HomeMy WebLinkAbout1996-12-09 City Council Summary Minutes Regular Meeting December 9, 1996 ORAL COMMUNICATIONS.........................................81-44 APPROVAL OF MINUTES OF OCTOBER 1 AND OCTOBER 7, 1996........81-44 1. Permit Streamlining--Implementation Plan - Refer to Policy and Services and Finance Committees........................81-44 2. Contract between the City of Palo Alto and SCS Field Services, Inc. for Landfill Leachate/Landfill Gas Extraction Well Replacement............................................81-44 3. The Finance Committee recommends to the City Council approval of the report on department achievements on Mission Driven Budget Key Plans and Impact Measures for Fiscal Year 1995-96 81-44 4. Ordinance 4389 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 901-909 Alma Street from CD-S(P) to PC" 81-45 5. PUBLIC HEARING: The Palo Alto City Council will consider an appeal of the Zoning Administrator's approval of a variance for property located at 548 Palo Alto Avenue for the location of a six-foot high stucco fence with six-foot by six-foot high columns within the public right-of-way between the front property line and the back edge of the sidewalk adjacent to the street frontage of an existing single-family residence in an R-1 Zone District...................................81-45
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6. The Utilities Advisory Commission recommends that the City Council accept and review the final report from Theodore Barry and Associates on the Utilities Organizational Review and requests that Council approve the Utilities Advisory Commission recommendation that the report be referred to the City Manager for staff's response to the consultant's recommendations and return with an implementation plan.81-48 7. Ordinance 4390 entitled "Ordinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1996-97 to Provide an Additional Appropriation to Fund the Purchase of Two Transport-Capable Fire Engines from Retained Earnings in the Vehicle Replacement and Maintenance Internal Service Fund" 81-62 8. Vice Mayor Huber and Council Member Fazzino re Single-Family Development Regulations--Assignment to Staff and Referral to the Planning Commission Regarding Modification of Floor Area and Related Regulations for Garages and Carports.......81-66 9. Council Comments, Questions, and Announcements.........81-67 ADJOURNMENT: The meeting adjourned at 9:43 p.m..............81-67
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The City Council of the City of Palo Alto met on this date in the Council Chambers at 7:10 p.m. PRESENT: Andersen, Fazzino (arrived at 7:45 p.m.), Huber, McCown, Rosenbaum, Schneider, Simitian, Wheeler ABSENT: Kniss ORAL COMMUNICATIONS T. J. Watt, homeless, spoke regarding the importance of the railroad crossing and the interference by the Sand Hill Road/El Camino Real connection. Glenna Violette, 95 Crescent Drive, spoke regarding representing the Palo Alto Civic League. Edmund Power, 2254 Dartmouth Street, spoke regarding honor. David Jones, 2500 Ross Road, spoke regarding speed bumps on the 2400-2500 block of Ross Road. APPROVAL OF MINUTES OF OCTOBER 1 AND OCTOBER 7, 1996 MOTION: Council Member Schneider moved, seconded by Huber, to approve the Minutes of October 1 and October 7, 1996, as submitted. MOTION PASSED 7-0, Fazzino, Kniss absent. CONSENT CALENDAR MOTION: Council Member McCown moved, seconded by Huber, to approve Consent Calendar Item Nos. 1 - 4. 1. Permit Streamlining--Implementation Plan - Refer to Policy and Services and Finance Committees 2. Contract between the City of Palo Alto and SCS Field Services, Inc. for Landfill Leachate/Landfill Gas Extraction Well Replacement; change orders not to exceed $5,800. 3. The Finance Committee recommends to the City Council approval of the report on department achievements on Mission Driven Budget Key Plans and Impact Measures for Fiscal Year 1995-96 4. Ordinance 4389 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 901-909 Alma Street from CD-S(P) to PC" (1st Reading 11/4/96, PASSED 8-0, Fazzino absent) MOTION PASSED 7-0, Fazzino, Kniss absent.
