HomeMy WebLinkAbout1998-02-17 City Council Summary Minutes Special Meeting February 17, 1998 1. Public Employee Performance Evaluation.................86-67 2. Public Employee Performance Evaluation.................86-67 ADJOURNMENT: The meeting adjourned at 8:00 p.m..............86-67 SPECIAL ORDERS OF THE DAY...................................86-68 ORAL COMMUNICATIONS ........................................86-68 1. Contract between the City of Palo Alto and Wallace Roberts & Todd for Downtown Urban Design Improvements Project Phase I: Construction Documents and Construction Management, CIP 19608 86-68 2. Contract between the City of Palo Alto and Aerotek Data Services Group for Temporary Staffing Services.........86-69
3. Ordinance 4479 entitled ΑOrdinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 in the Amount of $65,000 to Provide an Additional Appropriation for City Contribution to Cost of Structural
Repair of Williams Property, 351 Homer Avenue≅ .........86-69 4. Amendment No. Two to Special Counsel Services Agreement No. C7092914 Between the City of Palo Alto and Spiegel & McDiarmid for Legal Services.....................................86-69
5. Resolution 7745 entitled ΑResolution of the Council of the City of Palo Alto Amending the Compensation Plan for Management and Confidential Personnel and Council Appointed Officers Adopted by Resolution No. 7713 and Amended by Resolution No. 7729 to Extend the Authorization for Advance
Payment of Accumulated Sick Leave for the City Manager≅ 86-69
6. Ordinance 4480 entitled ΑOrdinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 for Additional Funding in the Amount of $250,000 for the Fiber Optic Customer Design and Connection Services Capital Improvement Project to be Fully Funded by Revenue by Billable
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Work≅ ..................................................86-69 AGENDA CHANGES, ADDITIONS, AND DELETIONS....................86-69 6A. (Old Item No. 8) Ordinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 to Provide an Additional Appropriation to Fund the Purchase of a Reserve Aerial Ladder Truck Apparatus Within the Vehicle Replacement and Maintenance Internal Service Fund and to Reduce the Fund Reserves by $195,000...................86-69 6B. (Old Item No. 9) Ordinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 for Additional Funding in the Amount of $50,000 for the Water Service and Hydrant Replacement Capital Improvement Project86-70
7. Council Member Fazzino and Mayor Rosenbaum re Cable Co-op=s Proposal (continued from 2/02/98)......................86-71 ADJOURNMENT.................................................86-85
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The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:03 p.m. PRESENT: Eakins, Fazzino (arrived at 6:18 p.m.), Huber (arrived at 6:06 p.m.), Mossar, Ojakian, Rosenbaum, Wheeler ABSENT: Kniss, Schneider CLOSED SESSIONS 1. Public Employee Performance Evaluation Subject: City Auditor William Vinson Authority: Government Code section 54957 2. Public Employee Performance Evaluation Subject: City Clerk Gloria Young Authority: Government Code section 54957 The City Council met in Closed Session to discuss matters involving Employee Performance Evaluations as described in Agenda Item Nos. 1 and 2. ADJOURNMENT: The meeting adjourned at 8:00 p.m.
