HomeMy WebLinkAbout1998-02-02 City Council Summary Minutes Special Meeting February 2, 1998 1. Interviews for Mid-Peninsula Access Corporation (MPAC) Board of Directors............................................86-3 ADJOURNMENT: The meeting adjourned at 7:00 p.m...............86-3 1. Council Selection of Candidates to be Interviewed for the Planning Commission.....................................86-4 ORAL COMMUNICATIONS..........................................86-4 APPROVAL OF MINUTES..........................................86-4 2. The Policy and Services Committee recommends to the City Council approval of installation of stop signs on Webster Street at North California Avenue.......................86-5 3. Contract between the City of Palo Alto and Inacom for Acquisition and Installation of Computers...............86-5 4. PUBLIC HEARING: The Palo Alto City Council will consider an appeal from the decision of the Director of Planning and Community Environment and the Historic Resources Board to designate the single family residence located at 805 Channing Avenue as a Contributing Residence......................86-5 5. Ordinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 to Provide an Additional Appropriation for Pre-Development Costs Associated with the Acquisition of the Sheridan Apartments by the Palo Alto Housing Corporation....................................86-13 6. Policy and Services Committee recommendation re Request for Proposals for the Provision of Universal Telecommunications Service................................................86-14
7. Council Member Fazzino and Mayor Rosenbaum re Cable Co-Op=s Proposal...............................................86-23 8. Council Members Eakins and Wheeler re Consideration of Possible Urgency Action for Tree Preservation at 450 Sequoia Avenue.................................................86-38
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9. Council Comments, Questions, and Announcements.........86-42 ADJOURNMENT: The meeting adjourned at 11:15 p.m.............86-42
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The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:50 p.m. PRESENT: Eakins, Fazzino (arrived at 6:55 p.m.), Huber, Kniss (arrived at 6:50 p.m.), Mossar, Ojakian, Rosenbaum, Schneider, Wheeler SPECIAL MEETINGS 1. Interviews for Mid-Peninsula Access Corporation (MPAC) Board of Directors No action required. ORAL COMMUNICATIONS None. ADJOURNMENT: The meeting adjourned at 7:00 p.m.
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Regular Meeting February 2, 1998 The City Council of the City of Palo Alto met on this date in the Council Chambers at 7:05 p.m. PRESENT: Eakins, Fazzino, Huber, Kniss, Mossar, Ojakian, Rosenbaum, Schneider, Wheeler SPECIAL ORDERS OF THE DAY 1. Council Selection of Candidates to be Interviewed for the Planning Commission City Clerk Gloria Young announced that Patrick Burt, Gay Danforth, Michael Midolo, Bonnie Packer, Gail Schubert and Duf Sundheim received four or more votes and would be interviewed on Monday, February 23, 1998. ORAL COMMUNICATIONS Cecelia M. Horn, 3470 Janice Way, spoke regarding red light run at Mayview Avenue and Middlefield Road. Edmund Power, 2254 Dartmouth Street, spoke regarding the printed media. Joe Baldwin, 280 Waverley Street, spoke regarding old business. Lynn Chiapella, 631 Colorado Avenue, spoke regarding 500 Los Trancos Road and Portola slope. Jim Dinkey, 3380 Cork Oak Way, spoke regarding leaf blower solution. APPROVAL OF MINUTES MOTION: Vice Mayor Schneider moved, seconded by Wheeler, to approve the Minutes of November 10 and November 17, 1998, as submitted. MOTION PASSED 7-0-2, Mossar, Ojakian Αabstaining.≅ CONSENT CALENDAR MOTION: Council Member Wheeler moved, seconded by Schneider, to approve Consent Calendar Items No. 2 and 3. 2. The Policy and Services Committee recommends to the City Council approval of installation of stop signs on Webster Street at North California Avenue, and to direct staff to seek long-term solutions on North California Avenue
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Resolution 7742 entitled ΑResolution of the Council of the City of Palo Alto Amending the Citywide Stop Intersection
System Map≅ 3. Contract between the City of Palo Alto and Inacom for Acquisition and Installation of Computers MOTION PASSED 9-0 for Item No. 2. MOTION PASSED 5-0 for Item No. 3, Eakins, Fazzino, Kniss, Ojakian
Αnot participating.≅ PUBLIC HEARINGS 4. PUBLIC HEARING: The Palo Alto City Council will consider an appeal from the decision of the Director of Planning and Community Environment and the Historic Resources Board to designate the single family residence located at 805 Channing Avenue as a Contributing Residence. Historic Resources Board Chairperson Roger Kohler said a majority
of the Historic Resources Board (HRB) supported staff=s proposal to designate the house a contributing structure as it was in keeping with the number of homes declared contributing throughout the year. Its scale and style were harmonious with the neighborhood. The
changes that were made were reversible and met Criterion No. 4, ΑIt embodies distinctive characteristics of a type, period, region, or method of construction, is particularly representative of an architectural style or way of life important to the city, region, state or nation, represents the work of a master, possesses high artistic values or contains elements demonstrating outstanding attention to architectural design, detail, materials or
craftsmanship.≅ The three opposing votes were based on mixed feelings because the house had been changed too much to consider it as contributing. Council Member Mossar asked, assuming that the house remained a contributing structure, what the owner could do with the house. Preservation Architect Consultant for Interim Historic Program Barbara Judy said a contributing residence designation was not a preservation designation; therefore, the property owner could propose to alter the house or replace it entirely. Substantial alternation or proposal to replace would trigger review for compliance with Compatibility Review Standards which were adopted under the Interim Historic Ordinance. Council Member Mossar asked whether the property owner could build a contemporary house on the lot. Ms. Judy replied yes.
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Council Member Mossar clarified that the house would not have to be replaced with a craftsman style house, or if it were remodeled substantially, would not have to be remodeled in its original style. Ms. Judy replied no. Vice Mayor Schneider said there was no discussion on the dissent of the HRB members, and she was surprised that the Council was not privileged to the discussions that were held. HRB Chairperson Kohler had mentioned that the dissenting votes ranged from strong to moderate feelings. She asked when those feelings and discussions could be elaborated on. HRB Chairperson Kohler said HRB member Anderson was fairly adamant that the house was not a contributing structure because there was not enough style within the house. HRB member Bernstein felt the same but was wavering. He himself also wavered but finally decided that the house did not have the strength other contributing structures had which had been designated throughout the year. The majority of the HRB members who were in favor of the house being a contributing structure were very strong in their feelings that the home and its location were the key to the entrance to the neighborhood and that the house had strong significance for the neighborhood. Council Member Kniss understood that if the house were a contributing structure, it could be torn down within a reasonable length of time, and the only stipulation would be that the City would oversee, with its current guidelines, what type of structure would replace the old structure. Ms. Judy replied yes. Council Member Kniss said it was important that the Council was not saving a house but simply indicating what would go into a neighborhood that would maintain integrity and character. Council Member Wheeler recalled that at the HRB meeting the applicant was not present and had not indicated prior to the meeting that there were any problems with the staff recommendation. Ms. Judy said that was correct. Mayor Rosenbaum declared the Public Hearing open. Tim Flagg, Appellant, 805 Channing Avenue, said the Interim Historic Ordinance was not written with the intention that such houses be designated as contributing residences. The reason given for 805 Channing Avenue being given contributing status was that it was labeled a Bungalow, which was one of the architectural styles
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that Palo Alto wanted to keep. Palo Alto=s Single-Family Residential Design Guidelines listed Bungalow as one of the styles and included five features, two of which were not present in the Channing house. He had talked to a well-known local architect who questioned calling the house a Bungalow; it had some window detailing and one wall with Bungalow siding but did not have the massing of a bungalow. He did not think it was a good example of a Bungalow. There were some additions to the house which appeared random and inconsistent with the style of the rest of the house. Style was discussed at the HRB meeting; however, the house was designated as contributing due to Criterion No. 4. Two weeks after he had filed his appeal, there was another meeting and a house at 1357 Webster Street was reviewed and classified as a Colonial Revival Bungalow, not just a generic Bungalow. The staff recommended contributing for that house because of Criterion No. 4 also. During the discussions, staff noted that there were no known architectural changes to the house as opposed to the 805 Channing
Avenue house. During the HRB=s discussion regarding style, a
motion was made to ΑDeclare the house with no historic merit, the stylistic leanings are not strong enough to warrant a contributing
status.≅ The motion was passed and the 1357 Webster Street house was classified as having no historic merit. He displayed pictures of both 805 Channing Avenue and 1357 Webster Street for comparison. Clearly, some houses should be classified as contributing in Palo Alto, but some houses were being labeled contributing that should not be. In addition, the HRB was inconsistent in its voting. He strongly agreed with the intention of having a contributing type of house and also with the process. Council Member Huber referred to an attachment to the staff report
(CMR:126:98), ΑApplication for Historic Review requesting an
historic merit evaluation.≅ He had not seen anything which would indicate an effort to do something different with the property, and he asked if there were other plans for the property. Mr. Flagg said he had architectural plans to rebuild on the site. Council Member Huber asked whether the plans would be consistent with the interim regulations requirements. Mr. Flagg said he had not yet gone through the complete process, but it seemed as though the same type of styles were preferred. He had plans for an English Tudor style cottage. Council Member Huber clarified it was for an entire new residence. Mr. Flagg said that was correct. One major issue was that a 20-foot setback was required on a typical street, whereas Channing Avenue had a 24-foot setback. Due to the way the contributing regulations worked, there were some large lots on the same side of the street, and some houses were set farther back. The line ended
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up three feet farther back than the 24-foot setback. At the current time, staff had not been made aware of the issue. Council Member Huber was curious as to whether Mr. Flagg had a philosophical difference with the interim regulations or whether he had a major problem with the design he was working on. Council Member Mossar clarified that the issue with the designation was that it caused a situation when the setback was greater than he would like it to be in order to build the structure he desired. Mr. Flagg said he appealed the contributing designation in the beginning because he disagreed with how the HRB had ruled due to some philosophical issues. Council Member Mossar asked whether those philosophical issues were stronger than actual practical considerations or was it both. Mr. Flagg said he originally put in the request for review because he was going to sell the house. Once he realized that nothing was available, he decided to try and build on the property. Council Member Wheeler asked why Mr. Flagg had not enunciated his objections to the HRB prior to or at the meeting. Mr. Flagg said he was not organized enough and had not thought it all the way through. Alice Mansell, 550 Santa Rita Avenue, said she was pleased that the staff reports and the appeals were much more comprehensive. Although there were seven illustrations in the staff report (CMR:126:98), there was not an illustration of the actual house that was under appeal. When she looked at the staff report, the text book examples of Bungalow and the picture displayed on the wall, the Bungalow style was not apparent to her. As the owner,