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PUBLIC HEARINGS 5. PUBLIC HEARING: The Palo Alto City Council will consider an appeal of the Zoning Administrator's approval of a variance for property located at 548 Palo Alto Avenue for the location of a six-foot high stucco fence with six-foot by six-foot high columns within the public right-of-way between the front property line and the back edge of the sidewalk adjacent to the street frontage of an existing single-family residence in an R-1 Zone District. Council Member Schneider said as lessor of a piece of property owned by the Mills' family, she would not participate in the item because of the potential concern of bias. Zoning Administrator Lisa Grote said both staff and the Planning Commission had recommended upholding the Zoning Administrator's approval of the variance application. Planning Commissioner Kathryn Schmidt said the Planning Commission had unanimously agreed with the Zoning Administrator's decision that the project met the three findings required for the variance and should be approved. If the fence was on the property line, a small area of property would be created between the sidewalk and fence which would probably be unattended. The fence also aligned with the neighbor's fence, who was appealing the variance. Council Member McCown asked whether the present fence, built in 1993, was located in the exact spot the prior fence had existed. Ms. Grote replied yes. Council Member McCown clarified the difference between the old fence and the current fence was the height and materials. Ms. Grote replied yes. Council Member McCown asked about the timing between the original variance, granted in 1993, and the fact it had taken three years to return to the Council in the form of a variance application, since if the City knew the fence was not in conformance in 1993. Chief Planning Official Nancy Lytle said a history of code enforcement actions had occurred with the property owner once a determination had been made that the fence had been built off the property line and in the public right-of-way. The applicant and appellant had gone through a series of meetings with the Code Enforcement Officer and herself to determine whether a compromise could be reached to satisfy both, which had taken place over a long period of time. Finally, after continuing code enforcement activity when the meetings conclusions had not resulted in any
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fruitful compromise or modification which would appeal to both parties, the applicant filed for an application to legalize what had been built in the public right-of-way. Although the appeal complained about the length of time the process had taken, staff's response in the staff report (CMR:492:96) had revealed the item had not been a high priority code enforcement issue. While staff had continuously taken action on the item and held several meetings with all parties as well as independent meetings, the issue had not surfaced until the application had been filed. Mayor Wheeler declared the Public Hearing open. Frank Mills, 548 Palo Alto Avenue, applicant for the variance, had lived at the site for 40 years and in 1993 had remodeled, at which time a variance had been applied for to replace an existing four-foot fence with a six-foot fence. The Zoning Department had approved the variance in April, and a fence was built in June of 1993 after which a complaint had been filed by David Cheriton. A new variance had been applied for in an attempt to settle the issue. In August 1996, the Zoning Administrator had passed the variance which again was appealed by David Cheriton and was unanimously passed by the Planning Commission. The Planning Department had approved two variances and one encroachment, had investigated all of Mr. Cheriton's complaints, and had found no valid objection. The Council was asked to approve staff's findings and approve the variance. Michael Price, 135 Cowper Street, lived next door to Mr. Cheriton and opposed Mr. Cheriton's objections, speaking in favor of the unique corner of Palo Alto created by the attractive gate and fence post located at 548 Palo Alto Avenue. The Council was urged to approve the variance in support of the 76 neighbors who had signed a petition in favor of the fence. Mayor Wheeler declared the Public Hearing closed. MOTION: Council Member McCown moved, seconded by Huber, to deny the appeal and uphold the Zoning Administrator's approval in accordance with the proposed Findings: Findings for Variance Approval 548 Palo Alto Avenue (96-V-14) 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 the parcel is an irregularly shaped through lot which is exposed to the street on three sides and San Francisquito Creek across Palo Alto Avenue. In addition, there is an unusually large and irregularly shaped parcel owned by the City of Palo Alto along a portion of the front property line which is visually
undiscernible from the subject site=s yard area;
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2. The granting of the application is necessary for the preservation and enjoyment of a substantial property right of the applicant, and to prevent unreasonable property loss or unnecessary hardship in that because the site has excessive street frontage, all yard area on the site is directly impacted by direct exposure to the public right-of-way. A six-foot-high fence in the location shown on plans received June 4, 1996 will provide better privacy for the subject site and the neighboring property and security for the yard area than would a four-foot-high fence. In addition, the fence will not completely obscure the view of the yard area and will still allow visual access to the front facade of the house and for the neighboring property, which is in keeping with the intent of the fence height regulations; and 3. The granting of the application will not be detrimental or injurious to property or improvements in the vicinity in that the fence maintains views of the house and yard area and will not result in unsafe sight-lines for the neighbor immediately adjacent to the fence or to users of the sidewalk or street.
It will not obscure the neighbor=s views of the creek and park due to its transparent construction. Council Member McCown disclosed a visit to the property. The fact that the original 1993 variance had not clearly indicated the fence would be rebuilt in the location it had previously been located was unfortunate. Some confusion had existed in 1993 about the location of the fence which had created the lingering problem. The fence was appropriate at its current location. Council Member Andersen asked how many hours had been spent on the project. Ms. Lytle said several hundred hours of staff time had been spent on the issue. Council Member Andersen thought a stipulation should be included in appeals requiring an appellant to cover some of the costs, especially individuals who failed to appear at the noticed meeting. The amount of money and staff time which had gone into the issue was disturbing. Mayor Wheeler disclosed a visit to the site, which had solidified her decision about the application and appeal in favor of the motion. The basis upon which the appellant had objected to the fence had been proven untrue, as the Planning Commission and Zoning Administrator had discovered. The appellant's property had no blockage of views. She was in agreement that Palo Altans should not hide beautiful homes behind fences which failed to provide any view into or by the community which was not the case in the subject property. The beautiful façade of the home was fully exposed to
