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Home My WebLink About1995-01-23 City Council Summary Minutes Regular Meeting January 23, 1995 ORAL COMMUNICATIONS ........................................ 74-423 APPROVAL OF MINUTES OF NOVEMBER 15 AND 21, 1994 ............ 74-423 1. Recommendation to Retain Surplus in City's Miscella-neous Employee Asset Account with the Public Employees Retirement System (PERS) - Refer to Finance Committee . 74-423 2. Consultant Agreement between the City of Palo Alto and CSS, Architects for Americans with Disabilities Act Improvements for Building Interiors, CIP 19309 ........ 74-423 3. Contract between the City of Palo Alto and Loomis Armored, Inc. for Armored Car Service ................. 74-424 4. Contract between the City of Palo Alto and Air Exchange, Inc. for Installation of Exhaust Removal System at Fire Station 6 .............................. 74-424 5. Revision of Contingency Fund for Demolition of the Building at 841 Alma Street and Installation of Fences 74-424 6. Reaccreditation of the Palo Alto Junior Museum and Zoo with the American Association of Museums .............. 74-424 7. Resolution 7477 entitled "Resolution of the Council of the City of Palo Alto Authorizing the City of Palo Alto to Apply for One or More Fiscal Year 1994/95 Used Oil Recycling Block Grants and Opportunity Grants from the State of California" .................................. 74-424 8. Resolution 7478 entitled "Resolution of the Council of the City of Palo Alto Approving and Authorizing the Issuance of $8,640,000 Principal Amount of Utility Revenue Bonds, 1995 Series A, and Authorizing and Directing Execution of Second Supplemental Indenture of Trust Relating Thereto, Awarding Sale of Such Series of Bonds, and Authorizing Official Action ................ 74-424 9. Resolution 7479 entitled "Resolution of the Council of the City of Palo Alto Approving and Adopting Changes in the City of Palo Alto's Restricted Parking Zones ...... 74-424 10. Resolution 7480 entitled "Resolution of the Council of 01/23/95 74-1 the City of Palo Alto Authorizing the Filing of a Claim with the Metropolitan Transportation Commission for Allocation of Transportation Development Act Funds for Fiscal Year 1995-96 ................................... 74-424 11. Resolution 7481 entitled "Resolution of the Council of the City of Palo Alto Amending the Compensation Plan for Management and Confidential Personnel and Council Appointed Officers Adopted by Resolution 7351 to Amend the Salary and Benefits for Council Appointed Officers 74-424 AGENDA CHANGES, ADDITIONS, AND DELETIONS ................... 74-424 13. PUBLIC HEARING: Appeal of the decision of the Director of Planning and Community Environment and the Architectural Review Board upholding the decision to approve a proposal for one A-frame sign for O'Connell's Eire House in the public right-of-way four feet away from Centennial Walk and adjacent to the curb along Bryant Street in front of 520 Bryant Street ........................................................... 74-425 12. PUBLIC HEARING: Planning Commission recommends to the City Council approval of an application to rezone property located at 2650 Park Boulevard and 204, 228, and 230 Sheridan Avenue from RM-40 (High Density Multi-ple Family Residence) District to PC (Planned Communi-ty) underground parking and site improvements (a 141-foot front yard setback variance and a Tentative Subdi-vision Map to create condominiums are also required) (continued from 12/19/94) ............................. 74-425 15. Palo Alto Sanitation Company Audit Report ............. 74-453 16. Council Members Gary Fazzino and Liz Kniss re Joining as a Party to the Lawsuit to Challenge the Implementa-tion of Assembly Bill 133 ............................. 74-462 17. Council Comments, Questions, and Announcements ........ 74-462 ADJOURNMENT: The meeting adjourned at 11:10 p.m. .......... 74-462 01/23/95 74-422 The City Council of the City of Palo Alto met on this date in the Council Chambers at 7:10 p.m. PRESENT: Andersen (arrived at 7:12 p.m.), Fazzino, Huber, Kniss, McCown, Rosenbaum, Simitian, Wheeler ABSENT: Schneider ORAL COMMUNICATIONS Edmund Power, 2254 Dartmouth Street, spoke regarding honesty in government (letter on file in the City Clerk's Office). George Parry, 510 Barron Avenue, spoke regarding the property at 3666 El Camino Real. Tony Badger, 381 Hawthorne Avenue, spoke regarding Sand Hill Road. Susanne Shields, Midtown Merchants Association, spoke regarding the Midtown Market Analysis. Lynn Chiapella, 631 Colorado Avenue, spoke regarding the Planned Community zone and landscaping. APPROVAL OF MINUTES OF NOVEMBER 15 AND 21, 1994 MOTION: Council Member Fazzino moved, seconded by Wheeler, to approve the Minutes of November 15, 1994, as submitted. MOTION PASSED 8-0, Schneider absent. MOTION: Council Member Fazzino moved, seconded by Wheeler, to approve the Minutes of November 21, 1994, as corrected. MOTION PASSED 8-0, Schneider absent. CONSENT CALENDAR MOTION: Council Member Kniss moved, seconded by Fazzino, to approve Consent Calendar Item Nos. 1 - 11. Refer 1. Recommendation to Retain Surplus in City's Miscellaneous Employee Asset Account with the Public Employees Retirement System (PERS) - Refer to Finance Committee Action 2. Consultant Agreement between the City of Palo Alto and CSS, Architects for Americans with Disabilities Act Improvements for Building Interiors, CIP 19309; amendments not to exceed $7,500 3. Contract between the City of Palo Alto and Loomis Armored, Inc. for Armored Car Service 01/23/95 74-423 4. Contract between the City of Palo Alto and Air Exchange, Inc. for Installation of Exhaust Removal System at Fire Station 6 5. Revision of Contingency Fund for Demolition of the Building at 841 Alma Street and Installation of Fences; change orders not to exceed $26,250 6. Reaccreditation of the Palo Alto Junior Museum and Zoo with the American Association of Museums 7. Resolution 7477 entitled "Resolution of the Council of the City of Palo Alto Authorizing the City of Palo Alto to Apply for One or More Fiscal Year 1994/95 Used Oil Recycling Block Grants and Opportunity Grants from the State of California" 8. Resolution 7478 entitled "Resolution of the Council of the City of Palo Alto Approving and Authorizing the Issuance of $8,640,000 Principal Amount of Utility Revenue Bonds, 1995 Series A, and Authorizing and Directing Execution of Second Supplemental Indenture of Trust Relating Thereto, Awarding Sale of Such Series of Bonds, and Authorizing Official Action" 9. Resolution 7479 entitled "Resolution of the Council of the City of Palo Alto Approving and Adopting Changes in the City of Palo Alto's Restricted Parking Zones" 10. Resolution 7480 entitled "Resolution of the Council of the City of Palo Alto Authorizing the Filing of a Claim with the Metropolitan Transportation Commission for Allocation of Transportation Development Act Funds for Fiscal Year 1995-96" 11. Resolution 7481 entitled "Resolution of the Council of the City of Palo Alto Amending the Compensation Plan for Manage-ment and Confidential Personnel and Council Appointed Offi-cers Adopted by Resolution 7351 to Amend the Salary and Benefits for Council Appointed Officers" MOTION PASSED 8-0, Schneider absent. AGENDA CHANGES, ADDITIONS, AND DELETIONS MOTION: Mayor Simitian moved, seconded by Fazzino, to bring forward Item No. 13. MOTION PASSED 8-0, Schneider absent. 13. PUBLIC HEARING: Appeal of the decision of the Director of Planning and Community Environment and the Architectural Review Board upholding the decision to approve a proposal for one A-frame sign for O'Connell's Eire House in the public right-of-way four feet away from Centennial Walk and adjacent to the curb along Bryant Street in front of 520 Bryant Street Mayor Simitian declared the Public Hearing open and noted that the 01/23/95 74-424 public hearing would be continued to the City Council meeting of February 21, 1995, and reagendized to a meeting in March 1995. MOTION TO CONTINUE: Council Member Wheeler moved, seconded by Fazzino, to continue the public hearing to the City Council meeting of February 21, 1995, and reagendized to a meeting in March 1995. MOTION TO CONTINUE PASSED 8-0, Schneider absent. City Manager June Fleming announced that Item No. 14, Ordinance Amending the Budget for the Fiscal Year 1994-95 to Reallocate Human Services Contracts, had been removed by staff. UNFINISHED BUSINESS 12. PUBLIC HEARING: Planning Commission recommends to the City Council approval of an application to rezone property located at 2650 Park Boulevard and 204, 228, and 230 Sheridan Avenue from RM-40 (High Density Multiple Family Residence) District to PC (Planned Community) underground parking and site improvements (a 141-foot front yard setback variance and a Tentative Subdivision Map to create condominiums are also required) (continued from 12/19/94) Council Member McCown said she would not participate in the item due to a potential conflict of interest. Chief Planning Official Nancy Lytle said the application would rezone the property at 2650 Park Boulevard and 204, 228, and 230 Sheridan Avenue from RM-40 (High Density Multiple Family Resi-dence) to PC (Planned Community). In order to construct the 30-unit, 50-foot high multiple-family project, the PC zone was needed in order to achieve 6 units above the density normally allowed under the current RM-40 high density regulations to exceed the allowable Floor Area Ratio (FAR) by 100 percent and height by 10 feet. The project applicant had offered the following public benefits for the PC zone change: 1) a new street cross-section, including street translation and new sidewalks and drainage on both block faces on Park Boulevard and Grant and Sheridan Avenues; 2) public amenities, including sculptures at the roof line of the building which would be publicly visible from several vantages in the California/Ventura Area and a water feature and courtyard which would be publicly accessible within the project; and 3) the provision of six units of housing beyond what could be developed under current zoning in an area where higher densities were appropriate due to the close proximity of the project to the transit station, commercial services and, therefore, the lack of impacts on surrounding commercial properties. The Architectural Review Board (ARB) and staff had supported the project based on the applicant's proposal; however, the Planning Commission in its review found that the project was in need of additional public benefits. The Planning Commission had added a requirement that the units would be rented for a 25-year period and had also recommended a requirement for a fourth Below Market Rate (BMR) unit beyond the normal housing program requirement of three units. Staff disagreed that the additional benefits would be needed; 01/23/95 74-425 however, she noted that one of the reasons the Planning Commission added the additional benefit was the discomfort with the housing being a public benefit consideration in the staff recommendation. Staff felt that the higher density housing in that desirable location was a public benefit based on the fact that the City had not received any market rate housing in the community in the present decade. If the Council did not view the six units of housing as a public benefit, staff believed the project could be approved on the basis of the other benefits being offered with the housing being a beneficial outcome of the project. Contract Project Planner Robert Schubert said at the request of the Planning Commission, the applicant prepared the model exhib-ited for the Council that evening. The model showed that the volume, mass, and setbacks of the proposed residential building were similar to the adjacent Court House Plaza office building. He noted that the model had four changes that differed from the project which was reviewed by the ARB and the Planning Commission: 1) the large dome had been removed, 2) the spire had also been removed, 3) the four half domes in the center of each elevation had been changed to full domes which was in response to a comment from the ARB, and 4) a new roof deck. The applicant submitted cost estimates of approximately $300,000 for the proposed public improvements which included the street improvements on Park Boulevard, the four rooftop sculptures, and the fountain in the plaza. The Public Works Department had completed its review of cost improvements on Park Boulevard and found that it would cost $20,000 to $35,000 more than the estimate by the applicant. The applicant's proposal was to install a new storm drain which differed from the City's standard catch basin. Staff recommended that the Council adopt the PC ordinance and approve the negative declaration, setback variance, and the tentative subdivision map which would create condominiums. Planning Commissioner Phyllis Cassel said the Planning Commission was concerned about the deletion of Public Benefit Findings No. 1 and 2. The Planning Commission was concerned about the number of developments presented which indicated the public benefit was to provide an increase of units above the zoning. The Planning Commission felt that if that explanation were used, the City would lose numbers on the zoning, i.e., an RM-40 would mean nothing if people were allowed to indicate the public benefit was to increase the zoning. The number of units in the present proposal seemed small in relationship to the fact that the FAR had been increased by two. Architectural Review Board Member David Ross said the ARB unani-mously supported the project's design and architectural features twice. The second review underscored that support