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Special Meeting February 17, 1998 The City Council of the City of Palo Alto met on this date in the Council Chambers at 8:06 p.m. PRESENT: Eakins, Fazzino, Huber, Mossar, Ojakian, Rosenbaum, Wheeler ABSENT: Kniss, Schneider SPECIAL ORDERS OF THE DAY Mayor Rosenbaum reported on action taken in the February 9, 1998, Closed Session. By a vote of 9-0, the Palo Alto City Council authorized the City Attorney to undertake negotiations for a settlement with Bill Graham Presents/Shoreline Amphitheatre of a sum not to exceed $10,000. ORAL COMMUNICATIONS Dennis Harvey, 1119 Oregon Avenue, spoke regarding the St. Francis Neighborhood Association. Paula Sandas, 1119 Oregon Avenue, spoke regarding the St. Francis Neighborhood Association. Carl King, 2351 Santa Catalina Street, spoke regarding the St. Francis Neighborhood Association Maureen McNulty, 2340 Carmel Drive, spoke regarding free counseling
for flood families through the Children=s Health Council. Edmund Power, 2254 Dartmouth Street, spoke regarding good government. CONSENT CALENDAR MOTION: Council Member Huber moved, seconded by Wheeler, to approve Consent Items Nos. 1 - 6. 1. Contract between the City of Palo Alto and Wallace Roberts & Todd for Downtown Urban Design Improvements Project Phase I: Construction Documents and Construction Management, CIP 19608 2. Contract between the City of Palo Alto and Aerotek Data Services Group for Temporary Staffing Services
3. Ordinance 4479 entitled ΑOrdinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98
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in the Amount of $65,000 to Provide an Additional Appropriation for City Contribution to Cost of Structural
Repair of Williams Property, 351 Homer Avenue≅ 4. Amendment No. Two to Special Counsel Services Agreement No. C7092914 Between the City of Palo Alto and Spiegel & McDiarmid for Legal Services
5. Resolution 7745 entitled ΑResolution of the Council of the City of Palo Alto Amending the Compensation Plan for Management and Confidential Personnel and Council Appointed Officers Adopted by Resolution No. 7713 and Amended by Resolution No. 7729 to Extend the Authorization for Advance
Payment of Accumulated Sick Leave for the City Manager≅
6. Ordinance 4480 entitled ΑOrdinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 for Additional Funding in the Amount of $250,000 for the Fiber Optic Customer Design and Connection Services Capital Improvement Project to be Fully Funded by Revenue by Billable
Work≅ MOTION PASSED 7-0, Kniss, Schneider absent. AGENDA CHANGES, ADDITIONS, AND DELETIONS MOTION: Council Member Wheeler moved, seconded by Huber, to move Item Nos. 8 and 9 forward ahead of Item No. 7. MOTION PASSED 7-0, Kniss, Schneider absent. City Manager June Fleming announced that Item Nos. 8 and 9 would become Item Nos. 6A and 6B. 6A. (Old Item No. 8) Ordinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 to Provide an Additional Appropriation to Fund the Purchase of a Reserve Aerial Ladder Truck Apparatus Within the Vehicle Replacement and Maintenance Internal Service Fund and to Reduce the Fund Reserves by $195,000 Agreement between the City of Palo Alto and the City of Mountain View for Joint Purchase and Use of Aerial Ladder Fire Truck MOTION: Council Member Wheeler moved, seconded by Huber, to approve the staff recommendation to: 1. Adopt a Budget Amendment Ordinance appropriating $520,000 for the purchase of a second aerial ladder truck, with a
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net reduction of $195,000 in retained earnings from the
Vehicle Replacement Fund for the City=s share of the cost. 2. Approve an agreement for joint-purchase between the City of Palo Alto and the City of Mountain View of an aerial ladder truck.
Ordinance 4481 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 to Fund the Purchase of a Reserve Aerial Ladder Truck Apparatus Within the Vehicle Replacement and Maintenance Internal Service Fund and to Reduce the Fund Reserves by $195,000" MOTION PASSED 7-0, Kniss, Schneider absent. 6B. (Old Item No. 9) Ordinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 for Additional Funding in the Amount of $50,000 for the Water Service and Hydrant Replacement Capital Improvement Project Contract between the City of Palo Alto and for Ken Leek Construction for Water Valve and Fire Hydrant Replacement Project MOTION: Council Member Fazzino moved, seconded by Huber, to approve the staff recommendation to: 1. Adopt a Budget Amendment Ordinance in the amount of $50,000 for the Water Service and Hydrant Replacement Major Project (CIP No. 8014) 2. Approve and authorize the Mayor to execute the amended contract with Ken Leek Company in the amount of $152,451 for Water Valve & Fire Hydrant Replacement Project. 3. Authorize the City Manager or her designee to negotiate and execute one or more change orders to the contract with Ken Leek Company for related, additional but unforeseen work which may develop during the project, the total value of which shall exceed $15,000.
