HomeMy WebLinkAbout1995-03-20 City Council Summary Minutes Regular Meeting March 20, 1995 1. Presentation of Business Recycling Awards ............. 75-242 ORAL COMMUNICATIONS ....................................... 75-242 2. Curbside Collection and Management of Household Batter-ies ................................................... 75-243 3. First Amendment to Funding and Regulatory Agreement Relating to the Barker Hotel (City Contract No. 4050213) between the City of Palo Alto and Palo Alto Housing Corporation (PAHC) Apartments, Inc. ........... 75-243 4. Ordinance 1st Reading entitled "Ordinance of the Council of the City of Palo Alto Amending Section 18.08.040 of the Palo Alto Municipal Code (The Zoning Map) to Change the Classification of Property Known as 2650 Park Boulevard and 204, 228 and 230 Sheridan Avenue from RM-40 to PC ............................... 75-243 5. Conference with City Attorney--Existing Litigation .... 75-243 6. PUBLIC HEARING: The Planning Commission recommends that the City Council deny the appeal of the use permit for the cottage and the variance for 165 additional square feet of floor area and approve the appeal of the 10-foot rear yard encroachment; this action would result in the cottage being located 20 feet from the easement line, which complies with rear setback requirements, and a total floor area, for the main house and cottage combined, of 5,865 square feet, where 5,700 square feet is the maximum otherwise allowed, for property located at 1457 Edgewood Drive ............... 75-244 7. Telephone Utility Users Tax Audit Report .............. 75-254 ADJOURNMENT: The meeting adjourned at 9:38 p.m. to Closed Session ............................................... 75-257 FINAL ADJOURNMENT: The meeting adjourned at 9:50 p.m. ..... 75-257
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The City Council of the City of Palo Alto met on this date in the Council Chambers at 7:07 p.m. PRESENT: Andersen, Fazzino, Huber, Kniss, McCown, Rosenbaum, Schneider, Simitian, Wheeler SPECIAL ORDERS OF THE DAY 1. Presentation of Business Recycling Awards Mayor Simitian presented the following Business Recycling Awards: Outstanding Comprehensive Recycling Programs to Carlos Thieveries and Louise Maoris representing Hewlett Packard; Outstanding Individual Effort in Recycling to Parti Lane representing Gleam's Jewelers; Outstanding Waste Prevention Program to Connie Durante representing Highboy's California Restaurants; and the Companies Nominated as the "Best Business Recycles in Town" by Palo Alto residents to Betty Lowman representing Klutz Press, Paul Gardner representing Paul Gardner Construction, and Lindsay Elliot, Jamie Master, Megan Phillips, Jennifer Prather, and Paula Rusfinelli representing the Youth Community Service Club at JLS Middle School. Council Members Kniss and Schneider presented the "Best Business Recycles in Town" to Timothy Ryan representing Timothy Ryan's New Life Spa. ORAL COMMUNICATIONS Edmund Power, 2254 Dartmouth Street, spoke regarding politics as usual (letter on file in the City Clerk's Office). Joe Stratton, Edgewood Drive, spoke regarding Shoreline Amphitheatre. Mary Erikson, 925 High Street, No. 120, spoke regarding the sprucing up the Downtown area. Vice Mayor Wheeler welcomed Mrs. Teruyo Yuasa, a Japanese teacher with the Palo Alto Unified School District; Mr. Tadao Hirose, Niihari Board of Education; and the exchange middle school students and teachers from the City of Niihari, Japan. The students participating in the middle school exchange program introduced themselves. Council Member Kniss asked Miss Sakamoto to take her greetings back to the Mayor of Niihari. Mayor Simitian acknowledged and congratulated the Regional Water Quality Control Plant for its receipt of the 1994-95 Suzanne Wilson Environmental Achievement Award for Pollution Prevention Promotion Director of Public Works Glenn Roberts said the Public Works Department received a prestigious award for the Regional Water
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Quality Control Plant. He acknowledged Phil Bobel, Dr. Kelly Moran, Manager, Environmental Control Programs, and Janet Cox. He showed the award to the City Council. City Manager June Fleming said that the Public Works Department staff presented an award to Janet Cox for all of her energy and support of the Environmental Control Program. CONSENT CALENDAR MOTION: Vice Mayor Wheeler moved, seconded by Schneider, to approve Consent Calendar Item Nos. 2 - 4. 2. Curbside Collection and Management of Household Batteries 3. First Amendment to Funding and Regulatory Agreement Relating to the Barker Hotel (City Contract No. 4050213) between the City of Palo Alto and Palo Alto Housing Corporation (PAHC) Apartments, Inc. Subordination Agreement between the City of Palo Alto and First Nationwide Bank 4. Ordinance 1st Reading entitled "Ordinance of the Council of the City of Palo Alto Amending Section 18.08.040 of the Palo Alto Municipal Code (The Zoning Map) to Change the Classification of Property Known as 2650 Park Boulevard and 204, 228 and 230 Sheridan Avenue from RM-40 to PC" MOTION PASSED 9-0 for Item Nos. 2 and 3. MOTION PASSED 7-1 for Item No. 4, Rosenbaum "no," McCown "not participating." CLOSED SESSION The item might occur during the recess or after the Regular Meeting. 5. Conference with City Attorney--Existing Litigation Subject: Robert Tiffany v. City of Palo Alto, SCC No. 730390