even more enthusiastically than the first review. The ARB was also con-cerned about the public benefits. He felt the present application and others like it pointed out a flaw in the zoning regulations that limited the production of certain housing type that was beneficial to the City and required it to go through a PC process with extensive PC findings in order to provide a quality of housing that the City wanted to encourage. The size of the public 01/23/95 74-426 benefit should probably relate to the amount of additional stress placed on the infrastructure or the zoning and whether the relationship of the public benefit being offered was appropriate for the type of project and the amount of stress. The ARB agreed unanimously that it was an appropriate location for that type of housing. He had reviewed the design changes presented that evening that would need to return to the ARB for approval, but the changes appeared to be responsive to ARB comments. The ARB had discussed the issue of private open space, and the roof deck, if provided, would be very responsive to the ARB's concerns about quantity of private open space. The additional water feature would also need to return to the ARB for review. Council Member Fazzino referred to the 150-foot setback and the PC zone provisions with respect to setbacks. He said the Santa Clara County Court House had a 150-foot setback from Park Boulevard which he believed was the standard for that area. Ms. Lytle said that was correct. The transition zone requirements were written that way and were applied to the different areas of residential and commercial interface, i.e., 100-foot strip areas, and it was also applied in the PC districts. In a PC zone there was no setback established other than what the building plans allowed; in the present proposal it was a 150-foot setback. It was an unusual circumstance to have such a wide setback which was why the variance was recommended. Council Member Fazzino asked whether the properties across the street came into play in terms of the setback requirement. Ms. Lytle said no, not along that area. Council Member Fazzino asked whether there was a precedent for the requirement recommended by the Planning Commission that the units should be rented for 25 years. Director of Planning and Community Environment Ken Schreiber did not believe that type of requirement had been proposed on any type of market rate housing that would constitute a precedent. The only project that had a rental requirement was the Southwood Project on Middlefield Road, but it was proposed by the applicant as part of his/her funding package. Council Member Fazzino asked for Mr. Schreiber's response to that requirement. Mr. Schreiber said the public benefits proposed by the applicant were sufficient. Staff believed the additional housing units were an additional, acceptable, and appropriate public benefit. Staff felt the project was appropriate in that location given the size of the adjacent structures and the way the building would fit into that area. Staff also felt the project had gone beyond the envelope of the RM-40 zone which was very acceptable, and it was a good package without the rental requirement. Council Member Fazzino asked whether the Planning Commission's 01/23/95 74-427 recommendation regarding the issue was appropriate. Mr. Schreiber said staff disagreed with the Planning Commission's recommendation. Council Member Fazzino clarified staff would not recommend a rental requirement for projects of that nature and did not view it as a good precedent. Mr. Schreiber said that was correct. Council Member Huber asked whether the staff disagreed with the concept of the rental requirement or the length of time involved. Mr. Schreiber said Palo Alto had a need for a wide variety of housing types. Staff felt the rental requirement for a particular length of time was not appropriate. The project would be a rental at the beginning, and there was the underlying condominium map. The community would also benefit if the housing shifted over to owner-occupied status. Council Member Rosenbaum understood the height restrictions on RM-40 was 40 feet and the building was 50 feet, but there was a variety of structures higher than 50 feet. He asked what consti-tuted the height requirement. Ms. Lytle said the height was the line of the parapet around the top of the roof. The application proposed a 50-foot height at the top of the roof. The RM-40 was 10 feet lower than that figure, and there was a floor above the RM-40 requirement. Sculptures, roof screens, and penthouses were permitted to extend another 15 feet above the maximum height in the district. When the dome was included in the spire which the ARB encouraged, it exceeded the 15-foot allowances which was why a design enhancement exception was processed by the ARB. The ARB approved the dome as a preferred design to the legally allowed equipment screen. The model submitted that evening did not show the dome that required the design enhancement exception above the 50-foot height on the plan. The applicant had submitted an allowable screening height requirement that did not require the extra exception. The additional floor was compatible with the 50-foot height on surrounding structures. Council Member Rosenbaum clarified screen mechanical structures with a height of 15 feet above the limit in the zoning were allowed. Ms. Lytle said that was correct. Council Member Rosenbaum referred to page 2 of the staff report (CMR:118:95) under Policy Implications, and he asked for an explanation of the statement "The project does not represent any change to existing City policies." He said the RM-40 was the most intense zone allowed, and the Council had decided recently that the FAR should not exceed one. 01/23/95 74-428 Ms. Lytle said the Comprehensive Plan had a policy that encouraged flexibility in the construction of housing beyond the zoning. Council Member Rosenbaum clarified the City had 3 multiple-family zones that allowed 15, 30, and 40 densities, and he asked whether the previous policymakers wanted to allow densities greater than 40 when the subject was recently reviewed. Ms. Lytle said when the multiple-family regulations were adopted, the policies did not accommodate mixed-use projects which was the original intent by the City. The Comprehensive Plan supported mixed-use projects probably to that extent in an appropriate location. The City did not have a zoning tool other than the Comprehensive Plan policy. Council Member Rosenbaum asked why the proposed project was considered a mixed use. Ms. Lytle said a provision had been allowed for a cafe and/or magazine and newspaper stand on the ground floor of the project. Council Member Rosenbaum clarified the applicant had recently requested that provision and it was not a mixed-use project when the project received staff approval. Ms. Lytle said that was correct. The issue was submitted at the Planning Commission review. Council Member Rosenbaum referred to page 28 of the minutes of the Planning Commission meeting dated November 30, 1994, and the statement by Ms. Lytle, "I think the public benefit finding in the ordinance itself gives the reasons this is clearly a project within walking distance of a train station and it has a great deal of suitability for handling higher density housing. We have no mechanism for accomplishing that type of housing in Palo Alto within a half-mile radius of a train station other than the PC process." He had never heard a half-mile radius mentioned, and he asked whether there was a City policy that higher density should be encouraged within a half-mile of a train station. Ms. Lytle said there were City policies about housing near train stations, and Santa Clara County had a General Plan policy that listed the half-mile radius as a desirable measure. The Land Use Element stated that "multiple-family densities ranged from 10 to 45 units per acre, but the higher densities may be allowed where measurable community benefit is to be derived where services and facilities are available to serve the increased density and where the affected increased density will be compatible with the Compre-hensive Plan." Council Member Rosenbaum clarified the half-mile radius was not a City policy. Ms. Lytle said it was a standard planning term being used county-wide as opposed to a City policy that had been adopted. Council Member Rosenbaum understood that the Planning Commission 01/23/95 74-429 disagreed with Public Benefit Finding No. 1, the added units being considered as a public benefit, presumably on the grounds that the project was at the maximum, and if the developer wanted to exceed the maximum, then some benefit must be provided rather than thinking of it as a minimum and the additional units became the benefit. He asked for staff's response on the belief that asking for more than the zoning allowed should be regarded as a public benefit. Mr. Schreiber said the City's long-standing planning policies had placed a high priority on obtaining additional housing in the community. A project that went beyond the zoning was not neces-sarily a public benefit, but the additional housing units, given past City policy and the Housing Element's encouragement for additional housing development, would constitute a part of the public benefit for that type of project. Vice Mayor Wheeler clarified the public benefit conditions before the Council had been recommended by the Planning Commission. Mr. Schreiber said that was correct. Vice Mayor Wheeler asked the appropriate process to pursue that evening if the Council had concerns and wanted to modify the conditions, e.g., if the Council were disturbed by the requirement for the rental agreement and/or if the Council wanted to ask for additional public benefit considerations such as a fifth BMR unit. City Attorney Ariel Calonne said during or after the public hearing, the Council could inquire of the applicant about the consequence of those conditions and the applicant's willingness to agree to those conditions. Vice Mayor Wheeler referred to page 7 of the Planning Commission Staff Report dated May 20, 1994, which indicated staff had questioned the adequacy of the proposed public benefits by the applicant and had urged the Planning Commission to strengthen the public benefits and require more than the minimum of three units of BMR housing. She asked what had transpired in the meantime that had changed staff's opinion on that recommendation. Ms. Lytle said there were no proposed street improvements, i.e., the cross-section, in the first portion of the project which was indicated in Public Benefit No. 3 on page 7 of the report. She corrected the sentence on page 7 to read "Staff recommends that 'if' additional public benefits...the following be considered." Staff suggested other options that the Planning Commission might discuss with the applicant in the preliminary hearing. She recalled that the Planning Commission asked for additional public benefits but not a specific direction, and the applicant returned with the street improvements as his/her selection. Staff found that selection to be adequate. Mr. Calonne said the Palo Alto Municipal Code stated the Council could take action to approve the PC based on the recommendations of the Planning Commission or could modify those recommendations. 01/23/95 74-430 The proposed Ordinance before the Council did not reflect the Planning Commission's actions. Council Member Andersen asked whether the proceeding was quasi-judicial and whether the applicant had been notified of the rules of order for a quasi-judicial public hearing. Mr. Calonne said portions of the proceeding were quasi-judicial, and he was uncertain whether the applicant had been notified. Council Member Andersen said RM-40 had 24 units and the proposed application had 30 units, and he asked whether the BMR requirement for both 24 and 30 units would be 2 or 3 units. Mr. Schreiber said the requirement was 2.4 units. The units usually ended up with 2 units at a lower price or 2 units with a small cash payment. Council Member Andersen asked how many units were on each floor. Michael Lyzwa, Architect, 193 Waverley Street, said that each floor, including the top floor and excluding the bottom floor, had eight units. Council Member Andersen had struggled with the data that suggested the doubling of the square footage for the six units would not make a cost-effective situation for the fourth BMR. Mayor Simitian asked the BMR requirement for a 30-unit project. Mr. Schreiber said 3 units were required for a 30-unit project. Mayor Simitian asked the basis for the 2.4 figure. Mr. Schreiber said it was based upon the 24 units allowed for the zoning. Mayor Simitian clarified the standard BMR requirement for a 30-unit project was 3 units. If the requirement were 2.4 units, it was not rounded up to 3 units but was 2 units plus a cash equiva-lent. Mr. Schreiber said that was correct. It was a negotiation process. When it was less than a half, it was rounded down with some type of adjustment to the price. Council Member Kniss asked the ratio between rental and property ownership in the City. Mr. Schreiber said rental was in the mid-40 percent. Council Member Kniss asked how much rental housing had been added in the City in the past five years. Mr. Schreiber said the only rental housing that had been approved was the Lytton IV low- to moderate-income project in Downtown 01/23/95 74-431 North and The Hamilton project. No market rate rentals had been approved in five years. Council Member Kniss asked why the City had not provided rental housing. Mr. Schreiber said there were a few units at the Byxbee House and four units