Ordinance 4482 entitled ΑOrdinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1997-98 for Additional Funding in the Amount of $50,000 for the Water
Service and Hydrant Replacement Capital Improvement Project≅ MOTION PASSED 7-0, Kniss, Schneider absent. UNFINISHED BUSINESS
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7. Council Member Fazzino and Mayor Rosenbaum re Cable Co-op=s Proposal (continued from 2/02/98)
City Clerk Gloria Young said Cable Co-op=s Proposal (Proposal) needed to be reviewed from the following perspectives: administrative and policy, legal, fiscal, and technological. There was a fundamental policy question that the Council needed to address which was whether or not the City was interested in entering into a 30-year contractual relationship with a new entity. Palo Alto was key to the Proposal moving forward. Staff was concerned that there were enough administrative and policy issues associated with the Proposal that regardless of the time frame, the Proposal presented serious considerations. First, staff understood that Cable Co-op had met informally with the other Joint Power Agency (JPA) members. Two weeks prior, City staff met with the JPA members and there were several initial concerns expressed by the members, including but not limited to a need to review the complete Proposal. Stanford University said it was unsure as to how it fit into the new franchise. The Menlo Park representative shared similar concerns including the use of its name and entering into a new, untried in their minds, endeavor. Second, there was an existing franchise agreement. The Proposal raised the question as to how it affected the existing franchise agreement and its existing members and whether the existing JPA members could opt out of the existing franchise if the Proposal was pursued. The other JPA cities were within San Mateo County, and opening up the existing franchise agreement for the 30-year extension, might allow the existing members an opportunity to opt out of the Agency. Also, it was unclear how the Proposal affected the franchise renewal process which could begin as early as 36 to 30 months prior to the expiration of the existing franchise agreement on March 24, 2001. Third, the Silicon Valley Communication Authority (SVCA) could fail based on: 1) the assumptions made were flawed; 2) the management company failed; 3) the probability that the industry could face hard economic times or the subscriber projections were not met; and 4) the cable proved to be a non-viable technology. As previously indicated, there were a number of questions which would need to be addressed. The following questions were provided as a starting point for the examination: 1) Could the analysis sustain the financial obligation that would occur with the issuance of the bonds; 2) Was the cable industry a vital future in this fast moving technological age; 3) What other contractual agreements, financial obligation did Cable Co-op have in addition to the bank debt; 4) What proof did the City have that there was no risk; 5) What would happen if the new Authority failed; 6) What was the effect on the existing JPA members, extended franchise agreement, and the refranchising process; and 7) What would happen to MPAC and the MPAC Board. City Manager June Fleming said the Proposal before the Council was
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a rather unique request. Staff was always available to assist Council in any matter that was assigned. There were several
concerns that staff wanted to bring to the Council=s attention before the staff assignment was requested. She reemphazied that
from staff=s perspective there were several legal, financial, technological, and operational concerns regarding the Proposal. City Attorney Ariel Calonne said the Proposal was one which challenged the staff to know exactly what its role was. He saw the Council request as looking for some more detailed study of what had been presented. The consistent message from staff was that no further study was necessary. On balance, the Proposal was inadvisable. Since the last meeting on the subject, staff had been presented with a large package of confidential financial information. He had extreme discomfort with it and had advised the staff against trying to serve as the translators and filters of this confidential information for the Council. The public decision should not be made on the basis of secret data unless it was specifically authorized by law. The issue was tough for staff because it was dealing with people who were committed to a laudable public purpose and who had worked hard for a lot of years and were facing eminent financial disaster. In that context it was tempting to be too polite. Senior Assistant City Attorney Grant Kolling said the issues fell into three categories: (1) whether the Proposal purported to only ask the City to express its interest in the particular venture, i.e., to form a JPA or whether it was a request to give feedback on the proposed assignment and renewal of the franchise. The franchise agreement required Cable Co-op to comply with certain procedural requirements and staff would have some concerns if that was the request; (2) whether the Proposal was intended to preempt the City from going forward with its Universal Telecommunications Service Request for Proposal (RFP). The two projects were not mutually exclusive and could be viewed as mutually interdependent; and (3) if the Proposal was accepted and CVA stepped in as the cable operator, could the type of arrangement that was envisioned which involved both the cable system and the telecommunication aspects of the particular system be viewed under federal and other applicable law as the granting of an exclusive franchise agreement. Acting Director of Administrative Services Melissa Caval said there were a number of important financial issues that the Proposal raised. First, there had only been one other financial transaction that had ever been structured like the Proposal, and she questioned whether the bonds could realistically be marketed and sold and would the municipality market place view them as investment grade bonds. More specifically, would bond holders be willing to pay $42 million for a cable system with assets worth approximately $15 million. The basis of the Proposal was that the bonds would have a