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the public street and the only area impacted by the construction of the fence and wall surrounding was a side yard which would normally be a private area. MOTION PASSED 6-0, Schneider "not participating," Fazzino, Kniss absent. REPORTS OF COMMITTEES AND COMMISSIONS 6. The Utilities Advisory Commission recommends that the City Council accept and review the final report from Theodore Barry and Associates on the Utilities Organizational Review and requests that Council approve the Utilities Advisory Commission recommendation that the report be referred to the City Manager for staff's response to the consultant's recommendations and return with an implementation plan. City Manager June Fleming said the process of the Organizational Review of the Utilities Department (the Review) had involved the Utilities Advisory Commission (UAC) in much the same manner the Blue Ribbon Task Force had been involved in the Organizational Review. Staff's involvement had primarily been to provide information and assistance to the team. Tom Resh, Director, Theodore Barry & Associates (TB&A) reviewed the purpose and scope of the project, the approach taken, and some of the high-level findings. The purpose of the Review had been to determine how the Utilities Department was organized and whether it was performing at the level of efficiency and effectiveness in providing responsive and reliable service expected by its customers. TB&A had followed parallel paths, one of which had focused on the organization of the department and the other had been a competitive assessment. Although TB&A had the overall lead for the project, Ron Oechsler had been brought in as a subcontractor to focus on certain aspects: 1) update the study which had been conducted approximately one year prior to TB&A which had reviewed the competitive assessment; and 2) Gas and Water issues. Tim Szbalski was the project manager on the assignment. In conducting the studies, TB&A had relied heavily on competitive benchmarking studies as well as a technique known as Value Centered Management (VCM), an interactive process which involved a large number of interviews with Utilities Department staff and other City departments providing services to the public utility. A great deal of interaction had occurred with staff through a number of work sessions. On the competitive assessment side, TB&A had conducted interviews with some of the Utility's major customers to understand service expectations as well as some of the programs currently being offered for customer retention. Overall, TB&A had developed a number of recommendations. The Review had revealed the Utilities Department was a very strong organization which had gone through a number of changes over the past few years, all of which had been in the right direction. As a result, TB&A thought the Utilities
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Department was providing an exceptional value to its customers and the citizens of Palo Alto. However, considering what the industry was going through, particularly the entire electric industry in California with the major restructuring of the market, a number of key challenges faced the Utilities Department. Many of TB&A's recommendations had focused not on correcting shortfalls or weaknesses of the current organization, since there were very few, but on future improvements necessary to continue moving the Utility in the direction of maintaining the high levels of service which had been provided in the past. The standard for performance would continue to be raised; and the people raising the level would be the customers, a fundamental shift in the entire structure of the utility industry in California. An outline of the final report had been included in the documents and reports which had been provided. A number of appendices had been included with the report, including the individual benchmarking studies, competitive assessment, customer surveys, etc., which were not less important than the content of the final report but had been appendicized in order to more easily manage the voluminous amount of information which had been provided. The contents of the appendices were critical to the conclusions, findings, and recommendations. In total, 39 recommendations had been made for improvement. One of the appendices contained the framework for an implementation plan for the 39 recommendations. The next step would involve the Utilities Department going through the implementation plan, working out a schedule, and delineating the steps necessary to make the recommendations take the form of actions. Utility Advisory Commission (UAC) Chairperson Paul Johnston said the UAC had been given an assignment from the Council upon recommendation of the City Manager oversee the Review process, including the Request for Proposals (RFP), reviewing the bidders on the proposal, and ultimately following through with the consultant through the Review itself. The UAC had completed its task and thought the consultant had met the requirements delineated in the Scope of Work in completing the Review. The UAC was not in the position of recommending TB&A's recommendations but had completed its task with regard to the Review. Prior to endorsing specific recommendations, the UAC wanted to hear from staff, since staff had remained neutral to the process. Staff's insights into the recommendations should be reviewed prior to UAC endorsement of the implementation plan. If the Council referred the Review to the City Manager and staff for review, at a later stage a decision could be made as to whether or not the UAC should review a final proposed plan or distinguish among the various recommendations which would result. The Review had covered a fairly large scope, including planning and operational issues. Operational issues in the Utility were not normally part of the UAC's overview, whereas a long-term planning process was. The Council could return with a number of potential recommendations as to how the UAC should or should not participate. TB&A had presented many recommendations, some of which were at the operational level, while some were global
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in terms of the organizational impacts. Until staff had reviewed the recommendations, the ways of moving ahead were widely varied. An example of a recommendation in light of the UAC's reluctance to specifically endorse the Review was given, i.e., the recommendation for the Utilities Department to combine the electric and gas utilities into an energy utility and combine the water and wastewater utilities into a single water utility. While it could be argued from a standpoint of the future competitive environment that marketing energy services of both electric and gas could be better served with a utility focused on energy. At the same time, Palo Alto was in the business of maintaining a distribution system. From maintenance of a distribution system, one might argue that the alignment of resources currently tended to place gas, water, and wastewater, i.e., "pipe folks," more closely teamed together, might work better from a distribution system. Good arguments could be made for a variety of methods. From the City's standpoint, the work was not complete and needed to be reviewed by staff and return to the Council with recommendations. The Review had been very helpful, had pointed to particular areas where stronger emphasis was desired in planning and information technology, and focus on marketing service toward the larger key customers. Council Member Schneider asked about the loss of retail sales mentioned on page 8 of the Executive Summary, regarding the risks of competition and deregulation in the electric market such as whether the reference had been to both commercial and residential customers, and what percent of electric usage came from commercial versus residential. Ron Oechsler, Project Leader, Resource Management International (RMI), said reference to the loss of retail sales meant the ability or desire of the customer to purchase the actual commodity or generation such as purchase energy from a supplier other than the City, while the City continued to supply the commodity through its distribution grid. A general trend had begun in the natural gas industry where the transportation function had been unbundled from the commodity function. The commodity function had been amenable to competition where a number of private firms had competed to provide the service, whereas the transmission was a monopoly function. Council Member Schneider asked whether "customer" referred to both residential and commercial. Mr. Oechsler replied yes. Traditionally, industrial and large commercial customers were considered most "at risk" because larger energy bills were often an important factor in the customer's position globally and meant the customer had a leverage which could be exerted over existing suppliers. However, in recent years, the "aggregation" of residential and small commercial customers had become a greater consideration. The California Public Utilities Commission (CPUC) had taken the position that when competition was
