, the HSR Committee concluded that the update to the May 2009 principles was essential to adequately reflect the City's evolving HSR policy position. The attached draft was created by the Committee at its meeting on May 13,2010. Council review and action on the revised Role and Guiding Principles document is requested. HIGH SPEED RAIL ISSUES UPDATE The High Speed Rail Authority has extended their deadline for comments on the Alternatives Analysis from June 8, 2010 to June 30, 2010. This is helpful although still a constrained timeframe, as the City has yet to receive full responses to information requests from High Speed Rail that are important for our response to the Alternatives Analysis. In addition, (FYI) the HSR Authority Staff forwarded their suggested guidelines for Preliminary Alternatives Analysis (See Attachment D). Obviously, the need for Community outreach indicates that even the revised deadline is too constrained. CMR: 250:10 Page 1 of2 Also Staff has identified some of the significant issues relevant to high speed rail. (Attachment C) The issue outline was prepared in response to Council's direction to identify the significant issues influencing Council's high speed rail policy discussions. The list is intended to be a very preliminary outline of major issues to facilitate Council discussion. Staff clearly understands it requires significant analytical work to inform a complete Council Policy Statement. Finally, the bill and summary of AB 3034, the Safe Reliable, High Speed Passenger Train Bond Act for the 21 st Century (2008) is attached. (Attachment D) ATTACHMENTS Attachment A: Draft Role and Guiding Principles Attachment ~: Adopted Guiding Principles May 2009 Attachment C: Draft High Speed Rail Policy Issues Outline Prepared by City of Palo Alto Staff at City Council's Request (5-12-2010) Attachment D: Guidelines for Preliminary Alternatives Analysis Attachment E: AB 3034 Legislative Summary PREPARED BY: CITY MANAGER APPROVAL: CMR: 250:10 Page 2 of2 Attachment A ROLE AND GUIDING PRINICIPLES OF THE HIGH SPEED RAIL COMMITTEE OF THE PALO ALTO CITY COUNCIL DRAFT May 13 /2010 Background In November 2008 California voters approved a nearly ten billion dollar bond measure, the primary purpose of which is to develop high speed rail (HSR) service from Los Angeles to San Francisco. The High Speed Rail Authority has decided that the route HSR will take from San Jose to San Francisco is along the Caltrain right of way (ROW), including the portion of the ROW that runs through Palo Alto. However, the Environmental Impact Report used by the Authority in making this decision has been de-certified per court order. Many issues, such as the vertical alignment of the HSR, remain undecided. Recognizing that HSR could have many impacts on Palo Alto, some quite negative, and that swift City action might be needed in many circumstances the City Council on May 18, 2009 created an ad hoc High Speed Rail Subcommittee of four Council Members, (since changed to a standing committee and renamed the High Speed Rail Committee). The Council also adopted a set of Guiding Principles which allowed the Committee to take a variety of actions in the name of the City without action of the full Council. During the past year the Committee---indeed the entire community---have learned a great deal about HSR and many HSR related actions have taken place. The City Council therefore, adopts the following Principles to guide its the decision making framework and actions of the Committee: Role and Authority of the High Speed Rail Committee The Committee shall advise the City Council on HSR and related rail transit matters and provide the community with appropriate forums for the discussion of such issues. The Committee shall keep the full Council informed on a regular basis. The Committee shall have the authority to act on behalf of the City on HSR and related rail transit matters when there is not sufficient time to refer a particular issue to the full City Council before action is needed. Such actions by the Committee shall include, but not be limited to, testimony before the state legislature, the HSR Authority, Congress and other pertinent governmental agencies and advocacy (oral or written) pertaining to pending or desired legislation. Such actions by the Committee shall be consistent with the following policies of the City: Guiding Principles 1. The City is opposed to an elevated alignment of HSR/Caltrain in Palo Alto. Attachment A 2. The City's preferred vertical alignment of HSR in Palo Alto is below grade. 3. All neighborhoods in Palo Alto affected by HSR should be treated on the same basis with respect to vertical alignment impacts. 4. The City believes that the pending program EIR for the Central Valley to San Francisco portion of HSR is fatally flawed and that the HSR Authority should reopen and reconsider its decision to use the Pacheco Pass route. 5. The City further believes that the ridership study used by the Authority contains dubious and erroneous assumptions and that the Legislature should order an independent ridership study under its direction and control. 6. The City supports the findings of the Legislative Analysts Office and State Auditor which question the viability and accuracy of the Authority's Business Plan on such matters as the identification of sufficient, reliable funding sources, project management and operations of HSR. 7. The City favors legislation which would enable effective implementation of the Peer Review committee authorized by AB 3034 with respect to HSR. 8. Palo Alto supports transit and urban design solutions that will be compatible with our economic development strategies, transportation goals, and vision of the transit corridor with i n ou r boundaries; HSR/Caltrain needs to complement the goals and strategies of our Comprehensive Plan. 9. Palo Alto supports the use of the Context Sensitive Solutions related to HSR and Caltrain that is effectively funded and implemented by the Peninsula Rail Program and the High Speed Rail Authority. 10. Palo Alto strongly supports CalTrain and the commuter rail service at the present or improved levels of service. 11. Palo Alto also supports the electrification of CalTrain pursuant to its present plans but independent of HSR. 12. Palo Alto will work cooperatively with neighboring communities with respect to HSR issues of mutual concern through vehicles such as the Peninsula Cities Consortium. 13. The Guiding Principles of the Committee incorporates Council adopted written comments to the Authority and its Representatives. City Council High Speed Rail Subcommittee Guiding Principles Adopted May 18, 2009 Attachment R The City Council High Speed Rail Subcommittee, consisting of four members, is designated by the City Council to represent the City in public in meetings with community groups and stakeholders, when speaking to other public agencies, when providing written correspondence in advocating for legislation related to high speed rail. The Subcommittee will have the authority to speak on behalf of the City Council at hearings on short notice when full City Council discussion at a regularly scheduled Council meeting is not feasible. In such cases the Subcommittee should be guided by broad principles that are consistent with existing City Comprehensive Plan and adopted City Council policies. In order to ensure consistency with existing City Council positions and policies, the Subcommittee will be guided by the following principles: • The City is supportive of efforts to improve accountability and effective' governance of high speed rail planning and operations. • The City advocates advancing economic feasibility analysis and project financing options by High Speed Rail Governing Body to implement selected alternatives. • The Ad Hoc committee will work with peninsula cities coalition to draft Memorandum of Understanding with Caltrain and HSRA and return to full Council for review and approval. • The City understands the opportunity to apply for Federal stimulus funding but is concerned that enough time is allowed for appropriate analysis, public process, and decision making. • The City recognizes that High Speed Rail, if done correctly, has the potential to minimize adverse impacts and be beneficial to the community. • While acknowledging that the current direction for the San Jose to San Francisco High Speed Train project is to use the Caltrain right-of-way as the for the high speed rail corridor between San Jose and San Francisco, the City is open to and could support alternative alignments. • The Ad Hoc Committee will be guided by the City of Palo Alto Scoping Comments for the California High Speed Rail Authority'S San Francisco to San Jose High Speed Train (HST) Environmental Impact Report/Environmental Impact Statement (EIR/EIS). Attachment B • The City supports Caltrain electrification and improved commuter rail services between San Francisco and San Jose. The City supports evaluation of operating conditions along the Caltrain right-of-way that would be conducive to a high speed rail intercity connection in San Jose, with improved Caltrain commuter rail service between San Jose and San Francisco. • The City is supportive of exploring creative urban design and use of context- sensitive design processes that consider community values in collaborative community-sensitive planning and for the high speed rail project. • The Subcommittee shall provide monthly reports to the Council on the activities of the Peninsula cities Consortium. • The Subcommittee will meet regularly with community leaders and stakeholders to inform and involve the larger Palo Alto community in the planning, review, oversight and decision-making for the San Francisco to San Jose HST project. ATTACHMENT C Draft High Speed Rail Policy Issues Outline Prepared by City of Palo Alto Staff at City Council's Request (5-12-2010) 1. Environmental Impacts a. Noise, Vibration, Visual Blight b. Traffic c. Construction Impacts 2. Vertical Separation a. Supports HSR in deep buried tunnel b. Options for Caltrain grade separations c. Covered Trench d. Restoring existing undercrossing to grade level 3. Caltrain (JPB) Commuter Service a. Caltrain Service preserved or enhanced after HSR b. Preserve "Baby Bullet" c. Travel times should be reduced d. Financial solvency for JPB e. Shared operations provided greatest flexibility 4. Land Use Compatibility a. Below grade options: Re-use Right-of-Way b. Study land use options of possible alternatives i.e. use of surface right-of- way, Transit Oriented development c. Right-of-Way adequacy d. Eminent Domain e. Equity of treatment of all sections in Palo Alto f. Impacts on existing stations (Downtown and California Avenue) g. Impacts to property values 5. Palo Alto Station Yes or l\Io? a. Quantify footprint and infrastructure requirements b. Impacts to Downtown c. Quantify Economic benefits 6. Community Engagement a. Identify Stakeholders issue, values and measures of success b. Understand choices and alternatives c. Understand criteria HSRA will use to make changes ATTACHMENT 0 GUIDELINES FOR PRELIMINARY ALTERNA"rlVES ANALYSIS COMMENTS Prepared by HSR Staff and presented to the Technic" or mg (Staff representatives) May 13, 2010 We are requesting that comments be received y June 30, 2010. Keep comments focused on the alternatives. Comments related to other issues won't be addressed as part of the Supplemental Alternatives Analysis. Be specific. Comments area easier to understand and address if we know specifically what your community is concerned about. Use the ~oals that have been deyeloped as a guide (See Issues and Opportunities Matrices o,n the PRP website for specific goals) to ensure that we are using a common vocabula,ry. ~onsider giving examples of what you are Interested in or concerned about. Comment on. each alternative. While we expect that each city will have a preference among the alternatives under study, it is critical to obtain feedback on all the alternatives, which will inform the cost/benefit analysis as the project is further defined. Focus on what works (and what doesn't) and why. Use the goals that we have developed to test whether a particular alternative works from your city's perspective. Please indicate which goals it meets or doesn't ,meet, and where, ~eographically speaking, an alternative causes concerns. (i.e. The aerial alternative causes concerns about noise and visual impact in the residential neighborhoods at the north end of our city.) Consider what would need to happen in order to make alternatives work. Be creative and consider what mitigations or amenities might be necessary in order to make each alternative the best for your community. (J.e. The open trench alternative would be optimized ifthe area between Street X and Street Y near City downtown were covered creating a new civic plaza.) Consider how combinations of alternatives might be best to meet different priorities in different parts of your city. Not all solutions work for all areas. Consider how to use the potential transitions that have been called out to identify combinations of alternatives that best address your community needs. Consider talking with your I'\ei(~~ori~.s cities about comments that are consistent betWeen your communities. Keep in mind "t'hat there are is communities along the corridor and not all of them have the same priorities and that the alternatives in one community can affect the alternatives in the next community. These areas will require strong communication and coordination between communities. Perhaps It is possible to work together to envision how different solutions could cross city boundaries. .\ Attachment E AB 3034 Legislative Summary Provided by Ravi Mehta Capitol Advocates Subject to voter approval, the act would provide for the issuance of $9.95 billion of general obligation bonds, $9 billion of which would be available in conjunction with any available federal funds for planning and construction ofa high-speed train system pursuant to the business plan of the High- Speed Rail Authority, and $950 million of which would be available for capital projects on other passenger rail lines to provide counectivity to the high-speed train system and for capacity enhancements and safety improvements to those lines. This bill would repeal the above-referenced provisions and enact new provisions submitting a $9.95 billion general obligation bond act to the voters for approval at the November 4, 2008, general election for the same purposes. The bill would revise and recast the previously proposed bond act. The bill would refer to construction of a high-speed train system consistent with the authority's certified environmental impact reports of November 2005 and July 9, 2008, rather than with the final business plan of June 2000. The bill would revise the descriptions of route corridors of the proposed high-speed train system. The bill would require excess revenues from operation of the high-speed train system beyond the amount needed for operating and maintenance costs and financing obligations, as determined by the authority, to be used for construction, expansion, improvement, replacement, and rehabilitation of the high- speed train system. The bill would require that not more than 10% of high-speed rail bond proceeds be used for environmental studies, planning, and preliminary engineering activities and that not more than 2.5% of high-speed rail bond proceeds be used for administrative expenses, except as specified. The bill would generally require the authority to complete various funding plans and financial analyses, as specified, prior to submitting a request for appropriation of bond funds for eligible capital costs and prior to committing bond proceeds for expenditure for construction and real property and equipment acquisition, but would also provide that up to 7.5% of high-speed rail bond proceeds may be used for specified expenditures outside of those requirements. The bill would require the authority to give priority in selecting corridors for construction to those corridors that are expected to require the least amount of bond funds as a percentage oftotal cost of construction, among other considerations. The bill would provide for the bonds to have a final maturity of not more than 40 years. CALIFORNIA LEGISLATURE-2007-o8 REGULAR SESSION ASSEMBLY BILL No. 3034 Introduced by Assembly Members Galgiani and Ma (Principal coauthor: Assembly Member Davis) (Coauthor: Senator Steinberg) February 22,2008 An act to amend Sections 2704.04, 2704.06, 2704.08, and 2704.095 of the Streets and Highways Code, and to amend Sections 1,3, and 4 of Chapter 697 of the Statutes of 2002, relating to transportation, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 3034, as introduced, Galgiani. Safe, Reliable High-Speed Passenger Train Bond Act for the 21 st Century. Existing law, Chapter 697 of the Statutes of 2002, as amended by Chapter 71 of the Statutes of 2004 and Chapter 44 of the Statutes of 2006, provides for submission of the Safe, Reliable High-Speed Passenger Train Bond Act for the 21 st Century to the voters for approval at the November 4, 2008, general election. Subject to voter approval, the act would provide for the issuance of $9.95 billion of general obligation bonds, $9 billion of which would be available in conjunction with any available federal funds for planning and construction of a high-speed train system pursuant to the business plan of the High-Speed Rail Authority, and $950 million of which would be available for capital projects on other passenger rail lines to provide connectivity to the high-speed train system and for capacity enhancements and safety improvements to those lines. This bill would make various revisions to the bond act to be submitted to the voters. The bill would refer to construction of a high-speed train 99 AB3034 -2- system consistent with the authority's certified environmental impact report of November 2005, rather than with the final business plan of June 2000. The bill would revise the descriptions of route segments of the proposed high-speed train system. The bill would require excess revenues from operation of the high-speed train system beyond the amount needed for high-speed train purposes, as defined by the authority, to be deposited in the General Fund. The bill would require that not more than 10% of bond proceeds be used for environmental studies, planning, and engineering activities, and would require the authority to have a detailed funding plan for each segment of the system that identifies the full cost of construction and the sources of revenues for that segment, prior to awarding a construction contract for the segment. The bill would require the authority to give priority in selecting each specific segment for construction to those segments that require the least amount of bond funds as a percentage of total cost of construction, among other considerations. This bill would declare that it is to take effect immediately as an urgency statute. Vote: %. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. The people of the State of California do enact as follows: 1 SECTION 1. Section 1 of Chapter 697 ofthe Statutes of2002, 2 as amended by Section 1 of Chapter 71 of the Statutes of 2004, is 3 amended to read: 4 Section 1. (a) In light of the events of September 11, 2001, it 5 is very clear that a high speed pasSen:gCf ti'am n~tvv'Ofk as described 6 in the High Speed Rail Authority's Business Plan is essefitial for 7 the tfaftsportation needs of the gfO'wifig population afid eeOfi:()ft'lie 8 activity of this state The continuing growth in California's 9 population and the resulting increase in traffic congestion, air 10 pollution, greenhouse gas emissions, and loss of land make it 11 imperative that the state proceed quickly to construct a 12 state-of-the-art high-speed passenger train network to serve major 13 metropolitan areas. 14 (b) The initial high speed train neWv'Ofk linking San Fmaciseo 15 and the bay area to Los Angeles '.vill sef'Ve as the baekbone of what 16 will bccome an extensFv'c 700-mile system that will link all of the 17 state's major population centers, ineluding Sacramento, the bay 99 -3-AB 3034 1 area, the Cetrtral Valley, Los Angeles, the Inland Empire, Orange 2 Coun-ty, and San Diego, and address the needs of the state The 3 High-Speed Rail Authority, after extensive studies and analysis, 4 proposf!s the construction of a new high-speed train network that 5 serves major population centers in the state and that links regional 6 and local transit systems to form an integrated transportation 7 network throughout the state. The network will link all of the state's 8 major population centers, including Sacramento, the Bay Area, 9 the Central Valley, Los Angeles, the Inland Empire, Orange 10 County, and San Diego. 11 (c) The high-speed train network proposed by the authority will 12 cost about one-third of what it would cost to provide the same 13 level of mobility and service with highway and airport 14 improvements and will contribute significantly toward a reduction 15 in air pollution and global warming. 16 (d) The high-speed train network, once it is completed and 17 becomes operational, will contribute significantly toward the goal 18 of reducing greenhouse gas emissions and other air pollutants 19 and will help reduce California's dependence on foreign energy 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 sources. W (e) The high-speed passenger train bond funds are intended to encourage the federal government and the private sector to make a significant contribution toward the construction ofthe high-speed train network. Ed) The initial segmCftts shall be built in a maooer that yields maximum: bCftefit eonsistent vv'ith available revenues. Ee) After the initial iftvestment from the state, operating revCftues from the initial segmeftts and funds from the fedeml government and the pry.'8:te seetor will be used to pay for C*pansion of the system. It is the intent of the Legislature that the entire high speed train system shall be eonstrueted as quiekly as possible in order to maximize ridership and the mobility of Californians. (f) At a miniffiUffi, the entire 700 mile system deseribed in the High Speed Rail Authority's Business Plan should be eonstrueted and in revenue sef'viee by 2020 It is the intent of the Legislature that the entire high-speed train system shall be constructed as quickly as possible in order to maximize ridership and the mobility of Californians, and that it be completed no later than 2020, and 99 AB3034 -4- I that all phases shall be built in a manner that yields maximum 2 benefit consistent with available revenues. 3 SEC. 2. Section 2704.04 of the Streets and Highways Code, 4 as added by Section 2 of Chapter 697 of the Statutes of 2002, is 5 amended to read: 6 2704.04. (a) It is the intent of the Legislature by enacting this 7 chapter and of the people of California by approving the bond 8 measure pursuant to this chapter to initiate the construction of a 9 high-speed train network consistent with the authority's-Fittal 10 Busilless Pltm ofJUlle 2000 certified environmental impact report 11 of November 2005. 12 (b) (1) Nine billion dollars ($9,000,000,000) of the proceeds 13 of bonds authorized pursuant to this chapter, as well as federal 14 funds and other revenues made available to the authority, to the 15 extent consistent with federal and other fund source conditions, 16 shall be used for planning and eligible capital costs, as defined in 17 subdivision (c), for the segmrut of the high speed traill system 18 betVv'eell Sall Fr8:llciseo Tl'8:llsbay Termillal alld Los Afigclcs Bftioll 19 StatiOll. Oftec eoftstruetioll of thcSall Frallciseo-Los Allgelcs 20 segmrut is fully fimded, all remailling ftmds dcscribed ill this 21 Sttbdrv'isioll shall bc uscd for I'lannillg alld eligible cal'ital costs, 22 as defilled ill subdrv'isioll (c), for the follO"w'illg additiollal 23 high speed traill scgmertts v,rithout I'referellce to order purpose of 24 including, but not limited to, the following high-speed train system 25 segments: 26 (A) Oaldflftd Sall Jose Sacramento to Stockton to Fresno. 27 (B) Sacramruto Mereed San Francisco Transbay Terminal to 28 San Jose to Fresno. 29 (C) Los Afigclcs I1ilaoo Empire Oakland to San Jose. 30 (D) I1iI8:lld Eml'irc Sall Diego Fresno to Bakersfield to Palmdale 31 to Los Angeles Union Station to Anaheim to Irvine. 32 (E) Los Afigeles m'illc Los Angeles Union Station to Riverside 33 to San Diego. 34 (F) Los Angeles Union Station to Irvine. 35 (2) Revenues gcnerated by operations above and beyond 36 operating and maintenance costs shall be used to-fulld complete 37 construction of the high-speed train system, as defined by the 38 authority If excess revenues exceed the amount needed for the 39 high-speed train system, those revenues shall be deposited in the 40 General Fund. 99 -5-AB3034 I (c) Capital costs eligible to be paid from proceeds of bonds 2 authorized for high-speed train purposes pursuant to this chapter 3 include all activities necessary for acquisition of right-of-way, 4 construction of tracks, structures, power systems, and stations, 5 purchase of rolling stock and related equipment, and other related 6 capital facilities and equipment. 7 (d) Proceeds of bonds authorized pursuant to this chapter shall 8 not be used for any operating or maintenance costs of trains or 9 facilities. 10 (e) The State Auditor shall perform periodic audits of the 11 authority'S use of proceeds of bonds authorized pursuant to this 12 chapter for consistency with the requirements of this chapter. 13 SEC. 3. Section 2704.06 of the Streets and Highways Code, 14 as added by Section 2 of Chapter 697 of the Statutes of 2002, is 15 amended to read: 16 2704.06. Nine billion dollars ($9,000,000,000) of the money 17 in the fund, upon appropriation by the Legislature, shall be 18 available, without regard to fiscal years, for planning and 19 construction of a high-speed train system in this state, consistent 20 with the authority's Firutl Busiftess PiftH: of JuH:e 2000 certified 21 environmental impact report of November 2005, as subsequently 22 modified pursuant to environmental studies conducted by the 23 authority. 24 SEC. 4. Section 2704.08 of the Streets and Highways Code, 25 as added by Section 2 of Chapter 697 of the Statutes of 2002, is 26 amended to read: 27 2704.08. (a) Proceeds of bonds authorized for high-speed train 28 purposes pursuant to this chapter shall not be used for more than 29 one-half of the total cost of construction of track and station costs 30 of each segment of the high-speed train system. 31 (b) Not more than 10 percent of the proceeds of bonds 32 authorized pursuant to this chapter shall be used for environmental 33 studies, planning, and engineering activities. 34 (c) In selecting each specific segment for construction and prior 35 to awarding a construction contract, the authority shall have a 36 detailed funding plan for that segment that identifies the full cost 37 of constructing the segment and the sources of all revenues needed 38 to complete construction of the segment. 39 (d) In selecting each specific segment for construction, the 40 authority shall give priority to those segments that require the 99 AB3034 -6- 1 least amount of bond funds as a percentage of total cost of 2 construction, shall consider the utility of that segment for other 3 passenger rail services, and shall ensure that any other passenger 4 service provided on that segment will not result in any operating 5 or maintenance cost to the authority. 6 SEC. 5. Section 2704.095 of the Streets and Highways Code, 7 as added by Section 2 of Chapter 697 of the Statutes of 2002, is 8 amended to read: 9 2704.095. (a) (1) Of the proceeds of bonds authorized pursuant 10 to this chapter, nine hundred fifty million dollars ($950,000,000) 11 shall be allocated to eligible recipients for capital improvements 12 to intercity and commuter rail lines and urban rail systems-t6 that 13 provide direct connectivity to the high-speed train system and its 14 facilities, or that are part of the construction of the high-speed 15 train system as that system is described in subdivision (b) of 16 Section 2704.04 aM te, or that provide capacity enhancements 17 and safety improvements. Funds under this section shall be 18 available upon appropriation by the Legislature in the Annual 19 Budget act for the eligible purposes described in subdivision (d). 20 (2) Twenty percent (one hundred ninety million dollars 21 ($190,000,000)) of the amount authorized by this section shall be 22 allocated for intercity rail to the Department of Transportation, for 23 state-supported intercity rail lines that provide regularly scheduled 24 service and use public funds to operate and maintain rail facilities, 25 rights-of-way, and equipment. A minimum of 25 percent of the 26 amount available under this paragraph (forty-seven million five 27 hundred thousand dollars ($47,500,000)) shall be allocated to each 28 of the state's three intercity rail corridors. 29 The California Transportation Commission shall allocate the 30 available funds to eligible recipients consistent with this section 31 and shall develop guidelines, in consultation with the authority, 32 to implement the requirements of this section. The guidelines shall 33 include provisions for the administration of funds, including, but 34 not limited to, the authority of the intercity corridor operators to 35 loan these funds by mutual agreement between intercity rail 36 corridors. 37 (3) Eighty percent (seven hundred sixty million dollars 38 ($760,000,000)) of the amount authorized by this section shall be 39 allocated to eligible recipients, except intercity rail, as described 99 -7-AB 3034 I in subdivision ( c) based upon a percentage amount calculated to 2 incorporate all of the following: 3 (A) One-third of the eligible recipient's percentage share of 4 statewide track miles. 5 (B) One-third of the eligible recipient's percentage share of 6 statewide annual vehicle miles. 7 (C) One-third of the eligible recipient's percentage share of 8 statewide annual passenger trips. 9 The California Transportation Commission shall allocate the 10 available funds to eligible recipients consistent with this section 11 and shall develop guidelines to implement the requirements ofthis 12 section. 13 (b) For the purposes of this section, the following terms have 14 the following meanings: 15 (1) "Track miles" means the miles of track used by a public 16 agency or joint powers authority for regular passenger rail service. 17 (2) "Vehicle miles" means the total miles traveled, commencing 18 with pullout from the maintenance depot, by all locomotives and 19 cars operated in a train consist for passenger rail service by a public 20 agency or joint powers authority. 21 (3) "Passenger trips" means the annual unlinked passenger 22 boardings reported by a public agency or joint powers authority 23 for regular passenger rail service. 24 (4) "Statewide" when used to modify the terms in paragraphs 25 (A), (B), and (C) of paragraph (3) of subdivision (a) means the 26 combined total of those amounts for all eligible recipients. 27 (c) Eligible recipients for funding under paragraph (3) of 28 subdivision (a) shall be public agencies andjoint powers authorities 29 that operate regularly scheduled passenger rail service in the 30 following categories: 31 (1) Commuter rail. 32 (2) Light rail. 33 (3) Heavy rail. 34 (4) Cable car. 35 (d) Funds allocated pursuant to this section shall be used for 36 connectivity with the high-speed train system or for the 37 rehabilitation or modernization of, or safety improvements to, 38 tracks utilized for public passenger rail service, signals, structures, 39 facilities, and rolling stock. 