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30-year term which did not seem feasible. An investor wanted to invest in a product whose youthful life was at least as long as the term of the bonds. With technology changing as rapidly as it was, it would likely be different in 10, 20, or 30 years. Shortening the terms of the bonds was not viable because it would increase the annual debt service payments which would further impact the financial viability of the Proposal. The Proposal also assumed that $12 million was all that was needed for capital and system upgrades for the next 30 years. Based on the state of Cable Co-
op=s existing infrastructure and the fact that ongoing capital investment would be essential to keep up with changing technology, the amount appeared to be understated, and an additional debt would likely be needed in the future. Although the Proposal did not address the cost of the annual debt service payments on the bonds based on her quick calculations keeping in mind that she had made assumptions for interest costs, the debt service would likely exceed the annual cash flow currently generated by Cable Co-op which lead her to question what that meant with respect to cable rates. The Amended Franchise Agreement required that rates be set so that net revenues would at least be 135 percent of the annual
debt service which called into question SVCA=s ability to keep rate competitive for the next 30 years. The other consideration was
that Cable Co-op=s current modem rates were among the most expensive in the United States. One of the selling points of the Proposal was that excess revenues would be available to member cities, and based on her calculations of debt service cost and the targets for potential annual cable rates it seemed highly unlikely. She also noted that the franchise revenues that the City currently received, which amounted to several hundreds of thousands of dollars each year, would be in question under the Proposal. Finally, while it was clear that the City would not be legally obligated to guarantee or to pledge revenues for the bonds, it was important to consider that the City would be part of the governing body of the new entity, SVCA, and accordingly would have the obligations of any proprietor. Utilities Telecommunications Manager Van Hiemke said with respect
to the technology issues associated with Cable Co-op=s Proposal, the Proposal called for an upgrade to its existing coaxial cable
infrastructure by using a part of the City=s fiber optic backbone, by extending new fiber deeper into residential areas, and by activating the existing B cable. Since the Proposal provided limited details about the nature of the upgrade and services to be offered, staff could only speculate about the services that would be deployed based upon the Hybrid Fiber Coax (HFC) systems that had been deployed in other communities. Considering the other HFC systems in mind, he asked the Council to consider several questions. First, how the proposed $63 million financing compared to the cost of constructing a new network with comparable technology. Not favorably. Based on industry averages new
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construction of HFC networks tended to run about $500 per address passed. In the City of San Bruno, the cost was actually lower for their current upgrade that was underway. At the proposed cost, assuming 26,000 residential addresses in Palo Alto, a new HFC network could be constructed for a cost of around $13 million. Cable Co-op proposed $63 million in financing to purchase and upgrade its legacy coaxial cable plant to a HFC network over an area of about twice the size of Palo Alto. With estimated costs
for Palo Alto=s share of Cable Co-op=s service territory at $31 million, the proposed purchase and upgrade of the aging coaxial cable plant was far too expensive, more than twice the cost of constructing a new one. With costs that far out of line, it was difficult to see how it could lead to the availability of an affordable high speed data service for the citizens of Palo Alto. Second, he asked what the risk of technological obsolesce was before the end of the 30-year financing period. He felt it was extremely high. While it was true that HFC networks were capable
of offering a data service that by today=s standards was considered high speed, it would not always be the case. With the pace at which data communications technology was evolving there was a near term risk of the proposed HFC network facing technological obsolescence within the next five years unless it continued to be upgraded over time. Substantial additional upgrades would likely be necessary during the course of the proposed 30-year time frame over which the revenue bonds would be repaid. Thirty years was a very long time when considering that the remaining life of the existing coaxial cable plant was probably less than 20 years and the estimated life of the electronic equipment that would be deployed as a part of the upgrade might be less than 5 years. The bottom line was in order to make a reasonable assessment of Cable
Co-op=s proposed approach, future upgrades and the full life-cycle costs needed to be considered. Third, he asked that the City Council consider whether or not there were other more future proof technological alternatives available. The answer was yes. Various alternatives to the HFC network existed with longer expected life spans, e.g., there were various approaches involving fiber to the curb or fiber to the home that could be deployed with far greater present and future capabilities than would be available with a HFC approach. Finally, he questioned whether the Proposal was the best option for Palo Alto residents. On the basis of the information before him, he simply did not know. The Proposal was not sufficiently detailed and the alternatives were not yet known. His preliminary modeling and the unsolicited interest that the City had received from other parties with respect to the Universal Telecommunications Service indicated that there were some very exciting possibilities for Palo Alto that could take better
advantage of the unique circumstances associated with the City=s fiber backbone, poles, conduits, and distributed facilities. He asked that the Council explore the other possibilities before considering the option of locking the City into a 30-year
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commitment to Cable Co-op=s Proposal. The City welcomed a response to the RFP by Cable Co-op at the time that the other proposals were solicited during the RFP process. If the staff were required to begin evaluating the Proposal now, it would only lead to delays to the RFP process.