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implemented for the utilities it regulated, all classes would have the ability within a short transition period to make their own purchase decisions. Numerous firms were "eyeing" the residential market as something to pursue. In examining the effects of competition, consideration had to be given to both residential and commercial/industrial. Director of Utilities Edward Mrizek said approximately 80 percent of Palo Alto's load was commercial/industrial and probably 10 customers made up 50 percent of the entire load. Council Member Schneider asked about the reference to the possibility of having the Utility Department purchase from other than the City at some point. Mr. Resh said the reference had been in connection with a review of the services currently being provided by City departments. A sequential process had been established, the first step of which would ensure that services being provided by City departments were as cost-effective and supportive as necessary. Much time had been spent determining whether the services were meeting the needs of the Utility, particularly in light of the competitive challenges the Utility was facing. If it was not working properly, the Utilities Department should be given latitude to pursue the solution. The third or fourth step in the process involved obtaining services elsewhere but was not the first recommendation. City Attorney Ariel Calonne said the summary on page 8 of the Executive Summary reflected a policy decision the Council might or might not make in the future. Staff had recommended to the UAC that the City opt to permit competition in its electric market, which was a policy recommendation to the UAC. The UAC had endorsed the recommendation on which the Council had not yet acted. Council Member Fazzino had followed the deregulation issue closely but was unclear about the impact on municipalities, i.e., how municipal utilities could compete with large utility providers like Pacific Gas & Electric (PG&E). Ms. Fleming said the issue of deregulation was not new to the City and a great deal of prudent, preparatory work had already been done to which TB&A had referred throughout the Review. One step which had been planned, but not implemented, involved the preparation of a primer for the Council on the issue of deregulation because of the number of related issues. Staff planned to work on the primer at the beginning of the next calendar year which was a major issue the Council would be faced with. A study session would be utilized to enable the Council to understand the issue better. The Utility would be able to compete with others in the industry, but business would have to be conducted very differently. She and Mr. Johnson had already begun discussions and would begin educating the Council about deregulation, what had already been done, and changes which
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would need to take place. The City had already begun to converse with its larger customers and had made commendable progress. Mr. Oechsler agreed with Ms. Fleming's comments. The issues strongly in Palo Alto's favor included: 1) having among the lowest rates of any utility in California either publicly or investor-owned; 2) a very high degree of satisfaction among customers as revealed in the unusually high ratings in surveys; and 3) power costs had not contained a high level of stranded costs which many other utilities, including municipalities, contained. The biggest advantage or service a small utility such as Palo Alto could offer to large customers was the intimate knowledge of the customers, a benefit City staff already held. Surveys had indicated many customers preferred dealing with a local utility, even though many customers envisioned exercising choice in a competitive market. The relationship was a foundation upon which to build. The various clients with which his firm was working across the country, both municipal and investor-owned, were exploring offering an expanded array of services, i.e., new energy products and services which could be tailored to meet a customer's needs making it simpler to conduct business. The City could offer itself as a progressive, well-managed organization with competitive power costs and an array of products and services tailored to meet the customer's needs. Council Member Fazzino asked how the stranded cost issue impacted municipals, both positively and negatively. Mr. Oechsler said the problem originated because many utilities across the country had generation plants which were in the rate base past investments that for one reason or another were not competitive in the current environment. The issue was not as much one of incompetence as bad timing. In many cases, power plants which seemed good 15 to 20 years prior, over the passage of time, were no longer promising. Certain technologies had not proven out. Across the industry, generating costs had been included in rates which were well above market levels. If customers exercised choice and purchased generation from another entity, absent other actions, the provider would no longer be in a position to recover generating costs. Such scenarios had given rise to what was known as Competitive Transition Costs (CTC) which the CPUC had authorized and legislature had endorsed. When added to the current market price for power, the CTC summed up to what was currently embedded in the utilities cost structure. If a utility currently had $.06 power and the market price was $.02, for a transitional period, a $.04 charge would be levied as a nonbypass charge in order to recover past investments. The method was one by which utilities were able to recover costs currently above market. Council Member Fazzino understood everyone paid the cost for the transitional fee, querying the net impact of the concept or fee on a municipal utility as opposed to an investor-owned utility which had significant stranded costs, i.e., whether the City was at an
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advantage because of not having significant stranded costs in a deregulated environment. Mr. Oechsler said the City had a very strong advantage in not having many assets. Many other utilities had far greater exposure and far greater levels of debt tied up in plants and long-term debts which could not easily be restructured. Without rendering a legal judgment, many municipal utilities, like the City of Palo Alto, had the ability under existing statutes to impose a CTC on customers without having to ask permission of the PUC or other entities. Mr. Calonne said the City had some costs which even a customer bypassing Palo Alto generation would be unable to escape such as payment for Diablo Canyon. Council Member Andersen said the Review had indicated the City had low rates without a significant amount of stranded costs from its own particular arsenal, however, the solution seemed only short-term. As competitors rid themselves of costs and became more competitive, the City would become more vulnerable. He sought the competitive difference when the City was no longer in the position of having a cost advantage and what would continue to make Palo Alto unique. Tim Szbalski, Project Manager, TB&A, said the distribution utility was the bulk of what ran the system. Benchmarking data and materials provided by the American Public Power Association (APPA), National Electric Cooperative Association, etc., appeared to suggest no real economies existed beyond the 50 to 100,000 size organization on the distribution side of business. As a distribution company, Palo Alto could be competitively successful. Issues which might determine success or failure for a smaller organization in the future included: 1) information systems; 2) a secondary marketing effort to keep up with national branding; and 3) aggregation of purchasing. Mr. Resh said the Review had contained a number of specific recommendations which focused on cost reduction and cost improvement in the operation of the distribution utility. TB&A had examined the distribution cost relationship between PG&E and Palo Alto and did not see much of an advantage. Once the generation component was removed, the two were very close. Council Member Andersen asked whether Palo Alto could reduce some of its distribution costs. Mr. Szbalski replied yes. Council Member Andersen asked about the total number of staff suggested in the Review which appeared to contain a considerable addition of staff without any downsizing.