Authority: Government Code ∋54956.9(a) Public Comment None. PUBLIC HEARINGS 6. PUBLIC HEARING: The Planning Commission recommends that the City Council deny the appeal of the use permit for the cottage and the variance for 165 additional square feet of floor area and approve the appeal of the 10-foot rear yard encroachment; this action would result in the cottage being located 20 feet from the easement line, which complies with
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rear setback requirements, and a total floor area, for the main house and cottage combined, of 5,865 square feet, where 5,700 square feet is the maximum otherwise allowed, for property located at 1457 Edgewood Drive Zoning Administrator Lisa Grote used viewgraphs to summarize the applicant's proposal and the Planning Commission's recommendation. The original application was for a main house and a cottage with the cottage located 2 feet from the easement line, not into the actual easement but 18 feet into the setback area. Total square footage of the house and the cottage was about 320 square feet over the allowed Floor Area Ratio (FAR) on the site. The applicant had requested a use permit for the cottage and variances for the overage of the FAR and for intrusion into the required rear setback. Her decision modified that proposal by reducing the size of the main house, and therefore, reducing the size of the overage of the FAR so that it was over by 165 square feet rather than 320 square feet and pulled the cottage back 8 feet so that it was 10 feet into the rear setback. The neighbors appealed the Zoning Administrator's decision based on the encroachment into the setback and possible or potential impacts to the creek and also overbuilding of the site by the 165 square feet. The Planning Commission recommended approval of the use permit for the cottage, denial of the appeal on the 165 square feet overage, and approval of the appeal of the encroachment setback so the 20-foot setback would need to be maintained. She said three additional letters were submitted to the Council that evening--two opposed the variance and one favored the variance. Planning Commission Chairperson Victor Ojakian said the Planning Commission voted unanimously for the use permit for the cottage. A majority of the Planning Commissioners voted for the addition of the 165 square feet, but he and Commissioners Schmidt and Carrasco spoke against the addition. Most of the Commissioners, other than Commissioner Schink, spoke against the variance on the setback. Commissioner Schink favored the Zoning Administrator's ruling and several other Commissioners varied in terms of what they favored or opposed. At the conclusion, it was decided that both the use permit and the additional square footage were acceptable, but the setback was not. Mayor Simitian clarified there were three items before the Council that evening--use permit to allow a cottage, a variance to allow an intrusion to the rear yard setback, and a variance to allow an increase in the allowable square footage. He understood each of the items were quasi-judicial items which meant that the Council judged whether or not the application conformed to the Palo Alto Municipal Code (PAMC). City Attorney Ariel Calonne said the application and whatever evidence heard that evening would need to conform to the PAMC. Mayor Simitian asked if the Council should indicate on each of the three items whether or not the application could meet the require-ments of the PAMC by way of findings. He asked if there were any particular requirements that the Council was obliged to address in
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connection with each of the three items. Mr. Calonne used viewgraphs to summarize the findings in the staff report (CMR:176:95). The first use permit findings were common to both the use permit issue and variance, i.e., that the use would not be injurious to adjoining property nor detrimental to the general health, safety, and welfare. The second finding was consistent with the Comprehensive Plan. Mayor Simitian clarified the issues that the Council was obliged to address when considering the application for the conditional use permit were whether or not the application and the evidence indicated that the application met the requirements of the PAMC with respect to those two items and that the Council produce findings that indicated either the application did or did not meet those requirements. Mr. Calonne said that was correct. It was important to explain how the facts presented to the Council could be applied to the legal statements. He presented viewgraphs of the requirements for the variance. Item No. 3 on the variance findings was common to both the variance and to the conditional use permit, i.e., no injury to property improvements nearby and no detriment to the general health, safety, and welfare. The first two variance findings were perhaps the strictest quasi-judicial findings in the PAMC. The first finding looked to unusual circumstances about the property, and the staff report had identified the creek as the principal unusual circumstance being relied upon. The second finding was of constitutional origin which was that the variance was necessary to avoid some undue economic hardship to the property owner. Mayor Simitian clarified the three findings were required in order for the Council to grant a variance. If the Council found that the three findings did not exist, the Council was obliged to deny the variance request. He clarified the same findings applied to the variance of the encroachment into the setback as one item and applied again with respect