at the Peninsula Times Tribune site. The City was not providing new rental housing in Palo Alto. It was a combination of relatively high land and construction costs and the annual yield not equaling enough to pay for the cost of the project. He said it needed to be recognized that the proposed project was very unusual. The applicant had owned the land for a long time, and he had indicated that the only way the project could work was if he did not consider the land cost as part of the project. The applicant's development investment strategy was a long-term strategy. From a time perspective, a rental project could work from a cash standpoint. A developer would not be able to obtain financing to buy a similar parcel and build a rental project. Mayor Simitian asked about the architectural elements that had changed, i.e., the dome, spire. He understood that if the Council approved the proposed project that evening, it would have to be approved conditioned upon review by the ARB. Ms. Lytle said the condition that the project return to the ARB for final project details was already in the proposed conditions before the Council. The Council might want to defer an amendment to the plan to the ARB for review. It was difficult to make a decision when there was a last minute request that changed the original plan. Mayor Simitian asked whether staff considered the elimination of the dome and/or spire as architectural details. The elements seemed major to him. Ms. Lytle suggested the ARB representative respond since the ARB encouraged the dome originally. Mr. Ross said the changes made by the applicant were responsive to requests made by the ARB. He did not see any impediment to an approval with a condition for review and final approval by the ARB. There were other items that needed to return to the ARB for final approval, and the changes could be reviewed at the same time. Mayor Simitian said a dome and a spire had been considered and approved in the staff report (CMR:118:95). Ms. Lytle said that was correct. Mayor Simitian clarified the model presented that evening no longer had a dome and a spire. Ms. Lytle said that was correct. 01/23/95 74-432 Mayor Simitian clarified the Council would have to make a decision about whether it preferred the recommendation for a dome and a spire, whether it did not, or whether it wanted the ARB to approve the final details regarding that issue. Mr. Schreiber said that was correct. Mayor Simitian asked whether there were any other architectural elements that required a Council decision. Mr. Schubert said the applicant had proposed a roof deck which would replace the dome and the spire. Mayor Simitian said the public hearing was quasi-judicial and Council Members should indicate whether he/she had had any contact with any members of the public or the applicant in connection with the project. He had met with the applicant, Harold Hohbach, and the architect, Michael Lyzwa, to discuss the project. He also made a brief site visit. Council Member Fazzino had met with Mr. Lyzwa and Mr. Hohbach regarding the project. He also acknowledged Mr. Lyzwa at 7:30 a.m. mass at St. Thomas Aquinas Church. Council Member Kniss had visited the site the previous day. She also met briefly with the applicant before the Council meeting that evening. Vice Mayor Wheeler had visited the site the previous day. She had also met previously with the architect and the applicant on the project. Council Member Huber had met with the applicant and architect, and he had a discussion approximately one month before with Lynn Chiapella regarding the trees that surrounded the project. Council Member Rosenbaum had met with the applicant and architect. Council Member Andersen had refused to meet with the applicant and architect. Mayor Simitian declared the Public Hearing open. Mr. Lyzwa said the building was very contemporary with strong historical references and residential character and scale. High quality detailing would be used in the project. It was an urban site with a strong urban context, and the proposed improvements along Park Boulevard would further establish the City's street-scape quality design standard. A plaza was being proposed as a public benefit, along with a water feature between the Court House Plaza and the new condominium project. A cafe with outdoor seating was also proposed. The applicant had voluntarily offered angel figures as part of the public art provision. He described the proposed landscaping and the floor surfaces and said the strong external building color material palette reflected a California character and heritage. Attention had been given to 01/23/95 74-433 architectural detailing, and the building would be a strong super-structure for the residents who occupied the facility. The project began in January 1994, and comments and evaluation of the project from the staff, neighbors, and interested parties had been incorporated. The ARB unanimously approved the project in October 1994. The Planning Commission approved the project in November 1994. The project was in line with the Palo Alto Comprehensive Plan and would make a strong contribution to the neighborhood. It was an ideal high-density housing site within close proximity to public transit. The developer, Mr. Hohbach, had a long history of providing high quality residential rental units, and there was a strong market demand for that type of product in that location. The FAR was in line with the 2:1 FAR of the surrounding residential projects in the vicinity. Under the current PC application, Mr. Hohbach had generously and voluntarily offered public art and had also offered to improve public pedestrian ways along Park Boulevard. The California Avenue area would benefit from the patrons of the project who would use the businesses. The site was an empty lot and would not displace any special need in the area. The project was also in line with the community charettes that had been held in the vicinity. Harold Hohbach, 29 Lowery Drive, Atherton, said the site was excellent for that type of housing. He purchased the land 25 years before and wanted to see the parcel developed. He felt the solution would fulfill his desires and would benefit the City, Park Boulevard, and the California Avenue Business District. The City had proposed that the street be narrowed so that large trees could be planted. He recommended sycamore trees be planted similar to the ones on the Court House Plaza property. The project would help begin the City's project for Park Boulevard and would build the first block on both sides. He was the sole owner of the project and asked the Council not to require an additional BMR which would make it more difficult to finance the project. Rental housing was difficult to build, but he had the land and believed he could build the project. He asked the Council to approve the project. Public Art Commission Chairperson Sandy Eakins, 3493 Greer Road, said the Public Art Commission (PAC) had not reviewed the project. She had recently previewed the project with Mr. Lyzwa, and it was scheduled for PAC review in two days. PAC would submit a report to the Council after the review. She said it was the second time in four and one-half years that a PC project had had a public art component, and it was the first time that a private developer had volunteered public art in that part of the City. She believed the use of public art as part of the PC process was useful. She emphasized other public art projects without requirements that were beneficial to the City. She applauded the applicant and the architect for enriching the whole neighborhood and enhancing a multi-story building with art objects. She also liked the idea of the fountain with public access. She urged the Council to continue to make choices about visual enhancements for residents, employees, and visitors. Lynn Chiapella, 631 Colorado Avenue, said she had a hard time with 01/23/95 74-434 the variance findings since only a small strip could be built on because of the artificial 141-foot variance setback. She thought the PC code should be followed which stated "that on any portion of the site in PC district which is opposite from a site of RE, R-1, R-2, RM, and applicable PC district and is separated by a street, alley, creek, drainage, must have at least a minimum 10-foot yard and the minimum yard shall be planted and maintained as landscape screen excluding areas required for access to the site." She thought the building was lovely but that landscaping elements would not do well. The original plans submitted by the applicant was better for the street trees because it actually provided enough soil volume for survival. The trees would now be encased in little small planting areas, but it was better to cluster them so that there was enough soil for support. There might not be any trees in five to seven years since that had happened on other projects. There would be at least 95 to 98 percent hardscape which would be ripe for graffiti. The large trees that would be taken out had not been dealt with, and in very few cases in Palo Alto had any of the trees planted by the developer grown back to replace the large trees taken out. On two sides of the building, enormous amounts of landscaping would be taken out and replaced with juniper shrubs. Planting large trees on Park Boulevard was a real public benefit. She hoped the Council would consider that many of the street trees isolated in small planters had died in surrounding areas. She hoped the trees that were saved would be protected. She supported the art objects as a public benefit, but the public benefit of the fountain and the area between benefitted the Court House Plaza rather than the general public. She wanted to see more benefit on Park Boulevard. There was presently a blank sound wall with no vines which went around the building. Council Member Kniss asked whether the arborist was consulted regarding the project. Ms. Lytle said the arborist was consulted on the cross-section for the street and the bulb-out planters. Staff spent a good deal of time with the Public Works Department, Mr. Hohbach, and the City arborist on the issue of adequate soil volume. Senior Planner Virginia Warheit provided the latest research on the depth and amount of soil volume that was really necessary to support trees in a hostile type of situation. Staff was confident that it would be successful. The problem was the infrastructure interfering with the site for the trees. There were sites on both sides that would not have infrastructure interference. Some of the trees might be grouped together, balancing the need to retain parking spaces between the bulb-outs. It was not easy to insert street trees into a tree cross-section. Council Member Kniss confirmed it was a different type of method for planting, maintaining, and encouraging survival. Ms. Lytle said the key difference would be the extension of private irrigation into the areas. Other jurisdictions had been successful with the concept, but the City had not changed a cross-section of a street before. Staff was confident that it could be done, and it would also be attempted at the Times Tribune site. 01/23/95 74-435 Vice Mayor Wheeler said Ms. Chiapella indicated that she preferred the original plan which grouped the trees closer to the building. Ms. Chiapella preferred the design on the same side of the building that had a continuous landscaping strip without the parking since there was plenty of parking for the buildings. The area would provide more soil and would be easier to maintain. It was difficult to maintain the small isolated parking lot situa-tions. City staff felt the design was not balanced, but she felt the overall design would survive better and the maintenance was cheaper. Vice Mayor Wheeler said the design was more traditional and similar to North Palo Alto's parking strips. Ms. Chiapella said yes. It was more successful throughout Palo Alto. Vice Mayor Wheeler asked the rationale for staff's recommendation. Ms. Lytle said all the parking would be lost on that side of the street when the space was converted into a long strip as opposed to planting trees in bulb-outs that allowed space for parking. Some of the parking spaces would be lost on that side of the street, but it was a compromise between auto parking and the desire to have street trees. Vice Mayor Wheeler did not understand why the parking would be lost with the traditional curb, gutter, and parking strip. Ms. Lytle said the installation of the street trees went into the public right-of-way on Park Boulevard. There were many activities in those lanes. The proposed design could afford to be narrow by the dimension of the bulb-out or median, but either the bike lane had to be lost, which was not acceptable because it was a primary commute bicycle corridor, or the parking if an entire median were completed. There could not be auto and bike lanes, parked cars, and a street trees strip. The bulb-out design allowed for parking between the tree bulb-outs which staff felt was an appropriate compromise. It was also approved by the Planning Commission and the ARB. Council Member Kniss asked if the demand for parking was high in that area. Ms. Lytle said the parking on that block was not as high as it would be in 10 years. Staff had tried to protect future situa-tions as well. Council Member Kniss wanted to see some figures on the area. She had not seen a great deal of parking in the area. Ms. Lytle said there was more parking on the opposite side of the street than on the side of the project. More activity and demand was likely to occur in the area in the future, e.g., Hewlett 01/23/95 74-436 Packard site, potential