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Mr. Szbalski said due to the risk Palo Alto faced, and in order to succeed and strengthen the organization, it would be necessary to market customer information, maintain good mapping records, have a good information technology system, etc., all which required an additional three positions in the area of information technology in the utility organization. Other recommendations called for reductions in certain substation areas. Overall, the result was a small reduction in staff. Council Member Andersen asked whether the City should consider moving outside its existing area. Mr. Resh replied yes, the issue was one the Utility should consider. Anytime the Utility could demonstrate a market advantage in providing services to customers outside the service territory, it should consider doing so. The result would be a source of new revenue and a way of keeping the cost-competitive position. Palo Alto was in a very enviable position in a number of areas. Council Member Andersen said the organizational structure revisions failed to contain the words "City Council" where the Council fit into the structure, especially as the Utilities entered a competitive environment. Ms. Fleming said discussions with the consultants, the UAC, and staff had revealed that the City's usual process for decision making was lengthy and laborious when working in a deregulated environment in which decisions had to be made quickly. The markets changed very quickly and the processes the City had in place required multiple levels of approval with referrals and returning to the Council prior to any decisions. The process would have to change and the rationale often given and considered for making decisions about purchases would need to be thoroughly examined and revamped. The tight controls which had been given to staff in terms of decisions it could make without returning to the Council would also have to be carefully reviewed. The Utilities Department would have to function more like a business, able to make decisions while remaining accountable and under very strict guidelines without having to go through the usual processes. Vice Mayor Huber asked about the process. Ms. Fleming said the process would be very similar to the one under which the Citywide Organizational Review had functioned. The Review would be forwarded to the City Manager's Office and recommendations would be returned to the Council. While the UAC was not involved in operational issues, the consultant had taken a very liberal interpretation of the assignment, which had been to the City's benefit and had turned into more than an organizational review, at the UAC's urging, such as issues related to deregulation. She and staff would work on the Review and, although
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the UAC was not a body to which staff would seek information about daily issues, as assistance was needed on preparation of the response, and questions might be posed to the UAC. If the Council specifically wanted the issue returned to the UAC, it should wait until the staff report had been reviewed after which action could be taken to send it on to the UAC. She was confident staff would be able to return with a response to which the Council could respond. Mr. Calonne said the Council's role faced important limitations on administrative service and the appointment and interaction with employees. Staff would work with the City Manager, the UAC, and the Council to gain insight on how the process would involve the UAC. The Council needed to give serious thought to whether or not it wanted the UAC to be in a position of supervising administrative staff or having an appearance of doing so. He had been concerned
about UAC=s involvement at the outset of the Review. Ms. Fleming said advice could be sought from the UAC without going through a formal process. Mr. Johnston said much of the Review had focused on operational issues which were not normally under the UAC's purview, agreeing with the City Manager that the item was not a normal referral to the UAC. However, because the scope of the study had been broader and dealt with competitive issues, more global organizational issues might arise which went to the longer-term planning process. The decisions, however, should be made when the City Manager prepared or the Council reviewed the staff report. Vice Mayor Huber asked whether reductions in profit levels could be expected as the City competed in the future which would affect the transfer to the General Fund. Mr. Oeschler said the issue of the transfer to the General Fund had not been considered as part of the scope of the project so it had not been evaluated. Ms. Fleming said the focus of deregulation would inevitably mean providing services at reduced costs. The gap in rates which currently existed between Palo Alto and PG&E would narrow. As a result of such narrowing, less funds would be transferred to the General Fund under a policy the City would adopt. Mr. Oechsler said most of the industries which had undergone restructuring had seen not only a compression of prices for the competitive versus the commodities such as significant reductions in the price of gas due to competition, but margins for distributors had been under pressure because customers wanted to ring out as many costs as possible in the input costs to allow competition in the global market. Service providers, including transporters and distributors, could expect that in a competitive
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market place pressure would be placed on margins. To deal with pressure on margins, many companies had adopted a strategy of recognizing the commodity markets which would be fiercely competitive with very small margins. Large energy suppliers wanted to move upstream and start rebundling the business, taking the very competitive commodity at any given hour with other services to make the combined package more attractive to the customer. The City was strongly urged to pursue the trend, i.e., develop an expanded array of services to offset the pressure placed on margins. Council Member McCown asked about the ranking of recommendations. The Appendix contained the complete list of 39 recommendations while the Executive Summary had been distilled down to 11 major recommendations. Mr. Resh said an effort had been put into identifying all of the recommendations, 11 of which were the most important, and the remainder of which were not ranked in any particular order. The top 11 in the Executive Summary contained the trail of the argument for what would make Palo Alto successful, i.e., starting with the planning process, being competitive with customers, going through a series of operational recommendations, etc. In a sense, the 11 recommendations represented the path by which the City would become competitive in order to meet the customers, reduce costs, and keep up with information technology. The top 11 had to do with competitiveness and, on an operational level, the cost savings. Council Member McCown asked staff whether items should be included on the list which was not found in the Review. Mr. Mrizek said staff had not become involved in benchmarking in detail. Nothing major differed in terms of the 39 recommendations, and staff agreed with many things contained in the Review. The recommendations would provide the City with a more competitive Utility by which to enter deregulation. Ms. Fleming said given the fiscal year configuration, she and Mr. Mrizek had discussed the possibility of pieces of the Review to which the City should respond with more urgency than others. Staff might not agree with TB&A concerning which items were most critical since staff was considering the items not only in terms of importance but timing. Mayor Wheeler asked what impact formation of an energy utility in a reorganization would have on personnel, assuming additional personnel would be required. Mr. Resh said formation of an energy utility was a direction with which the pressures of the market place were likely to push the Utilities into but not recommended for immediate action. Palo Alto's customers were benefitting from the integration, synergies were being gained in the field operation, and the extent the