Ms. Fleming said that staff had taken the City Attorney=s legal advice not to review the confidential information provided by Cable Co-op. She reemphasized the concerns that the staff had presented which included the fact that there were a number of questions and concerns that could not be answered by the information provided, they were unsure of the exact commitment that the City would be making under such a Proposal; and there was grave concern about the 30-year commitment given the technological changes that were being made. There was further concern about the commitment in terms of the financial obligations. The information did not provide enough detail to return to the City Council with a solid and fair response Cable Co-op. The suggested time frame was unrealistic for staff response. She was also concerned about how outside agencies viewed or interpreted any comments the City would make. She did not want any agency to interpret any work that staff did at that time, as
being considered a Αperiod of negotiations with Cable Co-op≅
because that would not be the case. It was not staff=s intent to be negative, but it was their responsibility to bring the legitimate concerns to the Council in order to allow them to make the right policy decisions. Council Member Fazzino asked given the legal issues associated with a fair and competitive RFP process, what information was appropriate for the Council to pursue outside of the formal RFP process and what information needed to be addressed through the formal process. Mr. Kolling said the Proposal involved upgrading of a cable system which also had telecommunications capabilities. The RFP was the
City=s way of saying that it would like to find out what type of telecommunication services it wanted to obtain for the community. The Proposal was not necessarily tied to the RFP because there would be at least two JPA members so the area of application of the Proposal covered not only Palo Alto but another jurisdiction. He thought if the City went forward on the Proposal, it could have
impact on anyone wanting to respond to the City=s RFP. Ms. Fleming said the City should participate in an open and competitive process which was done through the RFP process and were not restrictive. She felt the correct decision had been made about the RFP and Cable Co-op, as well as another entity, could respond. Mr. Calonne said the theoretical and practical effect was what impact the Proposal would have on any preliminary interest for
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other entities that might want to respond to the RFP. He thought it might have some negative affect. The legal issue with respect to the RFP process was whether the City was complying with its own laws which was dependent upon what services might ultimately be provided. He thought there was a tacet assumption the staff was making that Cable Co-op would be looking at a full range of telecommunication services, what implications that might have with federal regulations of a fiber ring, and how it would impact the RFP process which were all major concerns for staff.
Council Member Fazzino asked whether based upon the City=s rules, anything which involved service issues should be captured within the RFP process. Mr. Calonne said yes. Council Member Fazzino asked what information might be appropriate for the City Council to request in order to analyze the Proposal during the short-term. He assumed that any issue surrounding the concept of SVCA, e.g., how it was set up, what state law was in respect to the SVCA, and who needed to comprise the SVCA, etc., was appropriate to request. Mr. Calonne said the staff could review those issues in an academic way but he was interested in whether there were any other public agencies that were interested in pursuing the Proposal. Ms. Fleming said the issues raised by staff were not addressed in the Proposal. Mr. Calonne said the question was why the Proposal was presented to the Council at the present time, and what was it being asked to do
with the Proposal. The City welcomed Cable Co-op=s response to the RFP, but what the Council was being asked for was a preview of where policy decision makers might be because of an eminent
financing problem. The staff had no opposition to Cable Co-op=s participation in the RFP process. The urgency was a function of
financing, not of technology, not of the City=s financial needs,
and not of meeting a year 2000 deadline for staff=s Internet service for the public. Staff would be imprudent not to react to that sort of urgency. It was fine for Cable Co-op to respond to the RFP, but the Council was being asked to preview how it might react to issues which it had not properly been requested to react to, e.g., issues related to assignment, extension of the franchise, and extension related to the franchise for a time period which was astounding by any technological or financial standard. Mayor Rosenbaum asked about the advice given regarding review of the confidential information provided by Cable Co-op.