redevelopment, the Park Apartments. Herb Borock, 2731 Byron Street, said pedestrians would not be able to see the artwork which was the strongest public benefit in the project. The Subdivision Ordinance required all subdivisions to put in street trees, sidewalk improvements, etc., in the public right-of-way. It was strange to call it a public benefit. He asked whether the Council wanted to continue the current proce-dures and policies standards that all applicants must meet or whether it wanted to review each housing project on a case-by-case basis without any site development regulations. The project was a special case because it was across the street from the Palo Alto Central project which had a special exemption from the changes in the site development regulations and the multi-family zoning dis-tricts that were established in 1988. The proposed project was in the middle of the last phase of the Palo Alto Central project, so no one should object because it was another large building in the middle of other large buildings. He believed there was a problem in terms of applying the City's zoning regulations in a consistent fashion. The draft Comprehensive Plan proposed that there be no site development regulations in the City's multiple-family zones and that each applicant's project should be considered by the Council on a case-by-case basis. He recalled the history of the Southwood Apartments and that the City did a favor for the developer and the developer received certain tax benefits for a rental project. The ARB actually required the project to be rentals; and in exchange for that, the ARB allowed the project applicant to build inferior quality units. It was not a precedent for the proposed project. The situation was in the neighborhood that the previous Council had decided that the RM-5 zone was too large and that RM-40 was the correct zone for maximum. The Council in 1988 recognized the importance that it was how much square footage the developer could build that determined the financial considerations of the project. The units could be any size, and the FAR had to be the key limiting factor. Mr. Lyzwa said the tenants at the Mayfield raved about the landscaping, and landscaping for the project would be as good as the Mayfield's and would do exceptionally well at that location. Council Member Andersen asked whether Mr. Hohbach was comfortable with a 10-year rental. Mr. Hohbach said no. He was shocked by the interest rates in 1994 and would not be able to carry the project if the same thing happened in 1995. Rents were very stable and could not be increased to meet the fluctuations in interest rates. He would keep the project as a rental as long as he could afford to carry it. Council Member Andersen clarified the project would be kept as a rental unit as long as Mr. Hohbach managed the property. Mr. Hohbach said that was correct. Council Member Fazzino asked why the plans had been changed at the 01/23/95 74-437 last minute and what the impact of the full dome and the spire would be. Mr. Lyzwa said the initial design concept for the dome and the spire was to take the edge off a square building. The intention was to screen any mechanical equipment or flues that might be on the roof. He did not want the screen to be a flat element but a round dome; but the Uniform Building Code stated that if an enclosed dome were added, it added another story to the building. He had to create an open concept for the dome. The Planning Commission commented that the dome and the spire were above the 50-foot height. The ARB commented on the half domes that were initially proposed, and he decided to make those into a stronger full dome element as delineated in the model and eliminate the dome. He responded to another ARB comment for additional public space with a rooftop plaza. Council Member Fazzino asked about the concerns that the public would not be able to see the art sculptures from the street. Mr. Lyzwa said there was a magnificent elevated sculpture in Paris, France, and people saw the form and the energy involved from a long distance away. He believed the same type of effect could be achieved with the art sculptures. Vice Mayor Wheeler asked how Mr. Hohbach would comply with the condition to supply BMR units and whether the units would be at the project or whether he would contribute money towards locating them elsewhere. Mr. Hohbach said the project was not beneficial for BMRs. He would probably make an in-lieu payment to the City. He already had an agreement for three BMRs with City, if the Council approved the project, that he could have in-lieu rent or an option to buy out of the project by contributing 5 percent of the appraised value to the City at the appropriate time. Mayor Simitian declared the Public Hearing closed. RECESS: 9:12 P.M. - 9:25 P.M. MOTION: Council Member Kniss moved, seconded by Fazzino, to: 1. Approve the negative declaration, finding that the proposal will not result in any significant environmental impacts; 2. Adopt the ordinance rezoning the property from RM-40 (High Density Multiple Family Residence) District to PC (Planned Community) District in order to construct 30 multi-family residential units; 3. Approve a 141-foot setback variance along Park Boulevard, with the findings listed below; and 4. Approve a tentative subdivision map, with the findings and conditions listed below: 01/23/95 74-438 Variance Findings - 2650 Park Boulevard, 204, 228 and 230 Sheridan Avenue The following findings of the setback variance have been prepared by staff in support of the proposal: 1. There are exceptional or extraordinary circumstances or conditions applicable to the property involved that do not apply generally to property in the same district in that, because of the extraordinarily large setback of the adjacent County office building, the required setback along Park Boulevard is 150 feet and the depth of the project site is only 182 feet. 2. The granting of the application is necessary for the preser-vation and enjoyment of a substantial property right of the applicant, and to prevent unreasonable property loss or unnecessary hardship in that to base the proposed setback on the average setback of the adjacent structure (i.e., the County office building), development would be precluded on the majority of the subject site. 3. The granting of the application will not be detrimental or injurious to property or improvements in the vicinity in that the proposed setback is compatible with surrounding develop-ments in this urban context. With the exception of the adjacent County building, setbacks along Park Boulevard are similar to the proposed setback. The proposed setback allows for a large landscaped courtyard between the proposed building and the adjacent office building. Tentative Subdivision Map Findings - 2650 Park Boulevard, 204, 228 and 230 Sheridan Avenue The following findings of the tentative subdivision map have been prepared by staff in support of the proposal: 1. The proposed tentative subdivision map is consistent with the following Comprehensive Plan goals and policies: a. Land Use Element - The Land Use Element states that multi-family densities range from 10 to 45 units per acre (the proposed project is 50 units/acre). It also states that high-er densities may be allowed where measurable community benefit is to be derived, where services and facilities are available to serve the increased density, and where the effect of the increased density will be com-patible with the Comprehensive Plan. b. Housing Element, Policy 7 - Encourage and foster the development of new and existing housing units affordable to low-, moderate- and middle-income households, especially 01/23/95 74-439 those households with children. c. Housing Element, Policy 14 - Support the mixing of residential uses in commercial and industrial areas. d. Employment Element, Policy 2 - Encourage the construction of more housing primarily on or near industrial and commercial sites. e. Urban Design, Policy 3 - Promote visual aes-thetics through tree planting, landscaped areas and removal of visually disruptive elements on major City streets. 2. The design and improvements of the proposed subdivision are consistent with the Comprehensive Plan, in that it provides additional housing in close proximity to public transporta-tion (California Avenue Caltrain station, SamTrans bus stops on Park Boulevard and El Camino Real) and adjacent to trans-portation corridors (El Camino Real and Alma Street). The site is less than three blocks from retail shopping. The project also provides housing near office buildings, which makes it possible to work and live in one area without daily use of an automobile. 3. The site is physically suitable for the type and density of development proposed, in that the site is designated for multi-family residential use in the Comprehensive Plan. The site is suited for a high density housing project since it is in close proximity to several high density housing projects and is within walking distance to many services, shopping and public transportation within the Ventura neighborhood. El Camino Real, the California Avenue business district and the Caltrain station are all located within approximately three blocks of the site. A bus stop is located on Park Boulevard, at the southeast corner of the site. Existing bike lanes are located on both sides of Park Boulevard. 4. The design of the subdivision, the division of the site into 17 single-family lots, will not cause substantial environmen-tal damage or substantially and avoidably injure fish or wildlife or their habitat, in that the project site is a developed site within a developed urban area. 5. The design of the subdivision and the proposed improvements will not result in serious public health problems. The City received a letter from the Regional Water Quality Control Board (see the letter dated August 26, 1994 from the RWQCB which is attached to the EIA), stating that they have con-cluded that there are no water quality reasons that the proposed Sheridan Plaza project cannot proceed. The letter indicates that provided the recommended mitigation measures are implemented, the proposed project, both during and after construction, will have minimal impact on the movement or cleanup of the California-Olive-Emerson plume because it does 01/23/95 74-440 not appear as if it will obstruct or redirect the groundwa-ter. 6. The proposed design of the subdivision and improvements will not conflict with easements acquired by the public-at-large for access through or of property within the proposed subdi-vision, in that the site is unencumbered by any public access easements. Tentative Subdivision Map Conditions - 2650 Park Boulevard, 204, 228 and 230 Sheridan Avenue The following conditions of approval for the tentative subdivision map have been prepared by staff in support of the proposal: General 1. A final map shall be filed with the City within two years of approval of the tentative map and prior to issuance of a building permit. Prior to Issuance of Demolition Permit 2. The applicant shall be responsible for identification and location of all utilities, both public and private, within the work area. Prior to any excavation work, the applicant shall contact Underground Service Alert, at least 48 hours prior to beginning work. 3. The applicant shall submit a request to disconnect all utility services and/or meters including a signed affidavit of vacancy. The form is available at the Building Division. Utilities will be disconnected or removed within 10 working days after receipt of request. The demolition permit may be issued after all utility services and/or meters have been disconnected and removed. 4. A destruction permit shall be obtained from the Santa Clara Valley Water District to destroy the piezometer wells that are located on the site. Prior to Issuance of a Building Permit 5. All utility meters, transformers, backflow preventers, and any other required utilities shall be shown on the landscape and irrigation plans and shall show that no conflict will occur between the utilities and landscape materials and shall be screened in a manner which respects the building and setback requirements. 6. The applicant shall submit a completed WATER-GAS-WASTEWATER SERVICE CONNECTION APPLICATION - LOAD SHEET for City of Palo Alto Utilities. The applicant shall provide all information requested for utility service demands (water in G.P.M., gas in B.T.U.P.H., and sewer in G.P.D.). 01/23/95 74-441 7. The applicant shall submit subdivision improvement plans for utility construction and public improvements including installation of street trees within the public right-of-way on both sides of Park Boulevard between Sheridan Avenue and Grant Avenue. The plans shall show the size and location of all underground utilities within the development and the public right-of-way including meters, backflow preventers, fire service requirements, sewer cleanouts, storm drainage improvements and any other required utilities. These utili-ties shall be designed and coordinated to avoid interference with the proposed private and public landscaping and building architecture. 8. The applicant shall show on the site plan the existence of any well or auxiliary water supply. 9. The applicant shall record a public utility easement to provide access to the existing transformer on the adjacent property at 260 Sheridan Avenue, which is owned by the applicant. The location and dimensions of said easement shall be subject to review and approval of the Utilities Division. 10. The location of electric panel switchboard shall be shown on the site plan for review and approval by the Utilities Department and Architectural Review Board. 