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Utilities Department had gone into creating integration should not be thrown away at the current time. The issue had been raised because TB&A thought, unless things changed dramatically in the water utility, and water gained the same kind of competitive threats faced by the electric and gas utilities, the future would see a growing disparity in everything from salary levels to the requirements and demands on the talent levels of the organization, to the pressure of maintaining a competitive business versus a noncompetitive business. The issue had been raised as a flag and would not occur for at least three years. Mayor Wheeler clarified that moving in the direction of an energy utility was premature. Mr. Resh replied yes. Mayor Wheeler asked whether the comments were positive or negative with regard to the City's aggressive infrastructure replacement program which would need to be balanced out, i.e., the cost of the aggressive infrastructure in terms of the rates required to retire the debt or pay-as-you-go financing versus the City's ability to condition the infrastructure to deliver product to customers in the most effective and efficient manner possible. Mr. Oechsler said the benchmarking of water and wastewater had indicated a number of objective indicators which spoke to the need for infrastructure improvements. Leak rates were somewhat higher for the City's water than for other panel members and similar information was found in the natural gas area, indicating infrastructure replacement was important. Staff indicated the parameters had begun to improve. The message PG&E had recently received was that saving money was good but not at the expense of interruptions in service. Providing high levels of service to customers was important. Infrastructure was justified in the areas which had been examined by his organization and the infrastructure program was appropriate for the utilities. Mayor Wheeler asked whether the comment under the second bullet on page 12 of the Executive Summary, "The 'ideal' is not uniformly achieved, because some 'non-utility' services provided by Public Works (e.g., refuse collection) are perceived as 'poorer service,' asking whether the "poorer service" was due to the result of information from surveys of benchmark cities or among the City's own customers. Mr. Oechsler said the customer satisfaction surveys focused on the four commodities provided by the Utilities Department and no effort had been made to inquire about areas outside the scope of the study. However, in the process of asking customers about overall satisfaction with City services, several comments had been made indicating activities outside the Utilities Department which appeared on the Utilities bill were perceived as being the
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responsibility of Utilities, which was one of the disadvantages of having the services integrated. If perceptions were eroding the customer satisfaction level with services vitally important to the revenue stream, steps should be taken to either address the services or move toward a separation of the competitive from the non-competitive part of the business. Utilities Advisory Commissioner Richard Gruen, Box 2351, said TB&A had utilized 1994 data in the Review and the newest data was two years old and the oldest data was three and one-half years old. The electric and gas industries had changed widely since that time. Palo Alto's customers would not compare the Utility with data, but the price which would be determined by the real costs. The three components to electric or gas were generation, transmission, and distribution to residential customers. Page 9 of the Executive Summary had lumped generation and gas together, which was incorrect since Palo Alto purchased transmission and handled its own distribution. Support and marketing costs had all been included under distribution, but it was not truly distribution, rather the manner in which the Utility handled its customers. Good information was necessary to make good decisions. Although TB&A's second recommendation, "Determine reliability needs of each customer and class; determine willingness to pay; determine needs and set foals; rank projects by contribution to reliability; and link to overall business planning process," went to the issue of what the City could offer its customers that another company would not be able to offer, the planning process failed to take into account the customer's needs. Council Member Andersen asked whether Mr. Gruen's vote against the recommendation had been to draw attention to the issues just articulated or whether he concurred with the recommendations. Mr. Gruen said most of the recommendations were supported, however, he disagreed with Appendix K which failed to address the needs of the customers. The issue of splitting the energy utility was not necessary, however, splitting competitive utilities from noncompetitive utilities might be acceptable. MOTION: Council Member Rosenbaum moved, seconded by Andersen, to accept the final Organizational Review report by Theodore Barry and Associates on the Utilities Organizational Review and approve the Utilities Advisory Commission recommendation that the report be referred to the City Manager for staff's response to the consultant's recommendations and return with an implementation plan. Council Member Rosenbaum thanked the consultants for an excellent job and the UAC for the great effort put into reviewing it. A very important aspect of the report had been the assurance that the City was currently running an efficient Utility. The City wanted to maintain services in the most efficient manner. Inevitably, the