99 AB3034 -8- 1 (e) Eligible recipients may use the funds for any eligible rail 2 element set forth in subdivision (d). 3 (t) In order to be eligible for funding under this section, an 4 eligible recipient under paragraph (3) of subdivision (a) shall 5 provide matching funds in an amount not less than the total amount 6 allocated to the recipient under this section. 7 (g) An eligible recipient of funding under paragraph (3) of 8 subdivision (a) shall certify that it has met its matching funds 9 requirement, and all other requirements of this section, by 10 resolution of its governing board, subject to verification by the 11 California Transportation Commission. 12 (h) Funds made available to an eligible recipient under paragraph 13 (3) of subdivision (a) shall supplement existing local, state, or 14 federal revenues being used for maintenance or rehabilitation of 15 the passenger rail system. Eligible recipients of funding under 16 paragraph (3) of subdivision (a) shall maintain their existing 17 commitment of local, state, or federal funds for these purposes in 18 order to remain eligible for allocation and expenditure of the 19 additional funding made available by this section. 20 (i) In order to receive any allocation under this section, an 21 eligible recipient under paragraph (3) of subdivision (a) shall 22 annually expend from existing local, state, or federal revenues 23 being used for the maintenance or rehabilitation of the passenger 24 rail system in an amount not less than the annual average of its 25 expenditures from local revenues for those purposes during the 26 1998-99,1999-2000, and 2000-01 fiscal years. 27 G) Funds allocated pursuant to this section to the Southern 28 California Regional Rail Authority for eligible projects within its 29 service area shall be apportioned each fiscal year in accordance 30 with memorandums of understanding to be executed between the 31 Southern California Regional Rail Authority and its member 32 agencies. The memorandum or memorandums of understanding 33 shall take into account the passenger service needs of the Southern 34 California Regional Rail Authority and of the member agencies, 35 revenue attributable to member agencies, and separate contributions 36 to the Southern California Regional Rail Authority from the 37 member agencies. 38 SEC. 6. Section 3 of Chapter 697 of the Statutes of 2002, as 39 amended by Section 3 of Chapter 44 of the Statutes of 2006, is 40 amended to read: 99 -9 AB3034 1 Sec. 3. Section 2 of Chapter 697 of the Statutes of 2002, as 2 amended by Sections 2 and 3 of Chapter 71 ofthe Statutes of2004, 3 tm:d as further amended by Sections 1 and 2 of the act ameftding 4 this section in the 2005 06 Regular Session Chapter 44 of the 5 Statutes of 2006, and as further amended by Sections 2 to 5, 6 inclusive, of the act amending this section in the 2007-08 Regular 7 Session, shall take effect upon the adoption by the voters of the 8 Safe, Reliable High-Speed Passenger Train Bond Act for the 21 st 9 Century, as set forth in Section 2 of Chapter 697 of the Statutes 10 of 2002, as amended by Sections 2 and 3 of Chapter 71 of the 11 Statutes of 2004,--and as further amended by Sections 1 and 2 of 12 the act amending this seetion in the 2005 06 Regular Session 13 Chapter 44 of the Statutes of 2006, and as further amended by 14 Sections 2 to 5, inclusive, of the act amending this section in the 15 2007-08 Regular Session. 16 SEC. 7. Section 4 of Chapter 697 of the Statutes of 2002, as 17 amended by Section 4 of Chapter 44 of the Statutes of 2006, is 18 amended to read: 19 Sec. 4. (a) Section 2 of Chapter 697 of the Statutes of~ 20 2002, as amended by Sections 2 and 3 of Chapter 71 of the Statutes 21 of 2004,--and as further amended by Sections 1 and 2 ofthe act 22 amending this seetion in the 2005 06 Regular Session Chapter 44 23 of the Statutes of 2006, and as further amended by Sections 2 to 24 5, inclusive, of the act amending this section in the 2007-08 25 Regular Session, shall be submitted to the voters at the November 26 4, 2008, general election in accordance with provisions of the 27 Government Code and the Elections Code governing the 28 submission of statewide measures to the voters. 29 (b) Notwithstanding any other provision of law, all ballots of 30 the November 4, 2008, general election shall have printed thereon 31 and in a square thereof, exclusively, the words "Safe, Reliable 32 High-Speed Passenger Train Bond Act for the 21st Century" and 33 in the same square under those words, the following in 8-point 34 type: "This act provides for the Safe, Reliable High-Speed 35 Passenger Train Bond Act for the 21st Century. For the purpose 36 of reducing traffic on the state's highways and roadways, upgrading 37 commuter transportation, improving people's ability to get safely 38 from city to city, alleviating congestion at airports, reducing air 39 pollution, and providing for California's growing population, shall 40 the state build a high-speed train system and improve existing 99 AB3034 -10- 1 passenger rail lines serving the state's major population centers 2 by creating a rail trust fund that will issue bonds totaling $9.95 3 billion, paid from existing state funds at an average cost of __ 4 dollars ($ ~ per year over the 30-year life of the bonds, with 5 all expenditures subject to an independent audit?" The blank space 6 in the question to appear on the ballot pursuant to this subdivision 7 shall be filled in by the Attorney General with the appropriate 8 figure provided by the Legislative Analyst relative to the annual 9 average cost of the bonds. Opposite the square, there shall be left 10 spaces in which the voters may place a cross in the manner required 11 by law to indicate whether they vote for or against the measure. 12 (c) Notwithstanding Sections 13247 and 13281 of the Elections 13 Code, the language in subdivision (b) shall be the only language 14 included in the ballot label for the condensed statement of the 15 ballot title, and the Attorney General shall not supplement, subtract 16 from, or revise that language, except that the Attorney General 17 may include the financial impact summary prepared pursuant to 18 Section 9087 of the Elections Code and Section 88003 of the 19 Government Code. The ballot label is the condensed statement of 20 the ballot title and the financial impact summary. 21 (d) Where the voting in the election is done by means of voting 22 machines used pursuant to law in the manner that carries out the 23 intent of this section, the use of the voting machines and the 24 expression ofthe voters' choice by means thereof are in compliance 25 with this section. 26 SEC. 8. This act is an urgency statute necessary for the 27 immediate preservation of the public peace, health, or safety within 28 the meaning of Article IV of the Constitution and shall go into 29 immediate effect. The facts constituting the necessity are: 30 In order to modify the provisions of a general obligation bond 31 measure on the November 4, 2008, general election ballot that 32 would authorize the issuance and sale of bonds for the financing 33 of a high-speed passenger train system and for other related 34 purposes, it is necessary that this act take effect immediately. o 99 / TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DATE: MAY 17, 2010 DEPARTMENT: CITY MANAGER'S OFFICE PUBLIC WORKS CMR: 247:10 SUBJECT: Policy & Services Committee Recommendations Regarding Council Formation of an Infrastructure Blue Ribbon Commission RECOMMENDATION The Policy & Services Committee recommends that the City Council proceed with the formation of a citizen task force to evaluate the City's General Fund infrastructure backlog and needs. The task force would also make recommendations regarding a potential bond measure or other financing measure to address those needs. BACKGROUND The 2010 and 2011 Adopted Capital Budget and various staff analyses have outlined a General Fund infrastructure backlog and needs of as much as $510 million over the next twenty years. In addition, there are other potential infrastructure demands that the City may face that have not been included in prior studies. This backlog and potential needs can be represented by three key areas: CMR: 247:10 Page 1 of6 The top left circle in the above diagram represents future major infrastructure needs that have been identified but that are currently unfunded. These include: replacement of fire stations 3 and 4; replacement of the municipal services center (MSC) and animal shelter; completion of the Charleston and Arastradero Road corridor; and other major projects totaling approximately $148 million. The public safety building was not included in this study total and, if it were, the backlog would increase by another $60 million (to $208 million). These needs are identified on page 300 of the FY20 I 0 and 2011 Adopted Capital Budget (link on City's website: http://www.cityofpaloalto.org/ci vicalfilebanklblo bdload.asp?BlobID= 1563 7). The top right circle above represents the current backlog and future maintenance needs for existing City facilities and is broken down by category such as streets, sidewalks, buildings, parks, etc. The City'S Adopted Capital Budget shows a five year demand for approximately $153 million. It also shows a twenty year demand total of approximately $302 million. This area includes all existing infrastructure maintained using General Fund resources and is outlined On page 299 of the City'S capital budget. The bottom circle represents those future infrastructure needs that are not yet known but that may be needed to ensure the long term livability of our City. These might include: infrastructure related to high speed rail; the Grand Boulevard concept; infrastructure related to implementation of the current and future Comprehensive Plans; etc. These three circles suggest the range of Palo Alto's infrastructure challenge today and looking forward. The total identified backlog funding need is $510 million but this does not include any items in the bottom circle (future yet to be identified needs). The City currently contributes approximately $10 million annually from the General Fund to fund such infrastructure needs. This limited funding has generated an infrastructure capital deficit that significantly hampers the City's ability to maintain key infrastructure that is either critical to City operations (e.g. a seismically sound Public Safety Building) or that has significant community value (e.g. Lucie Stern Community Stern). City voters approved Measure N in 2008, which will fund a comprehensive investment in library facilities. However, this investment by citizens is not enough to address the needs for all of the City's valued and treasured community facilities. In addition, the City needs to be planning for the construction of new facilities or expansion of existing facilities to address future changes in the community and the visions of current and future Comprehensive Plans. In recognition of this significant investment need and funding gap, several members of the Council presented a Colleagues' Memorandum to the full Council on March 8, 2010 (Attachment A). This memorandum recommended that the Council direct the Policy & Services Committee to analyze the appointment of an Infrastructure Blue Ribbon Commission (lBRC) that would advise the Council on the City's infrastructure backlog and possible fmancing measures that could reduce or eliminate this backlog. The Policy & Services Committee discussed this item at the March 9, April 22 and May 11 meetings. The staff reports and minutes from these meetings are included as Attachments B -D to this report. The minutes from the May 11 meetings are not included due to the timing of the CMR: 247:10 Page 2 of6 meeting and this report to Council. The recommendations of the Committee related to the IBRC are outlined in the Discussion Section below. DISCUSSION The Committee discussion of a possible task force or commission to address the infrastructure deficit focused on several key elements: 1) scope of the task force's work; 2) potential task force deliverables and schedule; 3) structure of the task force and appointment methodology; and 4) staff resources necessary to support the task force. 1) Scope: The Committee spent a significant amount of time discussing the scope and problem definition for the IBRC as this determination lays the foundation for most of the other decisions related to the IBRC. The general consensus was that the IBRC should look at the broadest definition of the infrastructure deficit and then break it down into smaller modules for analysis and recommendation. The definition of infrastructure should remain open and the IBRC should narrow it down into a scope manageable for potential financing mechanisms. There was also consensus that the schedule or timing of an election should not automatically dictate or limit the scope. The Committee recommends that the IBRC address the following questions as part of the work effort: • What is the complete listing of the City's infrastructure backlog and future needs? What criteria should be used to prioritize this list of projects? • Are there ways the City's infrastructure needs can be prioritized into 5 year increments that can be financed and also effectively implemented given current staff resources? • What are potential financing mechanisms that could be used to address the City's infrastructure needs? Should there be a one-time financing mechanism or some ongoing source of infrastructure funding? What are the options for each of these choices? • Is a bond measure the best mechanism for funding the infrastructure backlog? If so, when should this move forward and how could it be structured? • How can public/private partnerships be leveraged as an infrastructure funding mechanism? • How are City project cost estimates developed and are these in alignment with other local jurisdictions? • How do Enterprise Fund infrastructure projects intersect with General Fund infrastructure projects? The IBRC should evaluate and make recommendations on possible election timing if a bond measure is recommended. Based on input from bond counsel, a General Obligation bond requiring a 2/3 vote of the electorate could be placed on any City election. This provides more flexibility and options for the IBRC to consider with respect to a bond measure. The potential upcoming election dates could be June 2011, November 2011, June 2012, and November 2012. CMR: 247:10 Page 3 of6 2) Task Force Deliverables and Schedule: The Committee recommended that the IBRC be selected by July in order to begin work. The work would continue from July 2010 through the spring of 2011, culminating in a final report and presentation to Council in the March June 2011 timeframe. The Committee also identified that an interim discussion with Council during the process would be helpful to provide additional guidance to the IBRC. The Policy & Services Committee recommended that the IBRC be allowed to determine its own internal organizational structure and meeting schedule but did provide some suggestions to this end. The IBRC could potentially create working subcommittees to focus on specific topical areas, e.g. financing, cost estimates, project prioritization, etc. The Committee also recommended that the IBRC typically hold two meetings a month in addition to any subcommittee meetings. 3) Task Force Structure and Appointment Methodology: The original Colleagues' Memorandum recommended an IBRC comprised of 18 members. After much discussion, the Committee recommended a total IBRC membership of 16 based on the following structure: • Four (4) members of City Boards and Commissions (one each from Planning & Transportation Commission, Utilities Advisory Commission, Historic Resources Board, and Parks & Recreation Commission) • Two (2) representatives of neighborhoods • Two (2) from non-profits or Friends groups, e.g. Friends of the Junior Museum and Zoo, Palo Alto Library Foundation, etc • Two (2) from business community • Three (3) with financial backgrounds • Three (3) with technical expertise in design, architecture, engineering or construction The Committee discussed that the IBRC should be comprised of community representatives from diverse backgrounds who might also be able to continue work on this issue after the Commission makes final recommendations to Council (if a bond measure is recommended). Commission membership should include a diverse set of backgrounds. and expertise, including financial, engineering, architectural, community engagement, and marketing, among others. The IBRC should be Council appointed and therefore, would be subject to the Brown Act and financial disclosure rules (FPPC Form 700 rules). However, instead of each Council member appointing two members to the task force, the Committee recommended an open application and selection process for the twelve members not currently serving on City Boards and Commissions. The Clerk's Office would conduct the recruitment in a manner similar to traditional Board and Commission recruitments. However, instead of the full Council interviewing all of the candidates, the Council w~)Uld form groups of two to interview the candidates from each recommended segment. One Councilmember would have to serve on two interview panels. For the four Board and Commission representatives, the staff liaisons would provide notice to the groups and a representative from each would be self-selected to participate on the IBRC. CMR: 247:10 Page 4 of6 The Committee also recommended that there not be an official Council liaison to the IBRC but that Council members could attend meetings as desired. 4) Staff Resources: The schedule and staff resources necessary to support the IBRC are critical questions to the success of the Commission's work. The Colleagues' Memorandum discusses having the IBRC seated and beginning work by May 1, 2010 and that the IBRC would provide its report to Council no later than February 28, 2011 in preparation for the November 2011 ballot. Given the Policy & Services Committee discussion and available staff resources, we cannot meet this original desired schedule. There are two key challenges with this timeline. The first is the experience of other similar task forces. The Blue Ribbon Task Force on the Public Safety Building was able to develop their recommendations to Council in a 6 month time period. However, the scope of that task force was very well defined. The Composting Task Force took approximately 9 months to develop a final report to Council. The Storm Drain Committee initially took 8 months to develop a report to Council. Council was looking for different recommendations and decided to pause for approximately two years before the Committee reconvened in 2004 for 3 months and developed final recommendations. These experiences suggest that the IBRC will take, at best, a minimum of 6 months to complete its work and will likely take closer to 9-10 months. To meet the target February date, the IBRC would need to begin work in May and complete the work within 10 months. Given some of the challenges identified below, the Policy & Services Committee recommended that the IBRC begin work in July 2010 and present a final report to Council in the spring of 2011 (March through Jupe timeframe). The second challenge to the timeline is the staff resources necessary to support this effort. Some of the staff who will be key to supporting this effort are the same staff who are currently preparing the operating budget, working on the Library Bond Program, and assisting or leading other current priorities. Realistically, they will not be available in any significant way until at least after the budget is adopted in June and probably beyond. Despite these challenges, staff recommends that the Council proceed and target the November 2011 election date. To meet the timeframe set forth by the Council, staff will need to reprioritize some existing workload. To be successful, this effort will require a cross-departmental team with staff from the City Manager's Office, Public Works and Administrative Services leading the effort. This effort will tap at least six staff who are part of the group identified by the City Manager as part of his "Route 66" key staffing model, with at least two or three needing to devote a significant amount of their time to this effort (estimated at between 25-40% depending on the schedule and work of the IBRC). This will require some reprioritization of existing workload. The Committee made a point of emphasizing the importance of this issue and the need to spend the time to design a structure that will be effective and maximize the resources necessary to accomplish the Council's goal. The City Manager wholeheartedly endorses this sentiment and will ensure that staff resources be appropriately reallocated towards this critical issue. The discussion above is an attempt to identify for the Council the difficult prioritization exercise that staff undertakes each time a new high priority project comes forward. CMR: 247:10 Page 5 of6 RESOURCE IMPACT As mentioned above, the formation of an Infrastructure Blue Ribbon Commission (IBRC) will require a significant allocation of staff resources and support. In addition, there may be other resources necessary to support the work of the Commission, such as engineering consultants, cost estimators, and outreach/polling consultants among others. Staff would identify these resource needs and work to address them either through existing staff channels or by returning to Council. If the IBRC recommends that the Council proceed with a bond election, there are numerous direct and indirect costs associated with preparing for an election. Staff would recommend that the IBRC have, as part of its direction from Council, the task of identifying and quantifying these resource needs in partnership with staff. POLICY IMPLICATIONS This report is consistent with Council direction for the Policy & Services COinmittee to further consider the formation of an Infrastructure Blue Ribbon Commission. ENVIRONMENTAL REVIEW The report does not qualify as a project under the California Environmental Quality Act. Any future infrastructure projects would undergo the required environmental review based on the project submitted at that time . • ATTACHMENTS Attachment A: Attachment B Attachment C: Attachment D: PREPARED BY: March 8, 2010 Colleagues' Memorandum on Infrastructure Blue Ribbon Commission April 22, 2010 Policy & Services Committee Staff Report and Attachments (CMR: 230:10) Excerpt from April 22, 2010 Policy & Services Committee Minutes May 11,2010 Policy & Services Committee Staff Report (CMR: 246:10- no attachments) Kelly Morariu Assistant to the City Manager ~ ~ Glenn Roberts Public Works Director CITY MANAGER APPROVAL: CMR: 247:10 Page 6 of6 'DATE: TO: FROM: CITY OF PALO ALTO MEMORANDUM March 8, 2010 City Council Colleagues Attachment A 17 Vice Mayor Espinosa and Council Members Klein, Scharff, and Schmid SUBJECT: Request for the City Council to appoint an Infrastructure Blue Ribbon Commission (IBRC) PROBLEM Staff has advised us, based on prior studies, that we have a backlog of . approximately $500 million of infrastructure projects. We presently allocate about $10 million per year of the General Fund budget to infrastructure. At that rate, we will never reduce that backlog, and in all likelihood will fall further behind. However, the Council has not explored in depth the need for particular projects in the $500 million list, whether additional projects should , - be added to the list and whether a bond measure or other financing measure should be attempted to reduce or eliminate this backlog. RECOMMENDATION The Council appoint, as soon as feasible, an Infrastructure Blue Ribbon Commission (IBRC) to advise us on the questions set forth in the Problem statement. The IBRC would be charged with providing its report to Council no later than February 28, 2011, so that there would be sufficient time for the Council to review the report and put an item on the November 2011 ballot if that was deemed desirable (final Council action would have to take place by late July 2011 for an item to be on the November ballot). The IBRC would be advised that it could assume that the Council would continue to fund infrastructure at not less than. 5% of General Fund revenues per year. We suggest that the IBRC consist of 18 members, each Council Member to appoint two following such procedures as he or she deems appropriate. One of the Mayor's appointees would serve as the Convener and the I BRC would elect a Chair and Vice Chair within its first 30 days. The IRBC would be subject to the financial disclosure rules and the Brown Act. We hope that the IBRC would .be seated and get to work no later than May 1,2010. A copy of this Memorandum has been sent to the City Manager who has expressed general agreement with its contents but has not as yet provided any specific comments. He supports sending it to Policy and Services Committee at this time for further discussion. CONCLUSION We hope that you will join us in voting to send this proposal to the Policy and Services Committee for further consideration with direction that the matter be returned to· the full Council in time for action at the Council's meeting of April 5, 2010. Attachment B City of Palo Alto City Manager's Report -----------------_ .... _-----_._--- TO: HONORABLE CITY COUNCIL ATTENTION: POLICY & SERVICES COMMITTEE FROM: CITY MANAGER DATE: APRIL 22,2010 DEPARTMENT: CITY MANAGER'S OFFICE PUBLIC WORKS CMR: 230:10 SUBJECT: Discussion and Recommendations Regarding Colleagues' Memorandum on Infrastructure Blue Ribbon Commission RECOMMENDATION Staff recommends that the Policy & Services Committee review the Colleagues' Memorandum on an Infrastructure Blue Ribbon Commission and make recommendations to Council on this memo. BACKGROUND On March 8, 2010, the City Council considered a Colleagues' Memorandum from Vice Mayor Espinosa and Councilmembers Klein, Scharff and Schmid that referred the issue of formation of an Infrastructure Blue Ribbon Commission (IBRC) to the Policy & Services Committee for further discussion and recommendation. The original Colleagues' Memorandum is included with this report as Attachment A. Due to the timing suggested in the original memo, the Policy & Services Committee had a preliminary discussion about the matter at the March 9, 2010 m~eting. The draft minutes from that meeting are included as Attachment B. The Committee raised several concerns about the proposal set forth in the Colleagues' Memorandum, including: issues of scope of the IBRC; timing and magnitude of a proposed financing measure; and implications of the proposal on existing workloads. The Committee did not believe they had sufficient time and information to thoroughly vet the issues given the timeline requested in the memo .. As a result, the Committee asked staff to bring the item back to the Committee for further discussion at the April 13, 2010 meeting. Due to the scheduling of other items on the agenda of April 13th (e.g., Stanford Medical Center projects) the Committee agreed to schedule a special meeting at the end of April to finalize recommendations to the full Council on the proposal set forth in the Colleagues' Memo. The 2010 and 2011 Adopted Capital Budget (Link on City's website: http://wvJw.cityofpaloalto.org/civica/filebankJblobdload.asp?BlobID=1563 7) contains a General Fund Infrastructure Backlog Summary (pg. 299) and a listing of Infrastructure Future Needs (pg. 300). The back log summary is broken down by category such as streets, sidewalks, buildings, parks, etc. and shows a five year backlog of approximately $153 million. It also shows a twenty CMR: 230:10 Page 1 of5 year backlog total of approximately $302 million. This backlog includes all existing infrastructure maintained using General Fund resources. The future needs are major infrastructure projects that are currently unfunded and include: replacement of fire stations 3 and 4; replacement of the municipal services center (MSC) and animal shelter; completion of the Charleston and Arastradero Road corridor; and other major projects for an additional backlog totaling approximately $148 million. The public safety building was not included in this back log total and, if it were, the backlog would increase by another $60 million. The resulting combined total backlog of all the above items is approximately $510 million. DISCUSSION This report lays out some key questions to assist the Policy & Services Committee structure their discussion and recommendations regarding any proposed Infrastructure Commission. The Colleagues' Memorandum puts forth recommendations regarding the structure of the IBRC, scope of the question/problem statement, possible scale of a financing measure and schedule. The memo doesn't necessarily address the staff and/or other resources necessary to support the Commission. The Policy & Services Committee should consider each of these areas in making recommendations back to the Council. Scope: As was discussed at the previous meeting, the problem definition and scope of the question posed to the IBRC is likely the most important element in ensuring the success of the Commission's work. Here are some discussion questions to assist in defining the scope of the question posed: 1) Should the IBRC look at closing the current five year CIP infrastructure gap or should they be analyzing a longer term or ongoing solution (e.g. a 10 year horizon or the Palo Alto 21 st Century Reinvestment Program)? 2) Should the IBRC review and make recommendations about both General Fund and Enterprise Fund projects? 3) How should "infrastructure" be defined for the IBRC? 4) Should any fmancing mechanism close the funding gap on the current backlog or should it address ongoing infrastructure repair and maintenance needs in some way? Additionally, there have been two other recent outside reports completed that have discussed the City's infrastructure needs. Staff recommends that the IBRC analyze the recommendations put forth in each of these reports as part of the Commission's work. The first report was the Infrastructure Report Card audit completed by the City Auditor in March 2008 (Attachment C). The second report (Attachment D) was a report prepared last year by a Leadership ICMA team hired by the City to analyze and recommend community engagement strategies around the City's infrastructure challenge. The International City/County Management Association (ICMA) developed Leadership ICMA as a competitive, intensive two-year program designed to cultivate key competencies needed for successful leadership at all levels of local government management. The team came from across the country and brought a diverse knowledge base and skill set to their analysis and report. The recommendations in this report may be helpful to the Commission in designing an outreach process around the City's infrastructure needs. Scale of a Financing Mechanism: Staff recommends that the Commission be tasked with researching different financing mechanisms to address the City's infrastructure needs and then CMR: 230:10 Page 2 of5 making recommendations regarding the type and scale of financing mechanism to be utilized. These recommendations will likely stem from the outcomes of the Commission's discussion on the questions posed as part of the problem statement. Structure of JBRe: The Colleagues' Memorandum recommends that the IBRC consist of 18 members with each Council Member appoint 2 members. One of the Mayor's appointees would serve as the convener of the IBRC and the Commission would elect a Chair and Vice Chair within its first 30. days. The Memorandum also recommends that the IBRC also be subject to financial disclosure rules and the Brown Act. At the March 9 Policy & Services meeting, the Committee members had a lengthy discussion about the pros and cons of. these recommendations. There are a couple key questions to help focus the discussion around the structure of the IBRC: 1) What is tne appropriate size of the IBRC membership? Is 18 the right number? A larger Commission membership number may be tenable if the group forms smaller working sub-committees. These sub-committees would not be subject to Brown Act guidelines. 