Mr. Flagg mentioned the City of Palo Alto=s five elements describing a Bungalow, and the majority of elements were not there. The fact that the HRB had a 4-3 vote showed that only by a majority of one was the decision made to make 850 Channing Avenue a contributing structure. She felt it was clear that a number of people were saying there were not enough elements to designate the house a Bungalow. Unless there was a style in a house, it could not be called a contributor. It was important for the Council to articulate statements to the HRB on what it meant when a style was not strong and when remodeling had occurred to the point that the majority of elements were not there. The fact that not many people appealed did not mean that people were not being active early in the process of the HRB or not attending the Council meeting. As an attorney, she had represented people who had dealt with the City in the past, and if one listened to the people who spoke, there was a sense of retaliation if people appealed, particularly the contributor designation. The City staff tried to do a good job, but the regulations were cumbersome. The fact was that the owner
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had appealed, but under the law, it was irrelevant what his plans were for the house. It was a matter of setting some guidelines for the HRB. Every appeal that surfaced was an opportunity for the City Council to look at the impact of the interim regulations, and how they were being ruled on. She felt there were many cases where houses were labeled contributor and the style was not clearly apparent. She asked the Council to look at the vote on 805 Channing Avenue and the elements of the style, and ask why the photograph was not included in the staff report (CMR:126:98), although seven illustrations were included. Mayor Rosenbaum declared the Public Hearing closed. MOTION: Council Member Mossar moved, seconded by Wheeler, to uphold the decision of the Director of Planning and Community Environment and the Historic Resources Board (HRB) to designate the residence at 805 Channing a Contributing Residence, based on the following findings: 1. The residence satisfies Criterion 4 for determining historic significance. As described above, it embodies the distinctive characteristics of an architectural style -- the bungalow style -- that embodied an ideal vision of healthy suburban living; a vision that reached its epitome in California. The construction of this residence signaled development of the Ashby addition, which became a flourishing new neighborhood by the 1920s. 2. The residence fits the category of Contributing Residence. The residence in its scale, style and setting supports the historic character of its neighborhood grouping and district. 805 Channing Avenue is a good example of a Contributing Residence, as it is a very early surviving example of a period residence constructed in what was then the outskirts of town, in a farm setting that was especially appropriate to the bungalow style. Council Member Mossar said she had visited the house at 805 Channing Avenue on two occasions and felt strongly that the staff recommendation with respect to the importance of the structure in the neighborhood and its relationship to the character of the neighborhood was well made. The particular lot was a corner lot, visually important, and the neighborhood was filled on all of the surrounding streets with other structures that contributed to the character of the area. She noted in the letter from the applicant that he was concerned about building a house that was compatible with his neighborhood. Having the assurances that the owner would be at liberty to build a house of any style, following basic design standards to ensure compatibility with the other structures in the neighborhood, led her to believe that it was a fair designation. Council Member Wheeler emphasized the remarks that Council Member Mossar made in support of the motion. It was a crucial
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intersection and with the exception of one house in the vicinity, which she assumed did not conform to any compatibility standards, the area surrounding the house had a definite character. The subject house certainly contributed, even though it was not the best example. It did not detract from the neighboring properties. If it were allowed to be demolished and replaced without using the neighborhood compatibility standards, it would, because of its prominent location, be a detriment to the character of that neighborhood. She also noted, as pointed out in the staff report (CMR:126:98), that the age of the structure and the fact that it was one of the original structures in the entire tract, added to the importance of the structure. City Attorney Ariel Calonne said with respect to the findings and the comments of Alice Mansell, what the owner could build on the site under the regulations if the house were designated as a contributing residence was not relevant to whether the structure should be designated contributing. However, once the decision was made that the structure met the criterion to be a contributing residence, the rationale that if it were removed it would be replaced with something that was compatible was appropriate. A decision had to be made that it was a contributing residence. The reasoning that the location was a crucial one to the neighborhood justified the compatibility review requirement. Council Member Ojakian would not support the motion. He could not make either of the findings as stated in the staff report (CMR:126:98). In Finding No. 1, the house was dramatically altered to the point it was difficult to say that it had a distinctive architectural style. At the HRB meeting, it was the architects who voted against the project, which he found to be a distinct message. Comparing homes on Boise Street and Channing Avenue, he could not make the second finding because he did not feel that the scale and style of the house contributed to the neighborhood but was a deterrent instead. He put his faith with the applicant in the hope that a house would be built that would contribute to the neighborhood better than the current one. He was in favor of an historic ordinance of some form and believed that there were several houses in Palo Alto that needed to be protected, but he did not find the particular house distinct enough. Vice Mayor Schneider would not support the motion because she could not make the findings. She noted upon receiving the staff report (CMR:126:98) that there was no photo of the house, but she was familiar with the house. Photographs of the bungalows that were included in Attachment 1 of the staff report had a very distinctive style. The only distinctive thing she found on the 805 Channing Avenue house was the overhang of the roof and the roof style. Other than that she could not find that it had the distinctive characteristics of a Bungalow. She was delighted to hear that the applicant was selecting a design that was in keeping with the neighborhood. Her decision was also based on the fact that three
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members of the HRB, the three architects, could not make the findings. Council Member Eakins thought it was not clear cut. Stylistically, it still had the bungalow shaped roof even with the front porch entry addition with the new roof and the addition in the back. It was on a prominent corner in the neighborhood. She disagreed that the house detracted from the neighborhood. The changes that had been made to other houses in the area had been done nicely and sensitively; the new and the old blended together to give a harmonious feeling to the neighborhood. That was what she thought the contributing status compatibility standards of the interim ordinance represented. It was a gateway to the neighborhood as had been mentioned previously. She believed the applicant when he said he would do a proper replacement structure, but the laws were needed and decisions needed to be made based on the rules and findings. Tying that belief to the entitlements or restrictions or conditions on a piece of property did not add up. She wanted to see the conditions for compatibility used for that piece of property. Additionally, if there was a problem with respect to the lot size and setbacks, she would like to see that worked out so the property owner could get the best house possible. Council Member Fazzino said it was a difficult issue, and it would have been an appropriate time to have had the permanent ordinance in place. He respected that everyone had difficulty in struggling with the issues and the conclusions reached. He would not support the motion. Having viewed the house, he did not believe it was a contributing structure but a totally unremarkable building. He got nervous when the Council ascribed contributing structure status to structures he believed to be totally unremarkable. The Council could be on the route to designating a significant percentage of homes in Palo Alto as contributing structures, which he truly believed could create problems in terms of support for the initial objectives of the historic preservation program. The structure had been significantly altered and did not meet several of the criteria. He believed it had become more of an issue of design review than historic preservation. He was open to the idea of some residential review, but the Council needed to deal with the issue directly and not incorporate it within the broader objectives of historic preservation. In the case of 805 Channing Avenue, he felt the Council might have confused the two. Ms. Judy and the HRB did an outstanding job with respect to the program. Because he viewed it as more of a design review issue which needed to be addressed directly in the future, he would vote against the staff recommendation. Council Member Kniss said it was interesting to hear the arguments for and against contributing structures. She would support the motion because she viewed it in the whole and as part of the neighborhood rather than the house itself. As the Council moved
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forward, that needed to be part of what would be considered each time a decision was made. Mayor Rosenbaum would not support the motion. The modest nature of the original structure was not worthy of the contributing category. MOTION PASSED 5-4, Fazzino, Ojakian, Rosenbaum, Schneider Αno.≅ ORDINANCES 5. Ordinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 to Provide an Additional Appropriation for Pre-Development Costs Associated with the Acquisition of the Sheridan Apartments by the Palo Alto Housing Corporation Agreement between the City of Palo Alto and Palo Alto Housing Corporation to Fund Pre-Development Expenses for the Acquisition of the Sheridan Apartments at 360 Sheridan Avenue Vice Mayor Schneider clarified that all of the resources available would be depleted, such as the 1997-98, 1998-99 Community Development Block Grant (CDBG) funds and the balance of the Residential In-Lieu Fund in order to fund the project. Senior Planner, Housing, Cathy Siegel, said that was what was expected. The staff report (CMR:127:98) did not include details on the financing because that was still being worked on by the Palo Alto Housing Corporation (PAHC) and its consultants. MOTION: Council Member Wheeler moved, seconded by Kniss, to approve the staff recommendation to: 1. Approve and authorize the Mayor to execute the agreement in substantially similar form (with form of promissory note) with the Palo Alto Housing Corporation (PAHC) in the amount of $145,500 to provide funds for pre-development activities related to the proposed acquisition and rehabilitation of the Sheridan Apartments at 360 Sheridan Avenue; and 2. Adopt the Budget Amendment Ordinance authorizing the transfer of $145,500 in Community Development Block Grant
(CDBG) funds from the ΑNew Housing Development Program≅
account to be used for PAHC=s expenses under the agreement.