11. All electrical substructures required from the service point to the switchgear shall be installed by the customer to City standards. 12. A construction logistics plan shall be submitted for review and approval by the Public Works Engineering Division. All truck routes shall conform with the City of Palo Alto's Trucks and Truck Route Ordinance, Chapter 10.48, and the route map which outlines truck routes available throughout the City of Palo Alto. At a minimum the plan shall address the following: - parking for construction workers; - identification of proposed construction access points and truck routes and staging areas; - site(s) for storage of construction equipment and supplies; - shoring for underground garage; - construction of temporary walkways, barricades, and fences; - provision of pedestrian and vehicular traffic adjacent to the construction site; - construction of temporary barricades and fences; - restoration of City streets impacted by construction activities; - replacement of City sidewalks in adjacent to the site in accordance with City standards; and - public relations plan directed at resolving the con-cerns of adjacent residents and businesses. 01/23/95 74-442 13. The applicant shall require its contractor to incorporate best management practices (BMP's) for stormwater pollution prevention in all construction operations, in conformance with the Santa Clara Valley Nonpoint Source Pollution Control Program. 14. A contingency plan shall be prepared and submitted to the Regional Water Quality Control Board (RWQCB) to account for contaminants in the soil and to control the risk involved with exposure to workers and the public during construction. 15. The applicant shall obtain the proper permits from the Palo Alto Building Inspection Division and Palo Alto Fire Depart-ment for construction of facilities for treatment of any contaminated groundwater from construction and operation of the project. 16. Final construction plans shall be submitted for review and approval by the RWQCB. 17. The proposed development will result in a change in the impervious area of the property. The applicant shall provide calculations showing the adjusted impervious area with the building permit application. A storm drainage fee adjustment will take place in the month following the final approval of the construction by the Building Inspection Division. 18. The Public Works Inspector shall sign off the building permit prior to the issuance of this permit. All off-site improve-ments shall be finished prior to this sign-off. 19. The approved relocation of service, meters, hydrants, or other facilities shall be performed at the cost of the applicant. 20. A separate water meter shall be installed to irrigate the approved landscaping. The meter shall be designated as an irrigation account, and no other water service will be billed on the account. 21. A new water service line installation for domestic usage is required to furnish the customer's demand specified in the load sheet presented with this project. For service connec-tions of 4-inch through 8-inch sizes, the contractor shall provide and install a concrete vault with meter reading lid covers for water meter and other required control equipment in accordance with the Utilities Standard Detail. 22. A new water service line installation for irrigation usage is required to furnish the project's demand specified in the load sheet presented with the project. 23. A new water service line installation for fire system usage is required to furnish the project's demand specified in the load sheet presented with the project. 01/23/95 74-443 24. An approved Reduce Pressure Principal Assembly (Backflow Preventor Device) shall be installed for all existing and new water connections from Palo Alto Utilities to comply with the requirements of the California Administrative Code, Title 17, Sections 7583 through 7605 inclusive. The Double Check Detector Check Valve shall be installed on the site adjacent to the property line. Inspection by the Utilities Cross Connection Inspector is required for the supply pipe between the city connection and the assembly. 25. An approved Single Check Valve shall be installed for the existing or new water connections for the fire system to comply the requirements of the California Administrative Code, Title 17, Sections 7583 through 7605 inclusive. The Double Check Detector Check Valve shall be installed on the site adjacent to the property line. Inspection by the Utilities Cross Connection Inspector is required for the supply pipe between the city connection and the assembly. 26. A new gas service line installation is required to furnish the project's demand specified in the load sheet presented with the project. 27. A new sewer lateral installation is required. 28. The applicant shall obtain approval of the Public Art Com-mission for the proposed rooftop art sculptures. Prior to Commencement of Construction 29. Tree protection measures, as required by Condition #12 in the Planned Community (PC) District Ordinance, shall be accom-plished. 30. The applicant shall obtain a grading permit from the Building Inspection Division. 31. The applicant shall obtain an encroachment permit or tempo-rary lease from the Public Works Engineering Division for any structure, awning, or other features constructed in the public right-of-way. 32. The applicant shall obtain an encroachment permit or tempo-rary lease from the public Works Engineering Division for the proposed construction, including pedestrian protection, which will impact the use of the sidewalks and streets. 33. The applicant shall obtain a Permit for Construction in a Public Street from the Public Works Engineering Division for construction proposed in the City right-of-way. 34. The contractor shall contact the CPA Public Works Inspector prior to any work performed in the public right-of-way. During Construction 01/23/95 74-444 35. Demolished materials shall be recycled, as feasible. 36. To reduce dust levels during construction, exposed earth surfaces shall be watered frequently, with reclaimed water, during the late morning and at the end of the day, with fre-quency of watering increasing on windy days. This require-ment may be modified when approved in writing by the Public Works Department. Reclaimed water, in accordance with Public Works Department policy, shall be used for this purpose. Dust nuisances originating from the construction operations shall be controlled at the contractor's expense. The City of Palo Alto Public Works Department shall monitor the contractor's dust control operations. 37. Spillage resulting from hauling operations along or across any public or private property shall be removed immediately at the expense of the developer. If required by the Public Works Department, streets shall be cleaned on a daily or weekly basis. 38. Overfilling of trucks by the contractor shall be prohibited. 39. Trucks shall be covered during the transportation of exca-vated and demolished materials from the site. 40. The contractor shall comply with the requirements of the Palo Alto Noise Ordinance, Chapter 9.10 PAMC. 41. Mufflers and housings shall be provided on construction vehicles and equipment. 42. The aquitard separating the A1U and the A1 water bearing zones shall not be disturbed without prior written approval by the RWQCB. 43. On-street signage directing pedestrians to the proper route around the temporarily closed sidewalks shall be provided. 44. The applicant shall implement a public outreach program to keep area residents updated on the construction schedule and the use of the adjacent streets for construction access. 45. The developer shall implement the following measures: a. standard construction area signs, subject to review and approval of the City of Palo Alto Transportation Divi-sion, shall be posted along Park Boulevard and Sheridan Avenue, to warn the public of the ongoing construction traffic; b. the contractor worker parking shall conform with plans approved by the Transportation Division and Public Works Department; c. storage of equipment or materials shall conform with plans approved by the Transportation Department and 01/23/95 74-445 Public Works Department; and d. emergency vehicle access shall be maintained at all times. 46. No storage of construction materials is permitted in the street or on the sidewalk without prior approval of the Public Works Engineering Division. 47. All construction within the City right-of-way, easements or other property under City jurisdiction shall conform to Standard Specifications of the Public Works Department and Utility Department. 48. All new underground electrical services shall be inspected and approved by both the Building Inspection Division and the Electrical Underground Inspector before energizing. 49. All new underground service conduits and substructures shall be inspected before backfilling. Prior to Occupancy 50. All sidewalks bordering the project shall be removed and replaced in compliance with Public Works approved standards. 51. A curb ramp for the disabled shall be installed at the corner of Park Boulevard and Sheridan Avenue. 52. The applicant shall install junction boxes as required by the Utilities Engineering Division for all cable runs exceeding 500 feet. 53. The following shall be installed to the satisfaction of the Fire Department (each item below requires permits and inspec-tions from the Fire Department): a. automatic sprinkler system; b. standpipe system (Class III); c. hose cabinets (Class II) in the underground parking garage; d. floor control valves; e. elevator gurney access (24 inches by 82 inches); f. emergency lighting; g. Knox box on the garage gate; and h. manual fire alarm system. 54. Central station supervision shall be provided for the water flow (by floor), valve tamper and manual fire alarm zoning, 01/23/95 74-446 to the satisfaction of the Fire Department (a permit and inspection from the Fire Department is required). Prior to Approval of the Final Map 55. Improvement plans shall be submitted for approval by the Public Works Department, Utilities Division, Planning Divi-sion and Transportation Division. The improvements within the public right-of-way shall include new street trees, irrigation, curbs, gutters, and sidewalks on both sides of Park Boulevard between Sheridan Avenue and Grant Avenue. Prior to submitting improvement plans, the applicant shall arrange a meeting with the Public Works, Engineering, Utili-ties, Planning, and Transportation Divisions. 56. A Subdivision Improvement Agreement, in a form satisfactory to the City Attorney, shall be executed between the City and the applicant. 57. A maintenance agreement, in a form satisfactory to the City Attorney, shall be executed between the City and the appli-cant for the proposed street improvements on both sides of Park Boulevard, including landscaping, irrigation and street sweeping. Public Benefit Findings 1. The project includes six additional housing units above the maximum number of units allowed under the current zoning (RM-40). The only mechanism available to achieve the increased density is by rezoning the site to a PC (Planned Community) District. The additional housing units are a public benefit because one objective of the Housing Element is to increase the supply of housing. Program 15 of the Housing Element is to "provide zoning flexibility to encourage the development of smaller units affordable to low- and moderate-income persons." The Land Use Element states that multiple-family densities range from 10 to 45 units per acre (the proposed project is 50 units/acre). It also states that higher densities may be allowed where measurable community benefit is to be derived, where services and facilities are available to serve the increased density, and where the effect of the increased density will be compatible with the Comprehensive Plan. The project provides additional housing within walking distance to shopping, services, public transportation (the California Avenue Caltrain internodal transit station, SamTrans bus stops on Park Boulevard and El Camino Real) and is adjacent to transportation corridors (El Camino Real and Alma Street). Existing bike lanes area located on both sides of Park Boulevard. The project also provides housing near office buildings, which makes it possible to work and live in one area without daily use of an automobile. The proposed use and density area are compatible with surrounding development. The site is near the Mayfield, the Palo Alto Central condominiums, and the Promenade condominiums, all high-density housing projects with similar FAR compared to 01/23/95 74-447 the proposed project. 2. The project will contribute less traffic congestion and air pollution because the site is an appropriate location for higher density housing due to its close proximity to trans-portation corridors, shopping, and services (California Avenue and El Camino Real businesses), and employment oppor-tunities. 3. Although Park Boulevard is a major pedestrian link in the area, it is unpleasant due to a lack of landscaping and other amenities such as sidewalk treatments. Program 14 of the Urban Design Element of the Comprehensive Plan is to encour-age the use of street trees and planting in the space between street and sidewalk rather than unrelieved concrete paving. The applicant proposes to provide public improvements, including new street trees, on both sides of Park Boulevard between Sheridan Avenue and Grant Avenue (see conditions of approval). These improvements will be made to the satisfac-tion of all City departments, including the Public Works Engineering, Public Works Maintenance, Transportation, Utilities, and Planning Divisions. The improvements would provide the pedestrian experience along Park Boulevard and provide additional safety for pedestrians. 