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emphasis of the current meeting's questions had indicated the desire to position the Utility for the future which would involve many changes, some of which might cost money and some which might save money, all of which to ensure the survival of the Utility. The questions about the General Fund transfers were important. Council Member Andersen concurred with Council Member Rosenbaum's comments. The bottom line was the City's ability to hold on to its top 10 customers. As much as he was interested in taking care of residents and small businesses, when 50 percent of the business was conducted by 10 businesses, the City would need to find out clearly what was necessary to meet the needs of the 10 and cater to them. Although the City had nothing about which to be concerned, particularly in the short-term, some of the competitive factors coming into play would have an impact on the City's operations. The issue was significant. Council Member Simitian raised the issue of cost-savings as an element of the effort, recognizing the fact that a number of the recommendations had been laid out in a cost/benefit format which he appreciated, even though many of the longer-term policy and planning issues had far greater cost ramifications. With respect to some of the earlier questions and comments about the UAC's further involvement, many of the issues which had been raised and long-term planning issues went to fundamental risk/reward questions which the City would have to deal with and were fundamentally policy issues and not only appropriate but necessary topics of conversation for the UAC. He hoped that before the item returned to the Council to discuss and resolve some of the larger issues, the Council would have had the benefit of the UAC's opinions, which was what the UAC had been created for. Council Member Schneider agreed with Council Member Rosenbaum. The work was very impressive and had required a large amount of energy on the part of the consultants, staff, and the UAC. The seamless work was a tribute to the parties which had worked together. The Utilities Department was complimented for perceiving themselves as being run like a business. A business which provided the kind of revenue the Utilities provided to the General Fund should be considered a business. The market was very fast-paced and belonged in the hands of professionals. The information could be reported to the Council like other City investments monthly or quarterly, concerning decisions made. The Council could trust its staff to make the right decisions. Council Member Andersen's comments about 50 percent of the business being covered by the top 10 users was probably an industry standard. In terms of the number of customers using the utilities, residential customers far outweighed the number of individuals which the City should remain mindful. Although residential customers might only represent 20 percent of the users and the numbers and dollars, in terms of numbers of individuals, it was important to keep in mind the service being provided to individual residents of the City.
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Mayor Wheeler agreed with her colleagues in thanking the consultant, staff, and the UAC. MOTION PASSED 8-0, Kniss absent. ORDINANCES 7. Ordinance 4390 entitled "Ordinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1996-97 to Provide an Additional Appropriation to Fund the Purchase of Two Transport-Capable Fire Engines from Retained Earnings in the Vehicle Replacement and Maintenance Internal Service Fund" Fire Chief Ruben Grijalva said the Palo Alto Fire Department (PAFD) was currently able to handle 90.5 percent of all patients transported out of Palo Alto, leaving 9.5 percent or roughly 250 to 300 patients not transported by Palo Alto paramedics. The PAFD responded to calls within 6 minutes or less 90 percent of the time. When PAFD units were busy and unable to respond to the 250 to 300 patients per year, the City relied on a Santa Clara County contractor to provide service as a backup. The average response time for contract paramedics to arrive in Palo Alto was approximately 16.5 minutes. In an updated study examining paramedic service delivery times in 1995, staff had found several key recommendations for improving services while maintaining 100 percent cost recovery for the City. The two paramedic transport engines recommended in the staff report (CMR:475:96) for approval would allow the PAFD to deliver service to an additional 4.5 percent of patients, or roughly 125 additional patients, leaving only 5 percent to be handled still by private contractors. The level of service enhancement, while at no additional cost to the General Fund since it would be offset by the new revenues generated by the additional 125 transports, would improve the level of service while maintaining 100 percent cost recovery. Council Member Simitian asked about potential litigation at the state level regarding the transport issue. City Attorney Ariel Calonne said the City would not be exposed to litigation at the state level unless Palo Alto moved into extra-territorial service. Conceivably, an arrangement with Stanford might be examined, however, the City was currently covered. Council Member Simitian asked whether staff's recommendation would remain the same regardless of the outcome of the statewide litigation. City Manager June Fleming replied yes. Council Member Fazzino asked what was meant by a "transport-capable" vehicle.
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Chief Grijalva said the current fire apparatus served multiple purposes, however, it failed in its ability to transport patients to the hospital. The City currently had two ambulances which, when busy, meant reliance on private vehicles. A transport-capable engine was designed to meet ambulance standards in the cab compartment and had a gurney and all necessary elements for transporting a patient. The proposal would not use the engines as the primary method of transport, only for simultaneous third and fourth calls. Council Member Rosenbaum asked about requirements necessitating paramedic accompaniment. Chief Grijalva said a paramedic was required to transport a patient in a paramedic service. The proposed engines would initially be assigned to stations where paramedics were already staffed, so the proposal would not require an increase in authorized staffing for the number of paramedics. The staff report (CMR:475:96) had indicated the possibility, if financially feasible and still 100 percent cost recoverable, of requesting additional funding for paramedics at some future time. The current request, however, had not included additional paramedic staffing. Council Member Rosenbaum asked whether an engine could legally be sent with only one paramedic while the other paramedic was kept for future calls. Chief Grijalva said Santa Clara County had approved the one paramedic service delivery option which was currently in place in San Jose. The engines would be located in an area with two paramedics. Stations 1 and 2 were staffed entirely by paramedics with the exception of the company officers. In most cases, the engines would have a minimum of one paramedic. Council Member Rosenbaum thought one of the reasons for the two extra engines was the tying up of paramedics for transport which would be more efficient if immediately available for another call rather than used for the transport. If only one paramedic went on a call, the other would still be available. Chief Grijalva said currently at Stations 1 and 2, an engine and a paramedic ambulance were housed. Each unit was staffed by paramedics. The paramedics currently on engines were not equipped or able to deliver paramedic services on the existing engines. Only the ambulances delivered paramedic services at the current time. By providing engines with such capability, two units would be housed at each station capable of delivering paramedic services, including transport. Council Member Rosenbaum understood the problem was currently having two paramedics in the ambulance and in some cases a patient with a problem being taken to the hospital. If another call came