2) Should· the Commission be subject to Brown Act and financial disclosure requirements? Because the Council is forming the commission and establishing the scope of its responsibilities, the Commission would be subject to the Brown Act and financial disclosure requirements. While this may enhance perceived transparency of the Commission's work, it will add to the staff resources necessary to support the Commission due to the more stringent noticing, agenda preparation, and minute taking required. However, the Commission could form smaller working sub- committees that would not be subject to Brown Act guidelines. Schedule and Staff Resources: The schedule and staff resources necessary to support the IBRC are critical questions to the success of the Commission's work and need to be discussed together. The Colleagues' Memorandum discusses having the IBRC seated and beginning work by May 1, 2010 and that the IBRC would provide its report to Council no later than February 28, 2011 in preparation for the November 2011 ballot. There are two key challenges with this timeline. The first is the experience of other similar task forces. The Blue Ribbon Task Force on the Public Safety Building was able to develop their recommendations to Council in a 6 month time period. However, the scope of that task force was very well defined. The Composting Task Force took approximately 9 months to develop a final report to Council. The Storm Drain Committee initially took 8 months to develop a report to Council. Council was looking for different recommendations and decided to pause for approximately two years before the Committee reconvened in 2004 for 3 months and developed final recommendations. These experiences suggest that the IBRC will take, at best, a minimum of 6 months to complete its work and will likely take closer to 9-10 months. To meet the target February date, the IBRC would need to begin work in May and complete the work within 10 months. The second challenge to the timeline is the staff resources necessary to support this effort. The City Manager identified this challenge at the March 9 Policy & Services Committee meeting. Some of the staff who will be key to supporting this effort are the same staff who are currently preparing the operating budget, working on the Library Bond Program, and other current CMR: 230:10 Page 3 of5 priorities. Realistically,.they.:wiUnot.be available·luany signifieant-way until at least B:ftercJh~ budget is adopted ih June and probably beyond. Despite these challenges, staff recommends that the Council proceed and target the November 2011 election date. Additionally, staff recommends that the Committee be seated, at the earliest, in the beginning of June to do their formation work with the substantive work beginning after July 1. To meet the timeframe set forth by the Council, staff will need to reprioritize some existing workload. To be successful, this effort will require a cross-departmental team with staff from the City Manager's Office, Public Works and Administrative Services leading the effort. This effort will tap at least six staff who are part of the .group identified by the City Manager as part of his "Route 66" key staffing model, with at least two or three needing to devote a significant amount of their time to this effort (estimated at between 25-40% depending on the schedule and work of the IBRC). This will require some reprioritization of existing workload. The Committee made a point of emphasizing the importance of this issue and the need to spend the time to design a structure that will be effective and maximize the resources necessary to accomplish the Council's goal. The City Manager wholeheartedly endorses this sentiment and will ensure that staff resources be appropriately reallocated towards this critical issue. The discussion above is an attempt to identify for the Committee the difficult prioritization exercise that staff undertakes each time a new high priority project comes forward. RESOURCE IMPACT As mentioned above, the formation of an Infrastructure Blue Ribbon Commission (IBRC) will require a significant allocation of staff resources and support. In addition, there may be other resources necessary to support the work of the Commission, such as engineering consultants, cost estimators, and outreach/polling. consultants among others. Staff would identify these resource needs and work to address them either through existing staff channels or by returning to Council. If the IBRC recommends that the Council proceed with a bond election, there are numerous direct and indirect costs associated with preparing for an election. Staff would recommend that the IBRC have, as part of its direction from Council, the task of identifying and quantifying these resource needs in partnership with staff. POLICY IMPLICATIONS This report is consistent with Council direction for the Policy & Services Committee to further consider the matter. ENVIRONMENTAL REVIEW The report does not qualify as a project under the California Environmental Quality Act. Any future infrastructure projects would undergo the required environmental review based on the project submitted at that time. CMR: 230:10 Page 4 of5 ATTACHMENTS Attachment A: Attachment B: Attachment C: Attachment D:, PREP ARED BY: March 8, 2010 Colleagues' Memorandum Excerpt from March 9,2010 Policy & Services Committee Minutes Infrastructure Report Card Audit Leadership lCMA Report on Infrastructure Kelly Morariu Assistant to the City Manager C~ Glenn Roberts Public Works Director CITY MANAGERAPPROV AL: ~ CO ~--t::A../J ~ \ ~~ ICS Keene -\ ~lty Manager CMR: 230:10 Page 5 of 5 DATE: TO: FROM: CITY OF PALO ALTO MEMORANDUM March 8, 2010 City Council Colleagues Attachment A 17 Vice Mayor Espinosa and Council Members Klein, Scharff, and Schmid SUBJECT: Request for the City Council to appoint an Infrastructure Blue Ribbon Commission (IBRC) PROBLEM Staff has advised us, based on prior studies, that we have a backlog of . approximately $500 rnillion of infrastructure projects. We presently allocate about $10 million per year of the General Fund budget to infrastructure. At that rate, we will never reduce that backlog and in all likelihood will fall further behind. However, the Council has not explored in depth the need for particular projects in the $500 million list, whether additional projects should be added to the list and whether a bond measure or other financing measure should be attempted to reduce or eliminate this backlog. RECOMMENDATION The Council appoint, as soon as feasible, an Infrastructure Blue Ribbon Commission (IBRC) to advise us on the questions set forth in the Problem statement. The IBRC would be charged with providing its report to Council no later than February 28, 2011, so that there would be sufficient time for the Council to review the report and put an item on the November 2011 ballot if that was deemed desirable (final Council action would have to take place by late July 2011 for an item to be on the November ballot). The IBRC would be advised that it could assume that the Council would continue to fund infrastructure at not less than 5% of General Fund revenues per year. We suggest that the IBRC consist of 18 members, each Council Member to appoint two following such procedures as he or she deems appropriate. One of the Mayor's appointees would serve as the Convener and the I BRC would elect a Chair and Vice Chair within its first 30 days. The IRBC would be subject to the financial disclosure rules and the Brown Act. We hope that the IBRC would .be seated and get to work no later than May 1, 2010. A copy of this Memorandum has been sent to the City Manager who has expressed general ag'reement with its contents but has not as yet provided any specific comments. He supports sending it to Policy and Services Committee at this time for further discussion. CONCLUSION We hope that you will join us in voting to send this proposal to the Policy and Services Committee for further consideration with direction that the matter be returned to the full Council in time for action at the Council's meeting of April 5, 2010. .. Attachment B POLICY AND SERVICES COMMITTEE ~egular Meeting March 9, 2010 Chairperson Yeh called the meeting to order at 7:05 p.m. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Yeh (Chair), Holman, Price, Shepherd Absent: none 1. Oral Communications 2. Discussion and Potential Recommendations on Colleagues' Memorandum Related to Infrastructure Blue Ribbon Commission. Herb Borock, PO Box 632 spoke regarding the task force being formed subject to the Brown Act. He said that the Blue Ribbon Commission, as well as any sub-committees formed should be subject to the Brown Act. City Manager James Keene summarized the Colleagues Memo from the previous night's City Council Meeting. He reminded the Committee that under Council procedures, the colleague's memo should be provided to the City Manager while in draft form. Typically, if an item goes to Council with a service impact, the Council could not approve the memo until a subsequent meeting to allow Staff to comment. The previous night was atypical. The impetus for the memo was a significant infrastructure backlog of about $500 million. A citizen's task force would be formed to determine if that was correct, and what the City should do about it. If there were to be a bond measure the memo assumes that the earliest it could be up for public vote would be the November 2011 election. The memo built three target dates into the schedule. One was the Policy and Services Committee to return to the Council by April 5, 2010 with their recommendations. Secondly, the task force could be convened and appointed no later than May 1, 2010, completing its work by February 28, 2011. It would be difficult to do the task force work starting May 1, 2010 because the Staff that would have to support the process and the meetings, would be the same Page 1 of 13 , Staff that were engaged vvlthFiriance~ an-d Council on tne'2011 budget preparations. Council Member Price said that given the entire workload with budget, labor negotiations, High Speed Rail, and everything else, true implementation of the task force should be considered after the adoption of the budget. With a November 2011 target date, it would take a tremendolJs amount of work to get it done. She said that the infrastructure issue must be addressed and if it continued to be deferred, it would only get worse. Council Member Shepherd said this needed to be done sooner rather than later. She was concerned about an 18 member task force. It would be a challenge given the Brown Act restrictions. She suggested looking at a nine member task force, and she asked for a better understanding of infrastructure problem. Council Member Holman said that her concerns were similar to those of Council Member Price. She said that given the current Staff workload, this was a fast timeline. She said it would be difficult to properly vet the issue. She said if the analysis was not done correctly it would not succeed. Chair Yeh said, regarding the process of the memo, the equivalent of the memo would be all the colleagues on Policy and Services directing the Finance Committee to hold a series of budget-focused community meetings within the month of April, prior to holding the budget hearings in May. He said that it was not appropriate for one standing committee to direct another standing committee to do something. He said, regarding timing, this issue could not be divorced from some of Council's other priorities such as Economic Development and Revenue Generation. He said the bond issuance relates to how much revenue would be antiCipated in the upcoming years. He said he wanted to better understand the parameters of the task force. He wanted to know what the prioritized projects were within the $500 million. He spoke regarding setting parameters to protect Staff time in relation to this task force. He said that putting this project first, before the other already determined Council priorities, would circumvent the entire process. Council Member Shepherd asked how much of this could get done now while preparing for the budget presentation in May. Mr. Keene said that the focus over the next few months would be on the Operating Budget. The Capital Improvement Program was a five year plan for infrastructure which the Council would adopt. The first year of that plan would be the Capital Budget, which was the only truly funded part of that five year plan. He said that the conversations regarding the infrastructure deficit had Page 2 of 13 .. been focused on the General Fund portion, not the Utilities portion. He said the General Fund contribution to the eIP was around $19 million for 2011. He said the support on the back log for the infrastructure process should be looked at separately. He said that Policy and Services was dealing with the workload issues and it would be appropriate for the task force issue to go to Policy and Services. Council-Member Holman asked the City Manager when he first saw the Colleagues Memo. Jim said he saw it about one week prior to the meeting. Council Member Holman said that she wanted this done right and rushing through things would lead to failure~ She said that if this went to Council on AprilS, 2010 and the task force was implemented the following month, there would be little opportunity to define role of the task force. She asked what the criteria for additional projects would be. There was no direction and no time to create it. Council Member Price asked how this fit in relation to all the other things on the list. She said questions about the viability of this project must be asked and that timing and scheduling were critical. She asked what projects would not progress due to impact on Staff time if this were to move ahead. She said a statement of mission requires much work on the part of Staff prior to launching any type of blue ribbon group. She said that if this were to be explored it should have proper preparation before the launch. The dilemma was how to respond quickly, but there still would need to be discussion on how it fits given everything else. She said that to be so schedule driven that content was not reviewed properly would cause a lost element of strategy. Council Member Holman said there had been discussion in the community regarding a Public Works Commission. She suggested that other communities may have tackled the same issues and that Palo Alto could perhaps learn from them. She asked what percentage of projects were General Fund versus Utilities. Mr. Keene said the capital value was bigger on the Utilities Side. Almost all of the General Fund projects were Public Works. Council Member Holman asked if there was a simple and direct way to find out up-front if the public would even support a bond measure. Page 3 of 13 Assistant to the City Manager Kelly Morariu referredto the Library Bond and that preliminary polling was used to gage public opinion. Mr. Keene said that the library needs were developed over time. He said the residents had strong opinions on infrastructure. The last National Citizen survey had two key drivers: the city street conditions and land use issues. He said that Council Member Shepherd's question about infrastructure was a good question. The community needed to understand what it meant. He added that the Policy and Services Committee could. discuss this as they deemed appropriate. The obligation would be to return to the Council with a recommendation. He said it was clear that the City had an infrastructure problem that would get worse if something was not done. There were currently inadequate funding sources. He said that if a bond measure was the answer, November 2011 was the earliest possible target date. He suggested a task force could be seated in June and then they would notbeginwork until much later. The design for this task force could not begin until July 1/ after budget adoption. Council Member Shepherd said that, in her experience, bond measures could go quicker than it seemed they could. She suggested vetting and choosing battles properly. This process could serve to bring the community together. In a financial crisis, everyone works double time. Everything needs to go on the table, regardless of workload. She said they need to start seating people on the task force to show the public that this was being worked on. Council Member Price asked Staff if this could be managed correctly in the next three to four months given all the other priorities. Mr. Keene said that the infrastructure problem was critically important and they should aim for the possibility of going to the voters in the fall of 2011. That being said Staff would not be able to do any meaningful work prior to July 1. He suggested that they start, even if they do not ultimately meet the November 2011 deadline. Ms. Morariu said that it was not just about the Public Works or Finance Staff. The whole concept was outreach. The amount of Staff time that goes into that needed to be considered and it needed to start from day one. Accomplishing that properly could be half to three quarters of the time of one Staff member. Mr. Keene said this was more complex than the library bond issue. Council Member Holman said the goal was an optimistic one. She asked if there was a way to get to an achievable end result without going down a long Page 4 of 13 unpredictable road. The polling that was done for the public safety building was not supported. Polling was done to determine if the public would support the Art Center as part of the library bond measure and that was not supported. She asked for ideas about what areas of infrastructure the community would support. She wanted to know if the bond measure could be targeted to an area the public would support so as not to spend too much time only to get to a no answer. Chair Yeh said Boards and Commissions that already exist should be considered as part of this process. A Blue Ribbon Task Force would circumvent the Boards and Commissions that were already in place. The City already had a group of people in place that were subject to the Brown Act and already submit Form 700s. They have already offered their time and demonstrated their desire to help. He suggested a cross Board & Commission group, consisting of one or two Commissioners from each Board, rather than creating a new task force. He cited the example of the Utilities Advisory Commission which had adopted a review of all Utilities CIPs using a subcommittee in an effort to prioritize the CIPs. He said the Commissioners were already familiar with the issues, they were close to the departments they advised, and they understood the services. The Parks and Recreation Commission, for example, was familiar with many of the CIPs going on in parks. They were qualified to discuss which should be prioritized. He said the qualifications of the members should be considered. The City could probably issue revenue bonds without going to the voters for the Enterprise CIP. The scale would then be reduced. Council Member Price said another option would be, to use the model ChairYeh suggested as a core, and then add a few people with other required expertise. The time to do the problem definition and vehicles was still out there and how it fit within all the existing priorities. She said it was an intriguing idea to use resou'rces that were already in place. Mr. Keene said there were three needs that were identified from the memo: 1) a definition of an ability to communicate the infrastructure needs, 2) what needs to be done to fix it, which could have a whole range of recommendations, and 3) who was going to promote it -effective advocates would be needed. Council Member Shepherd said that the memo specifically referred to vetting a bond measure which might require a different group of people than those seated on the Boards and Commissions. There were tasks that could be shaped by Board and Commission members prior to even seating a task force. Page 5 of 13 I , ' Mr. Keene said that infrastructure hada:key placeontheworkplan matrix. It was clear that this was going to be one of the biggest initiatives in the coming year. City Auditor Lynda Brouchoud said that an internal process would need to take place to address the prioritization of the infrastructure. Council Member Price said that, as a follow up, they need to frame the structure of the project. Perhaps the infrastructure definition could be one of the organizing principles for 30% of the list. She asked if it could be used as an organizing principle. Chair Yeh said an article in a recent edition of the San Francisco Chronicle was co-authored by the City of Oakland's City Auditor, Courtney Ruby, and Berkeley's City Auditor, Ann Marie Hogan. It had a basic focus on the need for elected policy makers to define core services and for them to have the political will to lead discussions that result in the service priorities being identified, even when that discussion might lead to painful cuts. Council Member Shepherd said that identifying what could be done given the restraints they have was critical. Council Member Holman said there were many areas where the City could run more efficiently. There was no timeline with work projects. She asked how Staff could reasonably be able to work towards having a more efficient workload. Mr. Keene said infrastructure was easier to define than services. He said the ability to structure something with infrastructure was easier than trying to structure a whole array of services. Everything the City did had a constituency attached to it, which could create challenges when making decisions. A system would be needed to make this happen. The elected policy makers were going to have to make some difficult decisions with incomplete information. . Council Member Holman said the public would ask what was being done to make sure the same problems would not happen again. Mr. Keene argued that it was an easier answer on capital issues than on operating issues. Chair Yeh suggested the Committee not take a vote immediately to go back to Council. He said it would be good to see it congealed into a clearer picture to be fine-tuned by the Committee at the next meeting. Page 6 of 13 Ms. Morariu summarized by saying Council set a deadline of April 5, 2010 to get back to them. She clarified that the Committee was asking Staff for a recommendation in terms of structure and time line. Mr. Keene suggested the Committee either schedule an additional meeting or extend the April 5 deadline. Council Member Holman asked if Staff could come back at the next meeting with a schedule of how to frame the infrastructure cataloging before the' task fo rce sta rts. Mr. Keene suggested they tell the Council that the Committee shared the belief that dealing with the infrastructure was important, and in an effort to be effective had asked the Staff to bring more information to the Committee on April 13, 2010. Council Member Price said that it was reasonable to list the items that need to be addressed. Ms. Morariu said there was a conflict on April 13, 2010. Council Member Price asked if the rest of the Committee felt a need for an additional meeting. She asked if there were other deadlines that would need to be pushed out if they continued this discussion on April 13, 2010. Chair Yeh said if it meant having more meetings he was open to it as they discussed expanding the role of the Committee. Council Member Shepherd said it should be revisited after the next goal setting meeting. Chair Yeh said that they need to consider the structure, scope of the task force questions, schedule, staff resources required for the task force, and how much it would cost. 3. Policy and Services Disc'ussion and Recommendations on Committee and Council Priorities Workplans. Assistant to the City Manager Ke!ly Morariu said it would be helpful to discuss the goals and the intent of the matrix with Staff. Page 7 of 13 City of Palo Alto Office of the City Auditor Honorable City Council Attn: Finance Committee Palo Alto, California Attachment C March 4, 2008 INFRASTRUCTURE REPORT CARD FOR PALO ALTO Maintaining aging infrastructure is a major concern in Palo Alto. The City has increased capital spending in recent years, but it is a challenge to ensure that existing infrastructure is maintained at an acceptable level. The purpose of our review was to assess the results of the increased capital spending, and to assess the impact of increased capital spending on the City's infrastructure including utilities -is the City making progress, losing ground, or just holding its own? Where do we stand? Palo Alto maintains a large number of infrastructure assets for a city of its size. Utility infrastructure, including electric, gas, wastewater collection, wastewater treatment, water, refuse, and storm drains, represents a significant portion of the City's infrastructure. The City also has substantial investments in parks, open space, community centers, city hall, fire stations, roadways, and trees. The 1997 Adamson report identified the need for increased infrastructure maintenance, and the City increased capital spending as a result. Our infrastructure report card (on pages 12-13) is a qualitative assessment to assess the impact of that spending. It is a monitoring tool to help ensure that all aspects of the City's infrastructure program stay on course. The report card shows that net asset values overall have increased, but General Fund progress is mixed. Moving toward a sustainable capital budget. Based on the Adamson report, the City launched the Infrastructure Management Plan (IMP) to address the identified backlog. 'However, many of the facility/infrastructure needs identified for years 1-10 have not yet been completed. It is now year 11, and the work identified by Adamson for years 11-15 should, ideally, be in the current 5-year capital improvement program. In addition, costs have escalated, and it has proven difficult to keep the focus on existing infrastructure. Furthermore, since Adamson, additional facilities have been determined to be physically and programmatically obsolete -in particular, the Police Wing of the Civic Center (proposed to be vacated in favor of a new facility to be built on Park Boulevard) and the Mitchell Park Library and Community Center (proposed to be rebuilt on site). We recommend adopting Government Finance Officers Association's (GFOA) best practices for capital maintenance and improvement. These include: maintaining a complete capital asset inventory; periodically measuring the condition of capital assets; establishing maintenance standards for capital assets; adopting ,financing policies for capital assets with a high priority on maintaining the quality of existing assets; allocating sufficient funds for routine maintenance and repair; annually reporting on the condition of and spending on capital assets; and reporting on overall trends in spending and replacement cycles. -1 - We further recommend that the .city use the Geographic Interface System (GIS) as a coordinating tool and, to the extent feasible, a repository of infrastructure inventory and condition. We also recommend the City adopt a sustainable capital budget that (1) provides additional funding for critical needs, and (2) lists unfunded needs in the annual capital bUdget document. Our report includes a total of 10 recommendations to improve the City's infrastructure program. Management has reviewed the information in this report and the City Manager's response is attached. We will be presenting this report to the Finance Oommittee on March 4, 2008. Public Works expects to present additional.information about the condition of the City's infrastructure to the Finance Committee in late March. Respectfully submitted, S~UJ.~ Sharon W. Erickson City Auditor - 2 - TABLE OF CONTENTS Cover letter INTRODUCTION • Background • Scope and methodology • 1 4 4 5 Where do we stand? ·7 • Palo Alto reports its investment in infrastructure in its financial statements 7 • The 1997 Adamson report and development of the Infrastructure 10 Management Plan (IMP) • An infrastructure report card for Palo Alto 12 Moving toward a sustainable capital budget 15 • Setting priorities for capital spending 15 • Adopt best practices for capital maintenance and replacement 16 • The need for systematic tracking of infrastructure condition and 16 maintenance needs • Providing for ongoing system maintenance, replacement and routine 17 upgrades • A sustainable capital budget 18 CONCLUSION 23 • Recommendations 23 CITY MANAGER'S RESPONSE 25 Appendix 1: GFOA Recommended Practice -Capital lVlaintenance and 27 Replacement (2007) Appendix 2: Questions to ask about infrastructure condition 29 Appendix 3: Cross-city Comparison of Capital Assets 30 Appendix 4: Summary of Adamson Report 31 Appendix 5: Capital Spending and Depreciation 32 Appendix 6: Description of Infrastructure Assets 33 - 3 - INTRODUCTION Background The City Auditor's Office conducted this review in accordance with the FY 2007- 08 Annual Audit Plan. The objective of this project was to assess the impact of increased capital spending on the City's infrastructure including utilities. For purposes of this report, "infrastructure" includes only publicly-held permanent physical assets. It does not include furniture, equipment, computers, or fleet. Palo Alto owns and maintains a large collection of infrastructure assets for a city of its size. Palo Alto's infrastructure assets include more than 30 city parks, nearly 4,000 acres of open space, and a 176-acre golf course. Palo Alto has 4 community centers --Lucie Stern, Mitchell, Cubberley, and Ventura. The City has 5 library facilities, a junior museum and zoo, and an art center. The 90,000 square foot civic center with 260,000 square feet of underground parking is located downtown on Hamilton Ave, and the 16-acre Municipal Services Center is located on East 8ayshore. The City owns other properties that are operated by others including Gamble Garden (a community horticultural foundation), the senior center (operated by Avenidas), Williams House (a history museum operated by the Museum of American Heritage), and Winter Lodge (an outdoor ice skating rink). The City operates 8 fire stations and maintains 2,700 fire hydrants. Roadway infrastructure includes 40 million square feet of pavement, 10 million square feet of sidewalks, 89 traffic signals, 6,200 street lights, and 425,000 square feet of striping and legends, bridges, thousands of street trees, and medians. The City owns and operates 20 parking lots and structures. In addition, the City owns, and Santa Clara County operates, a municipal airport. The City's utility infrastructure includes electric, gas, wastewater collection, wastewater treatment, water, refuse, and storm drains. Aging infrastructure is a major concern Aging infrastructure is a major concern throughout California, and has been a. City of Palo Alto priority for a number of years. According to the City's 1998- 2010 Comprehensive Plan: "Palo Alto's parks, community centers, libraries, and other civic buildings are an important part of what makes the City a desirable place to live. The City is committed to continued investment in its infrastructure and public facilities,as resources are available. This commitment requires a strong emphasis on maintenance, rehabilitation, and modernization. Retrofitting existing facilities to incorporate new technology is important to ensure that these facilities remain useful. The City is also committed to providing new facilities in areas that are under-served, and in areas where change is expected in the future. New parks, plazas, and community facilities will help the City sustain its position as a model for public service delivery. ,,1 I 1998-2010 Comprehensive Plan, Parks and Public Facilities Goal C-4 -4- The Bay Area and California infrastructure deficits The American Society of Civil Engineers (ASCE) has prepared a series of infrastructure report cards for the nation. In 2005, the San Francisco Section of ASCE prepared a Report Card for Bay Area Infrastructure that rated overall San Francisco Bay Area Infrastructure C-. The Bay Area report card was intended "to seNe as a vehicle to engage our community and civic leaders in a call to action for stronger investment in our region's vital infrastructure." The report card was based on ratings by public works officials in all nine county governments in the Bay Area and a representative number of cities in each county. Survey responses were weighted according to population served and letter grades were assigned. Exhibit 1 shows the Bay Area and California report cards. Exhibit 1: ASCE Infrastructure Report Cards -Bay Area 2005 and California 2006 I1IPoIr <C:KI» 3m fot' love~all S: ,F. 8ay Are~ InfrastrUf';ure I G,P.A.. "::. -. '. ,,: .... c- " ~ z , Audit Scope and Methodology ASCE CALIFORNIA mNFMSTRucruRE REPORT CARD 200)6 www.ascecareportcard.org Levees I Flood Control . i'·: .. \ >.;,." .