Ordinance 4477 entitled ΑOrdinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 to Provide an Additional Appropriation for Pre-Development Costs Associated with the Acquisition of the
Sheridan Apartments by the Palo Alto Housing Corporation≅
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MOTION PASSED 9-0. REPORTS OF OFFICIALS 6. Policy and Services Committee recommendation re Request for Proposals for the Provision of Universal Telecommunications Service
Director of Utilities Edward Mrizek said a little over 12 years prior, in an effort to accelerate the delivery of advanced telecommunications services throughout the community while limiting financial risk to the City, staff began the construction of the
City=s fiber-optic backbone. That backbone was currently available for license for both telecommunications service providers and end users. The strategy was intended to stimulate competition among service providers, improve service, and reduce costs for consumers. It was proven to be the case with commercial customers; however, additional steps appeared to be necessary to achieve the result for residential customers. Staff was recommending a process intended to accelerate the availability of affordable advanced telecommunications services, particularly high-speed data transport and Internet access to all of Palo Alto. The approach was simple: Palo Alto owned a fiber-optic backbone, miles of conduits, and hundreds of poles throughout the community. Those assets could be made available at a discount from the market value to one or more entities that agreed to make such services available to every address in Palo Alto within an acceptable time frame. Staff was recommending that a Request for Proposal (RFP) be prepared to solicit proposals from entities that might be interested in using
the City=s assets as the foundation of a network capable of providing the services. Staff anticipated receiving a number of informational items from the proposals. Staff would be looking at peak performance using commercially available technology, infrastructure that could be adapted for future service with minimal risk of becoming obsolete, limited risk to the City, affordable pricing for consumers, ability for multiple service providers to use the platform, and limited environmental impact. The concept might be simple, but the implementation would be complex. There would be many questions to be answered; therefore, staff outlined a process for identifying and addressing those questions that would closely involve the Telecommunications Advisory Panel (TAP), the Utilities Advisory Commission (UAC), the Finance Committee, and the Policy and Services (P&S) Committee. At the December 9, 1998, P&S Committee meeting, the process was approved and was being recommended to the full Council to approve that staff move forward on the RFP process. Council Member Mossar said she understood the intention was that people who could provide the communications services with any
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technology would be asked to submit RFP=s, not just particular technology. Mr. Mrizek said that was correct. Council Member Mossar asked how Cable Co-op fit into the RFP process. Mr. Mrizek said Cable Co-op could be a respondent just as any other entity that provided such service. Council Member Mossar asked that even though the City was participating in the RFP process and service providers were selected to work within the City, could independent providers of
those services not affiliated with the City=s projects participate. Mr. Mrizek replied yes. Council Member Wheeler said the time line mentioned on page 5 in the staff report (CMR:458:97) had already slipped, and she asked whether staff could put some new dates around when the steps might take place. Mr. Mrizek said the time line had slipped approximately two months from the dates indicated in the staff report. Council Member Wheeler clarified that the RFP would be in shape to be circulated to potential vendors around June 1998. Mr. Mrizek replied June to July 1998. Council Member Kniss clarified that the City that was quoted was Anaheim, California. There were other cities that had such a system in place, but they were not in California. She could think of a couple, and she asked whether staff knew of any others. She knew that Blacksburg, West Virginia, had universal access. Telecommunications Manager Van Hiemke said he knew of other cities that had universal service being provided for telecommunications. In the example of Blacksburg, he was not sure that the actual infrastructure was high-speed infrastructure throughout the community. The staff report (CMR:458:98) mentioned other communities such as San Bruno, California, which was in the process of upgrading to a hybrid fiber-coax network nearby and Cedar Falls, Iowa, which had already constructed a hybrid fiber-coax network currently being used to deploy high-speed cable infrastructure. Council Member Kniss asked how the cost was incurred, how was it done, and how was it working. She said it was a huge task being anticipated, and a number of people had not thought about what it might mean to have the universal connectivity.
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Mr. Hiemke said in the case of Cedar Falls, the infrastructure was built from the ground up, building a brand new hybrid fiber-coax system. He believed it was voted in by the citizens and financed through a bond measure. He would have to obtain further information on the details if the Council wished. San Bruno was a similar situation, but he was not sure exactly how it was done. Anaheim was a public/private partnership and had private financing brought in which did not involve any public financing. Council Member Kniss said Anaheim was a good example for the area. It was interesting to her that there were only four or five cities that were embarking on such a process. She anticipated that Palo Alto would be at the forefront. She felt it would be a major challenge. Mr. Hiemke said he received many calls from other cities interested in seeing what Palo Alto was doing, how it was being done, and how they might pursue something similar. Vice Mayor Schneider said it was mentioned in the staff report (CMR:458:98) that the cost of constructing the network ranged from $500 to $3,000, depending upon the capabilities design. She felt that was a huge spread. She asked whether staff could indicate what those different capabilities were. Mr. Hiemke said a range of technologies made up the range per address that was passed by the network. On the low end, it was a
Αplain vanilla≅ hybrid fiber-coax network much like the type deployed by San Bruno or Cedar Falls. Five hundred dollars per home was a typical estimate. The actual cost in San Bruno was projected to be lower. On the high end, it was an all-fiber solution to the home with advanced electronics that were really not commercial available currently. There were many other solutions that would fall within the range, but staff wanted to utilize numbers that showed the total range. There were fiber to the home solutions that could utilize currently available technology for a lower cost than $3,000 per home, but there would be some
limitations compared to the complete Αsoup to nuts≅ service available with the $3,000 per home option. Vice Mayor Schneider asked how many responses to the RFP staff anticipated. The technology being considered was sophisticated. Mr. Hiemke said that was difficult to answer. He would have to reflect on the interest he had heard over the prior years from various vendors. The most recent interest, since the item had been in the press, was approximately five or six proposals. Council Member Fazzino asked how the issue of content of City services would correlate with respect to the RFP. One of the exciting aspects of the system was the opportunity to access City services such as building inspection, library information, etc. He
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asked whether those types of issues would be addressed in the RFP or considered once a successful bidder was chosen. He asked when the City would then be in a position to take responsibility for managing those services and having the service linked to residents throughout the system. He wanted to understand how that related to the RFP and what was being asked of potential applicants. Mr. Mrizek said there were a number of options. When the dark fiber backbone was developed, staff indicated that a number of the dark fibers would be reserved for City use. That option could be utilized to interconnect the libraries or other City facilities and other internal connections. The City could hook onto whatever successful service provider would provide a fiber-optic system throughout and be one of the subscribers utilizing their services, but it would not be put in the RFP that the City would subscribe to that service. It would just be an option to the City as with any other customer in Palo Alto. City Manager June Fleming said it was an option staff was aware of, and staff would reserve decisions about how that would be taken care of as the City received responses to the RFP from the providers. It would be indicated that it would be an element that the City might be interested in. Council Member Fazzino clarified staff would want to talk to the UAC and other interest groups, but staff would see it as a possible item to include in the RFP, asking people to respond to the issue. Ms. Fleming said that was correct. Mr. Hiemke said when there was high-speed data transport available to and from every home, it created new possibilities that could be considered in the future that were not currently available for providing City services. It was premature to discuss currently because of the unknown cost factor and how much value would be provided. Council Member Huber asked whether it related to Stanford University. Stanford was a major university with major research and fields in that area, and he had heard comments from people at Stanford with respect to Palo Alto and Stanford being a community that people would assume would be wired to the hilt. He asked how Palo Alto would tie in with Stanford. Mr. Hiemke said it was safe to say that Stanford was wired to the hilt. Stanford currently had an extremely advanced network on campus, and in terms of their on-campus telecommunications, their needs were being met. However, when it extended to Stanford students or faculty that lived in the Palo Alto area, there was clearly a benefit to be had by extending the reach of that advanced technology to the residences in Palo Alto. That could be provided in a number of ways, depending on the type of technology that was deployed. Clearly, there should be a benefit for Stanford and the
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corporations in Palo Alto. Corporations were similarly wired to the hilt, but once one got outside of the corporate campus, there
was no connection to the employees= homes. Council Member Huber asked whether the RFP would deal with that effort to connect. Mr. Hiemke said he envisioned that could be considered as something the City would be looking for as an element of the proposals. Mayor Rosenbaum said the hybrid system mentioned was a combination of fiber and coax, and the $500 system might involve the hybrid. Clearly, Palo Altans had coax going to their homes currently, and he asked when staff anticipated duplicating that. Mr. Hiemke said the cost of construction of a new hybrid fiber-coax plant was $500 per address. In terms of upgrading the existing coax plant to provide for that capability, Item No. 7 on the Council Agenda dealt with those costs. He believed the number was $63 million for an area twice the size of Palo Alto, so the cost
for Palo Alto=s share would be approximately $31 million. Mayor Rosenbaum said he was not sure what the plant implied, but everyone had a drop going into their home. He asked when staff anticipated replacing or duplicating that. Mr. Hiemke said either was possible, and there could be proposals in both categories. Mayor Rosenbaum asked what the $500 represented. Mr. Hiemke said it represented new coax and fiber drops. Mayor Rosenbaum asked whether the reason for having new drops was that the old drops wore out. Mr. Hiemke said the only reason for new drops might be if an entity did not have drops currently and if those drops were not available for its use. The entity might propose a new system which would involve new drops. Michael Silverton, 114 Greenmeadow Way, supported the RFP proposal.