to the excess square footage. Mr. Calonne said that was correct. He said the burden of meeting the variance findings was harder to meet with respect to the square footage of the variance than it was with respect to the setback. He believed that the setback issue was more closely related to the creek concern than the square footage of the house. Council Member Fazzino said he had visited the site. He asked how to justify the property being qualitatively different than any property along the creek on Edgewood Road, thereby necessitating the use permit and the variance for the cottage. Ms. Grote said she reviewed the application as being different from the zoning district requirements for all R-1 properties rather than narrowing it down to the residential properties that were next to a creek. Council Member Fazzino asked whether that line of reasoning had to
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be followed under the law or could the City approach properties along a creek or properties that had a unique circumstance. Ms. Grote said the first finding indicated there were exceptional or extraordinary circumstances or conditions applicable to property that did not apply generally to property in the same district which meant all of the R-1 district. Council Member Fazzino clarified if the City had three or four properties in the 1300 block of Edgewood Drive with the same use permit and/or variance request, the City could measure them against the entire R-1 district. It was conceivable the staff could grant a use permit based upon the fact that the properties faced a hardship by being next to a creek. Ms. Grote said it was conceivable, but every variance application was judged on its own merits. Council Member Kniss said approval of the proposal would set a precedent since there had been very few cases with variances since the new requirements were put in place in 1989. She asked whether staff had done any research to determine whether or not any other similar properties had had variances of the same type, i.e., size, easements, and the creek issue. Ms. Grote said she did not do that type of research before she made the determination. She looked at the merits of the case, but it had been brought to her attention since that point that there had been very few applications submitted or approved. Council Member Kniss said she visited the site. Some of the houses in that area were constructed before the current easement was in place, and she asked whether some of the structures encroached into the easement space. Ms. Grote said yes. There were some small cottages that encroached into the easement area. Council Member Kniss asked whether the structures were built before the easement was put into place. Ms. Grote said yes. The easement was recorded in 1970, and many of the structures were built in the 1930s and 1940s. Council Member Kniss asked when the creek had flooded in that particular area. Ms. Grote said she did not know. Council Member Kniss asked why the project was designed so that it required a variance. Ms. Grote said the applicant felt he could not design within the stricter parameters of the rear setback and lot coverage requirements of the easement. More than 2,000 square feet could not be included in the area of the site and it added not only the
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20-foot setback from the top of the bank but also an additional 20-foot setback from the easement line. Council Member Kniss clarified the project could not be designed within the 15,000 square feet. Ms. Grote said that was correct. Vice Mayor Wheeler said the material mentioned that particular piece of property was not in the flood zone because of the depth of the channel at that point. The concern about the creek was more of an erosion and health and safety of the riparian habitat issue rather than flooding. She had visited the site and had looked at the site in relationship to the creek. The material also mentioned that the 20-foot easement might be deeper on that particular site than it was for neighboring property. She asked whether there was a viewgraph of that easement. The depth of the easement was part of the rationale for making one of the findings. Ms. Grote reviewed the viewgraph of the easement and explained that the easement differed on various sites. The Santa Clara Valley Water District determined how much land was needed to maintain that portion of the creek. Council Member McCown asked whether the affect of the Planning Commission's recommendation on the variance for the setback was that the cottage unit would have to be redesigned because it needed to be out of the 20-foot setback. Mr. Ojakian said the issue was raised with the architect for the project, Tom Sloan, and he said the cottage would have to be redesigned. Council Member McCown said if the Council concurred with the Planning Commission and denied the variance with respect to the setback, the Council would not know the project for which the use permit determination was being made. She presumed that the use permit process assumed that it was known what the use permit would be used for. Mr. Calonne said the Council could approve the permit that evening and the conditions would define the outer limits of what would be permissible or the Council could ask for some additional review. Council Member McCown was concerned that if the Council's action required a redesign of the cottage, the Council would not know what the design would be. Mr. Calonne said the zoning ordinance was fairly specific about the minimum requirement for cottages. If the Council resolved the location issue and met the detriment and other findings of the conditional use permit ordinance, the design features would fall into place. The Council could add conditions to that approval. Council Member Fazzino said the Planning Commission raised the issue of moving the cottage closer to the house, and he recalled a