- . Park~~t~R~~;,~p~ce :., Ports Transportation W·bah::R.~ddff.~~;., .... ::; ',.,,: .. '. "Ii' ~'i:, 'f. ;:',~'; • 1 Wastewater .. '. wat~f;l..;·: .... ":" ';;",.-:'.f·,'· California's Infrastructure GPA Annual Investment Needs C·' F D+ e+ e' . D+ D+ c+ :C+ :'," $37 Billion We conducted this review in accordance with generally accepted government auditing standards. To meet our audit objective, we researched the asset management and infrastructure report card strategies recommended by -5· professional organizations and used by other jurisdictions; we used available documents to prepare a description of the City's assets by type; and we used the City's Comprehensive Annual Financial Reports, adopted Capital Budgets, and financial system to summarize Palo Alto's net investment in infrastructure. -6- Where do we stand? Palo Alto owns and is responsible for maintaining substantial capital assets. The City reports its investment in its financial statements, budgets for infrastructure improvements in its 5-year capital improvement plan (CIP), and has developed a program to address its infrastructure backlog. That information is incorporated into an infrastructure report card for Palo Alto. Palo Alto reports its investment in infrastructure in its financial statements More than half of Palo Alto's capital assets are in the Utility/enterprise funds. Exhibit 2: Book value of total capital assets by fund (historic cost net of depreciation) as of June 30, 2007 Wastewater Treatment Wastewater Collection 8% Gas 9% 4% 21% Refuse 1% Storm Drainage 2% Source: 2006-07 Comprehensive Annual Financial Report Go-.ernmental funds 47% In total, Utility/enterprise fund assets (net of depreciation) have shown growth over the last 30 years. -7- Exhibit 3: Utility/enterprise Fund capital assets (197J, .. 2QQ7) 450,000 400,000 350,000-------------------------..,..,...,· 300,000 250,000 200,000 150,000 100,000 i---------- 50,000 .. Water o Electric Iill Wastewater Treatment III Refuse o Gas o Storm Drainage Source: Comprehensive Annual Financial Reports Investment in General Fund infrastructure • Wastewater Collection • External Sellice The City's General Fund owns and maintains various types of infrastructure assets. Exhibit 4: Book value of general governmental capital assets by type (historic cost net of depreciation) as of June 30, 2007 Roadway network 47% Recreation & open space network 3% Equipment 4% Source: Comprehensive Annual Financial Report 2006-07 Land and Buildings and improvements 11% 4% Construction in progress 10% With the adoption of GASB 342 in FY 2001-02, the City began recording and depreciating its General Fund capital assets in the Citywide financial statements.3 Capital assets are valued at historical cost, net of accumulated depreciation. 2 Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements for State and Local Governments 3 The City's financial statements are on-line at www.cityofpaloalto.orq/finance/cafr.html. -8- This includes buildings and structures, vehicles and equipment, and roadways.4 Prior to FY 2001-02, the financial statements excluded most General Fund assets and their depreciation. It is useful to record depreciation because it can be used to estimate the rate of deterioration of capital assets. Exhibit 5 shows the increased valuation of the City's assets after implementation of GASB 34. Exhibit 5: General Fund capital assets 1997-20075 400,000 350,000 300,000 250,000 200,000 150,000 100.000 +-----------_=_ 50,000 +--=0 ................ II Land and improvements o Street trees :. Buildings and improvements lEI Equipment o Recreation & open space network Source: Comprehensive Annual Financial Reports Capital spending o Construction in progress • Roadway network Capital spending can fluctuate significantly from year to year. As shown in Exhibit 6, capital spending by Palo Alto's governmental funds increased from an estimated $79 per capita in 1977-78 to $302 per capita in 2006-07; but to only $80 per capita when adjusted for population growth and inflation (Le. in 1977-78 dollars). 4 In January 2002, Harris & Associates prepared a GASB 34 compliant infrastructure valuation for the City. It included historic values, annual depreciation, accumulated depreciation, and net book value for City infrastructure assets. 5 In 2002, the City changed its method of accounting for General Fund assets, and began accounting for all its assets including depreciation on its financial statements; figures prior to 2002 did not include roads, various other infrastructure assets, or depreciation. -9- Exhibit 6: General Fund capjtal.sp~"!~~n.~per capita(in miUions)6 Capital spending per capita (governmental funds) A $450 $400 $350 $300 $250 $200 $150 $100 / ~ $50 $0 Source: ! / ~ ... T ../ ~ "'-""'----/ /' ---~ ~ "' -..---/' .... '" .... "" '" 0 N <') .... III (0 .... "" '" 0 ~ N <') .... III <D .... "" '" 0 ;; N <') J; " .... d; '1' <Xl :Y <Xl <Xl "" '1' '? ~ "" m 9' '" m m 9' J: :b m :i: ~ q q ,.:. 6 ~ J, .t . J, . N J, ,.:. 6 '" '" It) '" <Xl 0 a; .... ;; N .... .... .... .... .... '" OJ "" ro <Xl OJ IX) IX) ro ro m '" m m m '" m m '" 0 0 ~ m '" m ~ ~ '" '" '" '" '" '" m m m '" '" '" m m m '" ~ ~ ~ 0 0 0 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ---~ ~ ----N N N __ 3-year moving average adjusted for Inflation __ 3-year moving average Comprehensive Annual Financial Reports ............. .... It) q ~ <') 0 0 0 0 N N The 1997 Adamson report and development of the Infrastructure Management Plan (IMP) Over the years, Palo Alto has conducted various assessments of its infrastructure. In 1990, the City authorized a long term utilities infrastructure replacement program for its Utilities. And in FY 1996-97, the City contracted with Adamson Associates for an infrastructure management study of the City's buildings, streets and roadways, and parks. The goals of the study were to identify major site components and associated replacement costs anticipated in the next 25 years, identify annual funding requirements including backlog, organize logical flow of work to be done, and create ongoing infrastructure management systems and a method for periodic updates of the system. In response to the 1997 Adamson report, the City stepped up capital spending and also established an Infrastructure Reserve (IR). The IR was created to maintain and restore the City's infrastructure by ensuring that funding was available for infrastructure repair and replacement. In FY 2004-05, at the recommendation of the City Auditor, the IR was moved from the General Fund to the Capital Projects Fund -where it would accrue interest that would benefit the infrastructure CIP. The IR continues to be funded by transfers from the General Fund. The 1997 Adamson report provided a plan for General Fund infrastructure maintenance for the next 25 years. As shown in the sample at Exhibit 7, the report summarized the status of each infrastructure asset, and provided estimated cost data (unescalated; i.e. in 1996-97 dollars) organized by life cycle with adjustments to provide a smoother program-wide annual cost. 6 Population figures from California Department of Finance, and inflation from Bureau of Labor Statistics (Consumer Price Index -All Urban Consumers San Francisco, http://www.bls.gov/cpilhome.htm). -10 - \. I : : 1 I "'-+1 Ii '" .... q q '" (0 0 0 0 0 N N Exhibit 7: Sample asset data sheet from Adamson report I~a:-.-·,--.:. __ -Ja.:... __ • __ ·,.-, __ ·._.,., .-"a,.·.·,; •.. PalO ~uo P .. I1oI, MJnIl~JJt Stady AA !il7/39DS Palo AU~ CaUrOTnSa ]8 Stpt 97 F •• lbn", Park PukDAta D ... Opene<I 3300 Ploge Mill Road 1965 FootbmsParkeonteinspicnieareas,8orondoLake. lSmfl«oOtikingb'aitS,acampfire- cittle, overnight campina, and brge lavIJI s.rea. Aange (approximate) 'Ira!'" 1400 IS.OMil .. t'bcmonpreslingproblcmsinctudenilmaintUIMQ:\and watermanagenrentofihe turf are:a. A cumn( CiP intludts replacement or irrigated areas. F.cth!!l& Park Quant Unit lI.te $x l.OGO Paving OtherproltkJtJSnQI (ld~ Inf),luludyindltdsp4veJ ivaJwtJyryalnand parldng cap4cfly iJnres, Cydo P,.... ' , 0'1108 12I11 17/18 ~ 2 3 4 ~ 6 7 8 9 1011·1516-2021·25 lri.. 99100 00101 OllDl 0lIIl3 _ 04105 0S/06 0610'/ 07"'8 12113 17/18 %2123 !'odelng ut (lnterpr<tive Area) 20.000 SF 5.00 100 20 1998 100 0 Vi ... Hin 8,000 !iF 10.00 80 20 1998 8G 0 Interpretive ar~ walkw.ys 3,000 SF 10,00 30 20 1998 30 0 Trail maintcoMQC "lUlhuatty. s· MI ioooo SO I 1998 SO SO so SO so so so SO so SO 250 250 250 3 year cycle Turfirrigation and N~k -Ph8$Cl2 LS 250 2S 1998 2S0 Weed :removal. nOll native 210 AC 2,000 420 3 1993 420 210 210 42 42 126 84 126 @IS%of_ MeclwUcal clearing: oflake 1 LS 10,000 10 1 \ll98 IQ 10 to 10 10 10 10 10 !O 10 SO so SO Boronda Lake and Dom wo,k I LS SO,OO~ 50 10 1998 SO ~O SO Mistellanoous structures foot bridgo< 10' , 20 I!A 15,000 300 2S 1998 )00 Boat dodc tamp , ' I SA .31),000 30 25 1994 2019 30 Fencing "lI(Iflusl 1,000 LF 10.00 10 10 10 10 10 10 10 10 10 10 10 SO SO SO Camping .SIeBS 5 IlA 5,000 2l 20 1998 25 25 I Pi",!. tabl<, BBQ. benches, .to. 200 IlA 1,000 200 S SO SO SO 50 50 Total currCllt COSIS (unescaJated) 445 70 1,000 180 280 120 tl2 70 112 10 S76 514 60J Tabl.3 -13 The report summarized that data in a format that anticipated system-wide costs over the next 25 years. In 1998, staff proposed a $95 million, 10-year General Fund Infrastructure Management Plan (IMP) for the maintenance and improvement of the City's existing infrastructure based on the assessment that Adamson had completed: The first three modules were buildings, traffic and transportation, and parks. A fourth module on bridges and parking lots was expected in 1998, but was never produced. Appendix 4 provides more detail on the estimated cost of the IMP. The first 10- year plan was more than $95 million (in 1996-97 dollars). The life cycle cost analysis showed an additional $25 million would be due in years 11-15 (also in 1996-97 dollars), $9 million in years 16-20, and $9 million in years 21-25 for a total estimated cost of $138.6 million over 25 years (in 1996-97 dollars), In 2006, the City Council directed staff to review options to increase General Fund infrastructure spending by $3 million per year. The City's 2008-2018 Long Range Financial Forecast included a $7.6 million transfer from the General Fund for infrastructure projects in FY 2007-08, and assumed the annual transfer would increase by an inflation factor of 7% per year. Other sources of funding for infrastructure projects include gas tax7, development impacts fees, and federal/state grants. For example,the FY2007-12 Capital Improvement Plan (CIP) included $5.8 million in gas tax, $2.4 million in development impact fees, and $0.9 million in federal/state grants. An infrastructure report card for Palo Alto Given that the Adamson study was 12 years ago, and given recent increases in capital spending, the purpose of this project was to assess the results of this increased capital spending on the City's infrastructure, including utilities. Are we making progress, losing ground, or just holding our own? The following report card is one way to look at the question. Assignment of green (making progress), yellow (holding our own), or red (losing ground)8 is based largely on the following four factors: • Net book value -historic cost of assets net of depreciation (per GASB 34) • Change in net value over the last 3 years -to monitor whether assets are being improved or are being used up (includes construction in progress) • Approved-in-concept five year capital improvement program (2007-2012) • Unfunded backlog -estimated investment needed to prevent further deterioration of the asset and to ensure heath and safetl Additional information about the assets that are included in each category can be found in Appendix 6. The report card shows mixed results The report card shows the change in net value for assets in both the general and enterprise funds. An increase in net value over the last three years indicates that the City has invested more than has been expensed for depreciation10• Overall, the City is progressing, but results, especially for General Fund assets, are mixed. 7 Use of gas tax is restricted for maintenance of the road network system of the' city. 8 Rating system concept based on the GreenBiz Index (www.greenbiz.com) 9 Current estimates of the General Fund infrastructure backlog were not available at the time of this report. 10 While depreciation depends upon the original purchase price of the asset as well as the depreciation method used, it is a useful gauge for estimating whether the City's capital spending is keeping pace with the deterioration of the assets. For additional information see Appendix 5. -12 - Infrastructure Report Ca'rdfor Palo Alto Change in Net book net value value over the last 6/30/07 3 11 Current estimates of the General Fund infrastructure backlog were not available at the time of this report. -13 - Moving toward a sustainable capital budget The City has struggled to fund backlogs of infrastructure repair for a number of years. Based on the age and estimated useful life of infrastructure assets and their component parts, the Adamson Infrastructure Management Study proposed a schedule for maintenance arid replacement of various components with estimated costs (in 1996-97 dollars). The study identified $95 million of work required in years 1-10, and $25 million in work required in years 11-15. Many of the facllity/infrastructure needs identified for years 1-10 have not been completed. It is now year 11, and the work identified by Adamson for years 11- 15 should, ideally, be in the current 5-year CIP. Setting priorities for capital spending The City's current process for decision-making is based on departmental assessments of infrastructure needs. The City Manager's IMP committee reviews General Fund capital budget proposals to determine which projects should be recommended for funding in the 5-year CIP. Project submissions are selected based on any of the following five criteria: • Project involves a mission-critical need that, if not addressed, would impede operational effectiveness. • Project is the result of specific Council direction. • Project is legally required for compliance with codes or laws. • Project mitigates existing health and safety risks as identified by the Public Works, Fire or Building Division inspectors, or prevents potential future health and safety risks. • Project is fully reimbursed through an external funding source.12 The IMP committee has tried to prioritize items that were originally identified in the Adamson report. However, it has proven difficult to keep the focus on existing infrastructure. In the 10 years since the plan was adopted, the City built 2 new parking garages downtown (funded by the parking assessment district bonds), the Homer Avenue tunnel (largely funded by grants), acquired additional open space and built a new interpretive center at the Arastradero Preserve (largely funded by grants), and acquired the Roth building as part of the Summerhill development. In addition, costs of projects increased and scopes expanded. Furthermore, since Adamson, additional facilities have been determined to be physically and programmatically obsolete.13 122007-09 Adopted Capital Budget, page 3 13 The 1997 Adamson report observed that at that time 6 facilities were close to both physical and programmatic obsolescence, and recommended that planning for the replacement ofthese structures within the next 10 years should be considered. Those buildings were: Fire Station 3 (790 Embarcadero), Fire Station 4 (3600 Middlefield Road), the Animal Services Center, the Baylands Interpretive Center, the Lawn Bowling Facility, and the restrooms at Peers, EI Camino, Mitchell, and Rinconada Parks. -15 - Adopt best practices for capital maintenance and replacement The International City Management Association (ICMA) encourages local jurisdictions to develop policy statements that suggest appropriate levels of spending, as well as budgeting procedures, for maintaining fixed assets. Suggested policy statements include: • The budget will provide sufficient funding for adequate maintenance and orderly replacement of capital plant and equipment • All assets will be maintained at a level that protects capital investment and minimizes future maintenance and replacement costs14 The Government Finance Officers Association (GFOA) has issued a recommended practice for capital maintenance and replacement. It addresses key capital spending issues facing Palo Alto. We recommend adopting the practice as City policy. We have based additional recommendations in this report on the principles outlined in GFOA's recommended practice. The full text is included in Appendix 1. RECOMMENDATION #1: The City should adopt the Government Finance Officers Association Recommended Practice "Capital Maintenance and Replacement" as City policy. The need for systematic tracking of infrastructure condition and maintenance needs Estimates and inventory are outdated It is now year 11 of the Adamson study period. The work outlined in the first 10- year plan is not yet complete and, according to the 1997 Adamson work schedule, more repair and replacement is now due. Furthermore, cost estimates are out of date. The Adamson report recommended a consultant be retained to periodically update the conditions of the sites included in that study. According to the report, periodic "updates ar€l required for this report to remain a meaningful and useful financial planning tool." Staff has completed various condition assessments, and in July 2007, the City Council approved a contract in the amount of $147,684 with Kitchell CEM to update condltion assessments of 86 City buildings (CMR:303:07). Public Works is preparing an assessment of the total General Fund infrastructure backlog. That data was not available at the time of this report. The need to coordinate multiple asset management systems Asset management systems are used to systematically track maintenance, upgrades, and operating characteristics of physical assets. Systems include an 14 Evaluating Financial Condition: A Handbook for Local Government by Sanford M. Groves and Maureen Godsey Valente (leMA), page 105 -16- up-to-date inventory of assets, periodic condition assessment of infrastructure assets,and estimated annual amount required to maintain and preserve assets at a desired condition level. In addition to various consultant reports and studies of infrastructure condition, several asset management systems are maintained by staff in various City departments. For example, Public Works Facilities tracks building maintenance in a stand-alone database. Pavement maintenance and storm drain maintenance is stored in the City's geographic interface system (GIS). Parks information is stored in a stand-alone parks database (PlaySafe). Utilities information is stored in industry-specific databases. Additional sources of information about infrastructure assets include the City's financial system (that contains information about asset values), and appraisal reports that show asset values for insurance purposes. Thus, the City has considerable data, but does not have a comprehensive list of its infrastructure. The City's Geographic Interface System (GIS) contains some location-specific information about City assets, and is available to employees in all departments. GIS systems are designed to hold location-specific infrastructure information. RECOMMENDATION #2 (GFOA recommended practice): Develop and maintain a complete~inventory of all capital assets. This inventory should contain essential information including engineering description, location, physical dimensions and condition, "as-built" documents, warranties, maintenance history, book value and replacement cost. Operating cost information could also be included. Database and geographic information technologies should be employed to assist in this task. RECOMMENDATION #3 (GFOA recommended practice): Develop a policy to require periodic measurement of the physical condition of all existing capital assets. Document the established methods of condition assessment. Periodically evaluate the capital program using data driven analysis of asset condition as well as past expenditure levels. RECOMMENDATION #4: The City should utilize the GIS system as a central coordinating tool and, to the extent feasible, an ongoing repository of infrastructure inventory and condition. Providing for ongoing system maintenance, replacements and routine upgrades Asset management is "a methodology to efficiently aI/ocate resources amongst valid and competing goals and objectives. ,,1/:; It "is a business process and a decision-making framework that covers an extended time horizon, draws from economics as well as engineering, and considers· a broad range of assets. The asset management approach incorporates the economic assessment of trade- offs between altemative investment options, both at the project level and at the network or system level, and uses this information to help make cost-effective 15 American Public Works Association Task Force on Asset Management -17 - investment decisions.... [It] is a systematic process of maintaining, upgrading, and operating physical assets cost-effectively. ,,16 The Adamson report documented the need for a planned approach to infrastructure maintenance. In April 1998 (CMR: 191 :98), staff recommended Council adopt the priorities presented within each module of the Adamson report with some modifications that had been proposed by departments, and with backlogged work receiving the highest priority.17 Staff further recommended prioritizing existing facilities over new facilities for purposes of infrastructure funding, and that new or enhanced infrastructure should be funded from specific new revenue sources such as general obligation bonds, grants, new or increased taxes, assessments, or special tax districts. RECOMMENDATION #5 (GFOA recommended practice): Establish condition/functional performance standards to be maintained for each component of capital assets. Such standards may be dictated by mandated safety requirements, federal or state funding requirements or applicable professional standards. Use these standards and a current condition assessment as a basis for multi-year capital planning and annual budget funding allocations for capital asset maintenance and replacement. RECOMMENDATION #6 (GFOA recommended practice): Develop financing policies for capital maintenance/replacement which encourage a high priority for those capital programs whose goal is maintaining the quality of existing assets. Consider earmarking fees or other revenue sources to help achieve this goal. A sustainable capital budget There is no one right level of capital spending Comparisons of capital spending between jurisdictions are difficult for a variety of reasons: capital spending varies from year to year; the book value of assets depends on when they were purchased; and each city classifies its infrastructure in different ways. For example, as shown in Appendix 3, Palo Alto, Mountain View, and Redwood City each use different asset classifications that make comparisons difficult.· Among other things, the "right level" of infrastructure spending depends on the physical condition, averC\ge age/expected seNice life, capacity/utilization, safety/seismic concerns, functionality, sustainability issues, and even potential impacts of climate change18 on the City's infrastructure assets.19 16 U.S. Department of Transportation's Asset Management Primer, available on the web at www.fhwa.dot.gov/infrastructurelasstmgmtlamprimer.pdf 17 CMR: 191 :98 further explained that two areas in the original Adamson reports were not included in the proposed infrastructure program. These were City medians (originally identified as a $3.2 mi\lion backlog; later revised to $2.1 million in upgrades) and weeding in the City's open space areas (original estimate reduced by $1.13 million and recommended for funding within the operating budget). 18 According to a recent staff report, a projected 1 meter rise in sea level and increased storm surge would likely impact the Municipal Airport, Water Quality Control Plant, Municipal Services Center and -18 - The 2007 City Council "sustainable budget" priority In October 2007, the Administrative Services Department prepared a discussion paper on the Council's Top 4 priority "sustainable budget" (CMR:387:07). It provided the following definition: '}\ sustainable budget can be considered a spending plan that meets the needs of the present without compromising the ability to provide services to future generations. Such a budget would meet the challenge of funding current operational costs while at the same time funding incurred long-term liabilities." As aptly stated by the GFOA, "budgetary pressures may impede capital program investments for maintenance and replacement purposes, making it increasingly difficult to sustain existing capital asset condition and avoid functional obsolescence. Yet deferring such essential reinvestments reduces vital public services and may even endanger public safety. ,,20 Simply put, a sustainable capital budget is one that keeps existing infrastructure operable and decent -not "using down" the infrastructure that previous generations of taxpayers "built up". Provision for construction cost inflation The Adamson report e.stimated the cost of work to be performed during the 25- year period from 1998-99 to 2022-23. The study was intended to establish "order of magnitude" estimates for financial planning of long term work items. It did not make any allowance for inflation or discounting of future expenses. Exhibit 8 compares .the consumer price index to producer prices indices for various construction segments. Including building inflation estimates helps ensure accurate and sufficient capital budgets.21 Utility Control Center, Utility substations and transmission routes, recycling center, recreation facilities, storm drains, residential neighborhoods.and portions of business districts. 19 See Appendix 2 for a list of questions to ask about infrastructure condition 20 GFOA Recommended Practice, Capital Maintenance and Replacement (2007) 21 The State of Minnesota Department of Finance provides specific direction to its agencies to first determine estimated building costs in "today's dollars", and then inflate that value (using a provided construction cost inflation schedule) to the midpoint of construction (based on the proposed project schedule). -19 - Exhibit 8: Changes in consumer and producer price indices 1997-2007 180,---------~----------------------- 170+-----------------------~~-8' ~ 160+----------------------------+~~- ... ~ 150+---------~--------------~~~--- '1: GI ;140+-------------~------~._~~~--- -t-Consumer Price Index: All Urban Customers. San Francisco- Oakland-$an Jose __ Producer Price Index: Highway and street construction -Producer Price Index: Other heavt . construction @. 130 +----------F---~---_f__b¥'-----,~Producer Price Index: Non-~ , residential buildings . 'g .-120+--------~~~------~~------.g ~ 110+----~~+_---~~~~---------- ~ Producer Price Index: Maintenance and repair construction '-5% per year rule of thumb . 