It unequivocally expressed Palo Alto=s leadership in the evolution of local loop technologies and policies in an era of digital convergence which was extremely complex. He had met with Vice
President Al Gore=s Chief Domestic Advisor Greg Simon the previous year, who was instrumental in putting together information infrastructure policies. He learned the five guiding principles that the administration wanted to focus on: 1) competition, especially in the local loop; 2) universal service; 3) open access; 4) flexible regulation; and 5) to promote private investment. Mr.
Simon had emphasized that the government=s role should be catalytic
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and not construction. Both the staff report (CMR:458:97) and the memorandum dated December 9, 1997, presented to the P&S Committee in December, embodied the guiding principles which integrated and
harmonized Palo Alto=s residential information infrastructure policies with both the national and global policy equivalents already in place. He strongly recommended that the City Council adopt the staff recommendation. Fred Eyerly, 101 Alma Street, urged the Council to support the staff recommendation which had been approved and recommended by the Finance Committee, the P&S Committee, and the UAC. John Kelley, President, Board of Directors, Cable Co-op, 1868 Mark Twain Street, supported the RFP process with the intent to respond fully to it. Cable Co-op felt it had the best solution of any service provider responding to the RFP. Mr. Hiemke stated that the cost for upgrading the Cable Co-op plant was $63 million for the entire service area. Cable Co-op estimated that the upgrade costs for the entire service area would be approximately $12 million. In the case of Cable Co-op, that represented both the cost of putting fiber into the trunk lines and also activating the second B cable. With respect to the timing of the procedure, Cable Co-op was in a situation where it needed to make prompt decisions. While the RFP process was a good idea, Cable Co-op suggested that the RFP process be expanded on the front end by soliciting some preliminary information from applicants. The type of information Cable Co-op recommended for the short term was the following: 1) ask the applicant to submit a basic architectural plan; 2) information concerning the geographical coverage of the proposed system which included both what geographical areas would be supported and how close the proposed system came to actual houses and schools within the geographical areas covered; 3) what was the basic ownership structure being contemplated; would the City own any portion of the system and if so, in what way; 4) what was the basic financial structure proposed and how would one in general terms propose that such a system be funded; 5) what exposure of a financial nature would the City be exposed to, was the City being asked to make a direct financial contribution currently or in the future, was the City being asked to do something that would expose it to credit risk, was the City to propose a guarantee or a pledge, was the
City=s name going to be on offering documents; and 6) ask the applicant to submit a summary of proposed public benefits. Cable Co-op offered to provide a system that would be a regional solution extending to Menlo Park, East Palo Alto, Atherton, and Stanford, as well as Palo Alto. Cable Co-op offered a solution which would
utilize an existing coaxial plant that currently bypassed people=s homes. He believed the six points were ones that a serious applicant could address in a timely manner. It was a procedure that could be added to the existing RFP process such that the staff could finalize the request for information in a week to ten days, send it out to perspective applicants, give the applicants approximately three weeks to respond in a preliminary nonbinding
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manner, and then staff would have three weeks to analyze the information and to see which of the applicants had proposals that would combine public benefits with acceptable financial risk. He encouraged the Council to consider the six points as a supplement to the staff proposal. Mayor Rosenbaum said the six points proposed would be covered in the normal RFP process, and he asked why Cable Co-op would feel it would be important to do it on a more expedited basis. Mr. Kelley said, as he had stated earlier that evening, that Cable Co-op was currently in a position where some decisions needed to be made. Cable Co-op felt its proposal had substantial benefits, both for Palo Alto and surrounding communities. It was important that the City go through the RFP process to see what alternatives were available. By the same token, it was important that the City recognize that there were other options that might not be available to the City if the RFP process moved forward at a pace which could take well into the fall. He suggested that the City try to get preliminary nonbinding information up-front in order to get an idea of the range of proposals that were likely to be received. It
would allow the City to respond more intelligently to Cable Co-op=s detailed proposal in the near future. Bob Moss, 4010 Orme Street, corrected an article in the Daily News that day which stated the RFP process would be subsumed by Cable
Co-op=s proposal. That statement was absolutely untrue. The Cable Co-op Board of Directors met the previous week, specifically discussed the RFP and concluded that it was a good idea to move
forward, but in no way would it interfere with Cable Co-op=s independent proposal. Nothing the Board had said or done prevented or precluded an RFP. Cable Co-op would not ask for exclusivity and Board members specified that the intent, if the RFP moved forward, was to bid and not try to prevent the RFP from occurring. In answer to some of the questions raised by Council Members earlier,
he said with regard to other cities= operating telecommunications systems, there were more than 70 cities in the United States that owned and operated communications systems. One city, Lansboro, Kentucky, had done it for decades. Others were under construction such as Tacoma, Washington, which was the largest, currently estimated at $96 million. San Bruno, California, was financing with $4 million of profits from the existing city-owned cable system. Other cities throughout the country financed with property taxes, bond issues, tax overrides, and utility profits. With regard to financial risk, it depended on the individual cities and structure. In general, the issue was not new or novel. The largest system in the world was in Stockholm, Sweden, where the city established an organization which was in the process of wiring the entire city and connecting everyone to the Internet. Singapore, which was about half the size of Santa Clara County with approximately 4 million people, intended to be the first totally
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wired nation in the world. The basic concept of having the City of Palo Alto involved was not new nor unique to Palo Alto. The question was who to partner with and under what circumstances. An RFP was one way of finding out. Council Member Kniss asked whether the cities he was discussing provided universal access to the doorstep. Mr. Moss said it varied. Tacoma was planning to go to the doorstep, but many of the cities were not to the doorstep. Out of the 70, only a few had more than 10,000 subscribers. Some were high-speed direct to the doorstep, but they might be cities with only 1,000 to 1,500 subscribers. Randy Okamura, Pacific Bell Manager, 345 Hamilton Avenue, said Pacific Bell was interested in the RFP. Pacific Bell was working
on ΑDSL Digital Subscriber Line≅ which was high-speed access over the telephone wire. Pacific Bell would like to see what it could
do to combine its assets with the City=s assets and to leverage off of that. If Pacific Bell did not succeed as a bidder on the RFP, it would need to how that would affect Pacific Bell providers that did take advantage of the DSL Digital Subscriber Line. Pacific Bell looked forward to a dialog with the City to answer those types of questions. MOTION: Council Member Kniss, seconded by Huber, to support the Policy and Services Committee recommendation including, but not limited to, requesting the applicants to respond to City services as follows: 1) To authorize staff to solicit proposals from entities interested in accelerating the provision of advanced telecommunications services to every address in Palo Alto (universal service) through the expanded use of the City's existing assets, including the fiber-optic backbone; and 2) To appoint one Finance Committee member and one Policy and Services Committee member to participate in a reactivated Telecommunications Advisory Panel to provide feedback to staff during the proposed Request for Proposals process. Council Member Kniss said even though, as Mr. Moss pointed out, there were many other communities considering the issue, it was an astonishing step to move toward some type of universal access. It had only been four years since the Council had discussed the issue in detail, but universal access was currently well known. She thanked the staff for the great amount of work that was done. She felt it would catch the attention of the rest of the nation. She supported the motion. Mayor Rosenbaum said he had raised the issues of exclusivity and how Cable Co-op would fit. With regard to exclusivity, he found it difficult to believe that someone would be willing to come in and invest from $13 to $78 million and not demand an exclusive franchise. He felt the City would not be interested in taking
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actions that would put the City in an anti-competitive position. He was also concerned about putting City money at risk in pursuing such new technology. MOTION PASSED 9-0. COUNCIL MATTERS
7. Council Member Fazzino and Mayor Rosenbaum re Cable Co-Op=s Proposal Council Member Fazzino said he was the Council liaison to Cable Co-op. Cable Co-op had approached him and the Mayor and asked to make a presentation with respect to a debt reduction proposal and the issue of universal access. He believed that, given the
Council=s obligations to Cable Co-op as the lead agency for the Cable Joint Powers Authority (JPA), the Council had a responsibility to provide a forum for Cable Co-op to give their presentation. There was a proposal with respect to the possible creation of an independent authority. He was interested in hearing whether the City had a need to take formal action with respect to creation of an independent authority. Everyone would benefit by any plan that reduced the debt associated with Cable Co-op. In the past, the City indicated it had no interest in running a cable system. He did not want the Council to become a programming committee. The Council had an interest in protection of public access, local origination programming, and a form of ongoing local influence or involvement in general programming decisions. He saw those as legitimate interests for the City with respect to the issue of cable. John Kelley, Chairperson, Cable Co-op Board of Directors, 1868 Mark
Twain Street, said Cable Co-op had been following the City=s interest in Internet access for years. Cable Co-op was offering a data service to a small number of subscribers in the service area. The outline of a comprehensive plan that would do something no one else could do was submitted to the Council. No one else could take
the City=s fiber ring, use an existing plant, put it in place, build a Hybrid Fiber Coax (HFC) System, and have it work for Palo Alto, Menlo Park, East Palo Alto, Atherton, and Stanford before January 1, 2000. However, Cable Co-op could do that with the cooperation of the City. Cable Co-op spent much time addressing the primary concern of the Council that prior spring, which was that the City did not want to fund reconstruction or bail out of
Cable Co-op. Cable Co-op=s plan was to build a telecommunications system for the 21st Century, one that: was worthy of the unique needs of Palo Alto, Cable Co-op could realize with an existing customer base, could be financed without asking for funds from the City, could be financed without asking the City to sign a guarantee for debt, and could promise would deliver high-speed Internet access to homes and schools throughout the service area. Cable Co-
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op could add on to the City=s fiber ring or build a new plant. The
most creative strategy to follow was to enhance the City=s existing fiber ring. That would bring the benefits of high-speed Internet access to homes, schools, and existing video subscribers. Cable viewers in their homes would have greater choice in what they watched, people producing public access programming would have greater space on the system to make that type of programming available, there would be more space and choice available for government access programming, people would have clearer pictures and more reliable signals, and Cable Co-op would be able to introduce a new class of digital video services. That could be done by creating a new public, private partnership, forging a new JPA that would fund the construction and enhancement of the existing system. The community would remain at the forefront of the information communications revolution. The system could be built and finished before January 1, 2000. He asked for the
Council=s support in the endeavor.