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Mr. Calonne said he had not advised the staff not to look at the information but rather not to try and filter it, digest it, or summarize it for the City Council. He was not aware of lawful means of translating confidential information into some proper basis for public decision. Mayor Rosenbaum asked how staff would handle it if the Council requested more information which would lead to a public report. He asked whether there would need to be a request to Cable Co-op to make all of the information public. Ms. Fleming said yes. Mayor Rosenbaum asked how the City valued the video service. Mr. Hiemke said when he mentioned $13 million for a new HFC system for a city the size of Palo Alto, it included video and cable modem services. Ms. Caval said the $63 million Proposal included $42 million for purchase of the cable system. The system in the last several years has assets which ranged from $13 to $16 million, and the difference between the $62 million and $42 million was the goodwill. Her question was whether the marketplace would deem that as valuable. Mr. Hiemke said as mentioned a couple of weeks prior with respect to telecommunication systems built by other municipalities, three cities in particular were identified: Glasgow, Kentucky; Cedar Falls, Iowa; and Tacoma, Washington. All involved HFC which was built by the municipalities in an overbuild of the existing coaxial cable infrastructure that was in place by the cable television operator. The reason those were built was partially because the rates were quite high, and the services that were being received by the residents in those communities were not believed to be as high as they could be. The municipalities moved in and were very successful in gaining market share, dramatically reducing the prices that were offered to consumers.
Mr. Calonne said that Mayor Rosenbaum=s question also raised another perspective issue which had been commented on in the CalTax letter the Council received. It stated that the City was being asked to finance with what was hoped to be nonrecourse financing of the acquisition of a cable business and to own it in some form of public ownership in a joint powers entity. He said Mayor Rosenbaum was correct to look at the value of the video business operation because it would end up in pubic ownership under the Proposal. Mayor Rosenbaum asked what the alternative to the Proposal was. Ms. Fleming said the City had not reviewed alternatives. Mayor Rosenbaum referred to the previous proposal submitted by
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Cable Co-op the prior year and asked what level of City analysis had occurred. He asked whether there was a request to extend the franchise. Ms. Young said the previous request from Cable Co-op was made to the City which included an assignment of the franchise, but before the City had the opportunity to review it as a formal proposal, Cable Co-op rejected the proposal. Mayor Rosenbaum asked what action the City would have to take assuming the City did not accept the proposed Proposal. Ms. Young said that based on the franchise agreement, the City would have the first right of refusal which was within a 90-day period. It would allow the City to either assume or a transfer to take place with respect to a Proposal. Mayor Rosenbaum asked whether the only right the City had was to buy the system as opposed to allowing a transfer. Ms. Young said yes, but there was another factor which was an existing franchise agreement that was in place and presumably would be in effect regardless of the owner of the system. Mr. Calonne said Mr. Hiemke answered the question, but that he
could not inform the Council on whether Cable Co-op=s Proposal was good or bad in terms of the costs for video services to the customer. He said that Ms. Caval had identified the financial concerns and while he tended to support that as a inference, he was not ready to reach that conclusion. Council Member Wheeler referred to the issue of intertwining the Proposal with the RFP process and asked if the City Council gave staff direction that evening, whether the City could find itself in a position similar to one a decade prior when an exclusive franchise was awarded to Cable Co-op. Mr. Calonne said no. Staff was not trying to make that comparison. The City had a body of local law on bidding processes and there was a risk that running the two proposals parallel would result in a challenge to the integrity of the local bidding process. Council Member Wheeler referred to a member of the public who had spoken at the last meeting who had drawn an analogy between the Proposal and a utilities JPA in the northwest. She asked staff to comment. Mr. Calonne said the City Council needed to sort out the interest of the different people who spoke and cautioned against taking every person who spoke as an expert. The question was whether
there was some legal basis for the Αmoral obligation.≅ He felt
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under the Proposal, the City Council would be functioning as a proprietor. The prospects of the City walking away should the system be a financial failure was difficult, but almost certain to involve litigation by people who relied on official statements with the marketing of Palo Alto and Silicon Valley to the prospect of bond buyers. He concurred with Ms. Caval that under the Proposal,