100~~&e~~--~--~~--~~--~~-~ 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Index as of June 30th Source: Bureau of Labor Statistics (www.bls.gov) The importance of preventive maintenance Experts agree that preventive maintenance of existing assets is key to holding down future costs. Whether caulking windows, painting building exteriors, or slurry sealing roadways, the purpose of preventive maintenance is to prevent further deterioration which could lead to the need to rebuild facilities. For example, according to the U.S. Department of Transportation's Asset Management Primer, "The preventive approach is generally less costly and time- consuming than the traditional, more reactive approach. However, a strategy of prevention may be more difficult to justify because the public's expectation is that the worst roads demand immediate attention. Fwthermore, the public often interprets activities related to pavement preservation as 'fixing something that isn't broken." Additional funding for refurbishment According to staff, the annual budget for refurbishment has been $50,000 per year since the 1980's. The "Facility Interior Finishes Replacement" project (PF- 02022) is meant to replace worn interior finishes at various city facilities including ceilings, paint, carpet and flooring, and window coverings that are not part of a major renovation project. The need is great. For example, in 2005, the Auditor's Office recommended funding of $25,000 to $50,000 per year for unanticipated park repairs and minor improvements.22 Similarly, in 2007, the Auditor's Office recommended funding of routine maintenance and replacement of furniture, shelving and minor repairs in Library facilities stating that even minor upgrades would help. 23 22 Audit of Parks Maintenance (December 2005), page 14 23 Audit of Library Operations (July 2007). page 15 -20- The value of an Infrastructure reserve to smooth funding As previously discussed, the infrastructure reserve was created to maintain and restore the City's infrastructure by ensuring that funding was available· for infrastructure repair and replacement. As shown in Exhibit 9, the balance in the reserve has been declining. Exhibit 9: Balance in the infrastructure reserve at year end (in millions) Balance in the infrastructure reserve at year end (in millions) $40.000 $35.000 $30.000 $25.000 $20.000 $15.000 $10.000 $5.000 $0.000 <D I'-co '" 0 C? :b or '" '" 0 <D ~ cO d, 0 '" '" 0> '" '" 0 '" m '" m '" 0 ..... ..... ..... ..... .... N Source: Comprehensive Annual Financial Reports In our opinion, even if the current infrastructure reserve is completely spent down in the near term, it will be essential to retain the infrastructure reserve as a place to accumulate one-time monies and/or to save for anticipated future projects. RECOMMENDATION #7 (GFOA recommended practice): Allocate sufficient funds in the multi-year capital plan and annual operations budget for routine maintenance, repair and replacement of capital assets in order to extend the useful life of these assets and promote a high level of performance throughout the target period. RECOMMENDATION #8 (GFOA recommended practice): At least annually, report on capital infrastructure, including: • Condition ratings jurisdiction-wide • Condition ratings by geographical area, asset class, and other relevant factors • Indirect condition data (e.g. water main breaks, sewer back-up complaints) • Replacement life cycle(s) by infrastructure type • Year-to-year changes in net infrastructure asset value • Actual expenditures and performance data on capital maintenance compared to budgeted expenditures performance data (e.g. budgeted street miles reconstructed compared to actual). RECOMMENDATION #9 (GFOA recommended practice): Report trends in infrastructure spending and accomplishments in the jurisdiction's Capital Improvements Program including trends in spending, replacement cycle, and· other important factors for each major infrastructure category. -21 - RECOMMENDATION #10: Staffshould propose andtheCity Council should consider a sustainable capital budget that: • Provides additional funding for critical needs that have been identified in the infrastructure condition assessments, including construction cost inflation. • Lists all other unfunded needs that were identified in those assessments in the annual capital budget document. -22- CONCLUSION In recent years, Palo Alto has increased its infrastructure spending, and the net book value of Palo Alto's assets is increasing overall. Nevertheless, Palo Alto is losing ground in many categories. There is no one right level of maintenance or level of investment, however the City should maintain assets purchased by previous generations in a condition that is useful to future generations. Recommendations RECOMMENDATION #1: The City should adopt the Government Finance Officers Association Recommended Practice "Capital Maintenance and Replacement" as City policy. RECOMMENDATION #2 (GFOA recommended practice): Develop and maintain a complete inventory of all capital assets. This inventory should contain essential information including engineering description, location, physical dimensions and condition, "as-built" documents, warranties, maintenance history, book value and replacement cost. Operating cost information could also be included. Database and geographic information technologies should be employed to assist in this task. RECOMMENDATION #3 (GFOA recommended practice): Develop a policy to require periodic measurement of the physical condition of all existing capital assets. Document the established methods of condition assessment. Periodically evaluate the capital program using data driven analysis of asset condition as well as past expenditure levels. RECOMMENDATION #4: The City should utilize the GIS system as a central coordinating tool and, to the extent feasible, an ongoing repository of infrastructure inventory and condition. RECOMMENDATION #5 (GFOA recommended practice): Establish conditionlfunctional performance standards to be maintained for each component of capital assets. Such standards may be dictated by mandated safety requirements, federal or state funding requirements or applicable professional standards. Use these standards and a current condition assessment as a basis for multi-year capital planning and annual budget funding allocations for capital asset maintenance and replacement. RECOMMENDATION #6 (GFOA recommended practice): Develop finanCing policies for capital maintenance/replacement which encourage a high priority for those capital programs whose goal is maintaining the quality of existing assets. Consider earmarking fees or other revenue sources to help achieve this goal. RECOMMENDATION #7 (GFOA recommended practice): Allocate sufficient funds in the multi-year capital plan and annual operations budget for routine maintenance, repair and replacement of capital assets in order to extend the -23- useful life of these assets and promote a high level ofpeliormance throughout the target period. RECOMMENDATION #8 (GFOA recommended practice): At least annually, report on capital infrastructure, including: • Condition ratings jurisdiction-wide • Condition ratings by geographical area, asset class, and other relevant factors • Indirect condition data (e.g. water main breaks, sewer back-up complaints) • Replacement life cycle(s) by infrastructure type • Year-to-year changes in net infrastructure asset value • Actual expenditures and performance data on capital maintenance compared to budgeted expenditures performance data (e.g. budgeted street miles reconstructed compared to actual). RECOMMENDATION #9 (GFOA recommended practice): Report trends in infrastructure spending and accomplishments in the jurisdiction's Capital Improvements Program including trends in spending, replacement cycle, and other important factors for each major infrastructure category. RECOMMENDATION #10: Staff should propose and the .City Council should consider a sustainable capital budget that: • Provides additional funding for critical needs that have been identified in the infrastructure condition assessments, including construction cost inflation. • Lists all other unfunded needs that were identified in those assessments in the annual capital budget document. -24- From: Emily Harrison, Assistant City Manager Date: February 27,2008 Office of the City Manager MEMORANDUM Subject: Response to 2008 Infrastructure Report Card Audit Report . Staff is in general agreement with the recommendations contained in the Infrastructure Report Card audit report, and will be providing a more detailed response at the March 18 Finance Committee meeting. At that same March 18 meeting, staff will be presenting the updated Inventory and costing of the General Fund infrastructure program. That report recommends additional staff resources for Infrastructure, which would also be required to Implement the recommendations in the Auditor's Report. Any additional staffing, however, would need to be considered within the overall context of the assignment to staff to look at identifying new revenues and expenditure reductions to accommodate debt service for the public safety building COPs and for additional infrastructure funding. -25- APPENDIX 1 GFOA RE.COMMENDED PRACTICE Capital Maintenance and Replacement (2007) Background. Capital assets comprise major government facilities, infrastructure, equipment and networks enabling the delivery of public sector services. The quality and continued utilization of these capital assets are essential to the health, safety, economic development and quality of life ofthose utilizing such assets. Budgetary pressures may impede capital program investments for maintenance and replacement purposes, making it increasingly difficult to sustain existing capital asset condition and avoid functional obsolescence. Yet deferring such essential reinvestments reduces vital public services and may even endanger public safety. The financial result is increased cost as the physical condition of these assets declines. Government entities should therefore establish capital planning, budgeting and reporting practices to encourage adequate capital spending levels. A government's financial and capital improvement plans should address the continuing investment necessary to properly maintain its capital assets. Such practices should include proactive steps to promote adequate capital maintenance and reinvestment in existing public capital assets. Recommendation. The Government Finance Officers Association (GFOA) recommends that local and state governments establish a system for planning, budgeting and periodic assessment of their capital maintenance/replacement needs. The following actions should be considered: 1. Develop and maintain a complete inventory of all capital assets. This inventory should contain essential information including engineering description, location, physical dimensions and condition, "as-built" documents, warranties, maintenance history, book value and replacement cost. Operating cost information could also be included. Database and geographic information technologies should be employed to assist in this task. 2. Develop a policy to require periodic measurement of the physical condition of all existing capital assets. Document the established methods of condition assessment. Periodically evaluate the capital program using data driven analysis of asset condition as well as past expenditure levels. 3. Establish condition/functional performance standards to be maintained for each component of capital assets. Such standards may be dictated by mandated safety requirements, federal or state funding requirements or applicable professional standards. Use these standards and a current condition assessment as a basis for multi-year capital planning and annual budget funding allocations for capital asset maintenance and replacement. 4. Develop financing policies for capital maintenance/replacement which encourage a high priority for those capital programs whose goal is maintaining the quality of existing assets. Consider earmarking fees or other revenue sources to help achieve this goal. 5. Allocate sufficient funds in the multi-year capital plan and annual operations budget for routine maintenance, repair and replacement of capital assets in order to extend the useful life of these assets and promote a high level of performance throughout the target period. 6. At least annually, report on capital infrastructure, including: -27- a. Condition ratings jurisdiction-wide b. Condition ratings by geographical area, asset class, and other relevant factors c. Indirect condition data (e.g., water main breaks, sewer back-up complaints) d. Replacement life cycle(s) by infrastructure type e. Year-to-Year changes in net infrastructure asset value f. Actual expenditures and performance data on capital maintenance compared to budgeted expenditures performance data (e.g., budgeted street miles reconstructed compared to actual) 7. Report trends in infrastructure spending and accomplishments in the jurisdiction's Capital Improvements Program including trends in spending, replacement cycle, and other important factors for each major infrastructure category. References • John Vogt, Capital Budgeting and Finance: A Guide for Local Governments, ICMA, 2004. • Nicole Westerman, Managing the Capital Planning Cycle: Best Practice Examples of Capital Program Management, Government Finance Review, 2004. • GFOA & National Advisory Council on State and Local Budgeting Best Practices in Public Budgeting (Practice #s 2.2, 5.2, 6.2, 11.5). www.GFOA.org/serviceslnacslb. • GFOA Recommended Practice, Capital Project Budget (2006); www.GFOA.org. • GFOA Recommended Practice, Establishing the Estimated Useful Lives of Capital Assets (2002, 2007); www.GFOA.org. • GFOA Recommended Practice, Considerations on the Use of the (GASB 34 Reporting Model) Modified Approach to Account for Infrastructure Assets (2002); www.GFOA.org. Approved by the GFOA's Executive Board, October 19,2007. -28- APPENDIX 2 QUESTIONS TO ASK ABOUT INFRASTRUCTURE CONDITION DESCRIPTION AND CONDITION ASSESSMENT: General description of current assets and their condition. • PHYSICAL CONDITION: Description of overall condition and average age. Are assets wearing out, or wearing well? , • AVERAGE AGE/EXPECTED SERVICE LIFE: What's the average age (e.g. when were parks established, when last renovated) and estimated service life (e.g. what's expected interval between major renovations)? . • HISTORIC COST AND ESTIMATED REPLACEMENT COST: In accordance with GASB Statement 34, the City records its infrastructure assets in its financial statements. What is the historic cost of these assets net of depreciation? What is the estimated replacement cost, if available? • CAPACITY/UTILIZATION: Description of current capacity/utilization. Is there sufficient capacity to serve current/future demand? How intensively is the asset used? • SAFETY: Description of any near-term or long-term safety issues (e.g. seismic). • FUNCTIONALITY: Description of how well assets are suited to the functions they serve. Is the physical infrastructure meeting program delivery needs? • SUSTAINABILlTY: Description of energy efficiency, water conservation, storm water or other environmental impacts of the facility/assets. • CLIMATE CHANGE: Will this facility/asset be impacted by climate change (e.g. storm impacts or sea level rise). DESCRIPTION OF MAINTENANCE AND IMPROVEMENT PLAN: Description of current renovation and maintenance programs. • ANNUAL MAINTENANCE: Description of annual maintenance efforts and costs (i.e. what is estimated maintenance cost per year? Projected future maintenance needs?) • DEFERRED MAINTENANCEI BACKLOG: Description from 1997 Adamson report or other studies. What is nature of maintenance need -minor maintenance, major rehabilitation, replacement? What would it take to restore it to nearly new conditions? • PLANNED IMPROVEMENTS: General description of proposed 5-year capital improvement program (CIP). • NOT SCHEDULED FOR FUNDING: General description of improvements identified but not yet funded or scheduled. -29- APPENDIX 3 CROSS-CITY COMPARISON OF CAPITAL ASSETS No other nearby city owns and maintains a full range of utility infrastructure like Palo Alto, and each city classifies its infrastructure in different ways. For example, as shown below, even under GASB 34, Palo Alto, Mountain View, and Redwood City each chose different classifications for their assets that,make comparisons difficult. Cross-city comparison of capital assets as of June 30,. 2007 (in millions) Palo Alto Mt. View Redwood City POPULATION 62,615 77,025 GOVERNMENTAL ACTIVITIES Land and improvements $ 71.407 $ }1,708 $ 29,303 Street trees $ 15,042 $ - Construction in progress $ 34,309 $ 69,834 $ 70,533 Buildings and improvements $ 93,542 $109,455 $ 57.445 Improvements other than buildings $ -$105.546 $ 7.731 Equipment $ 40,155 $ 20.994 $ 16,693 Roadway network $239,179 $ 41,440 $ 75,745 Sidewalks, curbs and gutters $ -$103,769 $ - Traffic signals $ -$ 6.956 $ 2.452 Streetl ig hts $ -$ 7.476 $ - Storm drains $ -$ -$ 8.131 Bridges and culverts $ -$ 8,055 $ - Recreation & open space network $ 13.532 $ -$ - Parks,' bridges. etc. $ -$ -$ 21,609 Less accumulated depreciation $(171.465) $(240,680) $ (69,761) SUBTOTAL $ 335,701 $ 504.553 $ 219.881 Per capita $5.36 $6.89 $2.85 BUSINESS-TYPE ACTIVITIES Land and improvements $ 1.953 $ 220 $ 3~ Construction in progress $ 88.969 $ 27.834 $ 47, Buildings and improvements $ 18,915 $ 8,927 $ 10,915 Improvements other than buildings $ -$ 62,987 $ 81.750 Equipment $ -$ 2,755 $ 1,366 Transmission. distribution, and treatment systems $ 480.143 $ -$ - Harbor improvements $ -$ -$ 3.305 Less accumulated depreciation $(206,171) $ (35,403) $ (39.736) SUBTOTAL $ 383.809 $ 67,320 $ 108,738 Per capita $6.13 $0.92 $1.41 TOTAL $ 719,510 $ 571,873 $ 328619 Per capita $11.49 $7.81 $4.27 Source: ComprehenSive Annual FinanCial Reports -30- APPENDIX 4 1997 ADAMSON REPORT . Summary of repair and replacement needs over the next 25 years (1996-97 dollars, in millions) Years Years Years Years 1-10 11-15 16·20 21-25 TOTAL MODULE 1: BUILDINGS Civic center 4,224 575 1,008 1,685 7,492 Fire stations 2,342 390 243 309 3,284 MuniCipal services center 3,607 368 840 496 5,311 Community centers 3,755 1,079 930 908 6,672 • Libraries 2,886 446 492 228 4,052 I Park and golf facilities 4,322 170 347 147 4,986 Parking lots 407 667 185 1,127 2,386 Cubberley 6,984 971 2,213 401 I 10,569 Other 190 60 60 30 340 Subtotal 28,717 4,726 6,318 5,331 45,092 MODULE 2: TRAFFIC AND TRANSPORTATION Streets 24,679 9,000 - -33,679 Sidewalks 14,790 2,790 --17,580 Bikes and pedestrian facilities 1,261 186 --1,447 i Medians, islands, plants 6,377 5,329 --11,706 Subtotal 47,107 17,305 -. 64,412 MODULE 3: PARKS Parks 9,373 1,753 1,512 1,108 13,746 Open space 5,408 1,489 1,307 1,841 10,045 School sites 385 125 -125 635 Other 4,256 60 210 170 4,696 Subtotal 19,422 3,427 3,029 3,244 29,122 TOTAL $95,246 $25,458 $9,347 $8,575 $138,626 -31 - APPENDIX 5 CAPITAL SPENDING AND DEPRECIATION The City values capital assets at historical cost or estimated historical cost if actual historical cost is not available. Depreciation is provided on capital assets. The City has assigned useful lives to capital assets as follows: Governmental activities Buildings and structures 10-30 years Equipment 4-10 years Roadway network including pavement, striping and legends, curbs, 5-40 years gutters and sidewalks, parking lots, traffic signage and bridges Recreation and open space network including major park facilities, 25-40 years park trails, bike paths and medians Business-type activities Buildings and structures 25-60 years Vehicles and heavy equipment ~ears Machinery and equipment 0-50 years Transmission and distribution systems 10-100 years In a positive trend, the City's financial statements show that net capital assets in both the general governmental funds and the enterpri.se funds are growing. Since FY 2001-02, annual capital outlay/expense (i.e. what we are investing in capital assets) has exceeded depreciation expense (Le. what we are using up). General governmental funds (in millions) Enterprise funds (in millions) Net general Capital Net enterprise Capital capital assets outlal4 Depreciation capital assets expense Depreciation FY 2001-02 $266.9 $16.9 $6.7 $301 .. 2 $25.0 $10.4 FY 2002-03 $293.1 $32.4 $9.4 $315.2 $24.1 $11.0 FY 2003-04 $310.0 $22.3 $8.8 $329.1 $22.8 $11.4 FY 2004-05 $318.5 $21.3 $9.5 $346.9 $22.8 $11.7 FY 2005-06 $324.8 $13.2 $12.3 $360.9 $20.3 $11.8 i FY 2006-07 $335.7 $17.5 $11.0 $383.8 $28.9 $12.7 Source: Comprehensive Annual Financial Reports as shown In the Annual Service Efforts and Accomplishments Report 24 Includes capital expenditures in the General Fund, Capital Projects and Special Revenue funds. Does not include capital expense associated with Utility or other enterprise funds. FY 2002-03 and FY 2003-04 outlay included $32.3 million for two new downtown parking structures funded by an assessment district. -32- APPENDIX 6 DESCRIPTION OF INFRASTRUCTURE ASSETS The following list, compiled from various City documents, shows more detail about the assets included in the infrastructure assessment, and the broad scope and nature of City-owned infrastructure assets.25 Parks: The City owns and maintains about 158 acres of urban parkland in more than 30 parks. Facilities at the parks include lawns and pathways, playgrounds, picnic areas and benches, tennis and basketball courts, signage and fencing, and some restrooms and parking lots. In addition, there is a stadium baseball complex and softball field at 8aylands Athletic Center, a lawn bowling green and clubhouse, swimming pool facilities at Rinconada, skateboarding facilities at Greer, and field houses at Peers Park, Rinconada Park, and Mitchell Park. . Date Park and location Amenities Acres opened Baylands Athletic Center Softball diamond, baseball field, restrooms, pathway 6.0 1965 1900 Geng Road Bol Park Large lawn area, jogging and bicycle path, benches, 3.0 1970's 3590 Laguna Ave playground Boulware Park Lawn area, basketball court, picnic area with barbeque 1.5 1965 410 Fernando Ave facilities, toddler playground Bowden Park Lawn area, playground, benches, picnic areas 2.0 1952 2380 HiQh St Briones Park Lawn area, picnic areas, 2 playgrounds 3.7 1967 609 Maybell Ave Cameron Park Playground, picnic tables, lawn area 1.1 1965 2101 Wellesley St Cogswell Plaza Benches, redwood trees and an open lawn area 0.6 1924 264 Lytton Ave EI Camino Park Soccer field, softball field with bleachers and lights, 6.8 1914 100 EI Camino Real restrooms EI Palo Alto Park Home of the 1,000 year old EI Palo Alto tree (the City's 0.5 1971 117 Palo Alto Ave namesake), path, educational signage Eleanor Pardee Park Playground, picnic areas with barbeques, multipurpose 9.6 1922 851 Center Dr concrete stage area, jogging path, community garden plots and Master Gardener Palo Alto Demonstration Gardens Greer Park Lawn, area, 5 soccer fields, 3 softball fields, 1 Little League 21.7 1974/ 1098 Amarillo Ave diamond, 2 basketball courts, picnic area with barbeques, 1990 par course, small dog run, skateboard bowl, playgrounds, restrooms 25 Sources include the City's financial system, Infrastructure Management Study City of Palo Alto by Adamson (1997), Departmental Infrastructure Assessment by the Community Services Department (1997), GASB 34 Compliance Package by Harris & Associates (2002), Appraisal Report by Maximus (2002), Local Agency Formation Commission of Santa Clara County Service Reviews -City of Palo Alto by LSA Associates Inc. (2007), City of Palo Alto website (www.cityofpaloalto.org), Palo Alto Online (www.paloaltoonline.com), and All About Your Utilities by City of Palo Alto (2007). -33- i i I Heritage Park Lawn area 2.0 2003 Homer Ave Hoover Park 2 tennis courts, 2 handball courts, tennis backboard, softball 4.2 1954 2901 Cowper St field, playgrounds, picnic areas with barbeques, restrooms, multipurpose concrete bowl with basketball hoop, dog run, lawn area Hopkins Creekside Park Mile-long strip of land along the creek, 3 open grassy areas 12.4 1907 Palo Alto Ave with benches and tables Johnson Park Lawn area with shade trees, playground, wide concrete slide, 2.5 1980's 200 Waverly St basketball hoops, picnic area, sand volleyball pit, community garden plots Lawn Bowling Green Lawn area, bowling green, clubhouse 1.9 1933 474 Embarcadero Rd Lytton Plaza Paved area with benches and public art 0.2 1960's University Ave Main Garden 60,000 sq ft organic community garden located behind the 1.4 1970 1313 Newell St main library, bordered by fruit trees and flower beds Mayfield Park Small lawn area with benches; site of College Terrace 1.7 1898 2300 Wellesley St Library and child care center Mitchell Park 7 tennis courts, 2 paddle tennis courts, 4 handball courts, 21.4 1955 600 East Meadow Ave shuffleboard courts, checkerboard/chess tables, jogging trails, picnic areas with barbeques, multiuse concrete bowl, playgrounds, children's water park, large dog run, restrooms, field house, large lawn areas Monroe Park Mounded grassy area, playground, benches (this park is split 0.6 1975 4305 Miller Ave between the cities of Mountain View and Palo Alto) Peers Park 2 tennis courts, picnic tables, restrooms, field house, 4.7 1922 1899 Park Blvd playground, basketball court, large lawn area Ramos Park Playground, picnic areas with barbeques, multipurpose 4.4 1950's 800 East Meadow Ave square cement slab with basketball hoop, lawn area, paths with benches Rinconada Park Swimming pool (built in 1940), picnic areas with barbeques, 19.0 1924 777 Embarcadero Rd 9 tennis courts (6 with lights), 2 shuffleboard courts, 1 tennis backboard, multipurpose cement bowl, 2 playgrounds, jogging paths, Magic Forest, large lawn areas Robles Park Picnic areas with barbeques, playground, lawn area 4.7 1956 4116 Park Blvd Sarah Wallis Park Lawn area with benches, short path 0.3 1980 202 Ash St tt Park Circular basketball court, playground, picnic benches, small 0.3 1970's 1 Scott St lawn area Seale Park Lawns, playground, picnic area, barbeque area, large open 3.6 1950's 3100 Stockton PI areas for volleyball and soccer Stanford Palo Alto 2 artificial turf soccer fields, warm-up area, night lights, 6.0 2005 Community Playing restrooms, parking Fields EI Camino Real Terman Park 4 tennis courts, 1 basketball court, 2 soccer fields, 1 softball 7.7 1983 655 Arastradero Rd field, large lawn area, pathway Weisshar Park 2 tennis courts, small lawn area with benches 1.1 1965 2298 Dartmouth St Weery Park Large open lawn area, playground 1.1 1965 2100 Dartmouth St -34- Open Space: The City owns and maintains nearly 4,000 acres of open space in the baylands and foothills. In addition, the Midpeninsula Regional Open Space District owns and maintains 2,400 acres of open space in Palo Alto (2,200 acres of Montebello Open Space Preserve and 200 acres of Los Trancos Open Space Preserve). In total, over 1/3 of Palo Alto's land area consists of open space preserves. The City employs 5 park rangers and operates 3 interpretive centers in these areas. Date Open Space Areas Amenities Acres acquired I Baylands Nature Open space with trails, duck pond, ranger station 1,940 1946 Preserve (Harbormaster House built 1930), sailing station, parking, 3,600 (Byxbee Park) sq ft Lucy Evans 8aylands Nature Interpretive Center, Byxbee Embarcadero Rd Hills Park (public art), wildlife observation platforms, boardwalks, benches, picnic areas, restrooms, cUlverts and flood control tide gate, Emily Renzel Wetlands, Harriet Mundy Marsh, and Sea Scout building (listed under other community facilities). Faber Laumeister Tract (totaling 452 acres) was purchased 1926 and 1944. Foothills Park Open space with 15 miles of trails, 7 picnic areas (tables, 1,400 1965 3300 Page Mill Rd barbeques, and water), dam and lake with boat dock, 5,000 sq ft interpretive center, restrooms, maintenance facility, seasonal campground, fire trails, roadways and parking lots, large lawn area, fire trails Pearson Arastradero Open space with 10.25 miles of trails, bridges, interpretive 609 19861 Preserve center with restrooms, fencing, parking 2006 1530 Arastradero Rd Esther Clark Park Undeveloped nature reserve of grassland and oaks with no 22 1965 Old Trace Rd public access or services Golf Course: The City owns and maintains a 176-acre municipal golf course at 1875 Embarcadero Road which opened in 1956. The golf facility includes an 18-hole championship length course, lighted driving range,practice putting green area, 8,600 square foot Golf Pro Shop and restaurant constructed in 1979 (the interiors are the responsibility of the tenants), and maintenance facilities (3,600 square feet). The City subco'ntracts operations of the golf course, golf shop. driving range, and restaurant. Golf course revenues are currently sufficient to cover golf course operations, maintenance, debt service, and overhead. Community centers: The city owns and operates nearly 300,000 square feet of community center space. Date Community Centers Amenities Size . built Lucie Stern Community Community center complex which includes Children's 10,350 1934 Center Theatre, Children's Library, Community Theater, large SF 1305 Middlefield Rd ballroom, community room, fireside room, kitchen, outdoor patio, offices, restrooms, Boy Scout offices and fire circle, parking. The buildings are traditional Spanish style with wood framed structures, stucco exterior and clay tile roof. Lucie Stern was seismically upgraded in 1991. Lucie Stern Children's Fully equipped 200-seat theatre consisting of an auditorium, 15,700 1937, -35- Theatre ,stage, fly, lighting and sound systems, shop, costume room, SF 1305 Middlefield Rd dressing rooms, offices Lucie Stern Community Fully equipped 500-seat theatre 14,000 1933 Theater SF 1305 Middlefield Rd Mitchell Park Community Main hall, kitchen, patio, meeting room, offices, parking 10,400 1967 Center SF 3800 Middlefield Rd Palo Alto Junior Museum Wood frame stucco structure, mostly single story with 9.100 1941 and Zoo offices over the main entry. SF 1451 Middlefield Rd Palo Alto Art Center Former City Hall (1956-1971), now includes art studios, 30,000 1956 1313 Newell Rd gallery, offices and meeting rooms. It was remodelled after SF city offices moved to 250 Hamilton in 1971, and seismically retrofitted in the mid-1980's. The Palo Alto Art Center Foundation provides financial support and volunteers to help operate the Art Center. Cubberley Community The City leased 35 acres of the site from the Palo Alto 1955 Center Unified School District in 1990. In 2002, the City .4000 Middlefield Rd transferred ownership of 8 acres at the Terman school site to the Cubberley school site. As. a result. the City now owns 8 acres at Cubberley (including 76,138 square feet of buildings) and continues to lease 27 acres at Cubberley from the school district. Facilities total approximately 180,000 sql,lare feet including auditorium, theater, 2 gyms, amphitheater, dance studio. kitchen, offices. meeting rooms. and restrooms. The facility also includes tennis courts, soccer fields, softball field, football field with bleachers, and parking. The City is solely responsible for maintenance of the facilities. Library facilities: The City owns and operates 5 library facilities -Main, Mitchell. Children's, College Terrace, and Downtown -totaling 51,000 square feet. In comparison to other nearby libraries, Palo Alto's libraries are cramped and dilapidated. Only Children'S Library has been completely renovated; it reopened in September 2007. Square Date Library Facilities Description feet built Main Library Single story wood frame structure with concrete columns and 26,313 1958 1213 Newell Rd partial basement; heated by hot water using boiler in the Cultural SF Center; small remodels over the years include additional staff work areas, seismic bracing to the stacks. computer room addition, restroom remodels, asbestos abatement, carpet replacement Mitchell Park Library Single story wood framed structure with 2 small additions; 9,478 SF 1958 3700 Middlefield Rd renovations in the late 1980's included new carpet, stack lighting and bracing, and ADA upgrades College Terrace Wood frame/stucco exterior and clay tile roof (half the building is 2,392 1935 Library leased to a child care facility) SF26 2300 Wellesley St Children's Library Wood frame/stucco exterior with clay tile roof (part of the Lucie 6,043 1940/ 1275 Harriet St Stern Community Center complex) SF27 2007 26 The College Terrace facility includes 2,392 SF of library space and 2,650 SF of child care space, for a total of 5,050 SF. . -36- i Downtown Library 270 Forest Ave Single story wood framed structure with concrete columns Other community facilities: In addition to maintaining athletic fields and facilities at 15 Palo Alto Unified School District sites26, the City owns several other community facilities that are operated by community groups:29 . Other Community Amenities Size Date Facilities built Gamble Garden Formal and demonstration gardens, historic home, carriage house, 2.5 acres 1900 1431 Waverley St tea house; property is owned by the City and leased to Elizabeth F. with 8.800 Gamble Garden (a local non-profit comm·unity horticultural SF foundation). The Foundation is responsible for all maintenance and facilities im provements. Roth Building Historic 2 story office building with basement and added "spine" 17,000 SF 1931 300 Homer Ave with elevator; property is owned by the City and leased to the Palo Alto History Museum (a local non-profit). It is expected that the Museum will be re~ponsible for all maintenance and improvements. Sea Scout Building Historic wood frame structure; option to lease awarded to 2.209 SF 1941 Environmental Volunteers in 2007 with potential cost sharing for a public restroom that the City would maintain; otherwise proposed improvements, maintenance and operation of the property at no cost to the city . Senior Center 2 story wood framed stucco with tile roof; property is owned by the 17,800 SF 1930's i 450 Bryant St City and leased to Avenidas (a local non-profit providing services to mid-peninsula seniors). The City is responsible for the exterior shell of the building; Avenidas is responsible for interior maintenance and improvements. Ventura Community Former elementary school purchased from the school district in the 23,000 SF 1958 Center early 1980's. Includes 4 wood frame buildings leased to various 3990 Ventura Ct tenants including Palo Alto Community Child Care. Williams House 2 story historic Craftsman-style residence with historic gardens; 8,000 SF 19071 351 Homer Ave property is owned by the City and leased to the Museum of 2000 American Heritage in 1998; the museum constructed the Frank Livermore Learning Center in the rear of the property in 2000. The City has limited responsibility for the driveway; otherwise the Museum is responsible for all maintenance and improvements. Winter Lodge Outdoor skating rink (only permanent outdoor ice rink west of the 3.6 acres 1956 3009 Middlefield Rd Sierras), tennis courts, parking. Property is owned by the City and leased to Community Skating Inc. which is responsible for maintenance and improvements. 