Council Member Mossar said Mr. Kelley=s presentation emphasized
Cable Co-op=s interest and ability to provide better and faster Internet access through the community. She asked if that was a key part of the proposal. Mr. Kelley said the proposal would not have been put together if Cable Co-op did not intend to offer high-speed Internet access. Council Member Mossar said there had been differences of opinion in costs of upgrades to the system between Cable Co-op and City staff. She asked what the difference might stem from. Mr. Kelley said Telecommunications Manager Van Hiemke mentioned the figure $63 million which included the cost of upgrading the plant, which meant putting in fiber and activating the second B cable. A good portion of the additional money was set aside for the purchase of an ongoing business with revenues in 1997 of approximately $13 million and cash flows of approximately $4.9 dollars. One of the differences between what Cable Co-op was proposing and what other applicants were proposing in the Request for Proposal (RFP) process was that Cable Co-op brought an existing business to the table. He would be shocked if Pacific Bell offered the City a portion of its existing phone business. Cable Co-op was offering a proposal that would transfer all of the assets of Cable Co-op to a new, independent JPA, the Silicon Valley Communications Authority. Council Member Mossar asked how the proposal with its strong emphasis on high-speed Internet communications related to the
former agenda item regarding the City=s asking for RFPs and looking for potential providers of the service. She asked how he would look at the two proposals.
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Mr. Kelley said he would encourage the Council to see them as complimentary aspects of one process. The Council had a duty to look at the alternatives. Cable Co-op thought they could match and exceed any other proposal that was likely to go before the Council, in terms of weighing the benefits of the proposal against the financial exposure to the City. Council Member Ojakian said the memo provided to the Council suggested staff do a preliminary review of the proposal within 60 days and a complete analysis by September 1998. He asked how that schedule met with the needs of Cable Co-op. Mr. Kelley said Cable Co-op would prefer to see a faster time schedule. He proposed that, by working with staff, Cable Co-op would try to identify the tasks that staff would need to respond to when analyzing their proposal. Cable Co-op would like to assist the staff in the process. It would be important to receive preliminary information from people who might respond to the RFP process. He did not expect people to give a complete response to an RFP in 60 days, but he expected the staff might be working on the full RFP during the next 60 days. He felt that anyone who was prepared to make a commitment to the community could put together a five-page summary of the points he spoke to before and present it to the staff within a four- to five-week period. Within the 60-day period, the Council would have before it both the preliminary analysis of what Cable Co-op proposed in detail and a rough idea of what the other proposals were. It was important for Cable Co-op to know whether that was what the Council wanted to pursue. Council Member Ojakian asked whether it would cause difficulties for Cable Co-op if the time frame went to September 1998. Mr. Kelley said it would cause difficulties if there was not a strong indication of interest. Council Member Wheeler asked Mr. Kelley whether he would be able to do an analysis on the potential impact to the subscribers in terms of the change in rates that might be experienced if the proposal was adopted. It was a very ambitious financial package. Mr. Kelley said a detailed analysis was done and would be presented in considerable detail to the staff the following week. The Council would be aware of what Cable Co-op projected for anticipated rates in the future. Rates were expected to be increased over time. The project would pay for itself largely through market acceptance of the types of high-speed Internet
access services being provided. The benefit of Cable Co-op=s proposal was that it would be able to offer at least three revenue streams to support the project. The first was existing business, the second was the new revenues they expected to realize from offering high-speed Internet access services and other forms of data communication services, and the third was a new class of
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digital video services. The combination of the three would support the new system. Council Member Wheeler said the proposal was divided into four parts: 1) the installation of the fiber optic cables and activation of the B cable to provide Internet access to homes, schools and businesses; 2) the formation of the JPA to assume ownership of the Cable Co-op system; 3) the issuance of revenue bonds by the JPA to finance system upgrades and for the purchase of Cable Co-op assets; and 4) the JPA contracting for management of the system. She asked whether that was viewed as a total package or if it could be divided. Mr. Kelley said it was presented as a package, but in a flexible mode. If the Council felt something should be changed, Cable Co-op would try to respond positively. It was difficult for him to think of every possible permutation of the four parts. Council Member Wheeler said the implication of the fourth part was that the JPA would contract with Cable Co-op. Mr. Kelley said the management contract was one area in which they could be flexible. A management contract of limited term with renewal rights was proposed. It was essential to extend the franchise in order to place the bonds. Given the policies previously articulated by the Council, it was essential to form an independent JPA. Vice Mayor Schneider asked what the response of the other cities was that would potentially be part of the JPA and what would happen if there was not a buy-in from Menlo Park. Mr. Kelley said he had not had negotiations with other cities, but had preliminary discussions with all the cities. The JPA required at least two government entities to form, and it was essential that Palo Alto be one of those parties. If Palo Alto did not want to be a member of the JPA, it would send a negative signal to potential purchasers of the revenue bonds, especially since Palo Alto had its own fiber facilities. Palo Alto was a necessary part of the JPA in a practical approach to the issue. Vice Mayor Schneider clarified that if there were no second city, there would be no JPA. Mr. Kelley said he would have the opportunity to investigate whether other government entities, such as school boards, might want to participate in the process.
Vice Mayor Schneider asked about Cable Co-op=s percentage of subscribers in Palo Alto.
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Mr. Kelley said the percentage of Palo Alto subscribers was about 46 percent. Vice Mayor Schneider said the newspaper quoted Roland Alden, Chief Executive Officer for Internet Fiber in San Francisco, as stating that even with 100 percent market penetration at $40 month, that meant $1 million a month, $12 million a year. She related that to
the Cable Co-op=s figures of a $13 million cash flow. She asked where the good deal was. Mr. Kelley said Cable Co-op, because it was a cooperative organization formed to provide services for members, was willing to work with the City of Palo Alto and other cities in the service
area in order to transfer Cable Co-op=s assets at a very attractive price. Cable Co-op would build a system that would meet public policies of the community which were to provide high-speed Internet access to homes and schools within Palo Alto. They were offering a regional solution. Discussion took place about strengthening ties between communities in the mid-Peninsula. The proposal would allow the City of Palo Alto to take another decisive, dramatic step to show its commitment to regionalism. When the system made money, there would be public benefits that could be served by the financial profits from the system. That included support for the General Fund, schools, public access programming, local origination programming and other innovative services, and for rebates for subscribers. Council Member Huber said the question was why buy the bonds. The number of subscribers for high-speed access was questionable. It was not a requirement such as gas and electric. Mr. Kelley said one thing Cable Co-op had that was different from other potential applicants was that Cable Co-op had an existing business. It was the existing business that would support the major share of the repayment of the bonds. People could be shown how Cable Co-op had increased their revenues and cash flow. That was the cornerstone of the proposal from the perspective of the prospective bond holders. Council Member Huber said the bonds meant buying a huge debt. Mr. Kelley said there were many companies in the cable industry that issued bonds and that had a fair amount of debt. Cable Co-
op=s debt and cash flow were close to the industry average. Council Member Huber said there was not enough detail for him to make a judgment on the financial perspectives of a JPA. Mr. Kelley said Cable Co-op would try to address those points in more detail.