the City would be proprietors, it would be the City=s business. Council Member Wheeler asked what a workable assignment would be for staff with respect to the ability to provide the Council with some answers and also what the City could do without getting them into trouble with the RFP process. She asked whether there were pieces of the Proposal that could be analyzed without analyzing the pieces that might run the City into direct conflict with the RFP process. Mr. Calonne said the fundamental question was whether there were any other public agency that wanted to be a part of the JPA. Ms. Young said that all the current JPA members indicated they would need to have full disclosure and be able to go through their internal processes to provide some feedback. Council Member Fazzino referred to the issues raised by Ms. Young and asked whether those were the issues that could be addressed during the short-term, e.g., the legality of SVCA. It was his understanding that there was no relationship whatsoever between the Proposal and the Northwest Washington Public Power Supply (WPPS) to create nuclear power plants which according to Cable Co-op did not involve any financial risk to the City. He asked whether that could that be addressed within the next 60 days. He referred to
Ms. Young=s comments and said that they could be perceived as hearsay. He asked whether the City could receive formal response from the JPA members within the next 60 days without compromising the RFP process. Ms. Fleming said the staff was not trying to be a stumbling block, but rather to say in the most constructive way that they believed there was a fundamental underlying decision that was based upon the information that was available. Did the Council want to have staff resources and time spent on a proposal which committed the City for 30 years to a technology which was evolving and changing. She asked whether there were some questions which could be responded to in a reasonable time. The answer was yes, but whether those answers would then lead to another assignment got back to the basic response to the policy question. The meeting that the City Clerk referred to was not a casual meeting but included the JPA members. Ms. Young responded that the casual conversation was with respect to the Menlo Park representative because the meeting had occurred
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during the flood event and Menlo Park was not there. She discussed
the issue later with Menlo Park=s Assistant City Manager who then gave her the comments that were placed on the record. With respect to the 60-day period, the Council needed to be aware that the other agencies did not as a matter of course meet as often as Palo Alto did and therefore the Council needed to take into consideration that the City might not get a formal response back within that time frame. Mr. Calonne credited Cable Co-op for putting forward an advanced proposal in the sense that it described the operating structure. The problem associated with the Proposal was that the Council was
looking at putting the City=s name on $62 million worth of debt that by all accounts was not worth that amount. Council Member Fazzino asked whether that was not precisely the kind of legal issue which could be addressed within 60 days. Mr. Calonne said the questions with respect to the structure of CVA did not come to the real gut issue which was whether the transaction was something the City wanted to be involved in. He said that Cable Co-op, to its credit, had said it would rather have a prompt answer than one which was dragged out. Council Member Huber asked staff to respond to the time frame for the RFP process. Mr. Hiemke said staff felt that August 1998 was the time frame for issuing the RFP. MOTION: Council Member Fazzino moved, seconded by Rosenbaum, to direct staff to return with a preliminary legal assessment of the viability of the proposal within 60 days as long as the assignment does not compromise the RFP. Council Member Fazzino felt that in the final analysis the answers the Council needed with respect to the Proposal would occur within the RFP process, and he agreed with the staff that in no way should it compromise the RFP process. At the time he believed that it was a qualitatively different relationship for the City with respect to Cable Co-op, and the City was in a unique situation as the lead agency for the franchise agreement. He felt it was entirely appropriate for staff to respond to the Council on the legal issues without delay. He also wanted to know the answers to the questions raised by the City Clerk. He wanted to strictly limit the parameters raised by the Proposal, and he believed that by focusing almost exclusively on the legal aspects of the Proposal that he had done so. Council Member Eakins asked whether the response should be specific
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only to the legal issues and not the other areas such as technological, fiscal, and administrative. Council Member Fazzino said the motion referred to legal and other political issues associated with the formation of SVCA. Council Member Eakins had mixed feelings because she felt the Proposal was a creative prospect for financing an entity such as cable service. She could not support the motion if it went beyond
the City Attorney=s Office for answers. Mr. Calonne said the Council would be prudent to request written legal advice on how to go about the Proposal procedurally. He did not think it would be definitive for the Council because he did not believe it would produce final answers. Council Member Wheeler said the Proposal was innovative and responsive to what Cable Co-op and management heard from some of the Council Members at the study session held the previous year. Unfortunately, it came extremely late for the Council, staff, and Cable Co-op. If there had been more time for staff to do a proper analysis, she might have cast a different vote than she would that evening on the proposed motion. The City Attorney had reminded the Council several times that evening that it needed to make a basic policy decision and it was easy in the particular case because the Proposal was unique and innovative, it was very easy to get into the details, be persuaded by the cleverness of the proposal, and to want more information on which to base a decision. She felt that was almost a trap, and the Council needed to come to grips with the basic issue of whether the City wanted itself or some sort of quasi-city to own and run the cable telecommunication systems. Her answer to that question was no. There had been a long history in the country of bad business decisions being made by politicians.