27 The original Children's Library was 3,442 SF. 28 The City and School District jointly share maintenance and capital costs of athletic fields at specific sites and tennis courts located on school grounds. 29 Does not include: • Lou Henry Hoover Girl Scout House (1120 Hopkins Ave), which is located on City land, but owned by the Girl Scouts of America. Built in 1926, it is the oldest Girl Scout meeting house remaining in continuous use in the United States. • University Avenue Depot leased from Stanford University and subleased to others. -37- ( i Civic Hall: Built in 1970, the civic center at 250 Hamilton Ave is a 10-story office tower housing city offices, city council chambers, police station, and 3 levels (260,000 SF) of underground parking. The 90,000 SF building was seismically retrofitted in the mid-1980's .. The city is currently considering vacating the Police Wing of City Hall, .and building a new public safety building on Park Boulevard.30 Municipal Services Center (MSC): The 16-acre Municipal Services Center on E. 8ayshore Blvd houses Public Works and Utilities operations, the warehouse, and animal services center. MuniCipal Services Date Center Description Size built Building A Concrete tilt-up structure with tar and gravel roof; warehouse 15,300 SF 1966 3201 E. Bayshore Blvd and offices Building B Concrete tilt-up structure with tar and gravel roof; offices, 22,200 SF 1966 3201 E. Bayshore Blvd . maintenance shops, vehicle maintenance shop Building C Concrete tilt-up structure with tar and gravel roof; offices and 30,300 SF 1966 3201 E. Bayshore Blvd shops for Public Works and Utilities operations divisions MSCSCADA Concrete block structure with plaster exterior and metal 5,500 SF 1987 3241 E. Bayshore Blvd framed roof; utility control center. The 1996 Adamson report found this relatively new building was in relatively good condition. Animal Services Center Several single story wood-framed structures with some 6,300 SF 19721 3281 E. Bayshore Blvd concrete block walls; connected by an exterior walkway; 1986 small office addition in the early 1990's; and parking lot. Fire Stations: The City operates 8 fire stations (2 of the buildings are owned by others) Fire Stations Description h Size Built Station 1 Largest of the fire stations with a partial second floor. Concrete 9,100 SF 1965 301 Alma St block, steel framed structure with tar and gravel roof. Station 2 Second largest fire.station. Single story, block wall construction 6,800 SF 1965 2675 Hanover St with wood framed roof. Station 3 Smallest and oldest station. Wood framed structure with cold 3,000 SF 1942 790 Embarcadero Rd applied roof. Station 4 Wood framed construction with wood shake roof. 3,000 SF 1954 3600 Middlefield Rd Station 5 Single story structure with concrete block and wood frame 3,600 SF 1962 600 Arastradero Rd construction and tar and gravel roof. Station 6 Located on the Stanford Campus. Owned by Stanford, the 18,308 1969 711 Serra St shell is the responsibility of the University; the interiors are Stanford responsibility of Palo Alto. Station 7 Located at the Stanford Linear Accelerator (SLAC). Owned by 2,615 1966 2575 Sand Hill Rd Stanford; built with funding from the Department of Energy. Menlo Park Station 8 Wood frame and siding with composition shingle roof. located in 1,500 SF 1986 3300 Page Mill Rd Foothills Park. 30 In 2007, the City entered into an option to purchase the 1.27 acre Essex Park Blvd site for the proposed public safety building. -38- Streets: The City owns and maintains 197 linear miles (or 463 lane miles) of City streets. The approximately 40 million square feet of pavement has an estimated useful life of 40 years. Sidewalks, curbs and gutters: The City owns and maintains approximately 10 million square feet of sidewalks and 2 million linear feet of curbs and gutters with an estimated useful life of 40 years. Parking facilities: In addition to parking facilities managed by Parks and Open Space, and at City Hall, the City owns and operates at least 20 parking lots and parking structures. Date Parking Facilities Description Size built California Avenue surface Lots on Sherman Ave and Cambridge Ave parking lots Cambridge Parking Garage Single deck over on grade parking 58,000 SF 1968 Mimosa and CambridQe Parking Garage Lot B 2 floors below grade. The city has 20,000 SF 1988 Ramona and University responsibility for the first level below grade only. The city is 100% responsible for all cost associated with the public parking areas, 47% of lower level capital items, and 17% of replacement cost for elevators. Downtown surface parking Lot A (400 block Emerson St), Lot C (400 block lots Ramona St), parking lot D (300 block Hamilton Ave), Lot E (600 block Gilman St), Lot F (400 block Florence St), Lot G (600 block Gilman St), Lot H (400 block Hamilton Ave), Lot K (300 block Waverley St), Lot N (500 block Emerson St), Lot 0 (400 block Emerson St), Lot P (500 block , Lot T (Kipling) Parking Garage Lot Q 3 floors below a retail/housing development. 48,000 SF 1984 430 High St The city has joint responsibilities with the homeowner's association for 85% of elevator, mechanical and electrical. costs, and 50% of seismic improvements Lot R garage 2003 Entrances on Alma and High Lot Land S garage 2003 Between Bryant and Florence Ted Thompson Garage 2 floors 55,000 SF 1994 275 Cambridge Webster Cowper Garage 5 floors above grade plus basement; 180,000 SF 1988 concrete/steellwood structure with 2 elevators Street lights and traffic signals: The Utilities department maintains 89 traffic signals and 6,240 street lights as part of the Electric Enterprise Fund. Trees: The City owns and maintains nearly 35,000 trees, including street trees, trees in parks, and trees at City facilities. Public Works is responsible for planting new trees, trimming/pruning existing trees, removing dead/diseased trees, fertilizing and pest control, line clearing around electrical wires, 24/7 emergency response, and providing Certified Arborist advise to residents regarding care of street trees. Canopy, a local non-profit organization, also plants City trees. Managers in the tree -39- group also oversees~Y!?I<:lLtrE:lE:l:rel§ltE:l.d,cQn!ract~ .. including stumP remq"":lI).E?Je.~t!i~§-'Jil'1E:l_c.JE:lClringL and annual tree maintenancecontracis.' .' . . ..... ,. ........ ... '. . _... .. . Other roadway improvements: The City is also responsible for bike paths, bridges, medians, traffic signage, striping and legends. Estimated I Other roadway improvements Quantity useful life Bike paths 35,300 feet 40 years Bridges, underpasses and crossings 22 bridges (including roadway, pedestrian, and bike bridges) 40 years Traffic signage 10,000 signs 5 years Striping and legends 425,000 square feet 5 years • Medians, islands and planters Including at least 150 landscaped and non~ 25 years landscaped median strips, 15 concrete median strips, 50 traffic islands, 70 planters, 7 gateway areas, 4 traffic circles, 30 traffic diverters, 70 side strips and riQht-of-way areas The City of Palo Alto operates several utility systems .. Each of the utilities is responsible for its own infrastructure. Electric Utility: Founded in 1900, the electric utility purchases and delivers over 975,000 megawatt hours per year to its customers. Electric utility infrastructure includes the following (traffic signals and street lights are shown above as part of the roadway network): Estimated Description Quantity useful life Distribution system 413 miles of overhead and 186 miles of underground" 1 0-1 00 years distribution system Services and meters 28,700 service connections 10-50 years Miscellaneous 11 substations 1 0-1 00 years Fiber Optic Utility: Founded in 1996, the Fiber Utility is a sub-fund within the Electric Fund that owns and operates a fiber optic network with the following infrastructure: Estimated Description Quantity useful life Fiber backbone 40.6 miles : 10-100 years I Services to customers 161 service connections; 39.5 1 0-100 years miles of fiber 31 Since 1965, approximately 45% of the City's electric system has been undergrounded -including the majority in commercial areas, and about 14% of residences. Undergrounding requires the cooperation of telephone and cable companies, but California Public Utilities Commission rules limit their recoverable costs. At the current rate of 150-200·homes per year (with funding set at 2% of annual electric revenues per year), staff estimates it would take 70-100 years to complete the undergrounding of the entire city. -40- The City has considered expanding the networ.k to serve Palo Alto residences. A fiber to tbe home (FTTH) trial, approved in. Nov-2000,was terminated in Pec"'2005. The City is considering a proposal to deploy FTTH· cifYWlde. The estirriatedcostofthaf deployment is approximately $40 million. Gas Utility: Founded in 1917, the gas utility purchases and delivers over 31 million therms to over 23,000 customers. Gas utility infrastructure includes the following: Estimated Description Quantity useful life Distribution pipelines 207 miles of gas mains 10-100 years Services and meters 23,400 gas meters 1 0-1 00 years Miscellaneous 4 gas receiving stations. 1 booster station 10-100 years Refuse and landfill: The City owns and operates a 137-acre landfill, including a 2.5-acre recycling drop-off center and 9.300 sq feet of buildings, at 2380 Embarcadero Road.32 In FY 1991-92, a section of the refuse area was capped with final cover and Byxbee Park was constructed on top of that section. A second section was capped with final cover during FY 1992-93, but has not been opened to the public. The City expe'cts that the landfill will soon reach maximum capacity and that the remaining areas of the landfill will be closed in 2011. The City is required by State and federal laws and regulations to make annual funding contributions to finance closure and post-closure care. As of June 30, 2007, the city was in compliance with those requirements with the establishment of a fully-funded liability of $7.1 million for that purpose. The site is owned by the General Fund and is dedicated parkland (the Refuse fund pays rent to the General Fund for use of the property). The City has a masterplan for final development of Byxbee Park, but has not budgeted for park development on the site. The Refuse Fund also owns a portion of the former Los Altos Treatment Plant (LA TP) site. In 1985, Palo Alto entered into a lease purchase agreement with the city of Los Altos for an undivided half interest in the 13.26-acre former LA TP site with the intent of building a solid waste facility. The General Fund purchased the remaining half interest in 2007. Storm drainage: The City owns and operates a storm drainage system that collects storm water runoff from streets and developed properties, and conveys the water to one of four local creeks (San Francisquito, Matadero, Barron and Adobe) that flow directly into San Francisco Bay without receiving any treatment. Most of the storm drain system was built by private developers over the past 100 years as a component of individual residential subdivisions and commercial developments. Upon completion of construction, the City accepted the storm drain infrastructure from the developers and is now responsible for the maintenance and operation of the system.33 In April 2005, Palo Alto property owners approved a storm drain fee increase to provide resources for the storm drain improvements project. Due to rapidly increasing construction costs, projects were reprioritized and available resources were reallocated among projects. Supplemental funding may . be required. 32 In addition, the Palo Alto Sanitation Company (PASCO) currently leases 1.9 acres of city-owned land on Geng Road adjacent to the Baylands Athletic Center. That use may end in 2009 when the PASCO refuse hauling agreement expires. The existing Comprehensive Plan land use designation for the Geng Road site is Public Park; the zoning is Public Facilities with Site and Design overlay. 33 All About Your Utilities (2007) page 26 -41 - Estimated useful Asset description Quantity life Collection system 107 miles of underground pipeline; 2,750 storm 10-100 years drain inlets; 800 manholes; 7 pump stations Sewers: Founded in 1989, the wastewater collection utility maintains more than 200 miles of sanitary sewer lines, annually transporting over 3 billion gallons of sewage and wastewater to the Regional Water Quality Control Plant. The FY 2007-2012 CIP includes $26 million for an ultraviolet disinfection system to replace the current use of chlorine for disinfection. Estimated useful Asset descri tion Quantit life Collection system 202 miles of sewer mains 10-100 ye Service to customers 21,800 service connections Wastewater Treatment: The City owns and operates a regional wastewater treatment plant that treats about 26 million gallons of wastewater each day from Palo Alto, Mountain View, Los Altos, Los Altos Hills, Stanford, and East Palo Alto. Water that goes down a sink or toilet is treated and released to the Bay about 12 hours later. The cities of Palo Alto, Mountain View and Los Altos shared the original costs of acquisition and construction of the plant, and participate jointly in the cost of maintaining the plant. Water utility: Founded in 1896, the water system purchases and distributes more than 580 million cubic feet per year to its customers. The FY 2007-2012 CIP includes a $40.2 million emergency water supply project (WS-08002).34 Estimated useful· Asset description Quantity life Distribution and treatment 219 miles of water mains 1 0-1 00 years Services and meters 19,700 customer water meters 10-100 years Reservoirs and wells 5 emergency standby wells; 4 steel and 2 reinforced 30-100 years concrete reservoirs with a total capacity of 10.5 million gallons of stored water Hydrants 2,699 hydrants 50 years Other infrastructure, not specifically attributable to specific categories above includes other land owned by the General Fund and leased to Utilities, the Palo Alto Airport (leased to Santa Clara County), and levees. Palo Alto Airport: The City owns the 100-acre Palo Alto Airport at the end of Embarcadero Road, adjacent to the Palo Alto Baylands and the Golf Course. The County of Santa Clara operates the airport under a 50 year lease with the City ($25 for the entire term 1967-2017). Under the terms of the lease, all revenue from the Airport is to be used to reimburse the County for continuing 34 Note that proposed costs to retrofit and improve the Hetch Hetchy water system will be passed along to Palo Alto customers through increased water rates. -42- operations and/orfor maintenance and capital improvements at the Airport. Airport facilities include a I1ghted, paved, 2,443 footlong.runway, a smallteniporary terminal building, 357 tie-down spaces, a heliport, taxiways, and parking. The airport control tower is entirely funded and operated by the FAA. Two fixed based operators (FBOs) provide hangar space for about 95 aircraft, 3 large maintenance hangars, and airport-related office and commercial space. All facilities are the property of the City upon termination of the lease (2017 or sooner). Levees and sea level rise: The Santa Clara Valley Water District (SCVWD) and San Mateo County control easements and levees along San Francisquito Creek. Palo Alto is a participant in the San Francisquito Creek Joint Powers Authority, working with the Army Corps of Engineers to address flooding from the creek. The SCVWD is also responsible for the flood control basin in the baylands. According to a recent staff report, a projected 1 meter rise in sea level and increased storm surge would likely impact not only the baylands, but the Municipal Airport, Water Quality Control Plant, Municipal Services Center and Utility Control Center, Utility substations and transmission routes, recycling center, recreation facilities, storm drains, residential neighborhoods and portions of business districts. To date, projected costs to increase flood protection for these facilities has not been included in infrastructure projections. -43- ,'" Attachment D Palo" Alto, 'Californ ia: General Fund Infrastructure Opportunity Report Prepared for Mr. Jim Keene, City Manager, City of Palo Alto, California Submitted: September 3, 2009 Completed by 2009 Leadership ICMA Team Members': Mike Goodrich, Arlington County, VA Eric DeMoura, Town of Mount Pleasant, SC Sara Ott, City of Dublin, OH Pamela Rambo-Estill, City of Arlington, TX Sabra Smith-Newby, Clark County, NV Page 1 of33 Table of Contents Introduction .................................................................................................................. 3 Summary of Recommendations ................................................................................... 4 Capital Infrastructure Accuracy and Inventory Recommendations .............................. 5 Infrastructure Categorization and Prioritization Criteria ............................................... 8 Civic Engagement ...................................................................................................... 11 Multimedia Budget Storytelling Presentation ............................................................. 14 Conclusion ................................................................................................................. 15 Exhibit A: List of Document Analyzed ........................................ ~ ............................... 16 Exhibit B: List of Individuals Interviewed .................................................................... 18 Exhibit C: Examples of Weighted Prioritization Criteria ............................................. 19 Exhibit D: City of Palo Alto Infrastructure Storytelling Outline .................................... 32 Page 2 of33 Introduction I ncorporated in 1894, the City of Palo Alto has an estimated population of 61,200 (2007) and is approximately 25.6 square miles in size. The city includes portions of Stanford Univ~rsity and is headquarters to a number of Silicon Valley high technology companies, including Hewlett-Packard and Facebook. Palo Alto has a council-manager form of government consisting of a manager and a nine member City Council. In February 2009, Mr. Jim Keene, City Manager of Palo Alto, California, retained a team of Leadership ICMA (LiCMA) Class of 2009 members to perform a comprehensive study of the City's general fund infrastructure, methods for project selection, and community engagement. These members of LlCMA undergo a competitive, intensive two-yearlCMA University program designed to cultivate key competencies needed for successful leadership at all levels of local government management. The Leadership ICMA process culminates with a final capstone project, which requires participants to work in a team to complete a local government consulting project solicited through a formal RFP process with a local government client. Through the RFP process, a request for assistance submitted on behalf of the City of Palo Alto was selected and an agreement for consulting services was achieved. As a result of the request for proposal and the resulting agreement, the following tasks were completed on behalf of the City of Palo Alto: 1. Reviewed all pertinent documents and conduct interviews in order to properly describe the infrastructure funding issue in Palo Alto. 2. Collected and analyzed data in order to assess the comprehensiveness and accuracy of Palo Alto's general fund capital inventory. 3. Analyzed existing criteria used to prioritize and categorize projects, and provided recommendations as necessary. 4. Conducted stakeholder interviews in order to identify elements to be used in the development of a story narrative and multimedia presentation featuring the status of Palo Alto infrastructur,e. 5. Researched and recommended community engagement strategies in an effort to build public support to address the infrastructure issues in Palo Alto. The following report describes briefly the data collected, analysis performed, and recommendations suggested as a result of the completed tasks described above. Page 3 of33 Summary of Recommendations Capital Infrastructure Accuracy and Inventory Recommendations • That the City of Palo Alto update its capital asset information annually and invest in GIS compatible software specifically designed to keep and manage all vital infrastructure information, which will also help with asset analysis and with the developmentofthe City's Capital Improvement Program. • That the City should pass by ordinance a minimum annual contribution requirement from the General Fund to the Infrastructure Reserve. • That the City should establish an annual matching contribution cap for funds allocated towards challenge projects with "Friends Groups." • That the City of Palo Alto should use debt financing supported by a tax increase as the primary method to finance infrastructure repair. • That the City of Palo Alto should use the civic engagement strategies contained herein to tell the story of general fund infrastructure needs in order to receive the required two thirds voter approved debt financing. Project Prioritization and Criteria Recommendations • That the City of Palo Alto develop and implement a weighted criteria decision tool to more fully evaluate the relative value of competing Infrastructure projects when prioritizing. • That the City of Palo Alto should communicate potential capital projects through a categorization structure that emphasizes urgency and need rather than physical description. Community Engagement Recommendations • That the City of Palo Alto integrate its current Civic Engagement strategies with a mix of the fifteen (1'5) strategies contained herein in order to further the dialogues regarding resource allocations, and in particular, the general fund Infrastructure Reserve. Page 4 of33 Capital Infrastructure Accuracy and Inventory Recommendations The City has a vast general fund infrastructure profile that features, most notably, 8 fire stations, 5 libraries, 4 community centers, 30 city parks, 20 parking lots and parking structures, a civic center (which includes the Police Department), a municipal services center, a golf course, a zoo and junior museum and an art center. The average age of the City's buildings is 50 years old. The City also is responsible for the maintenance of 40 million square feet of pavement and 10 million square feet of sidewalks. Funding Infrastructure profiles of this size require substantial capital funding to adequately maintain, preserve and replace facilities. Adequate capital funding in support of these facilities did not occur in recent decades resulting in many parks, roads, sidewalks and buildings reaching their useful lives at the same time. The community's concern over the deterioration of their facilities reached its high pOint in the mid-1990's resulting in the city contracting with Adamson Associates for an infrastructure management study. The study identified all major facilities and their associated replacement costs anticipated in the next twenty-five years. The study also identified annual funding requirements, including backlog, and recommended an ongoing infrastructure management system. In response to the report, the City increased capital spending through direct General Fund contributions to what is known as the Infrastructure Reserve. The purpose of the Infrastructure Reserve is to ensure funding is available for infrastructure repair and replacement. However, despite the presence of the Infrastructure Reserve, funding has not been adequate to address capital deficiencies and, with the exception of libraries, additional public support for capital improvements is low in the community. The Adamson Report was an important document for the City as it successfully provided a foundation of information on which to plan for and fund improvements and, as a result, the City Council authorized annual contributions to the Infrastructure Reserve. Combined with grants, gasoline taxes and impact fees, the annual contribution to the Infrastructure Reserve successfully reversed the downward trend of general fund capital spending per capita as shown in Exhibit 6 of the March 4, 2008 Infrastructure Report Card for Palo Alto. Since the Adamson Report and later the Kitchell Report, the City has maintained at . varying levels its financial commitment to the Infrastructure Reserve, and many facility improvements have been made. But despite successes of the capital program, funding is not adequate to properly address the infrastructure backlog estimated by the City on May 13, 2009 to be $386M. General fund contributions, grants, special use taxes and fees, leases and Certificates of Participation are helpful to addressing this problem. But, in the opinion of the LlCMA Page 5 of33 team, the only effective means to remedy the large amount of deteriorating assets is through debt financing supported by a tax increase. Since many of the major community facilities have reached their usefLillives, issuing debt is the only means that will allow for needed, large scale capital asset repair to be accomplished quickly. While debt financing has obvious drawbacks, one benefit is that the repairs will be completed in today's dollars, saving taxpayers the future cost of materials and labor. And by issuing debt the cost of these repairs will be borne by multiple generations who stand to benefit from these new long-lived assets. Recommending indebtedness is not taken lightly by this LlCMA team and it is fully recognized that municipal general fund debt financing in California requires both available debt capacity and two-thirds support from the voters. Even with the recent passage of general obligation bonds to support libraries, Palo Alto still maintains considerable debt capacity which is capped by the State of California at fifteen percent of assessed value. The biggest obstacle is voter support. Understanding that receiving two-thirds support for municipal capital projects is difficult to achieve and, with the exception of libraries and moderate momentum for a police station, there currently is little public support. This will be addressed later in the report in the section of civic engagement. Debt financing supported by a tax increase is required to resolve a problem of this magnitude. The City should employ two methods to limit the amount of borrowing and the corresponding tax burden. First, the City should pass by ordinance a minimum annual contribution from the General Fund to the Infrastructure Reserve. This would demonstrate further commitment by the governing board by making infrastructure repair an organizational priority. It would also provide funding stability and reduce the level of debt issuance. Second, the City should establish an annual matching contribution cap for funds requested by "Friends Groups." While these groups are well intentioned, their requests (and decisions by the City to accommodate these requests) have disrupted the capital program by shifting resources from more critical projects. Accuracy of General Fund Inventory One major focus of this project is to assess the comprehensiveness and accuracy of Palo Alto's general fund capital inventory. Only through this effort could the LlCMA team see the full scope of the problem and determine whether the assets used to generate the infrastructure repair figures were reasonably accounted for. After conducting· stakeholder interviews and reviewing City documents (shown in Exhibit A) the initial conclusion was that not one location existed that inventoried the vast number of facilities in Palo Alto. Rather, it appeared that different facilities were listed in different documents found in different departments. However, as the research of the project team progressed, the LlCMA team has concluded that the Department of Public Works (DPW), through its GIS and compilation of nearly two dozen infrastructure lists, does indeed possess a comprehensive inventory of Palo Alto's streets, sidewalks, public buildings, parks and other facilities. However, with the exception of streets and sidewalks, vital statistical information (year built, square footage, etc.) and information Page 6·of33 on asset condition and life cycle is not easily accessible. But this information does exist in other City documents. Although asset information could be compiled better, the LlCMA team can conclude that city management can be confident that the DPW has a comprehensive inventory of the City's capital assets. While most of the documents reviewed provided some level of value, it is through the review of four major documents as well as the GIS that has led the LlCMA team to this conclusion. These documents are the 2007-08 Comprehensive Annual Financial Report, the City of Palo Alto Service Efforts and Accomplishments Report 2007-08, the March 4, 2008 Infrastructure Report Card and the CPEPP Property Schedule for the' City of Palo Alto. The first three documents were reviewed at the onset of the project. Each captured general fund facilities to some level, but neither was complete. This left the team with the belief, initially, that a comprehensive listing did not exist and left the team skeptical of the accuracy of the infrastructure backlog figures. But after receiving the DPWs infrastructure listings and reviewing the City's GIS information, it became clear that a comprehensive inventory of general fund facilities did exist and in sufficient detail. For example, while many City documents mentioned the golf course, the DPW's listings also included the office, the pro shop, and the maintenance shop. And the three documents were cross checked again to ensure the facilities mentioned were found in the DPW's listings and they were. But despite gaining confidence in the DPW's information, there was not a method of determining just how fully comprehensive the information was. The site visit was very important and very helpful, but not enough to gain high confidence in the listings of general fund infrastructure. This is where the fourth document, the Property Schedule, became very helpful. The Human Resources Department with the help of a private consulting firm maintains a complete listing of non transportation capital assets. This document allowed another means to successfully cross-check the information kept by the DPW. Although vital statistics (year built, square footage, etc.) found in the Property Schedule and other documents like the Adamson Report were either lacking or difficult to locate in the GIS, the LlCMA team can conclude that the City's DPW has a comprehensive inventory of general fund assets and that the maintenance, repair and backlog figures are reasonable. While the DPW possesses a comprehensive inventory, pieces of information regarding the inventory are located in different documents. Not one document or database exists that contains all relevant information about Palo Alto's general fund capital assets. An investment in GIS compatible software specifically designed to keep and manage vital infrastructure information is recommended. Newer software will also help with asset analysis and with the development of the City's Capital Improvement Program. Furthermore, if this report is successful in some way in helping the community to focus its attention on the need for infrastructure repair, the DPW's data will surely be scrutinized by the City Council and the community. As the consequences of long term financial commitments are weighed, they will expect the information to be presented to them in a more digestible format. More relevant and comprehensive software will assist in assuring the interested parties that the current information is correct. Page 7 of33 Infrastructure Categorization and Prioritization Criteria The prioritization criteria being used by the City of Palo Alto is logical, easy to understand and defensible on the whole. The Adamson report (1998) is the basis of the prioritization criteria and appears generally accepted by both the City staff and the City Council. Palo Alto's current capital improvement program is referred to as CityWorks. CityWorks is based on a 2008 update of the General Fund infrastructure backlog through 2028 and was created to document the backlog. Projects are now classified as: • Land, Buildings and Facilities • Streets and Sidewalks (including Traffic and Transportation) • Parks and open Space • Miscellaneous Equipment To be a capital project a project must have a minimum cost of $50,000 for each stand- alone unit or combined project, have a useful life of at least 5-7 years and must extend the life of an existing asset or provide a new functional use for,an existing asset for at least five years. Using physical descriptors to communicate the infrastructure investment needs is not making a connection with the community .. Categories of need rather than physical descriptions might bridge this gap and create more of a story than an inventory when it comes to classification. Prioritization In the background section of CIVIR 406:99 reports a prioritization of the General Fund IMP for Buildings and Facilities (CMR:466:96), Traffic and Transportation (CMR:297:97) and Parks and Open Space (CMR:409:97) was approved in 1998. These are the prioritization criteria found in the Adamson Report. Currently, Palo Alto reports that the overall criteria used to prioritize CIP projects is: 1. Council Direction Project is a result of a specific Council directive. 