4. The project includes artwork (four angel figures) on the roof of the building which will be visible to the public. One objective of the Urban Design Element of the Comprehensive Plan is to promote visual environments which are of high aesthetic quality and variety. 5. The project includes a plaza which will be accessible to the public. The plaza will include a water feature, benches, and landscaping. Council Member Kniss suggested that each of the Planning Commission's recommendations be considered separately. Council Member Rosenbaum opposed the motion. He admired Mr. Hohbach's perseverance, but he concurred with Planning Commis-sioner Tony Carrasco's comments that the project was being driven by the leftover steel from an unfinished office building. He had not found justification for exceeding the 40-unit per acre standard which was the City's maximum multi-family zone or for exceeding the FAR limit for the project. The Council had allowed exceptions for senior housing or Single Room Occupancy (SRO) projects, but the projects had small units with little parking impact. The proposed project was a market-rate unit with two cars per unit. He disagreed with the staff's justification, and every multi-family zone in the City was on a transit corridor. If there were justification for the density of the project, then it should apply for other multi-family zones. The Mayfield was built before the City had FAR restrictions on the multi-family zones, and it was one of the examples cited as the reason for needing the FAR limits. He was concerned The Hamilton would set a precedent when the Council voted on that project, and now The Hamilton had become 01/23/95 74-448 the standard in the staff report by which the Council judged the proposed project. The time had come to set some limits. Council Member Fazzino supported the proposal. He said Council Member Kniss's question regarding the number of rental units that had been built in the City over the previous five years spoke to the important reason why the project should be approved. The Council debated, discussed, and found itself very frustrated regarding the issue of additional housing in Palo Alto. Only a few housing projects had come before the Council over the previous years let alone rental housing projects. It was a unique opportu-nity to provide rental housing in the City. He would probably not support that kind of density in most areas of the City; but given the fact that it was on the edge of a commercial district and most importantly that it was very close to transit, he could justify support for additional density. The building was well designed for a structure of that size, and he was excited about the public art. He looked forward to the architect working with the Public Art Commission (PAC) to provide a wonderful sculpture as a public benefit. He hoped other developers would follow that lead, provide that type of public benefit, and work with PAC. He was persuaded that Ms. Chiapella's suggestion with respect to the original recommendation regarding the trees was a stronger alternative than the proposal submitted that evening. He appreciated the concerns of the Planning Commission on the issue of rental and the need to provide for rentals as long as possible, but he was troubled by the piecemeal approach regarding a specific project and the issue of rental commitment. He would have felt better about endorsing the Planning Commission's requests if the City had a policy and a set of criteria in place that required that kind of commitment on the part of a number of developers. He opposed the Planning Commission's recommendation. He believed Mr. Hohbach was committed to preserving the units as rental for quite some time. He supported the recommendation for four BMR units. He appreciated Messrs. Lyzwa's and Hohbach's response regarding the concerns of the ARB with respect to design; but he had been ready to focus on the issue of the full dome and the spire, which he felt was a unique design and deserved serious consideration, only to find that the proposal before the Council that evening was different. He would look to the ARB for its design leadership and accept its suggestions that it would be a sounder way to go which resolved the height concerns. Vice Mayor Wheeler was glad the dome and spire were eliminated. The elements left on the building would make it an intriguing building and would enhance the public art. It would be a building that people would talk about. She was frustrated with the housing projects in the City, and it was appropriate to have a discussion about the application a week before the Council discussed the Housing Element of the Comprehensive Plan. Every housing project that had been proposed had gone through the PC process which indicated the City's rules by which it permitted and encouraged people to produce housing units needed to be revamped. She was troubled about the public benefit issue, especially the BMR unit provisions proposed by the applicant and reworked by the Planning Commission. She said the Council was not supposed to use PCs as 01/23/95 74-449 precedent-setting actions. Each PC was supposed to be a complete-ly unique set of circumstances; but the more PCs the Council saw, the more it became likely that the Council would compare the provisions of one against the other. The two instances where the Council had given proponents of a project a FAR bonus such as that proposed in the project were The Hamilton and Lytton IV. Both projects made a real significant contribution to affordable housing, and The Hamilton went beyond that with a significant contribution to serve a senior population that could not afford the units in The Hamilton. The proposed project was as large as those projects, and she did not see a commensurate contribution to affordable housing in the project. Nothing was provided beyond the minimum that was absolutely required by the City's Ordinance in relationship to the project size. She would propose that the Council require a BMR contribution that superseded the minimum three BMR units required. She would propose that the Council require a BMR contribution equal to five units of BMR housing. She felt discomfort about the requirement for a mandatory rental project requirement and would propose and support the removal of that condition. Council Member Andersen had struggled with the density increase, and six additional units were difficult for him to accept. The public benefit was marginal. He queried whether the motivation for the size of units was to make certain that another BMR unit would not be required. He was persuaded that the cost of quality rental units could not be done with the existing land costs unless the units went beyond the size that the RM-40 provided. He would support the proposal with tremendous reluctance and agreed that the Council needed to consider the whole issue of increased density and minimal density carefully when it discussed the Housing Element. He could not support the project unless the public benefit went beyond the description in the staff report, and he would support the requirement of additional BMRs. He recognized the economic issues regarding maintaining the project as a rental, and he did not anticipate that the project would remain as rental units for a long time. He did not feel it was the Council's role as a government agency to put the kind of condition recommended by the Planning Commission on the project. Council Member Huber had struggled with the question of whether or not the Council would find itself in a situation of defining a public benefit. There were more units which led to the conclu-sions that the Council needed to do something with the public benefits aspect of PCs. He supported the project and believed it was an appropriate location for higher density and housing. The City needed the housing. He did not believe that the City could use as a public benefit the fact that additional housing would be provided. He agreed that Public Benefit Finding No. 1 should be deleted. Landscaping aspects had been used for many years as public benefits in the community for a lot of buildings, and he preferred the suggestion made by the staff. He did not believe a leasing requirement was an appropriate public benefit and should be deleted. It could be considered as a standard in the future. He agreed with Vice Mayor Wheeler that there should be five BMR units. If the application had been RM-40, 2.4 BMR units would 01/23/95 74-450 have been provided. The square footage had been doubled, and five BMR units were reasonable. There was considerable benefit for the developer with the additional 26,000 FAR. He did not believe it was unreasonable to allow a cafe and/or magazine and newspaper stand, and the benefits of the plaza and planting, etc., were fine as well as the public art. The most important thing was to require additional BMR units. Council Member Kniss said the project met the criteria that had been discussed previously to put housing close to transportation, jobs, and shopping. The Council did make special dispensation for special housing; however, the Council had density along some of the corridors to add to the housing stock. Housing had to be added in order to offset the jobs/housing imbalance. The 30-unit building would allow some people to move to a different kind of housing. Mayor Simitian echoed the comments of Council Member Huber that the focus should be on the fact that it was a 100 percent increase in the allowable FAR. The Council had to look at substantial public benefit when it considered that kind of increase. He agreed that the 25-year rule would work a hardship on the appli-cant, but if the provision were eliminated, greater public benefit would be needed in terms of the BMRs. He said the success of the application might depend on the five BMR units, and he asked whether it would be a choice between the denial of the application and providing five BMR units. Mr. Calonne said the Ordinance would have to be revised if the Council requested staff to go in that direction. There was a three-unit agreement in the packet, and the Council's action could include a direction to staff to include an agreement for five units before first reading of the Ordinance. That would give the applicant time to consider the Council's action. AMENDMENT: Council Member Kniss moved, seconded by Wheeler, to delete the Public Benefit Findings No. 1 and 2, which relate to considering housing in a desirable location to be a public benefit. AMENDMENT PASSED 7-0, McCown "not participating," Schneider absent. AMENDMENT: Council Member Kniss moved, seconded by Fazzino, that the Public Benefit Finding No. 3 with respect to the proposed street improvements along Park Boulevard be amended to specify Alternative 4A, a traditional planting strip rather than individ-ual bulb-out planters for each street tree. AMENDMENT PASSED 5-2, Huber, Simitian "no," McCown "not partici-pating," Schneider absent. AMENDMENT: Council Member Kniss moved, seconded by Wheeler, to not add a condition that the units be rented for at least 25 years unless rent controls are adopted by the City. 01/23/95 74-451 AMENDMENT PASSED 7-0, McCown "not participating," Schneider absent. AMENDMENT: Vice Mayor Wheeler moved, seconded by Huber, to add a public benefit to require two additional BMR units which would bring the total number of BMR units within the project to five. Council Member Rosenbaum referred to a letter dated November 28, 1994, to Mr. Hohbach on the subject of the BMR agreement with regard to either rental or sale of the units that stated "You shall pay to the City's Housing Reserve Fund a quarterly fee of $2,000" or $8,000 per year, and he assumed that was for three units. Mr. Schreiber said the figure was based on a differential between the anticipated market rate rent and below market rents. Council Member Rosenbaum clarified the applicant would pay $2,600 per unit and asked how the figure was derived. Mr. Schreiber said the calculation compared potential market rate rents with the rents that would apply to the below market incomes in the City's BMR program. There would be no BMR units provided, but the difference in rent payment would come to the City. Council Member Rosenbaum clarified if the units rented for $1,000 market rent and the below market rate was $800, the difference between $1,000 and $800 would be $200. Mr. Schreiber said that was correct. Council Member Rosenbaum clarified if the number were increased to five units at approximately $2,600 per unit per year, the applicant would pay $13,000 annually. Mr. Schreiber said it would be a proportional increase. Mayor Simitian clarified the motion would result in an agreement for the City Attorney's Office to further negotiate and discuss with the applicant to determine whether the applicant agreed with the revised document. Mr. Calonne said the five-unit agreement would be a precedent to the Council's giving a first reading of the Ordinance or approving any of the actions that evening. AMENDMENT PASSED 6-1, Fazzino "no," McCown "not participating," Schneider absent. AMENDMENT: Council Member Fazzino moved, seconded by Kniss, to modify the draft PC ordinance to allow a cafe and/or magazine and newspaper stand as a conditional use in the building. AMENDMENT PASSED 7-0, McCown "not participating," Schneider absent. 