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strong admonition on the part of a representative from the City Attorney's Office that the Planning Commission was not in a position of redesigning the cottage because that was not the specific variance proposal before the Commission. He clarified that the Council was not in a position that evening to resolve issues by moving the cottage closer to the house because that was not the actual proposal before the Council. Mr. Calonne said that was correct. Council Member McCown asked how the Council could act on a different location of the cottage. Mr. Calonne said there would be a problem if a different location implicated another variance. Ms. Grote said the Planning Commission's discussion occurred with regard to moving the cottage closer than 12 feet from the primary structure which would have required a variance. The Planning Commission decided that as long as the application met the 20-foot setback and the 12-foot distance then the redesign could take place because a variance would not be required and it would not overstep the bounds of the current application. Council Member Fazzino asked whether the Council's only course of action, if it decided to move forward that evening, would be to deny the variance request and to leave it open to the applicant as to whether or not he or she wanted to choose an alternate variance route and move the cottage closer to the house. Ms. Grote said the Council could redirect the proposal back to the Zoning Administrator to consider a different location. Council Member Fazzino clarified the Council could suggest that that might be appropriate alternate direction and asked the Zoning Administrator to consider it. Mr. Calonne said that was correct. That would preserve the full range of process available to the applicant and neighbors. Council Member Huber clarified every cottage required a use permit. Mr. Calonne said the was correct. Council Member Huber said the Council could not grant a blanket use permit for the property that indicated it needed to be kept in the confines of requiring no variances. An application for a cottage would still go through the use permit process so that neighbors could speak to other detriment effects. Mr. Calonne said the Council could make that policy determination, but it was not legally impossible to grant the use permit provided it did not implicate variance issues. The cottage provisions in the zoning ordinance were relatively specific about the require-ments, and the Council might be able to find those requirements
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independent of the precise litigation. Ms. Grote said the Council could attach a condition that required the final siting to return to the Zoning Administrator for review and approval. Mayor Simitian asked whether the application for a use permit would be for the right to put a cottage on the property as long as the cottage was consistent with all of the City's ordinances or was it specific to that particular design. Mr. Calonne said the application would be for that particular cottage, but the Council had very broad authority to add conditions which could modify the cottage. Mayor Simitian clarified the Council could grant a use permit for the cottage only if it did not require a variance. Mr. Calonne said that was correct. Council Member Schneider asked whether the variance would put the cottage within 12 feet of the main house. Ms. Grote said yes. The variance would meet the 12-foot minimum requirement. Council Member Schneider clarified the problem was that the 20-foot setback met the requirement of being more than 12 feet away from the main house, but by moving the cottage forward, there was a problem on the other side. Ms. Grote said there would be a problem with the 12-foot distance if the cottage were moved forward with the existing design. If the cottage were redesigned to be more rectangular, then it could meet the 12-foot requirement and the 20-foot setback requirement. Mayor Simitian declared the Public Hearing open. Tom Sloan, architect for the applicant, 255 North Market Street, San Jose, said his clients, Binh and Tina Nguyen, had requested a program for a fairly large house; and the problem with a large house was to try to please the neighbors. The site was rather narrow compared to the other sites in the neighborhood and the creek bisected the property, but the house was not the issue. He wanted to give the main house a smaller appearance from the street and the setback to the left of the property had been tripled. The house was set as far forward as possible which gave it a large landscaped area and a nice appearance for the neighborhood streetscape. The guest house was not originally perceived to be a problem because it was hidden behind the main house. If the main house were pushed forward, there was no ordinance in place for the neighbors to complain. He felt the proposed design was good for the neighborhood. No variance would be required if the back of the house were reduced and the garage and the guest house were placed in the front which would not make the neighbors happy.