2. Leverageq Funding (Public/Private Partnerships/ Grants/Impact Fees) Project has leveraged funding through private/public partnership, government grants, development impact fees, special revenues or enterprise funds. 3. Health and safety requirements Project mitigates existing health and safety risks as identified by Public Works, Fire or Building Division inspectors, or prevents potential future health and safety risks. . 4. Code/legal requirements Page 8of33 Project is legally required for compliance with codes or laws. 5. Operations needs and efficiency Project involves a mission critical need that, if not addressed, would impede operational effectiveness 6. Sustainability Project impacts the sustainability of the community-the ability of the community to meet its current needs without compromising the ability of future generations to meet their own needs. 7. Community Priorities Project meets community priorities or serves a Council-identified need of a segment of the community such as youth or seniors. Process The capital budget notes "Projects listed in [Adamson] are weighed in with other non- IMP projects as prioritized based on the seven criteria. The process for ranking then consists of a recommendation from the IMP Committee to the City Manager as to what should be included in the five-year plan. Recommendations The seven criteria currently utilized to evaluate capital projects using the IMP committee, while good from a conceptual standpoint, lacks rigor and is perceived as subjective. While adopted decision making criteria will never fully be objective, more rigorous evaluation criteria will allow the City of Palo Alto to improve its decision making process. The City of Palo Alto should develop and implement a weighted criteria decision tool to more fully evaluate the relative value of competing Infrastructure projects, such as the example of Louisville, KY in Exhibit C. The LlCMA team also recommends that the City of Palo Alto communicate the vast array of capital deficiencies using categories that emphasize urgency and need to provide the public with a cornpelling reason to undertake funding solutions for capital projects. Consequently. categories with emotive connections rather than physical descriptions might better convey the importance of public infrastructure investment while telling a cogent story about the current infrastructure deficiency issue. The following is only one possible categorization schematic, based on levels of need and disrepair, that would help describe why there is a need for completion as well as communicate a sense of urgency associated with the various projects. The categorization system provided below is designed to incorporate aspects of the Adamson Report and CityWorks, while mimicking the urgency and hierarchy of the Department of Homeland Security color scheme. The proposed categories in descending order of critical importance are: Level Red: Imminent Risk. Immediate health/public safety risk or high possibility that structural failure is a posing threat or other significant risk to health and Page 9 of33 safety will occur in the nea'r future, or that critical services and/or supply lines would be unavailable during an emergency. Level Orange: Significant liability exists for not meeting codes and/or other legal standards, public accessibility and/or quality service delivery is or will be disrupted in the near future if not addressed, and/or significantly escalated cost will make the project even more difficult to fund. The possibility exists that if ignored, conditions of the asset will deteriorate and the project will be escalated to Level Red, Level Yellow: Provides survivability and/or adds useful life and/or enhancements to existing assets, allows the community access to a new or improved service deiivery. Level Green: Provides opportunities for investments in the community, which include identified and currently or potentially available funding in from sources other than the City's general fund (Le. grants, "Friends" groups), but physical condition does not qualify it for Yellow, Orange or Red status. Level Blue: Is recognized as an existing asset that will need to be addressed at some point in the future due to physical aging and/or technological innovations, or a new asset that will be needed based on community values, growth, and/or other emerging issues, but is currently. not of a critical nature, or creating an existing service void. In categorizing capital needs using non-physical descriptors, care should be given to avoid the assumption that classification based on project attributes does not also carry with it an absolute as far as prioritization in the annual capital budget and the order in which projects will be completed. When taking into consideration a holistic picture, including weighted criteria as recommended in the beginning of this section, a Level Blue project that is low in cost and has 95% leveraged funding already in posseSSion of the City, might in fact be funded in any given year's capital budget before a Level Red project with significant barriers that must be addressed before work on the project can begin. Again, the color schematic becomes a communication tool for the public to better understand urgency and need, not an absolute on the order that capital projects will be addressed. While the LlCMA team believes that some categorization scheme based not on physical descriptors will assist the City of Palo Alto to more effectively communicate the level of need and urgency for funding capital improvements, we also recognize that the most difficult task of implementing this process involves correctly placing the projects into the categories. In the next section, the LlCMA team provides some recommendations regarding accessing citizen input to assist in the categorization of projects. Page 10 of33 Civic Engagement In .order te determine the current level .of civic engagement in Pale Alte, the LlCMA team interviewed a number .of city staff whe interact with the citizenry as well as citizens whe had served en varieus beards .or in lecal erganizatiens. In additien, the LlCMA team alse develeped a shert survey fer several citizens selected by city management that are invelved in Pale Alte neighberheed greups. The fecus .of these interviews and surveys was te determine several facters surreunding civic engagement, including the types of civic engagement teels empleyed by the city, the .openness .of city staff te werking with the citizenry, and the resulting epiniens .of citizens abeut the city's efferts te engage them. From this assessment, it appeared that the new city management was cemmitted te mere actively engaging citizens in the issues facing the city, but that staff still had reservatiens abeut enceuraging citizen participatien. These reservatiens seem te stem frem the censiderable expertise held by seme .of the mere eutspeken citizens and the fear .of having well-laid plans critiqued by citizens. Staff whe have .often spent their careers in a certain area, particularly specialized technical areas relating te infrastructure, .often believe that their years .of experience qualifies them as experts in the field. At the same time, Pale Alte citizens may have alse spent their careers in similar technical expertise areas-albeit .outside .of city gevernment-and previde their expert epiniens regarding the plans develeped by staff. As a result, the LlCMA team believes that .one impediment te true citizen engagement in Pale Alte will be everceming . the barrier .of fear that impedes dialegue between staff and citizens. Recommendations The LlCMA team interviewed a number .of citizens. In a review .of academic literature regarding civic engagement, specifically examining hew public reseurce discussiens are held in the public demain, several themes emerged. • Public participatien is mest beneficial early in any reseurce allecatien precess. Citizens reject attempts te cellect input inte a reseurce allocatien precess that is already underway, where the eutceme is perceived te already be determined. • Traditienal metheds .of gaining citizen engagement, such as public hearings .or public cemment perieds are limited in terms .of their efficacy. Public participatien is .often lew, and these citizens that de participate .often represent narrew cencerns. • Citizen engagement precesses are best when they invelve twe-way infermatien sharing and deliberatien. • Because any individual means fer cellecting public input will invariably have strengths and weaknesses, a cemprehensive citizen engagement strategy Page 11 of33 should include several types and opportunities for public input These means for collecting public input should complement each other, compensating for weaknesses and capitalizing on strengths in any given citizen engagement, strategy. Using these principles as guiding tools, the 1,.ICMA team has prepared a list of recommendations for citizen engagement tools. The City of Palo Alto may elect to use some or all of the set of suggested tools that will allow for maximum public participation and information sharing. While these tools were developed with the capital improvement process in mind, the optimal utilization of these recommendations would be integrated with the city's overall approach to civic engagement. The following are the suggested approaches and strategies to enhance the involvement of the citizens of Palo Alto. • Media tours of current infrastructure deficiencies designed to encourage coverage of the problems and consequences of delaying investment, thereby increasing public perception of need and urgency. Example: Colorado Springs, Colorado Transportation Education Initiative. • Neighborhood walking tours to identify the features that make neighborhoods desirable and the relationship between the infrastructure and the identified features. These are a good way to engage City Council members to help them hear what the neighborhood views as important. • Improve relationships with neighborhood groups such as Palo Alto Neighborhoods by designating staff liaisons for each group. Neighborhood groups and citizens would be encouraged to contact their liaison with concerns or questions, and the liaisons would be trained to access information and resources in various departments in order to provide the neighborhood groups with seamless customer service. • Create a Neighborhood College program that would seek to build capacity among citizen groups and with neighborhood organizations. The Neighborhood College would offer training opportunities on issues that matter to the neighborhoods, such as leadership capacity building, neighborhood organizing skills, and Homeowners Association (HOA) maintenance areas & financial management. Example: Charlotte, North Carolina • Create a Capital Improvement Advisory Commission comprised of citizen representatives that would work with residents, businesses and staff to develop the recommended CIP. Representatives would be geographically diverse in order to provide representation from the many neighborhoods within Palo Alto, and individuals on the Commission would be able to provide their neighbors with perspective on the challenges of developing a CIP. Examples: Arlington, Texas, Denton, Texas, and Chicago, Illiniois. Page 12 of33 • engage current Boards and Commissions to determine funding recommendations to City Council. Current Boards and Commissions already possess a great deal of intellectual capital regarding their subject-matter concentrations. This task may be accomplished by allowing the appropriate Board/Commission to allot limited 'points' in the weighted prioritization system. • Clearly link citizen input to budget decisions when presenting justification for recommendations before the Cit.y Councilor other public groups. Input can come in many forms -budget meetings, citizen surveys, focus groups, suggestions received throughout the year. • Clearly communicate budget priorities by identifying fundamental infrastructure categories that must be the priority for funding. Identifying those categories that must be the priority for funding could be accomplished by conducting a public prioritization exercise with the City Council and community. Example: Longmont, CO and Shoreline, WA • Communicate infrastructure improvements clearly and often to keep the community aware of the work that is being accomplished. Focus on the intended outcomes of the improvements .. Include the story about why the project is valuable and important, and what value it has added to the community. Provide cost information for typical improvements. Example: Chicago, IL and Greenville, SC. • Implement a NeighborCircles program, which involves resident-facilitated conversations about issues facing the neighborhood and City. Use tools such as paired comparison survey technique to create dialogue about priorities. • Create a city budget guide that explains what the city budget is, why it's important and how the community can make it better. The goal in creating this document is to analyze the budget, put the budget categories and expenditures in terms most people can understand, and compare resident and official budget priorities. One example is Lawrence, MA, which created a 72-page bilingual publication called Money, Our Future, Our Right to Know: The People's Guide to the Lawrence City Budget, which sheds light on the city's three major budgets - operating, capital improvement, and CDBG and HOME funds. • Create a document to explain taxes and revenues upon which the city depends. This document should be developed from a resident's perspective in terms that residents can understand. Make these documents available at all community centers and at community events. Example: Dublin, Ohio tax brochure. • Host a Community Lecture/Speaker's Series that would provide focused discussions on various aspects of city management and community issues. These speaker series could be hosted in conjunction with neighborhood Page 13 of33 organizations that could leverage group membership and be tailored to the interests of the neighborhood group. • Provide Internal Facilitator Training to build staff's skills in using facilitation techniques for meaningful dialogue. These in-house facilitators would be available for topic specific staff to utilize when public meetings are being held. The advantage of this is that staff experts would then be able to focus on the substance of the meeting, and not get caught up in managing the process as well. These training sessions would also help overcome barriers that staff may have in interacting with citizens that may be critical of staff plans. . • Host a series of World Cafes, which is a conversational process based on a set of integrated design principles that reveal a deeper living network pattern through which the collective future is co-evolved. These principles ensure that each participant's voice is heard and communicated and integrated with the larger group of interested parties. . Multimedia Budget Storytelling Presentation As part of the final report to the City of Palo Alto, the LlCMA team has prepared a short multimedia presentation that models the application of the principals of storytelling to the infrastructure funding needs of Dublin, OH. The hope of the LlCMA team is that this presentation may serve as a blueprint for a similar production for the City of Palo Alto that could be provided on disk, web, or at public meetings to effectively communicate the urgency for investment into public infrastructure. The multimedia presentation is included with this report. In addition, the LlCMA team has provided the City of Palo Alto with an outline of an infrastructure storytelling production, found in Exhibit D. Page 14 of33 ,,< Conclusion The LlCMA Team sincerely appreciates the opportunity to work with the City of Palo Alto, California. The team would like to specifically thank City Manager Jim Keene, Assistant to the City Manager Kelly McAdoo-Morariu, and all of the talented staff that devote their talents, skills and abilities to the citizens of Palo Alto. With their continued leadership, the LlCMA team is convinced of the future success of the City of Palo Alto. The City of Palo Alto has considerable work ahead in their general fund capital improvement program. The team debated over many weeks about the recommendations contained in this report, especially around increasing debt service for the City in this difficult economic climate. However, the team is convinced that the combination of the civic engagement strategies with the communication of the infrastructure needs will ultimately result in a successful and predictable revenue stream for capital projects. ' Page 15 of33 Exhibit A: List of Document Analyzed • The National Citizens Survey 2008 • 2008-09 Adopted Capital Budget • Infrastructure Report Card -March 4,2008 • Approval of Criteria that would identify Capital Improvement Projects -March 15, 2005 • Infrastructure Reserve Staff Report -February 23, 2005 • Planning & Transportation Staff Report -March 30, 2005 • Status of the Infrastructure Management Plan -September 16, 2003 • Manager Report on Infrastructure -March 5,2008 • Capital Improvement Project Funded Programs • Capital Improvement Project Adopted 2008-09 • Candidates Emphasize Planning: Opinions differ on management, Stanford expansion -October 3, 2007 • Milestones Estimated Completion Date • Library Service Model Analysis and Recommendations -December 4,2006 • 2008-09 Annual Street Maintenance Program -June 5, 2008 • Transportation Strategic Plan -April 2004 • Strategic Infrastructure Reinvestment Policy - May 26,2000 • 2007 -08 Comprehensive Annual Financial Report • City of Palo Alto Service Efforts and Accomplishments Report 2007-08 • CPEPP Property Schedule for the City of Palo Alto • Adamson Report • Kitchell Report • Department of Public Works Infrastructure Lists > 20-Year Projections for Transportation > 2008 Infrastructure Backlog -Byxbee Park Development > 2008 Infrastructure Study -Sidewalk > Building Module Campsite Capital Costs > Bridge Costs with Backlog > Building Seismic Estimates > Copy of Infrastructure Future Needs > EI Camino Park Restoration 032707 > Fire Station Civic Center and Animal Shelter Replacement > Infrastructure Future Needs > Infrastructure Report Final > Karen Bengards Building Replacement Module > MSL Construction .Cost Estimate -Option 3 > OS Management Study Page 16 of33 > PA Parks Management Study > Parking Lot Costs with Backlog > Pathway Costs > Police Wing Tenant Improvements > Shortcut to Infrastructure Report Final > Streets > Template 2008 Infrastructure Study • Budget Presentation -May 13, 2009 • 2010-11 Proposed Operating Budget • 2010-11 Proposed Capital Budget • GIS Database Page 17 of33 Exhibit B: List of Individuals Interviewed • Jim Keene, City Manager, City of Palo Alto • Steve Emslie, Deputy City Manager, City of Palo Alto • Kelly McAdoo-Morariu, Assistant to the City Manqger, City of Palo Alto • Glenn S. Roberts, Public Works Director, City of Palo Alto • Lalo Perez, Administrative Services Director, City of Palo Alto • Mike Sartor, Assistant Public Works Director, City of Palo Alto • Joe Saccio, Assistant Administrative Services Director, City of Palo Alto • Sharon Bozman, Budget Manager, City of Palo Alto • David Ramberg, Assistant Administrative Services Director, City of Palo Alto • Lynda Brouchoud, City Auditor, City of Palo Alto • Bern Beecham, Former Mayor/City Councilman, City of Palo Alto • Cash Alaee, Recreation Services Supervisor, City of Palo Alto • Stephen Levy, Director, Center for Continuing Study of the California Economy • Lanie Wheeler, Former Mayor/City Councilman, City of Palo Alto (Member of Blue Ribbon Task Force on Public Safety Building) • Pete Hazarian, Senior Administrator, Police Department, City of Palo Alto • Deputy Chief Roger Bloom, Fire Department, City of Palo Alto • John Melton, Storm Drain Oversight Committee/Library Bond Campaign Treasurer) • John Tarlton, Tarlton Properties (Local developer/Storm Drain Oversight Committee) • L.C. Tig Tarlton, Tarlton Properties Page 18 of33 ,. Exhibit C: Example of Weighted Prioritization Criteria LOUISVILLE CAPITAL BUDGET SCORING CRITERIA EXPLANATION Threshold Criteria The first filter to be used to integrate project requests into a capital plan is composed of threshold criteria. These criteria are used to discern the mandate level of the project, if any mandate exists. Mandate, as the term is used here, means that a project must proceed due to a specific commitment or requirement. The reasons for a mandate are described as separate criteria so that projects can be differentiated and ranked by mandate type. Every project fitting a mandate type will be automatically ranked higher than every project that does not have a mandate. This means, that in the integrated capital plan there will be a separate category of projects named "Mandated Projects". All mandated projects will also be ranked within the category according to the scores assigned for the mandate level as well as the scoring criteria that describe the substance of the project. The outcome would be a ranking of 1 through N of the projects that have a mandate level. 1. State or Federal Mandate As implied by the title, a State or Federal mandated project is one that must be funded in order to comply with a legal requirement enacted by the State or Federal Government. A good example of such a project would be to construct infrastructure, such as handicap ramps on sidewalks, in order to comply with the federal disabilities act requirements. In order to receive the pOints assigned to this criterion, the project description should identify the legal requirement that pertains to the project. 2. Local Law or Adopted Codes This criterion applies to projects that are proposed pursuant to a local law or adopted code, as opposed to a state or federal requirement. An example of this type of project might be to update fire suppression and warning systems in certain City/County owned facilities to comply with the locally adopted fire code. The project description should identify the local law or code requirement apropos to the project. 3. Local Policy/Service Equalization This criterion pertains to projects that are proposed in order to comply with local policy that does not have the force of law. For example, local policy may be that police patrol Page 19 of33 Improve Quality of Life 8. Unacceptable Environmental Condition/Protect/Improve Quality of Environment Projects that are designed to prevent or correct an unacceptable environmental condition will be scored in this criterion. To be con~idered, the project description must specify the hazardous condition and name the agency that has judged the conditioh to be hazardous or specify the code that the condition violates. An example of this type of project is removal of asbestos from a public building. 9. Substandard condition that would close infrastructure element or facility Projects that are designed to correct a substandard condition that would cause an infrastructure element or facility to be closed within a year will be scored in this criterion. The cause of the closure could be for any reason: hazard to occupants, safety of residents, functional obsolescence etc. 10. Historic:: Structure/Artifact If the project is designed to preserve an historic structure or artifact that will be damaged if work is not begun in the first fiscal year of the capital plan it will be scored using this criterion. The submission should describe the nature and extent of the damage that would occur without immediate action. 11. Leisure Time Activities Projects that will improve the quality of leisure time activities for residents will be scored in this criterion. This is self-explanatory. 12. Improve Quality of Transportation Projects that are meant to improve an element of the area's transportation system will be scored using this criterion. Projects fitting this description include investment in system maintenance, repair and replacement as well as system upgrades. 13. Public Health Projects whose purpose is to improve or protect public health will be scored using this criterion. In this case, the term public health is meant to apply to personal health as opposed to general environmental health. An example of such a project could b~ the construction of a new health clinic. Keep Us Safe Page 22 of33 ... • .. 14. Emergency Services If a project is designed to provide emergency services to the citizenry it will be scored under this criterion. Emergency is defined as a situation or occurrence of a serious nature, developing suddenly and unexpectedly, and demanding immediate action. 15. Homeland Security If a project is an element of a prescribed homeland security program or effort, if will receive points for this category. It is not sufficient to cite improved security as an outcome of the project. The project description must cite the overall homeland security plan of which it is an element. Create Strong Neighborhoods . 16. Housing A project that is meant to support the provision of decent, safe, sanitary and affordable housing will be scored using this criterion. This is self-explanatory. 17. Neighborhood Level Community Building A project with the primary purpose of building community at the neighborhood level will be scored under this criterion. Ail example of this type of project might be construction of a multi-purpose community center. Bring Us Together 18. Government Accessibility This criterion applies to project meant to make it easier for residents to access government operations and information through use of the inter-net and/or other non- technology based enhancements. An example of technology type of project might be an application allowing businesses to renew their business license on-line. A non- technology project might be opening a branch office for issuing business permits. 19. Co-location of related operations/Elimination of Service Duplication Projects that provide co-location of related operations or eliminate service duplication will be scored using this criterion. An example of this type of project might be construction of a senior services facility that houses geriatric health services and senior citizen social services programs. 20. Promote Diversity Page 23 of33 Projects with a purpose of promoting or leading to greater diversity will be scored under this criterion. A description of how the project will result in greater diversity is required to be scored under this criterion. Improve Financial Condition 21. Net Present Value Some projects will generate additional revenue or reduce operating cost, many will not. This is known as a return on investment (ROI). Projects with an ROI will be subject to an additional analysis by the Budget Office to determine the net present value (NPV)of the ROI. Net Present Valu~ applies a time value to the ROI stream to determine the economic value of the investment in current dollars. The Budget Office will determine the NPV of each project and rank them from most value to least value. The ranking will be divided into thirds and scored accordingly. New or increased revenue estimates must be fully explained and justified. Annual cost reductions must also be fully explained and justified with the understanding that the Budget Office will be fully justified in reducing the agency's operating budget in the future when an approved project Is completed. 22. Project Deferral Cost Increases All projects, if deferred, will experience cost increases greater, equal to or less than the rate of inflation. All projects will be scored on this criterion. An example of a project that might experience cost increases greater than the inflation rate might be deferred roadway paving. The American Public Works Association has developed a cost curve that shows that accelerating deterioration due to deferred maintenance increases the cost of future maintenance. That cost curve should be compared to historical inflation experience to determine how the project should be scored. Project cost will be assumed to increase at the historic inflation rate unless documented otherwise. Each project description should state cost increase expectations with appropriate docu mentation. 23. Project Cost Sharing This criterion will apply only to projects where a portion of the cost is to be paid by another party, either a government jurisdiction or a private party. This criterion is self- explanatory. 