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in and paramedics were tied up, he asked whether one paramedic could go with the patient, leaving the other paramedic instantly available. Mayor Wheeler thought Chief Grijalva was indicating that the number of personnel assigned to the two stations where the transport vehicles would be located were more than the necessary qualified paramedic staff for the existing engines. The PAFD had sufficient numbers of paramedics, but insufficient equipment. Deputy Fire Chief Judith Jewell said currently at the stations, both of the firefighters on the ambulance were paramedics. There were also paramedics on the engine companies. When the initial medical aid came in and the paramedics on the ambulance transported, one paramedic rode in back with a patient and delivered patient care while the other drove. One or two paramedics were still on the engine company which could be utilized as another transport unit. Four paramedics were not required, but the staffing setup provided additional paramedic trained personnel available to staff the medic transport engines. Council Member Schneider asked about the Request for Proposals (RFP) which had been sent out to ten bidders and the only one response had been inadequate, asking where the equipment would be found. Ms. Jewell had recently attended a firefighter conference and had spoken with other vendors interested in transport engines, one of which had designed transport engines for other jurisdictions. Council Member Schneider asked whether staff would send out RFPs to the prior ten bidders as well as additional interested companies. Ms. Jewell said some of the ten would be interested in rebidding for the transport engine. Mayor Wheeler asked whether the contract with American Medical Response (AMR) required a threshold or number of calls. Chief Grijalva said the City had no contract with AMR. AMR had a contract with Santa Clara County to provide services throughout the County. The contract specified response criteria but specifically excluded Palo Alto because of its own paramedic program. However, in the contract, AMR was required to respond and provide backup to Palo Alto but had no time standards or criteria it had to meet. Mayor Wheeler clarified a decision to move forward with the staff recommendation would not jeopardize the City's service from AMR. Chief Grijalva replied no.
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Council Member Simitian would deal with the issue in his new role, understanding it was an area fraught with controversy which Palo Alto had been able to escape because of its long-time history. However, the subject was one of great political debate and statewide litigation and occasionally the subject of thoughtful conversation in terms of the public interest. The City was encouraged to keep a watchful eye on the issue. MOTION: Council Member Schneider moved, seconded by Fazzino, to adopt the Ordinance. MOTION PASSED 8-0, Kniss absent. COUNCIL MATTERS 8. Vice Mayor Huber and Council Member Fazzino re Single-Family Development Regulations--Assignment to Staff and Referral to the Planning Commission Regarding Modification of Floor Area and Related Regulations for Garages and Carports Vice Mayor Huber said the issue had been raised when the Council had gone through the historic ordinance earlier in 1996. He and Council Member Fazzino had thought the item should not remain languished and by requesting a Council referral would keep it at a priority level. Peter Vilkin, 673 Maybell Avenue, asked whether the issue had been the result of carports being raised in response to research which had been conducted in the historic area or in response to complaints from people in the City. Council Member Fazzino said "both." Mr. Vilkin asked the Council to take into account the wishes of hundreds of other Palo Altans who preferred things which others complained about such as garages attached to houses, sizes of new houses, etc. He asked whether every complaint was being admirable, i.e., just because someone complained about wrap-around sunglasses, should a ban be put on wrap-around sunglasses. Council Member Andersen said the issue under consideration was carports. Some construction on new houses suggested an owner might ask for a wall to create a carport. Mr. Vilkin said building a carport was against the rules. Council Member Andersen asked what punishment could be inflicted on a contractor for such an action. Mr. Vilkin said people often asked whether an area could be closed in later, to which he explained the rule disallowed it.
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Council Member Andersen said many new homes were being designed with the particular intent of making it very simple for a future homeowner to put a wall back in. Mr. Vilkin said entire walls were being left out. Bob Moss, 4010 Orme Street, said the Barron Park Association requested enlarging the assignment to staff to include specific design guidelines. A survey had been sent out on November 8, 1996, and within 12 days, 54 percent of the people had returned the survey. Many people in Barron Park wanted to see very specific design review requirements because of inappropriate and excessive development. The Council was encouraged to make guidelines mandatory rather than voluntary. MOTION: Vice Mayor Huber moved, seconded by Fazzino, to direct staff to develop amendments to the single-family regulations addressing the carport and garage issue and refer the issue to the Planning Commission. Further, if staff is unable to address this issue in the first part of 1997, it should be considered in the review of the Planning Division's 1997-98 work program as part of the City's budget process. MOTION PASSED 8-0, Kniss absent. 9. Council Comments, Questions, and Announcements Council Member Simitian spoke regarding Proposition 208. City Clerk Gloria Young indicated that an information sheet regarding Proposition 208 would be forwarded to the City Council in the next City Council packet. Mayor Wheeler reminded the City Council of its meetings with the Council Appointed Officers and the consultant, John Shannon, scheduled for Wednesday, December 11, 1996, from 6:00 p.m. to 9:00 p.m., and the joint meeting with the Menlo Park City Council at the Cultural Center Thursday, December 12, 1996, beginning at 7:00 p.m. ADJOURNMENT: The meeting adjourned at 9:43 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
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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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