That was not the City Council=s forte, particularly in an area that changed so quickly, was so technologically complex, and had very smart private entrepreneurs going crazy all the time. She felt the Council was the worst type to try to play in that field, much as she admired the staff and her colleagues. She would rather allow the technological wars to be waged in the private sector and the technological advances and risks associated to be assumed entirely by the private sector. It was extremely important not to string Cable Co-op out by asking for a small, contained report because it would lead the Council 60 days down the road to ask the next level of questions. Cable Co-op needed to get about their business. Council Member Huber said ordinarily he supported most referrals from his colleagues but in the particular instance he had thought through the process of what the point of the information being requested was, and he was left with the fundamental question of whether he wanted the City to get involved in the Proposal. He
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concurred with Council Member Wheeler. He viewed the Proposal as two things, cable and data transmission. He had never been interested in government operation of a cable system, and the data transmission issue was being explored through the RFP process. He wanted to see what the private sector returned to the City with, and he felt that the RFP was the perfectly reasonable way to go. Cable Co-op could submit a response to the RFP, but he presently
did not want to take the time to delay Cable Co-op=s efforts to do what they needed to do. He would not support the Proposal. Council Member Mossar concurred with Council Members Wheeler and Huber and would oppose the motion. She felt it was important for Cable Co-op, the public in general, and Council and staff to be clear that the Proposal was complicated and deserved a thorough analysis which he believed deserved an analysis in the context of the larger RFP process. She hoped Cable Co-op would participate in the RFP process, but she felt that whatever information would return to the Council from staff within 30 days, 60 days, or 120 days would still leave the Council without enough information from Cable Co-op or the other potential bidders that the Council would need to make a sound judgment. Council Member Ojakian said he would oppose the motion. He concurred with Council Member Wheeler that he was supportive of franchising but not ownership. He was not interested in seeing the City get into ownership of Cable Co-op, although it did not mean that he did not think that services such as MPAC should continue. He said he was frankly convinced after hearing all of the staff comments regarding the concern with the Proposal and he did not want to direct staff to spend another 60 days on the request. Council Member Eakins found the comments from staff and her colleagues very useful. She agreed that being a proprietor for something in the industry which was not only volatile but under enormous pressures to change and modernize was not appropriate. Council should not give undue encouragement to the plan for refinancing Cable Co-op. She felt there were other ways to have local control over cable television service delivery. Since staff had indicated that the Council would not receive information that would contribute to a final decision, it was unfair for all concerned to continue. She would oppose the motion.
Council Member Fazzino respected his colleagues= view on the issue but asked if they were open to Cable Co-op presenting that type of proposal through the formal RFP process. Council Member Wheeler said yes, but the Cable Co-op needed to take into consideration comments made that evening. Mayor Rosenbaum said that Council Member Eakins had raised the
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point that there must be alternates that the Council did not know about, but he did not know that it would be as attractive as the Proposal which was before the City Council that evening. The public purpose for considering the Proposal was to maintain local control. To the extent that the City did not seem to value that at all, he felt the City was making a mistake. He thought the alternate would involve a complete loss of public control and perhaps a video system which was not as good as the present one. He felt that at the root of the issue was that Cable Co-op did not enjoy a reservoir of support and goodwill that was sufficient to enable the great amount of work that would be required to put the project together. It seemed very clear that the City was not willing to do it. MOTION FAILED 2-5, Fazzino, Rosenbaum Αaye,≅ Kniss, Schneider absent. ADJOURNMENT: The meeting adjourned at 9:55 p.m. 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 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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