24. Annual Operating Cost Increase This criterion will apply only to projects that will require additional annual operating costs to be appropriated to operate the improvement upon completion. Factors in this criterion will be assigned a negative weight on the premise that it is undesirable to add costs to the annual operating budget if no new/expanded service results. Page 24 of33 • ·\ 25. Increase in Property Tax Base Projects that will directly lead to an increase in property tax base will be scored in this criterion. Examples of this type of project might· be creation of an office park or extension of a roadway to serve a parcel of land for which development has been approved. To receive points under this criterion, the nexus for increasing the property tax base must be clearly articulated and documented. Information Technology 26. Information Technology Project Information Technology projects are to be scored according to the scoring criteria applied to all requests for information technology. The ranking of IT project requests will be divided into thirds and pOints will be awarded according to the project's ranking within the IT scoring criteria. 27; Records Security This criterion is self-explanatory. Department Importance 28. Department Priority The three criteria applicable to department priority are meant to incorporate a department's opinion of proje'ct importance into the ranking scheme. Project Beneficiary 29. Resident Benefit The three criteria applicable to this factor are designed to distinguish among the relative benefit levels of the projects in terms of the number of residents benefiting. This criterion will have to rely on judgment and estimates. For example, an improvement to a heavily traveled arterial roadway could be judged to benefit more than 50% of the citizenry based on traffic count. Conversely, an improvement to a local street with a much lower traffic count may benefit fewer than 10% of the residents. Project descriptions should take these criteria into account and provide a statement of the benefit estimate applicable to the project with a short explanation as to the basis for the slatement. Louisville, Kentucky Criteria Scoring Matrix Page 25 of33 Scorer Name: THRESHOLD # CRITERIA Mandate Level Is project required to meet a state or federal mandate? Is project required to comply with a local law or adopted 2 codes? Is project required to comply with local policy or to equalize service for new 3 residential or commercial development? Is project required to comply with a contractual 4 agreement with another governmental entity? Is the project a subsequent project phase necessary to keep a project 5 already begun from becoming useless? SCORING -CRITERIA Grow Better Jobs -Will the project directly lead to an increase in jobs that are eligible for state/lOcaI tax 6 incentives? 25 or fewer new jobs created 25 to 50 new jobs created 51 to 75 new jobs created 76 to 100 new jobs created Page 26 of33 101 or more new jobs created Is the project required to retain current employment with the following 7 impact: • 25 or fewer jobs retained 25 to 50 new jobs retained 51 to 75 jobs retained 76 to 100 jobs retained 101 or more jobs retained Improve Quality of Life Does the project prevent or correct an unacceptable environemental condition or improve 8 or protect the quality of the environment? Does the project correct a sub- standard condHion that would cause an infrastructure 9 element or facility to be closed in the next year? Does the project preserve a historic 10 structure of artifact? Does the project improve the quality of residents' leisure 11 time activities? Does the project improve the quality 12 of transportation? Will the project 13 improve or protect Page 27 of33 public health? SCORING CRITERIA Keep Us Safe Does the project improve the government's ability to provide emergency services 14 to residents? Is the project related to homeland 15 security efforts? Create Strong Neighborhoods Does the project provide decent, safe, sanitary and affordable housing 16 to residents? Does the project enhance community building at the 17 neighborhood level? Bring Us Together Will the project improve residents accessibility to government 18 operations By the application of technology By means other than technology Will the project provide better customer service by eliminating duplication or 19 bringing similar functions into closer proximity to one another? Will the project promote or lead to 20 greater diversity? Page 28 of33 ' . .. Improve Financial Condition Does the Budget Office rank the project in terms of Net Present Value of Return on 21 Investment: In the top 1/3 of ROI projects In the middle 1/3 of ROI projects In the lower 1/3 of ROI projects If deferred, will the project cost 22 increase: Faster than the rate of inflation Same as the rate of inflation Lower than the rate of inflation Will total project cost be shared with another jurisdiction/entity in 23 the following ratio: Other jurisdiciton share 10% or less Other jurisdiction share10% to 33% Other jurisdiction share 34% to 50% Other jurisdiction share 51% to 75% Other jurisdiction share more than 75% Will project add cost to the annual operating budget in the following 24 amount? $25,000 or less $25,001 to $50,000 $50,001 to $100,000 $100,001 to $500,000 Page 29 of33 $500,001 or more Wilt project directly increase property tax base value by . 25 the following: $1,000,000 to $5,000,000 . $5,000,000 to $10,000,000 $10,000,000 or more SCORING CRITERIA Information Technology Will the project implement an information technology improvement that the IT ranking 26 system scores: In the top 1/3 of project requests' In the middel1/3 of project requests In the lower 1/3 of project requests Will project provide for improved security of government 27 recordslinformation? Department Importance Factors What importance does the department assign to the project 28 request? Top 1/3 of department priorities Middle 1/3 of department priorities Lower 1/3 of department priorities Project Beneficiary Page 30 of33 Factors What percent (estimated) of the residents will benefit 29 from the project? 10% or less 11% to 50% 51% or more Page 31 of33 · . . -. Exhibit 0: City of Palo Alto Infrastructure Storytelling Outline I. Palo Alto is a wonderful place a. Diverse population b. Valued amenities c. Rich history of community, technology and pursuit of learning II. What is Infrastructure and why is it important for Palo Alto? a. Definition -facilities necessary for the community to operate b. Examples of City infrastructure i. Visible -roads, parks, libraries, city hall, rec center, fire trucks and stations ii. Invisible -broadband network, wi-fi network, storm sewer system, sanitary sewer system, water treatment and distribution, seismic retrofitting c. Importance i. Supports quality of life 1. children's theater, libraries, access to the Bay, access to transportation ii. Supports the local, national, and international economy 1. City selected as an employment center 2. transport of goods, services and information globally III. Getting infrastructure built through the Capital Improvement Program (CIP) a. Requires planning years in advance by City leadership b. Planning occurs through the Capital Improvement Program (CIP) c. CIP Definition: long term financial policy that provides blueprint for investment in the City d. CIP Timeline e. City staff responsible for engaging with community (residents, businesses, university, schools, etc) in the planning stages IV. Project Selection a. Revenue Projections and Debt Issuance b. Selection Criteria c. Administration recommends and City Council approves CIP V. Citizen Involvement in CIP a. Citizen involvement is critical for i. directing how dollars are spent ii. creating the best public policy b. How to get involved i. Citizen surveys ii. Public meetings Page 32 of33 iii. One-on-one meetings iv. Boards and Commissions v. Emails vi. Telephone calls vii. Neighborhood meetings c. Sharing information early and often i. Creating dialogue and understanding on project priorities ii. Developing citizen ambassadors for before and after funding projects Page 33 of33 .' Attachment C Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes POLICY AND SERVICES COMMITTEE Special Meeting Thu~day,April 22, 2010 Chairperson Yeh called the meeting to order at 8:06 a.m. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Yeh (Chair), Holman, Price, Shepherd Absent: none 1. Oral Communications None. 2. Discussion and Potential Recommendations on Colleagues' Memorandum Related to Infrastructure Blue Ribbon Commission. Assistant to the City Manager, Kelly Morariu gave a brief discussion of the outline for the structure, scope offinancing mechanisms, schedule and timing of the Infrastructure Blue Ribbon Commission (Commission). She stated there were three recommended questions brought forth: 1) Should the Commission review closing the five year infrastructure gap or should there be a broader scope to look at Palo Alto's infrastructure needs, 2) Should there be recommendations on both General Funds and Enterprise Utility Funds projects and 3) How should infrastructure be defined. City Manager, James Keene stated the discussions at Staff level were based on the importance of the scope of the Commission; what was the goal of achievement for the Commission, how broad or narrow would their responsibility should be. Chair Yeh asked for clarification on the information included in CMR 230: 10. Page 1 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes Ms. Morariu explained the documents included were the original Colleagues Memo, an excerpt from the prior Policy & Service Committee meeting minutes where the discussion had taken place, the infrastructure report card released in March 2008 from the City Auditor's department, Attachment D was a list of best practices derived from the team of local government professionals from around the country who spoke with Staff, community stakeholders, toured facilities, reviewed the infrastructure needs and made recommendation on how to engage the community around the infrastructure challenges. Council IVlember Price asked whether the questions asked by Staff for the Commission had equal weight. Ms. Morariu stated the key areas to discuss were the structure and timeline. Mr. Keene stated his preference would be to have a brief discussion around the scope of the Commission which would feed into the structure and schedule. Chair Yeh asked whether the Commission was to look at closing the five year Capital Improvement Projects (CIP) infrastructure gap or should they be analyzing a longer term ongoing solution. Assistant Public Works Director, Mike Sartor stated the Capital Budget was a five year plan where the first year was funded. Staff had identified in the five year plan backlog, each year had a funding gap. Mr. Keene stated the CIP Fund was constrained by not enough funding or the capacity to complete selected projects. The question was what was the role infrastructure takes in land use and the Comprehensive Plan. Council Member Price stated, based on the skepticism by the community, she requested considering a two part phase for the 2011 ballot process. The first phase was for the Commission to review the five year infrastructure gap and phase two was a vision of the future. Her suggestion was to have the initial step be a smaller increment done well and the next step of a broader approach. Council Member Holman stated the CIP was a very comprehensive document, containing complex projects that were not well understood. She stated the scope of the Commission should be to look at the CIP and prioritize the projects, which ones were grant funded, which were required or desired, were there projects that should be added based on a proactive approach. Page 2 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes Chair Yeh stated the Commission needed to review the magnitude of the infrastructure needs over the entire City, return to Council with the prioritized list of projects in five year increments. Council Member Shepherd stated the Commission needed to have a strong financial outlook do to the complexity of the needs of the City's infrastructure with the financial backdrop. She stated the entirety of the City's infrastructure needed to be vetted and brought back to Council for review in smaller increments. Chair Yeh asked for the context for the remaining questions by Staff in order for Policy & Services (Committee) to prepare their thoughts. Mr. Sartor stated Scope Item No.2 was whether the Commissions' focus was to tackle the Enterprise Fund infrastructure and the General Fund infrastructure backlog. He clarified the Enterprise Funds had oversight commissions and generally have funding capability built-in; whereas, the General Fund had difficulty funding infrastructure needs as a whole. 0 Mr. Keene stated the General Fund funded a large piece of the infrastructure by reinvestment and maintenance on current buildings and other infrastructure projects; replacing or repairing the HVAC system, roofs, street maintenance and repairs. He stated infrastructure repairs involved multiple departments coordinating their efforts to ensure step one was completed in order for the next step to move forward; financial consideration was a main factor in infrastructure but not the complete picture. C6uncil Member Price asked whether the $90 million in the unfunded five year plan included the General Fund infrastructure, Capital Improvement backlog and the Enterprise Fund. She asked for clarification on what projects the $90 to $150 million applied to. Mr. Sartor stated the $90 to $150 million was strictly General Fund infrastructure projects which included building, roads, streets, parks; Open Space was listed. The Enterprise Funds backlogs were managed within their funds. Mr. Keene stated there needed to be boundaries to what was included in infrastructure. Page 3 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes Mr. Sartor stated the $90 and $150 million backlog did not include other potential infrastructure new projects or renovations reminiscent of fire stations 3 and 4. The Comprehensive Plan may include a pedestrian connection to the Baylands, an overpass over Highway 101, remodel or new public safety facility. Council Member Price asked if the Enterprise Fund infrastructure projects were funding from within, why was it a discussion point when it was the General Fund was having difficulty accomplishing its infrastructure backlog. Mr. Keene stated the task for the Commission was not to make recommendations on the Enterprise Fund projects or to address the progress on these projects. Council Member Holman stated the public needed to be informed as progress moved ahead with repairs or replacements. In a sustainable arena the community needed to be aware of the longevity an older building could have with a little maintenance. She clarified the importance for the Commission to review both Funds and define the importance for coordination of infrastructure projects. Council Member Shepherd asked whether the Enterprise Fund projects were prioritized and slated for start dates or merely listed as infrastructure needs. Mr. Sartor stated the Stormdrain Oversight Committee was working on prioritizing the Capital Projects which was established by the voters during the fee increase; the Utilities Oversight Committee reviewed and prioritized the Capital programs for the water, gas, waste water and electric funds. Council Member Shepherd stated the Enterprise Fund projects would be incorporated into the review of the Commission but not necessarily a part of their prioritization process. Council l"1ember Holman requested when the Commission began the prioritization listing that it be made clear what the project was, its location and type of project. Chair Yeh stated there would be an education process for the Commission members to familiarize themselves with both Funds and their perspective infrastructure projects. He asked about the benefit in having the Commission Page 4 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes members made up of current Board & Commissioners. He clarified the final report needed to have a section where it was clear to Staff and the public the differences between the Enterprise and General Fund and their projects. Mr. Sartor stated Scope Item No.3 defined what infrastructure was. The term infrastructure expanded from existing facilities that required maintenance to infrastructure that was not yet in place but could be needed to meet the goals of the City. There was importance placed first on the need to finance ongoing maintenance on existing infrastructure, then the need to consider major renovations to buildings or facilities and then the potential for new facilities. Council Member Price stated the Comprehensive Plan needed to be reviewed and understood with a clear nexus between where the City was and the improvements needed to achieve the goal. Council Member Shepherd asked for clarification on the concept of internal infrastructure as in the HVAC system and roofing repairs or replacement. Mr. Sartor stated roofing and heating, ventilating, air conditioning (HVAC) served as mechanical pieces of the building. The building was the infrastructure; the inner projects were designed to maintain the buildings or facilities in good condition so they were available for use. Council Member Shepherd stated the repairs and replacement of the inner workings of a building or facility were maintenance projects and should be contracted on a year by year basis; not part of an infrastructure plan. Mr. Sartor clarified the backlog included those types of projects in order to maintain the infrastructl.Jre. Council IViember Shepherd asked whether the inner maintenance was considered under Bond funding. Mr. Sartor stated he believed so. Council Member Shepherd clarified the General Fund did not have a line item for maintenance. Page 5 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes Mr. Sartor stated the question was how the Operating Budget versus the Capital Budget differed. He clarified the Capital budget was funded primarily to maintain the existing infrastructure. Mr. Keene stated questions 3 and 4 correspondingly merged together. How was the infrastructure defined for the scope of the initiative and how much of the back log was deferred investment. He stated there was a maintenance budget but there was a gap between what was needed and the amount budgeted. Council Member Holman stated the Commission needed a defined deliverable. What was their purpose and how did their existence benefit the City, Council and the community? Chair Yeh stated the benefit of the Commission was to define how to best expend limited resources given a certain magnitude of needs. Council Member Holman stated it would not be appropriate for the Commission to go into detail on items that appeared to be a digression from the intention of the group. Although, if a project came to their attention it could be a part of their deliverable to recommend an audit. Council Member Price stated defining the purpose and scope of the task was critical which led to who would best participate as a members of the Commission. She clarified the projects list was not completed; there was an initial list and a subsequent list, there was the prioritization of the list, the criteria for selecting the priority, and the funding mechanism. She felt repairs and maintenance should be built into the infrastructure needs. Council Member Shepherd stated the deliverables needed to interlock with the ideals or thought process of High Speed Rail. She questioned the desire to take care of the entire infrastructure problem without having a revenue generating mechanism to support the infrastructure. Council Member Holman stated the deliverables were best discussed after a review of the entire element for consideration. She stated a secondary approach would be how volunteers could be utilized. She stated there needed to be transparency on the cost of the projects and how the cost was determined. Council Member Shepherd highlighted page four of thirty-three towards the end of the packet where some of the different financing mechanisms have already Page 6 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes been identified by the ICMA team. It talks a little bit about what could be low hanging fruit for private/public partnerships. This might be an interesting way of handling some things and to really get these things accomplished. Council l\1ember Price stated there were other options for funding aside from the Bond Measure that should be considered. Chair Yeh stated a full array of different financing mechanisms and a shared base level of information would be helpful. He questioned whether the City had a philosophy on what Bonds, parcel taxes or assessments should fund. Council Member Price stated engaging volunteers could be effective; although, there needed to be caution on how that would affect the labor base. Mr. Keene stated there were financing mechanisms available to the City beyond Bond issuances. There were factors involved with other options such as the interest rates, consideration of construction cost savings in the near term and decay cost for deferred infrastructure. Council Member Shepherd stated the Commission needed flexibility within the structure of their function. Council Member Holman requested Staff follow-up with a listing of available grant opportunities for cities or lobbying opportunities that may be available. She stated she understood the time constraints of Staff but felt facilitating public meetings or town hall meetings held in different locations would benefit the overall education of the community. Chair Yeh stated the ICMA report showed seven different criteria for prioritizing: Council direction; leverage funding; health and safety requirements; code and legal requirements; operations, needs and efficiency; sustainability and community priorities. He questioned how the Commission would view the basis of prioritization in terms of the scope and deliverables. Ms. Morariu stated Staff was looking for the Committees' direction on the size, structure and how the Commission should be appOinted. Council Member Price stated the purpose and scope needed to be defined prior to deciding the size and structure of Commission. She stated there needed to be a clearer understanding of the impacts on Staff resources. She noted the Page 7 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes scope, schedule, structure and a realistic deliverable needed to be completed in concurrence. She suggested fewer than eighteen Commissioners. Council Member Shepherd suggested a nine member Commission with an alternate Commissioner who attended the meetings and could be ready to step up in the event one of the Commissioners' was unavailable. Council Member Holman stated the conceptof having alternates was agreeable and felt the minimum Commission panel should be twelve. She noted the combination of expertise, experience and geographic familiarity was the key to a successful Commission of this type. She suggested having a participant from the Utilities Advisory Commission (UAC), the Planning & Transportation Commission (P&TC), possibly the Historic Resources Board (HRB) and the Architectural Review Board (ARB). She stated the schedule needed to entail deadlines and interim reports presented to Council. Chair Yeh agreed there should be more emphasis on the importance of membership opposed to the number of Commissioners. The Commission should consist of geographic representation of various neighborhoods, business community, and non profits to understand the different perspectives. Council Member Price requested Staff return with different concepts of how the Commission could be structured, possibly a hybrid model of the current Boards & Commissions. She stated in order to get a meaningful outcome the expertise and participation should not be made up of a singular component. Council Member Holman stated there would be value in having a finance segment to the Commission whether in a subgroup or a part of the scope itself. She asked whether the deliverable portion of the Commission could be deliberated at the next Committee meeting prior to being brought to full Council. Ms. Morariu stated the next Committee meeting was scheduled for May 11, 2010; the continuation of the issue could be agendized and brought to Council on the May 17, 2010 meeting. Mr. Keene stated the authors of the original Colleagues Memo had inquired as to when the discussion would be brought to Council. Page 8 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes Council Member Shepherd stated the Commission composition would have the Staff thread which would pull in what was occurring throughout the different Boards & Commissions. If not, she suggested Staff provide an executive summary to the Commission from discussions within the other Boards & Commissions to provide continuity. Council Member Price asked from a productive perspective, if Staff felt bringing the recommendations to Council for review a week later than originally suggested would benefit the discussion. Mr. Keene stated if the Committee felt the discussion pOints had sufficient merit to be presented to Council for a full discussion, he would schedule the report to be presented for May 10, 2010; if not, then the discussion would return to the Committee on May 11, 2010. Council Member Holman stated she was in favor of returning to the Committee for further discussion on the matter and agreed spending a small amount of time would prove prudent once the item went to tile full Council. Mr. Keene stated considering the time involved in writing a staff report, he felt bringing the report to Council would be best on June 7, 2010, which was the first meeting in June. The other option was to write the CI'v1R in parallel with the Committee meeting on l'v1ay 11, 2010. Chair Yeh stated to continue with the discussion at hand and focus on the Brown Act, Council ApPointment and deliverables giving Staff sufficient information to write a staff report. Council Member Price asked whether the suggestion was for the report to return to the Committee or go to Council. Chair Yeh clarified to continue the current discussion and make recommendations to move forward for Council review. Council Member Holman agreed spending time defining the recommendations would allow for a smoother discussion with full Council. Chair Yeh asked whether Staff had context for the Brown Act. Page 9 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes Ms. Morariu stated that, based on discussions with the Attorney's office, the Commission was subject to the Brown Act given the Council's role in defining the structure of the task force. Mr. Keene recommended the Commission needed the weight of the Council backing it as a support mechanism to show the community they were behind the concept of the Commission and their goals. Council Member Holman stated the Commission should be Council appointed and the Brown Act should be applicable. She stated the infrastructure was the public's infrastructure and therefore it needed to be completely transparent and the concept of subcommittees within the Commission made the point of it needing to be a larger group. Council Member Shepherd asked for clarification on the function of a subcommittee .. Ms. Morariu stated there were multiple ways a subcommittee could function; one was for the Commissioners to be broken into smaller work groups tasked with a specific question or concern of the overall Commission returning to the full Commission with their recommendation. Mr. Keene stated a subcommittee was a more intimate group broken out with . specific skills and expertise levels. Council IVlember Shepherd asked how large the subcommittee was, how many subcommittees would there be and would they all be appointed Commissioners. Mr. Keene stated a decision on how a subcommittee was determined was typically made by the Chair and Vice Chair of the Commission. CouncillVlember Shepherd asked the Commissions' role in civic engagement and holding public meetings and questioned whether Staff would be assisting. Mr. Keene stated the scope itself would define the structure of the Commission; therefore, the determining factor of having subcommittees or not was not yet defined. He clarified the Commission was to write a report and present recommendations to Council on their findings. Page 10 of 11 Attachment C: Excerpt from April 22, 2010 Policy & Services Committee Minutes Council IVlember Shepherd asked for confirmation that civic engagement was structured at the infrastructure priority setting level. She felt civic engagement was set after the scope and structure were vetted. Chair Yeh suggested preparing the Committee minutes from the current meeting to be presented to Council for their review of the processes thus far while the matter return to the Committee for further deliberation regarding the Brown Act, appOintment process questions and the deliverables. Council Member Holman asked the probability of Staff presenting the Committee with a draft staff report for the May 11, 2010 meeting. Mr. Keene stated it was possible for Staff to compile a report at eighty percent and present an outline for the final discussion. Page 11 of 11 City of Palo Alto ,,-, .. .;y Manager's Report TO: HONORABLE CITY COUNCIL ATTENTION: POLICY & SERVICES COMMITTEE FROM: CITY MANAGER DEPARTMENT: CITY MANAGER'S OFFICE PUBLIC WORKS DATE: MAY 11,2010 CMR: 246:10 SUBJECT: Recommendations Regarding Colleagues' Memorandum on Infrastructure Blue Ribbon Commission RECOMMENDATION Staff recommends that the Policy & Services Committee review the attached staff report to the City Council on an Infrastructure Blue Ribbon Commission and make any changes or additional recommendations to Council in advance of the May 17 City Council meeting. Please note that . this is a ,very preliminary draft. . DISCUSSION ... .. On April 22,2010, the Policy & Services Committee considered a Colleagues' Memorandum from Vice Mayor Espinosa and Council members Klein, Scharff and Schmid that referred the issue of formation of an Infrastructure Blue Ribbon Commission (IBRC). The staff report and related attachments from that meeting are included as Attachment A to this report. The draft minutes from that meeting are not yet available but will be provided to the Committee prior to the meeting, if feasible. . The Committee made recommendations regarding several of the discussion points outlined in that staff report. However, there were 'still several areas that warranted further discussion. To expedite the process of returning recommendations to the full City Council, the Committee asked staff to return at the May 11 Committee meeting and to present a draft staff report. This draft report would outline the recommendations made by the Committee and would be taken to the full Council on May 17~ The draft report to the full Council is· included as Attachment B. The several items that still required further discussion by the Committee prior to making final recommendations to the Council are: deliverables; schedule; appointment methodology; Council liaison; and staff resources. Once the Committee makes recommendations regardjng these additional items, staff will include these in the draft May 17 staff report to the Council. RESOURCE IMPACT The . resource , impacts associated with this report have been identified in previous reports (See Attachment A). CMR: 246:10 Page 1 of2 POLICY IMPLICATIONS This report is consistent with Council direction for the Policy & Services Committee to further consider the matter. ENVIRONMENTAL REVIEW The report does not qualify as a project under the California Environmental Quality Act. Any future infrastructure projects would undergo the required environmental review ba.sed on the project submitted at that time. . ATTACHMENTS Attachment A: Attachment B: PREPARED BY: Apri122, 2010 Policy & Services Committee Staff Report (CMR: 230:10) Draft May 17, 2010 City Council Staff Report Kelly Morariu Assistant to the City Manager Glenn Roberts Public Works Director CITY MANAGER APPROVAL: CMR:246:10 Page 2 of2