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Council Member Fazzino asked Mr. Kelley to expand on the reason why he needed formal City approval to establish an authority and
comment on the City=s participation being risk free. Mr. Kelley said it was his understanding that a JPA could only be formed by two government entities. Cable Co-op was not a government agency and could not form a JPA themselves. There were different reasons why the JPA insulated the City of Palo Alto from financial obligations. The first was that it was an independent entity, similar to forming a corporation. Individuals came together to form an artificial person which was different from the individuals. The JPA had an existence in law which was different from the existence of its participants. The bonds would be revenue bonds, would be issued in the name of the JPA, and would be backed by the revenues from the system. A reserve fund would be created at closing to act as a buffer to insure repayment of the bonds. They were hopeful they would be able to get insurance for the bonds. Council Member Fazzino clarified that the City would be risk free if the authority vehicle was used. Mr. Kelley said he understood that the City did not want to have any obligations for the bond and that the offering documents would make it clear that they were obligations of an independent government entity. Council Member Fazzino said the City had been locked into an RFP time table which was likely not to be concluded until the end of the year. He asked what the consequences were for Cable Co-op in terms of its short-term financial obligations. Mr. Kelley said Cable Co-op asked for a preliminary response to the proposal within 60 days; if the response at that time was not positive, it might require that Cable Co-op go back and examine other alternatives. Cable Co-op intended to fulfill their financial obligations and would like the City to make a preliminary determination. Council Member Eakins asked Mr. Kelley whether he was referring to television when he mentioned existing revenues. Mr. Kelley said it was revenues paid for by subscribers. Advertising revenues were a significant portion of the revenue strand. There was a small amount gained from data services which were becoming an important independent revenue strand. Council Member Eakins asked what kind of growth curve was estimated for the data services. Mr. Kelley said growth of about 400 percent was expected in 1998.
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Council Member Eakins asked what would make the bonds attractive to purchasers. Mr. Kelley said it was because Cable Co-op demonstrated there was considerable, consistent demand for communication services in the community. Based on the historical track record, they were able to project that the demand would continue. They could project that there would be new revenue streams coming in that would provide further support for the bonds, important financial protections set
forth in Cable Co-op=s detailed proposal to meet the needs of the bond holders, a coverage ratio covenant, a reserve fund set up at closing, and a portion of the available net revenues from the system that would be set aside to meet the needs of the bond holders. Council Member Eakins asked whether there were compelling reasons to not do the 60-day analysis at the same time the City was asking that the RFP be prepared. Council Member Fazzino said he met with staff and discussed the issues. It was important to separate what could be done and what was appropriate to be done in the short term. The issue of establishing authority was separate from the longer term issue of whether or not Cable Co-op was the appropriate partner for the City with respect to fiber optics and universal access. It was his assumption that the staff would recommend the Council incorporate that aspect of the proposal into the just approved RFP process. Council Member Mossar said she understood there were several pieces to the proposal. Mr. Kelley had said the whole proposal worked because of the high-speed Internet communication and debt services piece. She questioned why the Council would want to make a policy decision to form the JPA when the Council was unsure the rest of it worked. Council Member Fazzino said he did not suggest the Council give authority to the staff to work with Cable Co-op to establish the JPA; but recommended that staff explore legal and financial issues associated with the JPA and then bring that information back to the Council within 60 days. Council Member Kniss said that during the prior 15 years, Cable Co-op did not have the best reputation in the community. Cable Co-op attempted to overcome that in many ways, but was not saying they were going to make a massive difference in the community. Cable
Co-op indicated that in order to do that, they needed the City=s good name.
Mr. Kelley said Cable Co-op needed the City=s support. Council Member Kniss said the issue discussed was the City lending its name, even though Cable Co-op said there was no financial
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responsibility actually incurred by the City. She asked Mr. Kelley to help the Council get over the hurdle of looking at the issue as a perception of what was being delivered in the community. If the City said the high-speed network was going to be delivered by Cable Co-op and its founders, the City might discover there were questions about the voracity of that. Mr. Kelley said that service was being delivered; Cable Co-op demonstrated it was able to provide the service to a limited number of people. Cable Co-op could provide the Council with detailed statistics in the future. One thing the City had done over the years was track complaints registered with the City of Palo Alto. Complaints had lessened dramatically. Cable Co-op tried to institutionalize internally and subject itself to external regulation or auditing of what was being done to improve quality control standards on a regular basis. Cable Co-op received ISO 9000 certification, which no other cable company in North America had. Much time was spent on that, and it was an ongoing commitment. It demonstrated that Cable Co-op was concerned with not only improving customer service but improving it on a long-term, measurable basis. One thing central to the proposal was replacement of portions of the trunk network with fiber optic cable. That would have concrete benefits for people to make sure the signal went through to the home as much as possible. That service could be enhanced by removing a large number of analog amplifiers and replacing them with a fiber optic system. That would mean there would be fewer instances in which an outage would cause interruption in service. Cable Co-op would replace older analog technological devices and substitute them for fiber optic cable. People would have better pictures because the signal quality would improve. The level of complaints was down on a measurable basis. Internal procedures to make sure the process continued were instituted.
Council Member Kniss said Cable Co-op=s challenge was to overcome past performance in order to make the promise for the future. Mr. Kelley agreed that Cable Co-op needed to overcome the perceptions of its past performance. Council Member Huber asked what the impact would be on the City of Palo Alto if the JPA fell apart. Mayor Rosenbaum said the idea of a JPA had been around for a number of months. He was surprised at how little information had been provided to the Council. Mr. Kelley said Cable Co-op intended to provide detailed financial information to the staff. There was a provision in the franchise agreement that allowed Cable Co-op to submit the financial information in confidence. RECESS: 9:40 P.M. 9:50 P.M.
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H. Horn, 3470 Janice Way, said the basic problem was that a balloon payment was due and there was no money to pay it. The cable system in Palo Alto was inadequate and overpriced. Residents wanted cable TV at competitive prices. Money should be raised on the open market without using the good name of Palo Alto or any other city. Previous Palo Alto illegal action with respect to Cable Co-op cost Palo Alto more than $3 million. He did not want to see that happen again to Palo Alto taxpayers. Robert L. Smith, 2291 Greer Road, said he was a former Board Member of Cable Co-op and a Programming Committee Chairman. Many things in the community were of great value and often their value was not realized until they were lost. Trees and houses were examples. Cable Co-op had excelled in a number of areas compared to other systems in the country, in terms of programming, local programming, customer service and member input and control. Cable Co-op was always within the confines of the industry as a whole; confined to use the equipment, programming, and standards the industry had. People who left the community often found that Cable Co-op was a stunningly, excellent system. He did not want to see the City bail out Cable Co-op or get into the cable TV business. In the prior year, he advocated that the system be sold in order to meet its debt obligations. He would be willing to advocate that again if the current plan or something as good did not bear fruition. The plan was very clever and met the needs of the City in a timely and cost-effective way. It was worthy of some thought. The Council should quickly consider the plan and advise Cable Co-op as soon as possible. Jim Kaubisch, 821 Ross Court, said he had been involved in the digital business for approximately five years and responded to a number of RFPs, similar to the one proposed. He thought back about four years to the numbers projected by phone and cable companies and said if those projections had been right, there would have been five to seven million people signed up for digital service, but in reality there were thousands. People get hung up on technology questioning whether fiber was better than HFC, and was DSL the savior to it all. The question was services. The reason things fell about five years ago was that one could figure out the business model. The Council asked why people would buy the bonds. The question was why would anyone want to spend $70 million, bonds or otherwise. The point made was the difference between someone who provided a service and someone who installed the technology. A good amount of weight should be placed on whether or not the people installing were going to be providing a service. Ken Allen, 3784 Grove Avenue, said he had been a member of Cable Co-op for many years and produced one of the public access television shows on Cable Co-op. He supported public access as a public benefit to the community. People supporting the proposal were enthusiastic, saw it as an innovative and groundbreaking approach that would bode well if it succeeded in the provision of
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services that were contemplated. Cable Co-op wanted to work with the communities and the City of Palo Alto which was a key participant in the plan. The City of Palo Alto had an obligation to look closely at the needs of Cable Co-op because of its unique position as the leader in the current JPA which oversaw Cable Co-op. The franchise that would be required to be extended to the new Silicon Valley Communications Authority was not necessarily an exclusive franchise, but it was a necessity that it be extended to the Silicon Valley Communications Authority for the purpose of establishing the bond. Cable Co-op wanted to work within the boundaries of the proposal presented. The City could maintain a measure of local control that would not be available if the Cable system and its business were transferred to a private company that was headquartered outside the area. The commitment to Cable Co-op as a service company was not a long-term commitment. He encouraged the Council to accelerate the process and provide the benefits to the community which could be provided at the current time at a reasonable cost. Marvin Lee, 1241 Harker Avenue, said he believed that supporters of maintaining local control of the cable system would favor the