01/23/95 74-452 AMENDMENT TO REFER: Council Member Huber moved, seconded by Fazzino, that the City Council refer the dome, spire, roof deck, and related design details to the Architectural Review Board for review. AMENDMENT TO REFER PASSED 7-0, McCown "not participating," Schneider absent. MAKER AND SECONDER AGREED TO INCORPORATE INTO THE MOTION that the staff return to the City Council with a revised ordinance for first reading reflecting the amended findings and conditions at such time as the revised BMR agreement was prepared and endorsed by the applicant. MOTION AS AMENDED PASSED 6-1, Rosenbaum "no," McCown "not partici-pating," Schneider absent. REPORTS OF OFFICIALS 15. Palo Alto Sanitation Company Audit Report City Auditor Bill Vinson said the audit report represented the results of the audit of the City's contract with the Palo Alto Sanitation Company (PASCO). The audit was initiated as a follow-up to the previous audit of the PASCO contract that was issued in March 1992. The scope of the audit was limited to the City's management and oversight of the contract and did not include an evaluation of refuse rates or the quality of services provided by PASCO. The results of the audit concluded that internal controls and procedures surrounding the City's administration of the contract were inadequate. The conclusion was based on the lack of a thorough review of expenses submitted by PASCO, the lack of definition of expenses that related to the delivery of services, the lack of review and evaluation over adjustments to profit such as the exclusion of insurance dividends, inadequate documentation of practices related to the administration of the contract, including a clear description of the way in which PASCO's profit would be determined, and the lack of evaluation of other methods in determining a fair and reasonable profit for PASCO. The current method had been in effect since 1978. The results of the audit had been reviewed with the City Manager, and she was in general agreement with the conclusions. In some cases, corrective action had already been taken, e.g., in May 1994 the budget staff performed a detailed review of the PASCO's budget submittal as recommended. Staff identified $97,969 in expense reductions from the PASCO submittal. The audit report provided recommendations to improve management controls, and it suggested that staff evaluate the existing contract to ensure that the financial aspects were consistent with other similar contracts and would serve to protect the City's interest. City Manager June Fleming said the audit evaluated internal controls and procedures over the administration of the PASCO contract. As the City Auditor had indicated, she was in general agreement with the majority of the issues that had been raised in the audit report. There was disagreement with the issue of 01/23/95 74-453 adjustments to PASCO's profit. The City Auditor had proposed a way to execute the calculations, and he also explained how he arrived at the $270,000 figure. She understood the way in which the City Auditor and his staff arrived at the formula, but she needed to look into the process and the formula further. She also understood that the formula and the way the City Auditor arrived at the calculations were a process used by most cities and that Palo Alto's process was a minority. She wanted to evaluate what had been done and to consider different calculations before the City began any renegotiations of the contract with PASCO. The work would take a considerable amount of time. Most of the areas raised by the City Auditor were internal, and he recommended that staff provide documentation and do a more thorough examination. She agreed with those issues; but if the recommendations were accepted, additional staffing would be necessary to provide additional scrutiny. It raised the issue of priorities both for staff's work and funding. The budget process would address the need for additional staffing to implement all the recommendations of the audit report. The Public Works Department, City Attorney's Office, and the Finance Department would have to shift priorities to prepare the work necessary to begin the negotiations. The City Attorney had indicated that it would take 300 to 500 hours per year to prepare for the negotiations. Additionally, it would take approximately a 0.5 full-time equivalent (FTE) position per year from the Finance Department and a 0.25 FTE position per year or more from the Public Works Department. Some of staff's priorities would have to be changed, and staff would indicate where the shift would occur. She wanted Council to be aware of the amount of staff time the recommendations would take. The City Attorney had raised a concern that if the contract were reopened to renegotiate the formula, the City would not be able to do a limited opening of the contract. The City would have to allow Paul Madsen, Jr., owner of PASCO, to put issues on the table, and there might be issues that outweighed the potential benefit. She had not done a cost-benefit analysis on the issue, but there was the potential that more would be lost than saved. Staff would attempt to preserve the flexibility to make changes to the contract to meet the changes in Council priorities. Director of Public Works Glenn Roberts said one of the issues that arose was the relationship of PASCO and PASCO's payments to the overall Refuse Fund. It was important to understand that the Refuse Fund was made up of more than just PASCO's payments. The money paid for the garbage bills did not go to PASCO but went to the City of Palo Alto and made up the Refuse Fund which was approximately $18 million per year. PASCO received $6 million or one-third of the money. The remainder of the money was spent in a variety of ways, i.e., administration, street sweeping, recycling, refuse operations at the landfill, household hazardous waste programs, etc. Staff had looked at the issue from the perspective of the impact of the recommendations. While staff did not agree with all of the City Auditor's findings about the savings, staff assumed for the purpose of the analysis that the savings could be recouped without incurring other costs and had tried to relate that to the garbage rates and the Refuse Fund. The findings amounted to $270,000 over the three-year period or an average of 01/23/95 74-454 $90,000 per year. The figure was 0.5 percent of the total Refuse Fund or approximately 1.5 percent of the PASCO budget. The residential single-can rate was $16.50 per month, and l.5 percent on the total Refuse Fund would equate to about 8 cents per can per month. The information was provided to deal with the questions that had arose about whether Palo Alto's refuse rates were too high, whether PASCO received too much money, and whether the findings would have a significant impact on reducing the rates and the earnings. City administration had responded to the initia-tives and findings proposed in the audit report by sending a notification to PASCO that the City intended to reopen the contract and preserve the City's contractual ability to negotiate the items raised in the audit. The contract required that any such notification be provided by December 31 of a given year, and the notification was issued on December 22, 1994. The Public Works and Finance Departments, City Manager's Office, and City Attorney's Office had begun to develop a work plan for pursuing the issues. Staff proposed three steps: 1) during the next six months, staff would develop a letter of understanding with PASCO which would document the specific issues to be renegotiated; 2) studies of the various issues raised by the audit would be undertaken, e.g., a cost of service study which would evaluate the rates by class of user to determine whether residential, commercial, and industrial rates were appropriately structured and a rate comparison study to evaluate Palo Alto's rates in reference to similar services provided in other cities; and 3) alternative compensation methodology would be reviewed to determine whether there might be other bases for determining appropriate earnings for PASCO. Staff would refer to the budget process the issue of additional staffing required to implement the comprehensive written policies and procedures which the audit recommended. It was estimated that the actual contract renegotiation process would take 18 to 24 months, totally 1 to 1.5 FTE positions over one and one-half to two years duration. The administration had taken the recommendations seriously and had proposed a work plan to carry them forward. Ms. Fleming said the Council would need to indicate that evening whether there were other issues it wanted addressed during the process. The issues to be addressed flowed directly from the audit report. Mr. Vinson said the scope of the audit did not include an analysis of the impact on refuse rates. The dollars used in the analysis only reflected the effect of the insurance dividends and deprecia-tion and did not include any other type of potential reductions in fees to PASCO such as those identified in the alternative methods. Council Member McCown referred to page 4 of the audit report that stated "PASCO's total operating expenses have increased an average of 11% each year since 1987 (without adjusting for inflation)," and the staff response stated a figure of 4.7 percent adjusting for Consumer Price Index (CPI). She asked whether the actual increase adjusted for inflation, which the audit report did not provide, was 4.7 percent. 01/23/95 74-455 Director of Finance Emily Harrison said there was considerable discussion with the City Auditor's Office to make sure that the methodology was acceptable to both departments. Mr. Vinson said he was confident with the 11 percent. The adjusted number was not provided by his staff, and he could not verify or attest to the accuracy of that number. Ms. Harrison said the calculation was provided to the City Auditor's Office. Council Member McCown referred to the use of the percentage of fixed assets method for the profit determination and the compari-son that other agencies used a percentage of operating expenses. The audit report stated "We were unable to determine why the City uses fixed assets as a basis for PASCO's profits." She asked whether the staff responded to why fixed assets had been used as the method. Mr. Vinson said yes. In 1976 the City and PASCO had an agreement whereby profits were calculated on a net income or retained earnings basis. The next documentation was dated 1983 and refer-enced a practice which was in existence five years prior. His staff was unable to find out why fixed assets were used but speculated that since it was a common practice in the area of utilities, someone made a decision to use that methodology since the PASCO bill would be part of the Utilities bill. Council Member McCown understood it was an interactive process with the staff and did not understand how the Council could get a report that stated that the City Auditor's Office was unable to get the information that explained the reasoning why a certain process had been followed in the past. The City Auditor's agreement with the information was a different matter. She asked whether the City Auditor's Office received the information or whether the information that was given was not a sufficient explanation. Mr. Vinson said when the question was raised with staff, his office was not provided with an explanation of why it was the basis. Mr. Roberts said the answer might be best stated that it was the contractual basis for compensating PASCO which was previously approved by the Council and thus became the dictate to staff to use in each year's contract review and the basis of setting PASCO's earnings. Mayor Simitian asked what year the practice started. Mr. Vinson replied 1978. Mayor Simitian asked why that practice was used in 1978 instead of some other practice. Deputy Director of Public Works Operations Mike Miller said an 01/23/95 74-456 earlier memorandum provided in the review indicated a discussion of services provided and equipment necessary to provide the service and that there was a relationship between expanding the services and acquiring equipment. By using that process, staff could base a formula on the acquisition of additional assets necessary to provide the services that the City requested. Council Member Andersen said staff had indicated that it would be difficult to renegotiate the contract and that once the contract was opened, other issues might be raised which might adversely affect the City's negotiating position. He asked whether there might also be an opportunity to reexamine some of the issues that would be beneficial to the City. Ms. Fleming said that was correct. Council Member Andersen said 300 to 500 hours to get ready to negotiate was extraordinary. Ms. Fleming said the hours were an estimate of what it would take to renegotiate contract. City Attorney Ariel Calonne said the City Manager had stated the internal control issues would be or had already been handled. There were external issues that involved arms length negotiations with PASCO, and there was no way to guarantee any particular outcome. The estimate of 300 to 500 hours for negotiations was for each of the years involved which averaged one day per week. He believed that was a conservative estimate given staff's past experience with the SMaRT Station. He did not raise the issue as a prelude for asking for money to do it or to suggest that there was any negative effect associated with the audit. The point was that there was no way to look at one issue of the contract, and the opening of the contract had to be approached comprehensively. Council Member Andersen clarified the contract was not ever opened, and the agreement had been in place for many years. The only increase was on the basis of the fixed assets accounts. Mr. Miller said staff reviewed Council's direction over the previous 12 months pertaining to refuse collection or recycling services. The changes were incorporated into the upcoming budget based on the budget that PASCO submitted. Staff then negotiated a percentage of refuse billings to be paid to PASCO based on the submitted budget and incorporated the new services. Council Member Andersen clarified nothing changed if there were no Council direction. He asked when the last time was that Council had looked at changes to the contract other than rate changes and recycling issues. Mr. Miller said the last major contract revisions were in 1987 which was a consolidation of a 1971 refuse disposal contract, 1980 agreement for recycling, and 1983 agreement for the disposal of public receptacles. 