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Council Member Andersen asked whether the cottage could be redesigned with the existing square footage into a design that would not be detrimental to the trees and would be effective without encroaching into the setback area. Mr. Sloan asked whether Council Member Andersen was suggesting that the cottage be pulled out of the 20-foot additional setback. Council Member Andersen said yes. The design suggested that it could be redesigned to be more boxy. Mr. Sloan said the overall design would be an inferior structure, and condensing the structure would create a bulkier structure. Council Member Fazzino asked for Mr. Sloan's comments regarding the suggestion that the cottage be moved closer to the main house. Mr. Sloan said it was not allowed. Council Member Fazzino asked whether architecturally it would be desirable if the Zoning Administrator were willing to consider a variance. Mr. Sloan said in order to reach the proposed design, a three-car garage was changed to a two-car garage and the area between the two residences was proposed to be used as parking place. If the cottage were moved too close, the parking spot would be lost. The applicant wanted all of the cars parked off the street. Council Member Fazzino asked whether there were any other problems other than parking. Mr. Sloan said if the cottage were moved to the right, the parking would be possible but there would be no backyard. The design was intended to give the neighbors a nice streetscape. Mayor Simitian said Mr. Sloan mentioned that the creek bisected the property, but the map showed the creek at the end of the property. Mr. Sloan said the explanation of the term bisected meant that the creek cut through the property. Mayor Simitian said the critical issue was whether the site did or did not create a unique circumstance that satisfied the findings. Linda Elkind, 2040 Tasso Street, said the fact that the site was on the outside curve of the creek and was subject to the greatest force was a practical consideration. She said the creek was an important natural resource, and the public health and safety over the long term should be protected. She said one of the key points of the application was that construction too close to the top of the bank at one point could preclude use of biologically or ecologically more desirable bank stabilization or flood control options for the future. The City had existing setback requirements from the easement line and SCVWD had an easement of
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20 feet totaling 40 feet which was ideal. It was important that the City take advantage of the tools that it had to accomplish flexibility for the future. There was a flood problem on the creek, and better solutions would be found with more options available. She urged the Council to uphold the recommendations of the Planning Commission regarding the creek setback. Dena Mossar, 1024 Emerson Street, said the staff report (CMR:176:95) stated there were no policies in the existing Comprehensive Plan which required specific setbacks from the creek; however, Palo Alto had an existing ordinance which required a 20-foot setback from the SCVWD easement. The zoning tool should be used to maximize public safety and environmentally sound flood control options. The SCVWD's options for flood control got closer to concrete channels as existing buildings got closer to the top of the bank. A concrete channel meant less property value to the property owner and an enormous loss to the community that loved and cherished the creek. The City could not assume that the SCVWD's easement was guaranteed from trouble. Planning Commissioner Beecham observed that the combined SCVWD and City setbacks already appeared to be less than 40 feet in many places in the neighborhood as a result of the continuing erosion along the banks of the creek. Palo Alto was a participant in the larger San Francisquito Creek watershed, and the City asked its upstream neighbors to provide adequate setbacks to protect Palo Alto flooding and erosion and protect habitat values. Palo Alto shared in the responsibility to its neighbors. The update of the Comprehensive Plan would address setback issues, but the Council had enough information to support the Planning Commission's recommendation to maintain Palo Alto's existing 20-foot creek setback zoning ordinance. Mary Schaefer, 