City=s sending the proposal to committee in order to explore all the ramifications of such an expansion of the JPA for all the communities. A few members of Cable Co-op suggested in April 1997 the idea of reformulating the existing JPA between the various communities in order to maintain the assets of Cable Co-op under local control. As part of their support for the proposal that the community retain local control of the valuable cable TV and cable FM system, some residents wanted the Council and staff to look at a possible three part configuration for an expanded independent JPA business structure which would encourage competition and creative solutions as part of a broad strategy to provide the best high-speed telecommunication advantages for the communities. The following configurations were advocated: 1) a restructured, reorganized and democratically governed and controlled cable co-op to contract and run the cable TV and cable FM systems; 2) a separate, independent community telecommunication agency which
would be under contract to establish connection to Palo Alto=s fiber ring in order to bring on a competitive basis the best available and most economic high-speed Internet connections to all residences and businesses in all the communities associated with the JPA; and 3) a separate contractual relationship with a wholly independent and adequately funded nonprofit Midpeninsula Access Corporation to provide all community access, local origination, community cable TV and cable FM services and government meetings to all residences and businesses of the JPA service area. Michael Silverton, 114 Greenmeadow Way, said former General Manager Brad Anderson was mentioned as making accomplishments. He acknowledged and saluted Cable Co-op for the tremendous job that was done, the service provided to the community, and the expression of values that the community embraced for a number of years. Local
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ownership and equal access were important. Cable Co-op was creative and clever in devising the plan. In late 1996, while conducting research for a project at Stanford, he came across PA
Com Net and Cable Co-op and a quote from Brad which said, ΑThe most cost-effective way to accomplish an information utility is for the
cities to not buy Cable Co-op=s assets but rather to build from
scratch.≅ He used Αcities≅ as a plural, anticipating some type of
JPA. Another quote, ΑThe value of Cable Co-op lies with its cash
flow and status as a going concern,≅ not in the value of its assets as presented as one of the pillars of the great deal by John Kelley. There was a question about university involvement. He found during his studies at Stanford University, that there was great interest in what was going on in the City by leading network researchers at the Stanford Computer Industry Project of the Grad School of Business. There was a good amount of interest in how the larger policy scenarios, national and global information infrastructure policies, were applied in the local level. There was much intent of the Telecom Act to invigorate the local loop. There was a lot of interest and potential for the partnerships. High-speed Internet access was sold as one of the prospects of the good deal. The only problem was as more users were added to a cable modem system, the quality of service diminished. A concern was equal access to equal quality information. He questioned the
prospect of a growing Αhigh-speed Internet≅ program. Richard Carlson, 4126 Donald Drive, said he was an expert on financial disasters. He devoted four years picking up the pieces of the largest municipal bond default in American history; that was the Washington Public Power Supply (WPPS) system which defaulted on $3.1 billion of bonds. It was important with that background to point out the astonishing deja vu he was currently experiencing. WPPS, as it was called, was a JPA, composed of 88 municipalities in the Pacific Northwest, all of which were promised from the start that their credit was not a risk. All of the citizens were promised that the organization would produce a wonderful surplus of incredibly inexpensive power for the Pacific Northwest; there were no technical issues and no financial risks. Twenty-five billion dollars was spent on the endeavor, backed by the same bond underwriters that were listed in the current proposal. The communities spent in excess of $100 million digging themselves out of the hole they were in, and they were ultimately forced to pay
over $800 million on the Αsure thing.≅ The bond holders paid over $100,000 to try to get back some of their money. The reason Cable Co-op was before the Council was that, because of the risk, they
could not raise the money privately. Palo Alto=s good name was the moral obligation that was the ultimate guarantee of the bonds. The technical risk was with satellite TV coming in and killing the cable business. There were billions of dollars of private money being bet that satellite TV would take over cable. There were billions of dollars being bet that digital subscriber lines would be much better than improved cable to handle Internet access.
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Private investors had a right to make that type of gamble; however, as a taxpayer, he did not have any direct control over what the City did with his money. He did not believe the City had a right to gamble with public money. Bob Moss said Cable Co-op was not talking about old cable or about bringing Home Box Office (HBO) to another 10,000 homes. They were talking about high-speed, two-way data access at 10 to 20 mg, bi-directional. Pacific Bell could not bring that over copper lines. Regarding comments about putting on more users and getting slower service, that was true at approximately five to ten thousand on the existing coax system. The whole point of the combination was the ability to get fiber to the individual users as the users required it, to scale as scaling was required, and to provide service as needed. Regarding high-speed fiber, the people who financed cable systems advised if between 3 and 5 percent of the users were daily users, that would be a winner and financing would be easy to obtain. Cable Co-op had been selling high-speed cable for about seven months and already had more than 2 percent of users signed up. About 20 percent of the cable modem users were not cable TV subscribers. By forming the JPA, Cable Co-op would sell the bonds at a lower interest rate. The interest cost would be about 25 percent less than the current cost for interest. The cash flow was operating expenses less debt service. If the debt were 25 percent less, the cash flow would approach $6 million in the current year. The bonds would be sold because the current debt would roll over in approximately six to seven years; the bonds would be 30-year bonds. The debt service per year would be smaller. The difference between debt service on a 30-year bond at a lower interest rate than a 7-year bank loan at a higher interest rate translated to a combination of lower cost to the consumer and a higher return to
the JPA=s and more money to invest in upgrading the system. As for the technology, Cable Co-op was the first cable system in the world to have some of the high-speed cable modem services actually tested and used on its system. Approximately five years ago, hybrid networks were transmitting high-speed, two-way cable systems and
signals over Cable Co-op=s system. Cable Co-op=s system was in the top five or ten percent in the country in terms of quality of network and performance. Cable Co-op could perform and provide something that no one else could provide: high speed, two-way access to the poorer areas. The Mayor of Menlo Park was very interested and enthusiastic and thought there was interest on his Council to form a JPA. Cable Co-op intended to pursue that. Tony Hughes, 839 Northampton, Western Region Manager of Smith
Barney=s Public Finance Department, said John Kelley discussed with him the dilemma that Cable Co-op faced. Mr. Kelley had said any solution would not be feasible if it had any City financial commitment. The City was not interested in running a cable TV system, and any transaction proposed needed to help the Co-op deal with its impending financial situation. The solution had to include enough resources to finance a capital upgrade to enable the
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system to be competitive currently and into the 21st Century with respect to cable, video, and data services. In reviewing a graph displayed for the Council, he said the debt service was not level, the video services currently provided by Cable Co-op would provide
the Αlion=s≅ share of the revenue to pay back the bonds, and based on the revenue projections of the leading media communications consultant, the potential revenues in the out years were significant. The revenues would remain locally and were subject to local control. Smith-Barney was the number one underwriter of municipal bonds and had been for several years. Mr. Carlson talked about the largest municipal bond default in history, attributing
Smith-Barney=s involvement. There were some serious Αtake or pay≅ contracts and disputes with respect to those that caused much of the system to go down. He did not want to react to the hyperbole of Mr. Carlson with respect to his discussion of WPPS. With respect to the moral obligations of cities participating in JPAs, since 1997 when the default took place, there was much work and focus on disclosure and due diligence with respect to contracts and financial obligations. He asked if there were such a problem, did the Council believe that a JPA in Orange County could have gone to market with $1.4 billion of nonrecourse JPA issued revenue bonds where the largest participant in the JPA was the County of Orange, the second largest municipal default in history. He understood that Palo Alto participated in JPA financing or acted as a conduit on behalf of certain nonprofit issuers since that time. That raised questions with respect to participation. The residents of Palo Alto deserved the due consideration of staff of a financial proposal. It was a win-win situation for everyone involved, particularly because it allowed preservation of local origination and local programming and, at the same time, captured revenues that were generated by an existing system for the benefit of the students, the cities, and the governments in Palo Alto and the surrounding areas. Council Member Kniss asked if Mr. Hughes was previously involved in bond issues using a JPA. Mr. Hughes said yes. Recently, he was involved personally. Council Member Kniss asked Mr. Hughes to provide details to the Council off-line. Mr. Hughes said it was a well accepted financing technique. It was clear from the offering documents that the obligations of the underlying participants were not moral or financial, but there was an obligation pursuant to those documents to participate pursuant to the bylaws and the terms of the JPA. Council Member Kniss asked Mr. Hughes to indicate off-line why Cable Co-op needed the City.