01/23/95 74-457 Mayor Simitian asked whether the 1987 agreement involved a complete review of the contents of the agreement or whether it involved a consolidation of the previous amendments and existing agreements. Mr. Miller said it involved a complete review, consolidation, and the addition of many items. Council Member Fazzino was excited about the insurance dividends issue, but the City Manager's response made a lot of sense since it was good public policy for the City to encourage a good safety record, and therefore, there should be some incentive to run a good outstanding workers' compensation program. He asked for the City Auditor's response on the issue. Mr. Vinson did not disagree with a good safety program incentive to encourage good safety practices, but there was an insurance dividend that was allowed as an exclusion in 1976. There was no documentary evidence to support the fact that that had been reviewed as to the need for the continued dividend. There were years when the safety practices resulted in no dividend. The issue was that it should be built into the cost of the agreement. The City paid for a safety program. Staff was seeking some form of justification to support not only paying for the safety program but also allowing the dividend exclusion. Council Member Fazzino clarified it should be included in profit. Mr. Vinson said that was correct. Council Member Fazzino was surprised that the City Manager's report suggested that significant increase costs would be incurred in order to respond to the City Auditor's suggestions. He was trying to separate the issues of working smarter from the need to develop a different level of contractual relationship with PASCO. He appreciated that changing the process of contractual negotia-tions would lead to additional costs; but he wanted to make sure that the City Manager was not mixing the two, and some of the City Auditor's suggestions dealt solely with the need to work smarter. He did not see the need for significant additional costs to implement some of the recommendations suggested. Ms. Fleming said the issues were internal control over what the staff did and monitoring and analyzing what was brought to the Council in terms of the PASCO contract. The City had very limited staff allocated to the process. She agreed with the City Auditor that the City did not have adequate documentation and written procedures in place but to develop the procedures and provide adequate documentation would require more staff. Staff had not done anything wrong, but it could not provide it. Adequate staff would be able to provide the documentation and procedures. The City Auditor believed there was another way to calculate the contract, and if the Council wanted staff to look at other ways, it would be done, but it would take time. The contract could be reviewed and renegotiated with the hope of more profit being realized. The Council needed to decide whether it wanted the 01/23/95 74-458 resources to do the job. Council Member Fazzino asked whether there was the possibility of process improvements without the need for additional expenditure of dollars. He was troubled by the immediate response. It was the most significant message from the City Manager in the report. He did not dispute the fact that more money might need to be spent in order to develop a sounder contractual process, but there was no reference to the possibility of process improvements which might result from doing the job smarter and better without the need for additional expenditures. Ms. Fleming said there might be some positive improvements. Council Member Rosenbaum was prepared to refer the issue to the Finance Committee. Paul Madsen, Jr., 4244 Los Palos Place, said the City Auditor's report had damaged the public and City staff's perception of PASCO and the trust it had taken years to build. The subject matter in each section pointed suspicion at PASCO's values and motivations. He was hurt that the concerns and suspected revenue gains for the City were mythical. The report's executive summary explained that the audit did not evaluate refuse rates or services provided under the agreement yet the four bullets of summary subjects named PASCO and its earnings as targets that needed careful policing. The subject, PASCO contract, and the accused past and present City staff were graded careless as to controlling the PASCO threat to City revenues. Mr. Vinson did not verify with PASCO any of his concerns or conclusions before publishing his findings. He tried to grasp the intent or objective of the report but was only able to recognize one ongoing focus--that PASCO had become dangerous and its haphazard course must be stopped or controlled to prevent loss of revenues to the City. The time taken on the audit had involved more than 16 months and was still not complete. Mr. Vinson's response to his letter dated January 18, 1995, indicated PASCO had been under the same audit since 1992. He did not know what the audit was for. The audit report recommended that the contract be changed to plug up the loophole-fattening agreements for PASCO's pocketbook made by previously inept City employees. The report required more City personnel to check on people already getting the job done on time. That type of thinking was non-productive. Reports that caused damage, cost, and harm were not acceptable to him as a citizen. He had not tried to influence individual Council Members and had not supported any Council Member with time, money, or support since he started as a garbage man in 1958. He had not asked for favors from City staff for personal gain or advantage for his company. He had suggested and introduced customer cost-saving solutions repeatedly in order to survive. The industry standards mentioned in the report were mythical. Each City wanted different standards and placed different values on each standard. He was competent in Palo Alto. The City of San Jose paid almost $200 per ton for recyclables, but Palo Alto paid the market price of $46 per ton. His workers' compensation insurance experience modification was 50 percent for the current year which saved $16,000 per month or $192,000 per 01/23/95 74-459 year, and the previous year it was 41 percent which was a national record. The company received dividends on that low premium charge. The savings were earned by careful training of the personnel with skilled management incentives and consequences for poor behavior controlled by the citizens of Palo Alto. The report indicated that more procedures and controls would fix or avoid what was perceived as wrong. PASCO met its deadline and did it for less by investing in its people and equipment. Mayor Simitian clarified there would be a follow-up audit based on the recommendations in the audit, and he asked when it would return to the Council. Mr. Vinson said it would return the next audit year approximately January 1996. Mayor Simitian asked when a report would return to Council on the changes undertaken on the items. Ms. Fleming said staff would provide a status report to the Council every six months on the items which would be independent of the audit follow-up. MOTION TO REFER: Council Member Rosenbaum moved, seconded by Kniss, to refer the issue to the Finance Committee. Council Member McCown was frustrated with the way the issues were being communicated. The Council had asked the City Auditor to look at opportunities where the City could work smarter. There was a financial component to evaluating internal controls. The Council had asked the City Auditor to move into operational issues, and the goal was to come up with ideas. Staff would then evaluate the ideas and determine whether it could work. She viewed it as positive, not negative, opportunities for the City. She found it frustrating but understandable that there was a defensive reaction on the part of staff. Council Member Fazzino commented about the first thing that came out of the report was that more staff would be needed to do the work which was a defensive reaction. Neither staff nor PASCO needed to be defen-sive. The Council heard resoundingly from the citizens about the quality of service. The Finance Committee would not solve the problem, but she hoped that ways would be found to encourage the City Auditor and the staff to continue to work together in a way so that people would use the help and not be defensive. She hoped the defensiveness could be avoided in the future. Council Member Andersen associated with the comments of Council Member McCown. He noted the sense of pride from Mr. Madsen and the people who worked for PASCO. The issue did not question the integrity or the operation of the PASCO services. He only wanted to look at the City's mechanisms. There was a natural tension by the very structure of having an auditor who was a Council Appointed Officer. The City Auditor worked under the Council's direction, and he acted in the Council's behalf. The audit had been in progress since 1992, and better communication was needed. Staff should have communicated with PASCO about the audit. 01/23/95 74-460 Mayor Simitian associated with the comments of Council Member McCown. He supported the referral to the Finance Committee, and he hoped the Committee would clarify the issues which were complicated. The City Manager had spoken very straightforward regarding the internal control issue, and the other issue refer-enced by the report was that the contract had not been put out to bid for 25 years and it had not had a thorough review for approx-imately 7 years. The City Auditor stated the contract did not get year-to-year scrutiny which might provide greater comfort about whether or not the City had negotiated the best possible contract on behalf of the City. It was uncertain what had been negotiated since the City had not been through the process. He hoped the Finance Committee would discuss whether or not the City might achieve some real results from a more vigorously renegotiated contract document. It had both service and dollar and cents implications. It was a legitimate finding in the audit. He said the worst inference that could be drawn from the report was that the Auditor credited PASCO as being effective negotiators on behalf of PASCO. Council Member Kniss felt confident that the Finance Committee would thoroughly analyze the issue and return with a summation of the process and the direction to move forward. Ms. Fleming said due to the referral to the Finance Committee, she would delay action to renegotiate the contract. Council Member Andersen asked how long the contractual door would stay open with the memorandum of understanding. Ms. Fleming said the contract was not in jeopardy. Since notifi-cation had been done, the door would stay open until it went through the Committee. Council Member Andersen clarified the referral to the Finance Committee would not affect the effort if the Council decided to renegotiate the contract after the recommendation from the Committee. Mr. Calonne said the objective was to return with a list of issues that would be negotiated. The Finance Committee would be helpful in identifying the list. Mayor Simitian asked how quickly the item would be referred to the Committee. Ms. Harrison said the item could be agendized for February or March 1995. MOTION TO REFER PASSED 8-0, Schneider absent. COUNCIL MATTERS 16. Council Members Gary Fazzino and Liz Kniss re Joining as a Party to the Lawsuit to Challenge the Implementation of 01/23/95 74-461 Assembly Bill 133 MOTION: Council Member Fazzino moved, seconded by Kniss, to support the California Preservation Foundation's request that Palo Alto join as a party to the lawsuit and direct the City Attorney to investigate and promptly report back to the Council on the pros and cons of joining the lawsuit. MOTION PASSED 8-0, Schneider absent. 17. Council Comments, Questions, and Announcements Council Member Andersen asked for clarification for personal quasi-judicial interaction with Council Members. City Attorney Ariel Calonne said the City Council Procedural Rules required the Council Members to disclose their actions with respect to a project. Council Member Kniss said the libraries had provided Internet access. ADJOURNMENT: The meeting adjourned at 11:10 p.m. 01/23/95 74-462 ATTEST: APPROVED: City Clerk Mayor NOTE: Sense minutes (synopsis) are prepared in accordance with Palo Alto Municipal Code Sections 2.04.200 (a) and (b). The City Council and Standing Committee meeting tapes are made solely for the purpose of facilitating the preparation of the minutes of the meetings. City Council and Standing Committee meeting tapes are recycled 90 days from the date of the meeting. The tapes are available for members of the public to listen to during regular office hours. 01/23/95 74-463