742 DeSoto Drive, reminded the Council that many Palo Altans lived in the San Francisquito flood plain. There were two serious floods that invaded a large section of Palo Alto in the 1950s, and she wanted the options left open. The Council should be extremely concerned about anything that happened along the creek and what it would do to the fresh water flood plain and the people who lived along the creek. Binh Nguyen, 1457 Edgewood Drive, said the SCVWD approved a 20-foot setback requirement so that a guest cottage could be built on the property. The plans were modified and the garage was reduced to two spaces to meet the City's requirements. He asked the Council for a reasonable adjustment and to grant the building permit. He said the cottage would be built for his aging parents. The family had spent about four months trying to get the permit, and it would be costly to redesign the cottage. Mayor Simitian declared the Public Hearing closed. MOTION: Council Member Huber moved, seconded by Wheeler, to approve the appeal of a variance and conditional use permit for the location and construction of a second living unit (cottage) approximately 10 feet from the edge of the flood control easement line at the rear of the property, where a 20-foot setback from the
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easement line was otherwise required, and a total floor area for the main house and cottage combined of 5,865 square feet, where 5,700 square feet was the maximum otherwise allowed, with the proviso that Council's action was without prejudice to a reapplication. Council Member Huber said the Council had the obligation to make hardship determinations, and he could not find the hardship that was necessary to make the finding for either of the variances. Creekside property was measured against other creekside properties, not the universe of R-1 properties. The ordinances provided a certain type and size of cottage. There was nothing in the property that was unique that would require anything addition-al; in fact, it was a scrape and start over project as opposed to an older building wherein exceptions might have to be made. The Council should not approve use permits without knowing the design that would be delivered. Vice Mayor Wheeler said variances had been and should be given out very sparingly given the background and history of FARs in R-1 neighborhoods. She found it impossible to make the hardship finding that was necessary on a lot the size of the proposed project even minus the footage devoted to creek protection and easements. There was ample room to develop a very sizeable house as well as a cottage that would fall within the FAR limitations and within the allowed developable envelope on the lot. Council Member McCown said the property owner had lost the ability to count almost 2,500 square feet for FAR purposes when under some circumstances another 165 square feet of FAR would not be unreasonable. If there were evidence of other types of physical constraints on the site, i.e., an existing house, the case could be made for that kind of a variance on creekside properties that were affected the same way as that particular site was. The designer and property owner had the opportunity to start from a blank slate in terms of the design and location of the structures which made it difficult to find a hardship sufficient to need the 165 square feet. She supported the implied requirement in the motion that the cottage would need to be redesigned and she was uncertain whether the 165 square feet was significant. She concurred with the entirety of the motion. Council Member Rosenbaum said he was supportive of the Planning Commission's recommendations and would be willing to allow the 165 square feet but would oppose the setback. Council Member Fazzino agreed with the comments of Vice Mayor Wheeler and Council Member Huber regarding the creek issue. He was concerned about the potential impact on the creek and would not support any variance from the setback requirement for that particular property or any other property along Edgewood Drive. He hoped there was a way for the Zoning Administrator and the City Attorney to evaluate the proposals within the context of that particular R-1 district rather than the entire R-1 district. A separate process might be necessary. He believed there was a way to accommodate the main house and the cottage on the property.