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Tom Passell, 3825 Louis Road, said he had been involved in the cable issue since 1970 when the Council appointed him to the Cable TV Investigation Committee. The City had given him a 50 percent discount on his electricity during the 42 years, relative to what he would have received if he lived in Menlo Park. He perceived that was because there was a locally controlled natural monopoly on electric distribution lines. He foresaw in the not too distant future when the information highway would be just as important as the electric distribution lines were currently because they would be a means of doing commerce that was not done presently. He asked the Council to give serious and fair consideration to the Cable Co-op proposal presented to the Council. Al Kenrick, 2377 Ramona Avenue, said he lived in Palo Alto when the Co-op discussion originally took place. Having lived in other parts of the state, he was surprised that a group of committed citizens built an asset for the community that was not as appreciated as it could have been. He hoped the Council considered the valuable asset it had in the Cable system that had been developed and built by the committed citizens when the Council made its decision. Cecelia M. Horn, 3470 Janice Way, said she had lived in Palo Alto since 1960 and recalled that Santa Clara County had a cable system. The Santa Clara County School District decided that they were no longer going to spend money on cable, and the people who were
involved said they were going to Αpull up their boot straps.≅ The JPA bothered her because there would be a large, unwieldy appointed board. It would be like Bay Area Rapid Transit (Bart) and the Association of Bay Area Governments (ABAG). Herb Borock, 2731 Byron Street, said the proposal showed a $63 million proposed bond measure, of which $4 million was in transaction costs for such things as investment bankers and $5 million for interest reserve which appeared to be about the annual interest cost. That left about $54 million in real value which
consisted of buying the current system=s obligations for $42 million and upgrading the system for a cost of $12 million. There was about 54,000 potential addresses in the system and the $12 million was about $222 an address for the upgrade. If it served the entire 54,000 addresses, that would be comparable to the $500 low-end of the $500-3,000 range. A system built from the beginning with $54 million of real value would mean $1,000 per address which was in the mid-point of the range. If the Council decided that a JPA type of arrangement was a good idea, it was a question of deciding where the $54 million would go. The Council might decide the best idea was to buy out for most of the money the current assets and good will of the Cable Co-op, or to spend the $54 million building a new system.
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MOTION TO CONTINUE: Vice Mayor Schneider moved, seconded by Ojakian, to continue the item to Tuesday, February 17, 1998, City Council Meeting. MOTION PASSED 9-0. 8. Council Members Eakins and Wheeler re Consideration of Possible Urgency Action for Tree Preservation at 450 Sequoia Avenue Council Member Eakins said the memo to the Council from Council Member Wheeler and herself mentioned there was considerable concern and controversy about what should happen to the tree. The matter
was brought to the Council=s attention as a concern because of correspondence between the director of Canopy, the tree protection organization, and the owner of the property. The tree protection ordinance was reviewed to see whether it covered the situation. There was some thought that the ordinance did not fully spell out everything the Council intended when the ordinance was passed. City Attorney Ariel Calonne said the ordinance did not allow removal only of those trees within the footprint of a building; it would allow for removal of trees outside the footprint. The Council was generally aware of that. The discussion was not clear as to how the canopy of a tree would relate to the envelope of a building, namely, the three-dimensional aspect of the ordinances authorization to remove trees within the building area. The Council did not give much consideration to how the three-dimensional aspect would work. The trunk of the tree was clearly outside of any building footprint; it abutted the sidewalk but overhung the building footprint sufficiently that it was arguable that a considerable amount of the tree could be removed under the ordinance, thereby rendering it questionable as far as whether it would survive. Planning Arborist David Dockter said although the tree existed outside the building envelope, it was substantially growing inside the building envelope. Building activity could injure and kill the tree if allowed to do so. He was working with the developer and came up with a proposal where the tree would survive. The ordinance amendment would address other properties in the future that would be in the same situation. The intent was to save the large landscape trees that were outside the building envelope. The tree in question could be killed by detrimental activity and the owners would be allowed to do so by law if it was not addressed at the present time. Mr. Calonne said staff prepared an ordinance that the Council could use. The proposal would create, until the end of 1998, a prohibition on removing protected trees such as native oaks larger
than 112 inches in diameter unless they were within the two dimensional footprint. In the meantime, staff would have to figure
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out what was necessary to better balance trees outside the footprint. Staff had no interest in recommending or supporting single-family design review. The question was whether a recommendation could be made that would allow a ministerial review during the course of the building permit rather than some type of discretionary fact based analysis. He urged the Council to check the findings and modify the first sentence of Section 1.C, which
indicated that ΑThe new property owner of the parcel located at 450 Sequoia Avenue intends to remove a Valley Oak tree on the
property.≅ He did not know if that was correct and suggested editing or deleting the sentence. Council Member Wheeler said she understood the proposed amendment to the ordinance was that staff was not proposing that the Council enhance the ordinance or give it more meaning than was the
Council=s intent when the ordinance was passed. Mr. Calonne said he had not found anything in a staff report or minutes that indicated that the Council looked at the three-dimensional issue. It was a blank as to what the Council intended. The proposal gave staff a chance to fill in the blank. Staff felt it was nonsensical for the tree not to be protected. Mayor Rosenbaum asked whether the amendment replaced or added to the existing ordinance. Mr. Calonne said the amendment was an uncodified ordinance that would supplement what was currently on the books. It would add an additional limitation on trees, the trunk of which sat outside the two-dimensional footprint. Kate Feinstein, 1600 Bryant Street, said she was a member of the Tree Task Force and worked hard to help Council and staff reach agreement on a tree protection ordinance for Palo Alto. She believed at the time the ordinance was adopted, the Council indicated it would revisit the ordinance after some period of time. It seemed it was an opportune time to revisit the ordinance to make sure it said exactly what the Council intended. The ordinance mentioned canopy. Those who wrote the ordinance were aware that a tree is not a trunk, but did not take into account that sometimes trees did not grow only vertically. There would be little disagreement amongst members of the Council that the tree on Sequoia was probably the most remarkable landmark Oak tree in Palo Alto. She urged the Council to do all it could to support preservation of the tree. It would be wise to consider incentives that would help a property owner with a large tree which incurred expense and inspection. There were two categories of protected trees, one was by size and species, and the other was heritage trees. The tree in question probably fit into both categories, but
Αheritage tree≅ was never defined.
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Debbie Mytels, 2824 Louis Road, said the situation was being monitored because of the proposed house to be built. It appeared that the applicant and City staff worked together to create a plan for the house that would preserve the tree. There was some question about whether the ordinance was sufficiently precise to preserve both the trunk and canopy of the tree. The ordinance should be clarified. She supported an amendment to make the situation more clear, which would also be helpful to future applicants in similar situations. Jennifer Griffiths-Morrissey said the house was designed to fit behind the tree. There were concerns about a fireplace, and the plans were being altered so that would not affect the canopy. She had not seen the changes to the ordinance. Council Member Ojakian clarified the canopy would be protected. Ms. Griffiths-Morrissey said that was correct. She read some of
the correspondence between Mr. Dockter and the McLennan=s, the onsite arborist to protect the tree during demolition of the house. There was some discussion about trimming two small limbs. The house was designed to be underneath and behind the canopy. Council Member Ojakian said the original letter sent by the applicant indicated that an arborist might be retained to look at the trees. Ms. Griffiths-Morrissey said they would continue to retain arborists to monitor the tree. Three arborists had varying opinions regarding the health of the tree. Vice Mayor Schneider said someone mentioned incentives for homeowners. At a pre-Council meeting that same morning, Home Improvement Exceptions (HIE) were discussed. She asked whether that was something that could be looked at. Mr. Calonne said the prior year the Council authorized preservation for protected trees as justification for an HIE. He did not know if that would apply for a ground-up remodel. Director of Planning and Community Environment Ken Schreiber said staff would be receptive to working on an HIE or variance to facilitate achieving both a desirable and appropriate house for the site and saving the tree. That message was passed on to the owner previously. MOTION: Council Member Eakins moved, seconded by Wheeler, to adopt a short-term urgency ordinance to preclude removal of heritage trees, the trunks of which are outside the allowable building area in order to clarify the legislative intent, with the following
revisions to Section 1. C: ΑThe new property owner of the parcel located at 450 Sequoia Avenue intends to could remove a Valley Oak
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tree on the property. This Valley Oak is one of the largest and finest native oak trees in Palo Alto. The proposed potential removal is in anticipation of the demolition and reconstruction of
the single family residence currently on the lot.≅
Ordinance 4478 entitled ΑOrdinance of the Council of the City of Palo Alto Prohibiting the Removal of Specified Protected Oak Trees, Imposing Penalties for Such Removal, and Declaring the Urgency Thereof, to Take Effect
Immediately≅ Council Member Wheeler said she wanted to assure the applicant that the action taken by the Council was not directed solely at their property. It was something that was not enunciated clearly when the original ordinance was adopted. The clarification would affect
the applicant=s property as well as all trees of a similar nature
and was in keeping with the Council=s original legislative intent. Council Member Eakins said the Council needed to be concerned about protection for other trees. She hoped the intent of the Council was to protect other trees in similar situations. MOTION PASSED 9-0. 9. Council Comments, Questions, and Announcements Council Member Mossar reported on the Airport Noise meeting. Council Member Ojakian thanked staff and, in particular, City Manager June Fleming and Fire Chief Ruben Grijalva for their response to the telephone outage emergency and response to the storm that evening. Mayor Rosenbaum noted the Santa Clara County Cities Association (SCCCA) meeting scheduled for Thursday, February 5, 1998. ADJOURNMENT: The meeting adjourned at 11:15 p.m. in memory of Gay Passell who contributed significantly to the community. ATTEST: APPROVED:
City Clerk Mayor NOTE: Sense minutes (synopsis) are prepared in accordance with Palo Alto Municipal Code Sections 2.04.180(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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