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The applicant might lose some parking space but he would rather preserve the creek setback requirement than one additional parking place. The motion allowed the applicant to return to the Zoning Administrator with a way to accommodate both the cottage and the main house. He appreciated Mr. Sloan's efforts to find a way to build a large home which was attractive to neighbors and did not have an overbearing impact on the view of the house from the street. He believed the proposal for the additional 165 square feet needed to be evaluated within a larger consideration. He said a balancing act had to be achieved with respect to the setback requirement, the cottage, and the large size of the main house and the need to make it attractive. He supported the Planning Commission's recommendation to allow the additional square footage, but he hoped the applicant would work with the Zoning Administrator to find a way to accommodate the cottage on the site. Council Member Schneider supported the Planning Commission's recommendations. She was touched by the letters written in support of the proposal and by the applicant's desire to take care of his parents. She hoped the applicant did not feel that the Council's decision did not support that effort. Council Member Kniss agreed with the comments of Council Member Fazzino regarding the architect's attempt to fit the project into the neighborhood. She found it difficult to justify a hardship. The house and the cottage would be there for many years, and the decisions made by the Council were for the long term. Council Member Andersen felt the Planning Commission's approach was appropriate with regard to the square footage. Mayor Simitian said the decision made by the Council was not a legislative decision or a matter of simple preference, but a matter of whether or not the application met the standards that were required in order to grant a variance. He emphasized that in order to grant a variance, the Council was required to make all three of the findings. He could not make all three of the findings with respect to either the setback or the additional square footage. He could not make the finding that there were exceptional or extraordinary circumstances or that the property was unique given the many properties throughout the community that abut a creek nor could he make the finding that granting of the application was necessary for the preservation and enjoyment of the substantial property right of the applicant. The applicant had flexibility on the site to produce a doable project that met the needs of applicant and protected those property rights. It was not a question of preference or value but whether or not he could make the findings based on the evidence before the Council that evening. He would support denial of the setback and the square footage variance request. He said if the entire Council agreed the applicant should be able to put a cottage at the back of his property, he was concerned that denying the cottage would add unnecessarily to the delay of the project. He asked whether the Council could indicate that it approved a use permit for a cottage which met the Palo Alto Municipal Code (PAMC), required no
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variances, and received approval by the Zoning Administrator. Mr. Calonne said the Council could hold jurisdiction pending some redesign or could condition the application for review by the Zoning Administrator. Mayor Simitian asked if the Council retained jurisdiction whether the applicant could redesign the cottage with a total square footage on the property and a setback that did not require a variance and bring it back to the Council with a staff recommenda-tion. Mr. Calonne said yes, but the public hearing should be reopened. Mayor Simitian clarified that route would not involve the Planning Commission and the Zoning Administrator. Mr. Calonne said that was correct. MAKER AND SECONDER AGREED TO INCORPORATE INTO THE MOTION that the conditional use permit portion of the application be retained under the City Council's jurisdiction for review of an application of a redesign of the project including reopening of the Public Hearing. MOTION DIVIDED FOR PURPOSES OF VOTING FIRST PART OF THE MOTION to deny the variance with respect to the additional square footage with a direction to staff to return with appropriate findings. FIRST PART OF THE MOTION PASSED 5-4, Andersen, Fazzino, Schneider, Rosenbaum "no." SECOND PART OF THE MOTION to deny the variance with respect to the intrusion into the rear of the property with a direction to staff to return with appropriate findings. SECOND PART OF THE MOTION PASSED 9-0. THIRD PART OF THE MOTION to retain the conditional use permit under the City Council's jurisdiction. THIRD PART OF THE MOTION PASSED 9-0. REPORTS OF OFFICIALS 7. Telephone Utility Users Tax Audit Report City Auditor Bill Vinson said the report reflected the results of the audit of the Telephone Users Tax. Two major areas of concern were developed from audit. First, the companies were not always properly identifying Palo Alto residential and commercial custom-ers. Second, improvements were needed in the oversight and management for collection of the tax. The City of Palo Alto imposed a 5 percent tax on its interstate calls. In Fiscal 1993-
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94, the City received approximately $1.6 million in revenue from the Telephone Users Tax. The phone companies that provided service were responsible for the collection from the residential and commercial customers, and at the end of 1993-94, there were 43 companies which paid the tax to the City. He showed a viewgraph of some of the large payers but cautioned the Council that the situation would change rapidly with deregulation which made the need for tighter controls over the payment of the tax even more important. He said Pacific Telephone and Telegraph was currently the major payer to the City. The Finance Department and the Revenue Collections Office were charged with the responsibility for collection and processing payments from the various companies. The first objective of the audit was to assure that the taxes were properly calculated and paid, and the second objective was to ensure that the payments were properly monitored by the City and properly collected on a timely basis. He summarized the steps taken to meet those objectives (staff report dated March 16, 1995). Staff found that the telephone companies had not properly identified all the Palo Alto residential and commercial customers and that the nonrecognition of the customers resulted in underpayments of $155,300 over the previous three years. An underpayment of $96,300 was quantified for the previous three years from a company that used zip codes to identify Palo Altans and did not identify residents within the 94303 zip code which was shared with East Palo Alto. Two companies used street addresses for Palo Alto customers. Staff compared the companies' address data base against address fields in the City's Utility Billing System and found 56 addresses which were not in the telephone companies data base but were registered in the Utility billing system data base as Palo Alto residents which resulted in an underpayment of $59,000 for the previous three years. Staff estimated the correction to the data bases would result in an additional $51,000 per year in additional tax revenue to the City. The City was in final negotiation with the companies to collect the $96,300 and $59,000. Staff found the telephone companies that were providing service in Palo Alto were not properly identified. Staff obtained a list from the California Public Utilities Commission (CPUC) of those companies that were registered to operate phone service in California. There were 161 companies, and a sample of 32 companies showed 5 companies had customers in Palo Alto but were not paying tax. There were 40 customers for those companies, and staff estimated to date the collections would be approximately $4,700 for those customers. Staff recommended that the Revenue Collections Office obtain the list from the CPUC on an annual basis and to compare that list on a judgmental basis to determine whether the companies were operating in the City of Palo Alto. Staff noted that penalties for late tax payments had not been assessed. The Palo Alto Municipal Code allowed for a 10 percent penalty for late payments. During Fiscal 1993-94, no penalties had been assessed and there had not been formalized procedures established by the Revenue Collections Office. Staff reviewed all of the payments made in 1993-94 using the check processing dates and estimated that at least 10 percent of the payments might have been late. Procedures have been established by the Revenue Collections Office to keep and review the postmarks for the late payments. Staff found that amounts received from
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telephone companies were not reviewed and analyzed. Staff found that there were fluctuations in the payments made over a period of time from certain companies. The telephone companies provided a minimal amount of support with its billing so it was critical that the City monitor the fluctuations in the receipt of the payments. The Revenue Collections Office was currently tracking the payments periodically. Staff found that taxable sales information was not always obtained and reviewed. Companies did not always include the detail in its billing. Staff found that three out of nine companies did not show taxable sales information. Without that detail, the Revenue Collections Office could not make the calculation accurately. The Revenue Collections Office had since developed a standardized report form which would be submitted to the telephone companies for completion and inclusion in their remittance. Staff extended its appreciation to Council Member Rosenbaum for his assistance with the audit which lead to a significant recovery. City Manager June Fleming said staff had responded in the staff report dated March 16, 1995. Council Member Fazzino asked what were the political considerations which went into the decision regarding the imposition of the tax on interstate telephone calls in 1987 as opposed to interstate and intercontinental telephone calls. Director of Finance Emily Harrison said the law had changed since the time the Utility Users Tax (UUT) was passed in 1987. The City had the ability but had not chosen to extend the tax to interna-tional and interstate telephone calls. Council Member Fazzino clarified in 1987 the City was only able to tax interstate calls. Ms. Harrison said that was correct. Council Member Andersen asked whether an 800 number was an interstate call. Ms. Harrison said the 800 number was handled the same way as an interstate or international call and would not be subject to a tax in Palo Alto. Council Member Schneider asked whether the taxes were collected but not paid to the City and, if so, whether there was a way to recover the tax money from the user. Mr. Vinson said the tax was not paid by the telephone companies and was not assessed against the customers. Staff had discussed the issue with the telephone companies, but it was up to the companies to decide whether the back taxes would be assessed. The companies had concluded that it was impractical to try to identify the customers, assess the tax, and collect the tax after three years. Council Member Schneider asked whether there had been any objec-
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tions from the people who now had to pay the tax. Mr. Vinson said no. Mayor Simitian asked whether the recommendations in the audit report required Council action. Ms. Fleming said the recommendations were administrative matters and would be handled as indicated. Council Member Andersen appreciated the cooperation demonstrated by both the Finance Department, staff, and the City Auditor. He was concerned about the extensive number of companies that could be a part of the industry and asked how the City would track those companies. Ms. Harrison said because of the cost benefit of pursuing companies that might not be generating significant amounts of revenue, staff would do an annual testing to keep track of universe. In many cases, it was not cost beneficial to go after small revenue producers. No action required. ADJOURNMENT: The meeting adjourned at 9:38 p.m. to Closed Session. The City Council met in Closed Session to discuss matters involving existing litigation as described in Agenda Item No. 5. Mayor Simitian announced that no action was taken on Agenda Item No. 5. FINAL ADJOURNMENT: The meeting adjourned at 9:50 p.m. 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.
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